The Tribune

By NATARIO McKENZIE

Tribune Business Reporter

nmckenzie@tribunemedia.net

BISX-listed Consolidated Water said that it expects to ‘very soon’ close the deal for a 50/50 joint venture 25-year water exclusivity franchise for western New Providence, its President and Chief Operating Officer saying that the company had anticipated closing the transaction on or by June 30.

During the Cayman-based company’s second quarter conference call Frederick McTaggart, president and CEO of Consolidated Water Company Ltd said that the company had anticipated closing the deal on or by June 30.

“Earlier this year we announced that we had agreed to purchase 50 per cent of the ownership of a joint venture in The Bahamas which provides water to approximately 1,000 customers on the western end of New Providence pursuant to a 25 year exclusive water utility franchise granted by The Bahamas government. This new venture is an excellent addition to our Bahamas operation and will be the first retail venture for our company outside the Cayman Islands. Although we had anticipated closing this deal on or before June 30, various administrative non-business matters delayed the closing and we expect this transaction to close very soon.”  

David Sasnett, Consolidated Water’s CFO, said that the company’s upcoming $7.7 million investment in the joint venture with NPDevCo would impact its earnings in the later part of this year.

“Investors should expect service segment results to improve when we finalise a new management and engineering services agreement with the new retail sector joint venture in The Bahamas in the third quarter of this year,” said Sasnett.

Sasnett said that the company’s operating results in the second quarter were adversely impacted by unusual water conditions with more than two feet of rain falling on Grand Cayman in the second quarter this year compared to just four inches the same period last year.

“In spite of this abnormally high rainfall which reduced our retail segment revenues by approximately 10 per cent compared to the second quarter 2011 we were able to achieve overall results which were comparable to last year because of improvements in our bulk segments results. Our net income was up slightly by one per cent this past quarter compared to last compared to a last year.”

Consolidated Water’s gross profit rose 3 per cent to approximately $5.4 million (33 per cent of total revenues) in the second quarter of 2012, compared with approximately $5.3 million (35 per cent of total revenues) in the prior-year period. Gross profit on retail revenues declined 14 per cent to approximately $3.0 million in the most recent quarter (51 per cent of retail revenues), compared with approximately $3.5 million (53 per cent of retail revenues) in the quarter ended June 30, 2011. The decline in retail gross profit reflected the impact of fixed production costs on a relatively lower revenue base, which more than offset first quarter base rate increases. Gross profit on bulk revenues increased 62 per cent to approximately $2.3 million (23 per cent of bulk revenues) in the most recent quarter, from approximately $1.4 million (19 per cent of bulk revenues) a year earlier.

“Consistent with our expectations, the expansion of the Blue Hills plant in Nassau which was completed in November last year enhanced revenues and gross profitability of our bulk segment by 31 per cent and 62 per cent respectively, reflecting a 30 per cent increase in the volume of water sold in this operating segment,” said Sasnett. The CFO noted that the Bahamas was somewhat behind on its receivables due to the company.

“The Bahamas is behind somewhat on their receivables due to us but they recently completed their governmental budgeting process under which we understand they allocated monies to us that are receivables. We would expect to get those monies in the later half of 2012. The Bahamas always maintains a significant receivable balance with us. That’s just the nature of the way they operate. We usually have about there month of receivables due from them, it’s a little bit more than that now but we expect them to pay it down to more on the 90 day level over the later half of 2012,” said Sasnett.