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Consoltd Water has a market cap of $106.1 million; its shares were traded at around $7.11 with a P/E ratio of 17.3 and P/S ratio of 1.9. The dividend yield of Consoltd Water stocks is 4.1%. Consoltd Water had an annual average earning growth of 7.7% over the past 10 years. GuruFocus rated Consoltd Water the business predictability rank of 4-star.
Highlight of Business Operations:Total revenues for the three months ended March 31, 2012 were $16,728,727, up from the $13,906,620 in revenues for the three months ended March 31, 2011, as revenue increases for our bulk segment and, to a lesser extent our retail segment, more than offset a decline in services segment revenues. Gross profit for the three months ended March 31, 2012 was $5,947,849 or 36% of total revenues, as compared to $5,250,555, or 38% of total revenues, for the three months ended March 31, 2011. Gross profit for the bulk and retail segments increased while gross profit for the services segment declined. For further discussion of revenues and gross profit for the three ended March 31, 2012, see the “Results by Segment” analysis that follows.
Retail segment gross profit remained relatively consistent between the periods at $3,523,382 (54% of revenues) and $3,492,639 (55% of revenues) for the three months ended March 31, 2012 and 2011, respectively. The slight decrease in gross profit as a percentage of revenues from 2011 to 2012 reflects the increased energy pass-through charges and higher non-revenue water volumes for 2012.
Bulk segment revenues were $10,069,217 and $7,166,836 for the three months ended March 31, 2012 and 2011, respectively. The increase in bulk revenues of approximately $2.9 million from 2011 to 2012 resulted from (i) a 34% increase in the number of gallons of water sold, which was primarily attributable to the expansion of our Blue Hills plant in the Bahamas during the fourth quarter of 2011; and (ii) energy pass-through increases to our rates due to higher energy prices.
Gross profit for our bulk segment was $2,413,764 and $1,564,472 for the three months ended March 31, 2012 and 2011, respectively. Gross profit as a percentage of bulk revenues increased to approximately 24% for 2012 as compared to approximately 22% for 2011. The improvement in the bulk segment’s gross profit as a percentage of revenues in 2012 from 2011 is results from the increase in revenues, as a significant portion of our production costs are relatively fixed in nature and do not increase proportionately with an increase in the volume of water sold.
Based upon the estimated fair value determined as of March 31, 2012, we concluded that no impairment loss was required to be recognized on our investment in OC-BVI for the three months ended March 31, 2012. This conclusion assumes that the BVI government will fulfill its obligations under the contract for the Bar Bay plant and that OC-BVI will collect all of the $10.4 million awarded by the Court (of which only $5.0 million has been received to date). Should the BVI government decide to appeal to the Privy Council in England, and should such appeal result in a reduction of the $10.4 million Court award, we will be required to record an impairment charge that will reduce the carrying value of our investment in OC-BVI by an amount approximately equal to 44% of any reduction of the $10.4 million awarded by the Court. If the BVI government fails to honor the terms of its agreement for water supplied by OC-BVI’s Bar Bay plant, the actual cash flows from OC-BVI could vary materially from the expected cash flows we Company used in determining OC-BVI’s fair value as of March 31, 2012 and we would be required to record an impairment charge to reduce the carrying value of our investment in OC-BVI. Such impairment charges would reduce our earnings and could have a material adverse impact on our results of operations and financial condition.
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