Sao Paulo, Brazil-based Companhia de Saneamento Basico do Estado de Sao Paulo, or SABESP’s (SBS) net income in the first quarter 2012 increased drastically by 169% year over year to R$491.9 million (US$277.9 million). Earnings per share came in at R$2.16 (US$2.44), an increase from R$0.80 (US$0.96 per ADR) in the year-ago quarter. Results exceeded the Zacks Consensus Estimate of US$1.62.
Revenue: Net revenue in the first quarter increased 12.8% to R$2,588.4 million (US$1,462.4 million), driven by higher water supply, sewage collection and treatment, and construction revenue. Results surpassed the Zacks Consensus Estimate of US$1,357 million.
Billed water and sewage volume in the quarter went up by 3.0% year over year to 905.5 million cubic meters. Of the total volume reported, roughly 57.8% represented water variation and about 42.2% came from sewage. The increase in billed water and sewage volume was due to higher number of connections and acceleration in consumption.
Water loss rate in the first quarter 2012 was at 25.7% versus 26.2% in the year-ago quarter. Water volume produced increased 2.0% year over year; water connections soared 2.6% and sewage connections rose by 3.6%.
Margins
SABESP’s cost of sales and services, as a percentage of revenue, plummeted to 58.2%, thus improving the gross margin by 1.4%. Operating expenses, including selling, administrative and other expenses increased in the quarter settled at 14.4% of total revenue versus 21.7% in the year-ago comparable quarter.
EBITDA in the quarter was around R$888.6 million (US$502.0 million), up 35.8% year over year with a margin of 34.3%.
Balance Sheet
Exiting the first quarter 2012, SABESP’s cash and cash equivalents stood at R$2,019.3 million (US$1,109.5 million), down 6.1% sequentially. Loans and financing, net of current portion increased 4.7% to R$7,295.7 million (US$4,008.6 million).
Cash Flow
Net cash flow from operating activities decreased by 16.7% year over year to R$427.8 million (US$241.7 million). Capital spending on property, plant and equipment together with intangible assets were R$19.1 million (US$10.8 million).
Following its first quarter 2012 earnings announcement, SABESP keeps up its position as the largest water and sewage services provider in the world, serving roughly 7.5 million customers for water and 6.0 million for sewage.
The company faces stiff competition from Veolia Environnement S.A. (VE), a privately held Thames Water Holdings plc, and GDF Suez (GDFZY.PK).
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