I know that the economy of Brazil is a major factor. The riots in San Paulo are certainly a secondary factor. Could one of you closer to the problems present a clearer picture of the downturn? Thanks.
The stock split 2 for one in January 2013 and it split again 3 for 1 in May 2013. If you are looking for a reason why the stock price has decreased, I suggest that you, first of all, make an analysis of the effect of these stock splits on its value.
The effect has hardly been disasterous. For instance in 2010 I bought 500 shares of SBS for $19,782. Now, after the stock splits and all the problems with the Brazilian economy, I have 3,000 shares which are worth $32,370. I am not puzzling my mind about the downturn in value of the shares, the economy of Brazil, etc. etc. As far as I am cncerned, everything has worked out very well.
Search for Trouble for a Brazilian Water Stock article dated April 27. This is a good description of some of the problems the company is facing. The state government owns just over half of the shares. President Rousseff demanded rate cuts for power utilities and about half of the requested rate increase from Sabesp was approved. I have not researched developments since then.
Its even simpler than the much smaller political issues posed by the protests -- which in reality have little to do with transport or water prices. The simple fact is that most of the debt of SBS is in foreign currencies -- while 100% of their revenues are in Reis -- and their high debt gearing is getting higher with every click down of the Real. We have seen this before during the last bout of Real weakness several years ago. When the Real pops back, SBS is highly leveraged and will whip back like a metal coil. The risk is that the Real will remain weak, and the debt ratios don't improve and cause liquidity problems.
As of December 31, 2012, had the Brazilian real appreciated or depreciated by 10% against the US dollar and the Yen with all other variables remaining constant, the effect on pre-tax profit for the year would have been R$323,118 (R$306,708 in December 2011) lower or higher, mainly as a result of foreign exchange losses or gains on the translation of foreign currency-denominated loans.