Le Lézard
Classified in: Environment, Business
Subjects: ERN, CCA, FVT

Consolidated Water Reports Q3 2019 Results


GEORGE TOWN, Cayman Islands, Nov. 12, 2019 /PRNewswire/ -- Consolidated Water Co. Ltd. (Nasdaq Global Select Market: CWCO), a leading developer and operator of advanced water supply and treatment plants, reported results for the quarter ended September 30, 2019. Quarterly and first nine months comparisons are to the same year-ago period unless otherwise noted.

(PRNewsfoto/Consolidated Water Co. Ltd.)

Financial Highlights

Management Commentary

"In the third quarter of 2019, we advanced our business in a number of areas; however, our lower financial performance reflects an unusual confluence of factors across our operating segments," commented Consolidated Water CEO, Rick McTaggart. "Our revenue from bulk water is lower due to new rates that came into effect earlier this year in Grand Cayman under new long-term operating and maintenance contracts that we won through competitive bidding processes. While our manufacturing and services revenues were lower, our related pipeline has been expanding. So, we don't see Q3 as indicative of a trend, and we remain on course for a year of strong revenue growth and profitability as demonstrated by our nine-month results.

"Q3 also underscores the importance of further diversifying revenue by adding complementary service and product offerings, as well as expanding our geographic presence and customer base. This effort began with the acquisition of Aerex in 2016. We have since strengthened our executive team and Aerex's capabilities with the addition of a new VP of manufacturing earlier this year who is overseeing the expansion our Aerex operations.

"More recently, we acquired PERC Water, based in Costa Mesa, California, which designs, builds and operates water and wastewater infrastructure projects nationwide with a strong focus on the water-challenged southwestern U.S. PERC Water has won numerous industry awards for innovative design and its efficient project delivery model.

"We view PERC Water as highly-complementary and synergistic to our existing business. PERC Water will expand our product and service offerings to include advanced water and wastewater recycling plants, while providing a platform to expand our core business of designing, constructing and operating desalination plants into water-short regions of the U.S.

"The Southwest's water management challenges in particular have created a growing demand and opportunity for water treatment and reuse projects, with the Pacific coastline providing access to extensive desalination opportunities. Our specialized capabilities, greater access to capital and other important resources will better position PERC Water to take advantage of this fast-growing market.

"Given our specialized manufacturing capabilities and experience related to markets with relatively high barriers to entry, such as those that require unique quality controls and certification, we see the prospects for our manufacturing segment continuing to be favorable. We also fabricate water treatment equipment for a diverse number of industries involved in wastewater treatment infrastructure. So, with the numerous municipal utilities in need of improvements in this area we expect continued growth of this business segment.

"Regarding our Rosarito, Mexico desalination project, we had positive developments earlier this year including congressional authorization, approval of a significant portion of the debt financing for the project, and obtaining additional rights of way. Certain steps remain to be completed by the State of Baja California government before we can begin construction, most notably obtaining the revolving line of credit required for the State's payment trusts for the project.

"The State's project activities have been delayed as of late, in part due to the installation of a new, recently elected administration. However, we expect the State to recommence its project development efforts by the first quarter of 2020, and we are encouraged by the new governor's recent public comments communicating his support for the project. Designed to produce 100 million gallons per day of potable water, the plant is expected to be the largest of its kind in the Western Hemisphere and will provide a much-needed source of drinking water for the coastal region of Baja California for at least 37 years.

"Many other water-scarce areas of the world exist in addition to Mexico. In fact, such areas continue to increase due to the growth in populations and urban expansion. Therefore, we are continuing to explore potential projects where we can support the growth and quality of life in local communities by providing essential fresh water supplies.

"We continue to have ample liquidity on our balance sheet to expand into new markets and diversify our revenue streams. PERC Water exemplifies the high-quality opportunities we will continue to pursue to drive growth and enhance shareholder value over the coming year."

Third Quarter 2019 Financial Summary

Revenue declined 12% to $15.9 million from $18.1 million in the same year-ago quarter, which was driven primarily by decreases of $1.4 million in bulk water sales, $711,000 in services and $181,000 in manufacturing.

The decrease in bulk water was due to the lower rates that came into effect in February for water supplied by the Red Gate and North Sound plants, as well as lower rates that came into effect in July for the North Side Water Works plant. The decrease in services revenue was due to lower fees generated under the company's management services agreement with OC-BVI, with the year ago period including $710,000 from an OC-BVI plant refurbishment project. Manufacturing was lower due to slightly fewer active projects. These decreases were partially offset by a marginal increase in retail revenue, which was due to a slight increase in the volume of water sold by Cayman Water.

Gross profit was $6.7 million compared to $7.1 million in the year-ago period, with gross margin as a percentage of revenue improving from 39.5% to 42.2%.

Net income attributable to stockholders was $1.7 million or $0.11 per basic and diluted share, compared to $4.6 million or $0.30 per basic and diluted share in the year-ago quarter. The decrease was primarily due to the year-ago quarter including substantial non-recurring income from a legal settlement.

Cash and cash equivalents totaled $42.0 million as of September 30, 2019, as compared to $31.3 million as of December 31, 2018. The increase resulted primarily from net income generated from continuing operations and the sale of CW-Belize.

First Nine Months of 2019 Financial Summary

Revenue increased 7% to $51.2 million from $47.7 million in the same year-ago period. The increase was primarily driven by increases of $5.7 million in manufacturing and $1.1 million in retail revenue.

Manufacturing revenue increased due to an increase in orders and production activity. Retail revenue improved due to a more than 2% increase in the volume of water sold by Cayman Water, with this attributed to lower rainfall in 2019. The increase in retail revenue was also due to increased energy prices which increased the energy pass-through component of the company's Cayman Water retail revenue by $400,000.

The increase in manufacturing and retail revenue was partially offset by a decrease in services revenue and a decrease in bulk revenue. The decrease in services revenue was due to lower fees generated under the company's management services agreement with OC-BVI, with the year ago period including $710,000 from an OC-BVI plant refurbishment project. The decrease in bulk water was due to the lower rates that came into effect in February for water supplied by the Red Gate and North Sound plants, as well as lower rates that came into effect in July for the North Side Water Works plant.

Gross profit increased 9% to $21.2 million from $19.5 million in the same year-ago period, with gross margin as a percentage of revenue improving from 40.9% to 41.5%.

Net income attributable to stockholders was $10.4 million or $0.69 per basic and diluted share, up 18% from $8.8 million or $0.58 per diluted share in the same year-ago period.

Third Quarter Segment Results



Three Months Ended September 30, 2019




Retail



Bulk



Services



Manufacturing



Total


Revenue


$

6,271,220



$

6,449,757



$

95,980



$

3,072,282



$

15,889,239


Cost of revenue



2,945,586




4,269,739




31,601




1,933,333




9,180,259


Gross profit



3,325,634




2,180,018




64,379




1,138,949




6,708,980


General and administrative
expenses



3,497,320




294,189




546,204




487,914




4,825,627


Gain on asset dispositions and
impairments, net



6,518




500




-




-




7,018


Income (loss) from operations


$

(165,168)



$

1,886,329



$

(481,825)



$

651,035




1,890,371


Other income, net



















229,841


Income before income taxes



















2,120,212


Benefit from income taxes



















(40,075)


Net income from continuing
operations



















2,160,287


Income from continuing
operations attributable to non-

controlling interests



















433,235


Net income from continuing
operations attributable to
Consolidated Water Co. Ltd.
stockholders



















1,727,052


Total income from discontinued
operations



















-


Net income attributable to
Consolidated Water Co. Ltd.
stockholders


















$

1,727,052


 



Three Months Ended September 30, 2018




Retail



Bulk



Services



Manufacturing



Total


Revenue


$

6,185,558



$

7,806,552



$

807,424



$

3,253,750



$

18,053,284


Cost of revenue



2,750,599




5,289,151




682,713




2,205,830




10,928,293


Gross profit



3,434,959




2,517,401




124,711




1,047,920




7,124,991


General and administrative
expenses



2,967,187




366,532




846,258




627,102




4,807,079


(Loss) on asset dispositions and
impairments, net



(9,084)




-




-




(3,331)




(12,415)


Income (loss) from operations


$

458,688



$

2,150,869



$

(721,547)



$

417,487




2,305,497


Other income, net



















2,326,768


Income before income taxes



















4,632,265


Provision for income taxes



















12,659


Net income from continuing
operations



















4,619,606


Income from continuing
operations attributable to non-
controlling interests



















310,579


Net income from continuing
operations attributable to
Consolidated Water Co. Ltd.
stockholders



















4,309,027


Total income from discontinued
operations



















243,362


Net income attributable to
Consolidated Water Co. Ltd.
stockholders


















$

4,552,389


 

First Nine Months Segment Results



Nine Months Ended September 30, 2019




Retail



Bulk



Services



Manufacturing



Total


Revenue


$

19,941,395



$

20,502,121



$

287,349



$

10,452,158



$

51,183,023


Cost of revenue



8,753,948




13,992,452




198,614




7,013,977




29,958,991


Gross profit



11,187,447




6,509,669




88,735




3,438,181




21,224,032


General and administrative
expenses



10,020,019




900,572




1,811,971




1,466,091




14,198,653


Gain on asset dispositions and
impairments, net



401,088




47,000




-




-




448,088


Income (loss) from operations


$

1,568,516



$

5,656,097



$

(1,723,236)



$

1,972,090




7,473,467


Other income, net



















540,264


Income before income taxes



















8,013,731


Provision for income taxes



















73,117


Net income from continuing
operations



















7,940,614


Income from continuing
operations attributable to non-
controlling interests



















1,172,039


Net income from continuing
operations attributable to
Consolidated Water Co. Ltd.
stockholders



















6,768,575


Net income from discontinued
operations



















3,621,170


Net income attributable to
Consolidated Water Co. Ltd.
stockholders


















$

10,389,745


 



Nine Months Ended September 30, 2018




Retail



Bulk



Services



Manufacturing



Total


Revenue


$

18,884,929



$

22,934,036



$

1,054,100



$

4,798,948



$

47,672,013


Cost of revenue



8,234,803




15,736,936




921,653




3,300,370




28,193,762


Gross profit



10,650,126




7,197,100




132,447




1,498,578




19,478,251


General and administrative
expenses



8,926,550




961,266




2,162,632




1,865,311




13,915,759


(Loss) on asset dispositions and
impairments, net



(11,074)




-




-




(3,331)




(14,405)


Income (loss) from operations


$

1,712,502



$

6,235,834



$

(2,030,185)



$

(370,064)




5,548,087


Other income, net



















2,786,397


Income before income taxes



















8,334,484


Benefit from income taxes



















(113,607)


Net income from continuing
operations



















8,448,091


Income from continuing
operations attributable to non-
controlling interests



















484,778


Net income from continuing
operations attributable to
Consolidated Water Co. Ltd.
stockholders



















7,963,313


Net income from discontinued
operations



















869,794


Net income attributable to
Consolidated Water Co. Ltd.
stockholders


















$

8,833,107


 

Outlook
Based on committed purchase orders, the company expects the performance of its manufacturing segment for the 2019 fiscal year to exceed its performance for 2018.

Given existing contractual bulk water commitments and the third quarter of 2019 reflecting the full effect of the new Cayman Islands contracts, the company expects revenue and gross profit generated by its bulk segment to stabilize.

As a result of the acquisition of PERC Water, the company's business development team is actively pursuing a number of new projects in the U.S., and expects to commit significant management time and other resources in pursuit of these projects.

The company traditionally sells more water on Grand Cayman during the first half of the calendar year when the number of visitors is typically greater and local rainfall is less as compared to the back half of the year. In 2019, stayover tourist numbers continued to exceed 2018 numbers, supported by additional capacity of the recently expanded airport in Grand Cayman. This indicates that 2020 may be another record year for stayover visitors in the company's exclusive utility franchise area.

Conference Call
Consolidated Water management will host the call, followed by a question and answer period.

Date: Tuesday, November 12, 2019
Time: 11:00 a.m. Eastern time (8:00 a.m. Pacific time)
Toll-free dial-in number: 1-844-875-6913
International dial-in number: 1-412-317-6709
Conference ID: 10136288

Please call the conference telephone number five minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact CMA at 1-949-432-7566.

A replay of the call will be available after 1:00 p.m. Eastern time on the same day through November 19, 2019, as well as available for replay via the Investors section of the Consolidated Water website at www.cwco.com.

Toll-free replay number: 1-877-344-7529
International replay number: 1-412-317-0088
Replay ID: 10136288

About Consolidated Water Co. Ltd.
Consolidated Water Co. Ltd. develops and operates advanced water supply and treatment plants and water distribution systems. The company operates water production facilities in the Cayman Islands, The Bahamas and the British Virgin Islands and operates water treatment facilities in the United States. The company also manufactures and services a wide range of products and provides design, engineering, management, operating and other services applicable to commercial and municipal water production, supply and treatment, and industrial water and wastewater treatment. For more information, visit www.cwco.com.

Cautionary Note Regarding Forward-Looking Statements
This press release includes statements that may constitute "forward-looking" statements, usually containing the words "believe", "estimate", "project", "intend", "expect", "should", "will" or similar expressions. These statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements inherently involve risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to (i) continued acceptance of the company's products and services in the marketplace;(ii) changes in its relationships with the governments of the jurisdictions in which it operates; (iii) the outcome of its negotiations with the Cayman government regarding a new retail license agreement; (iv) its ability to complete the project under development in Baja California, Mexico; (v) the future financial performance of its subsidiary that manufactures water treatment-related systems and products and provides design, engineering, management, operating and other services applicable to commercial, municipal and industrial water production; (vi) the collection of its delinquent accounts receivable in the Bahamas; (vii) its ability to integrate and profitably operate recently acquired subsidiary PERC Water Corporation; and (viii) various other risks, as detailed in the company's periodic report filings with the Securities and Exchange Commission ("SEC"). For more information about risks and uncertainties associated with the company's business, please refer to the "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Risk Factors" sections of the company's SEC filings, including, but not limited to, its annual report on Form 10-K and quarterly reports on Form 10-Q, copies of which may be obtained by contacting the company's Secretary at the company's executive offices or at the "Investors ? SEC Filings" page of the company's website at http://ir.cwco.com/docs/. Except as otherwise required by law, the company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Company Contact:
David W. Sasnett
Executive Vice President and CFO
Tel (954) 509-8200
[email protected] 

Investor Relations Contact
Ron Both, CMA
Tel (949) 432-7566
[email protected]

 

 

CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS




September 30,



December 31,




2019



2018





(Unaudited)






ASSETS









Current assets









Cash and cash equivalents


$

41,991,071



$

31,337,477


Restricted cash



1,610,471




-


Accounts receivable, net



22,955,201




24,228,095


Inventory



3,031,011




2,232,721


Prepaid expenses and other current assets



2,151,903




1,035,796


Current portion of loans receivable



-




734,980


Costs and estimated earnings in excess of billings



1,656,392




835,669


Current assets of discontinued operations



-




1,959,494


Total current assets



73,396,049




62,364,232


Property, plant and equipment, net



62,106,181




58,880,818


Construction in progress



925,570




6,015,043


Inventory, non-current



4,534,038




4,545,198


Investment in OC-BVI



1,879,448




2,584,987


Goodwill



8,004,597




8,004,597


Land and rights of way held for development



24,161,024




24,161,024


Intangible assets, net



1,331,111




1,891,667


Operating lease right-of-use assets



4,393,737




-


Other assets



2,046,090




2,123,999


Long-term assets of discontinued operations



-




1,944,033


Total assets


$

182,777,845



$

172,515,598











LIABILITIES AND EQUITY









Current liabilities









Accounts payable, accrued expenses and other current liabilities


$

2,152,023



$

4,570,641


Accrued compensation



1,367,856




1,286,468


Dividends payable



1,290,291




1,286,493


Current maturities of operating leases



647,709




-


Billings in excess of costs and estimated earnings



-




109,940


Current liabilities of discontinued operations



-




646,452


Total current liabilities



5,457,879




7,899,994


Deferred tax liability



494,513




659,874


Noncurrent operating leases



3,809,573




-


Other liabilities



75,000




199,827


Total liabilities



9,836,965




8,759,695


Commitments and contingencies









Equity









Consolidated Water Co. Ltd. stockholders' equity









Redeemable preferred stock, $0.60 par value. Authorized 200,000 shares;
issued and outstanding 33,751 and 34,796 shares, respectively



20,251




20,878


Class A common stock, $0.60 par value. Authorized 24,655,000 shares;
issued and outstanding 15,027,574 and 14,982,906 shares, respectively



9,016,544




8,989,744


Class B common stock, $0.60 par value. Authorized 145,000 shares; none
issued



-




-


Additional paid-in capital



87,858,251




87,211,953


Retained earnings



65,847,791




59,298,161


Cumulative translation adjustment



-




(549,555)


Total Consolidated Water Co. Ltd. stockholders' equity



162,742,837




154,971,181


Non-controlling interests



10,198,043




8,784,722


Total equity



172,940,880




163,755,903


Total liabilities and equity


$

182,777,845



$

172,515,598


 

 

CONSOLIDATED WATER CO. LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)




Three Months Ended September 30,



Nine Months Ended
September 30,




2019



2018



2019



2018


Total revenue


$

15,889,239



$

18,053,284



$

51,183,023



$

47,672,013


Total cost of revenue



9,180,259




10,928,293




29,958,991




28,193,762


Gross profit



6,708,980




7,124,991




21,224,032




19,478,251


General and administrative expenses



4,825,627




4,807,079




14,198,653




13,915,759


Gain (loss) on asset dispositions and
impairments, net



7,018




(12,415)




448,088




(14,405)


Income from operations



1,890,371




2,305,497




7,473,467




5,548,087



















Other income (expense):

















Interest income



154,175




172,805




444,827




504,028


Interest expense



(19)




(2,492)




(1,501)




(7,122)


Profit-sharing income from OC-BVI



2,025




536,625




10,125




621,675


Equity in the earnings of OC-BVI



38,174




1,472,154




26,686




1,710,230


Net unrealized gain (loss) on put/call options



-




75,000




(24,000)




(47,000)


Other



35,486




72,676




84,127




4,586


Other income, net



229,841




2,326,768




540,264




2,786,397


Income before income taxes



2,120,212




4,632,265




8,013,731




8,334,484


Provision for (benefit from) income taxes



(40,075)




12,659




73,117




(113,607)


Net income from continuing operations



2,160,287




4,619,606




7,940,614




8,448,091


Income from continuing operations
attributable to non-controlling interests



433,235




310,579




1,172,039




484,778


Net income from continuing operations
attributable to Consolidated Water Co. Ltd.
stockholders



1,727,052




4,309,027




6,768,575




7,963,313


Gain on sale of discontinued operations



-




-




3,621,170




-


Net income from discontinued operations



-




243,362




-




869,794


Total income from discontinued operations



-




243,362




3,621,170




869,794


Net income attributable to Consolidated Water Co. Ltd.
stockholders


$

1,727,052



$

4,552,389



$

10,389,745



$

8,833,107



















Basic earnings per common share
attributable to Consolidated Water Co. Ltd.
common stockholders

















Continuing operations


$

0.11




0.28



$

0.45



$

0.53


Discontinued operations



-




0.02




0.24




0.06


Basic earnings per share


$

0.11




0.30



$

0.69



$

0.59



















Diluted earnings per common share
attributable to Consolidated Water Co. Ltd.
common stockholders

















Continuing operations


$

0.11




0.28



$

0.45



$

0.52


Discontinued operations



-




0.02




0.24




0.06


Diluted earnings per share


$

0.11




0.30



$

0.69



$

0.58



















Dividends declared per common and
redeemable preferred shares


$

0.085




0.085



$

0.255



$

0.255



















Weighted average number of common shares
used in the determination of:

















Basic earnings per share



15,026,710




14,963,195




15,022,489




14,960,602


Diluted earnings per share



15,138,094




15,124,720




15,132,843




15,119,415


 

SOURCE Consolidated Water Co. Ltd.


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