Companhia de Saneamento Basico do Estado de Sao Paulo (SBS), or SABESP reported encouraging results for first quarter of 2010, with 6.0% year-over-year growth in net operating revenues and 13.4% growth in net income.
Reported net income grew 13.4% to reach R$ 290.6 million (US$162.7 million) in the first quarter 2010, compared with R$256.2 million in the year-ago quarter. EPS was R$1.28 (US$1.43) versus R$1.12 in the first quarter of 2009. Reported EPADR was above the Zacks Consensus Estimate of $1.31.
Considering the top line, net operating revenues (net of COFINS and PASEP taxes) of R$1.8 billion (US$1.0 billion) increased 6.0% year-over-year from R$1.6 billion in the year ago quarter, primarily due to a 3.8% year-over-year increase in billed water and sewage volume. Of the 855.3 million cubic meter volume reported, roughly 58.0% represented water variation and 42.0% of sewage.
During the quarter, SABESP efficiently managed its expenses resulting in a 13.3% year-over-year decline in costs and expenses to R$1.0 billion (US$0.56 billion). Adding to the improvement were year-over-year declines in payroll and benefits, supplies and treatment supplies expenses as well as over 11.0% year-over-year decline in depreciation and amortization. Costs and expenses, as a % of total revenue declined from 72.1% in the first quarter 2009 to 59.0% in the first quarter 2010.
EBITDA in the quarter grew 38.3% year-on-year to R$862.4 million (US$482.9 million) and represented 49.2% of net operating revenues. EBITDA margin was 49.2% in the quarter versus 37.7% in the year-ago quarter. EBIT was R$718.5 million (402.4 million), up 55.5% year over year.
SABESP’s efforts to reduce water loss were evident from continued reduction in water loss rates, which declined from 27.2% to 25.7% year over year. Water volume produced in the quarter increased 1.8% year-over-year; water connections increased 2.5% and sewage connections rose by 3.4%.
At quarter end, SABESP had cash and cash equivalents of roughly R$852.5 million (US$477.4 million), compared with R$769.4 million in the previous quarter. Loans and financing were R$5,610.1 million (US$3,141.6 million), compared with R$5,549.4 million in the previous quarter. Net cash flow from operating activities was down roughly 22.0% year-over-year to R$584.1 million (US$327.1 million). SABESP’s spending on acquisition of property, plant and equipment increased 24.0% year-over-year to R$403.7 million (US$226.1 million).
Following its first quarter 2010 earnings announcement, SABESP continues to be the largest water and sewage services provider in the world based on the number of customers.
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