Companhia de Saneamento Básico do Estado de São Paulo– SABESP (SBS - Analyst Report), a leading provider of basic and environmental sanitation services based in Brazil, kept its shareholders and other interested parties informed about the latest minutes and updates of the meeting held on January 10, 2013.
At the meeting, the board of directors approved the change in the number of common shares comprising the NYSE traded American Depository Receipts (ADRs). The company’s ADR currently comprises two common shares per ADR, which are to be reduced to one common share per ADR. The company’s Depositary Institution in the United States, Bank of New York Mellon (BK - Analyst Report), will issue the new ADRs which will be distributed among the existing ADR holders. As a result of the change, the earnings per ADR will go down.
Also, it was decided at the meeting to split the company’s common shares in a proportion to be announced later. Upon subsequent shareholder approval, the total capital stock of the company will change, depending on the proportion decided upon.
Exiting the third quarter of 2012, the company had total outstanding shares of 227.8 million. The company had cash and cash equivalents of R$1.8 billion. However, the company’s long-term debt was much higher at R$7.1 billion.
The company is one of the largest water and sewage service providers in the world, based on the number of customers. The stock currently holds a Zacks Rank #5 (Strong Sell). Not all utility-water supply stocks are performing as poorly as SABESP; the company’s competitors like Connecticut Water Service, Inc. (CTWS - Snapshot Report) and American Water Works Company, Inc. (AWK - Snapshot Report) hold a Zacks Rank #1 (Strong Buy) and a Zacks Rank #2 (Buy), respectively.