A relatively dry 2018 helped boost sales by Cayman’s local water company, Consolidated Water.
Consolidated Water released its 2018 annual report on Monday, showing an 11 percent increase in both revenue (from $59.4 million to $65.7 million) and gross profit (from $24 million to $26.7 million) over 2017. Sales in Cayman increased by 8 percent last year, boosting revenue here from about $30.2 million in 2017 to $34.6 million last year. Consolidated Water also has operations in the British Virgin Islands, the Bahamas, Indonesia and the United States.
“We believe the increase in the volume of water sold for 2018 is primarily attributable to weather conditions, as (based on information provided by Cayman Islands National Weather Service) the amount [of] rainfall recorded for Grand Cayman for 2018 was 43.5 inches, as compared to 59.2 inches for 2017,” stated Consolidated Water, which serves customers in George Town and West Bay through its subsidiary, Cayman Water.
Last year’s recorded rainfall was not only a decrease from 2017, but was also 20 percent lower than Cayman’s 30-year average of 56.2 inches.
Sales increase expected to continue
Consolidated Water CEO Rick McTaggart said on Monday on a company conference call that he expects his company’s increased sales to continue through the first half of this year, as Cayman continues to experience a tourism boom.
“The company traditionally sells more water on Grand Cayman during the first and second quarters of the year when the number of tourists visiting its areas of operation is typically greater and local rainfall is less, as compared to the back half of the year,” the company stated in a press release. “For 2019, the company sees this trend continuing, and anticipates a seasonally stronger first half of the year due to favourable tourism activity.”
Other drivers of Consolidated Water’s 2018 financial performance included a decrease in impairment losses by about $3 million from 2017 to 2018. For instance, Consolidated Water recorded a $1.7 million impairment loss in Bali in 2017 because of operating losses there. Those operating losses decreased from $1.9 million in 2017 to $218,000 last year, making the Bali operations immaterial to Consolidated Water’s financial condition at the end of 2018.
Additionally, a litigation settlement with the BVI government increased aggregate income from BVI operations by nearly $2.3 million, according to Consolidated Water.
“On August 31, 2018, OC-BVI and the BVI government entered into a settlement agreement for the Baughers Bay plant with an agreed upon value for the plant of $4,432,834, which resulted in a net payment (i.e., after legal and other expenses) to OC-BVI in September 2018 of $4,271,409,” the company’s annual report states. “Such amount is included in other income, net in OC-BVI’s 2018 consolidated results of operations.”
While revenue and profits increased last year, Consolidated Water’s cash balances decreased from $45.5 million in 2017 to $31.3 million in 2018, due to capital investments made last year. Among the capital investments was Cayman Water’s new Abel Castillo Water Works facility located off the Esterley Tibbetts Highway in West Bay, adding another million gallons of production per day with a chance to double that output.
The plant, which opened last month, cost US$6.1 million to build, and an adjoining water tank cost another $2 million.
Consolidated Water may increase its cash balances at the end of the first quarter this year, as the cash the company has repatriated from selling its Belize operations will be recorded during that period.
Consolidated Water had been experiencing difficulties in repatriating profits because that requires the approval of the Central Bank of Belize, and is dependent on the amount of U.S. dollars available to Belize banks to execute such transfers. Rising interest rates in the U.S. have contributed to U.S. dollar shortages in emerging markets throughout the world.
However, the company was able to sell its operations there to Belize Water Service Ltd., which earned Consolidated Water US$7 million and helped it repatriate an additional US$12 million.
With the desalination market projected to double by 2026, McTaggart said his company is looking to penetrate new markets in 2019.
He said on Monday that he is speaking to one interested party about a possible acquisition.
The CEO did not disclose what market the new acquisition would open, but said Consolidated Water is searching for opportunities outside the Caribbean because “the Caribbean is quite slow right now.”