Consolidated Water reported 53% revenue growth to US$25.1 million in the third quarter over the same period last year, reflecting higher income in all business segments.
Led by a 172% jump to $8.7 million in service revenues, bulk water revenues were up 26% to $8.7 million, retail revenue increased by 20% to $6.3 million and manufacturing income was $291,000 higher.
The increase in retail revenue resulted in part from a 14% increase in the volume of water sold on Grand Cayman, mainly from the continued return of tourism activity. Although tourist visitor numbers to Cayman remain below pre-pandemic levels, the company anticipates 2023 will see a return to those figures.
Both bulk and retail revenues were also pushed up due to higher energy costs that increased the energy pass-through component of the company’s water rates.
The beginning construction of a $82 million advanced water treatment plant in Goodyear, Arizona, in the third quarter, increased services revenues from the group’s US subsidiary PERC’s contract with Liberty Utilities. The company anticipates it will report additional revenue from this project until the construction is completed by June 2024.
“Our 53% increase in revenue in Q3 reflected strong growth across three of our four business segments,” said Consolidated Water CEO Rick McTaggart.
“However, certain higher (general and administrative) expenses last quarter affected net income, including employee bonus accruals resulting from our strengthened financial performance, higher salaries due to cost-of-living increases that were given earlier this year, and bank fees related to the transfer of our profits from our Bahamas subsidiary.”
Gross profit for the third quarter of 2022 of $6.8 million was up 20% year on year and represented 27.3% of total revenue, down from up 34.7% of total revenue for the same period a year ago.
Net income from continuing operations in the quarter was $824,000 or $0.05 per basic and diluted share, compared to net income of $1.4 million or $0.09 per basic and diluted share for the same year-ago period.
During the third quarter, Consolidated Water completed the design and preliminary permitting activities for a new desalination plant it is constructing on Grand Cayman under the 10-year design, build and operate contract with the Water Authority.
“While the revenue generated by the design phase of this project was minimal in Q3, we broke ground last month and expect to recognise significant additional revenue beginning in the fourth quarter,” McTaggart said.
“We expect revenue generated over the approximate 11.5-year term of the Water Authority contract to total about $20 million (based on January 2022 values). We expect the majority of the revenue to be generated by the construction and sale of the plant during the first 18 months, with the rest earned from bulk water sales over the following 10 years.”
McTaggart said the company is seeing some activity in the Caribbean market for seawater desalination and has bid for a design, build and operate contract for a 1.7 million gallon-per-day seawater plant in Honolulu, Hawaii.
In October, PERC was awarded an expanded 10-year, $49.2 million contract to operate and maintain two advanced water treatment facilities in Southern California.
“This milestone win is the longest-term operation and maintenance contract PERC has ever signed, and represents an affirmation of the world-class services that PERC provides,” McTaggart said. “This win also supports our plans for growing this segment of our business in the Western U.S., a region that has been experiencing unprecedented drought conditions.”
Consolidated Water, in October, exercised its option to buy the remaining 39% minority interest in PERC. The purchase price will be based upon a third-party valuation which is currently underway.
The company’s manufacturing segment, McTaggart said, continues to be held back by supply chain constraints and challenging economic conditions that increased costs.
“However, we began to see improvement last month, which allowed us to advance more of our large order backlog through the manufacturing process. Our contracted manufacturing backlog increased over the past three months to a record $20 million, and we anticipate most of this will be booked as revenue next year.”
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