Companhia de Saneamento Basico (ADR) (NYSE:SBS) Struggling to Regain its Stock


Dallas, Texas 10/11/2013 (Financialstrend) – Companhia de Saneamento Basico (ADR) (NYSE:SBS) is a Brazil based water utility major who has been struggling to regain form since its 2Q weak earnings announcement.

On September 6, the top management of the firm got together to address analysts and take questions in regards to 2Q performance. The management highlighted that the indeterminately stalled “tariff revision process” is severely impacting the profitability of the water utility. In early August Brazil’s government agency ARSESP had suspended the proposed tariff revision process. They also admitted to applying a lot of their collective resources and time in reverting to agencies with regards to questions raised around the company asset base. The tariff revision issue still remains unresolved since the president of ARSESP resigned on August 16, leading to a logjam in the decision-making process of the board of ARSESP.

Companhia management also highlighted the returns from its operations for 2Q. It was able to register a 23% increase in net income from the quarter operations. For 1H period, the income appreciation is a more modest 9.3%. EBITDA had shown a impressive 14.2% increase from 2Q12.Over all picture one gathered from the numbers discussion was a company on strong financial footing with debt ratios and margins at optimal levels. This is in spite of the slowdown in the Brazilian economy with the Brazilian “Real” loosing leverage against most other international currencies.

SBS management also highlighted the successful conclusion of a public private partnership agreement with the local government of “São Lourenço”. The water utility firm has signed up to expand needed infrastructure to supply water to an additional 1.3 million consumers in the metro region of São Paulo. The company expects to plough in a additional Brazilian real 2.2 billion as its share of investment into this project.