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Sao Paulo, Brazil-based Companhia de Saneamento Basico do Estado de Sao Paulo, or SABESP (SBS - Analyst Report) reported a marginal increase in net results for the first quarter 2013 on May 9, 2013.  Earnings in the quarter came in at R$0.73 per share (or US$0.73 per ADR) versus R$0.72 per share (or US$0.71 per ADR) in the year-ago quarter.


SABESP generated roughly R$2,645.0 million (US$1,322.5 million) in net revenue in the quarter, up 2.6% year over year, driven by higher water supply, sewage collection and treatment.

Billed water and sewage volume in the first quarter 2013 went up 2.0% year over year to 923.9 million cubic meters. Of the total volume reported, roughly 57.9% represented water variation and about 42.1% 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 was at 25.5% versus 25.7% in the prior year quarter. Water volume produced decreased 1.0% year over year; water connections crept up 2.7% and sewage connections rose 3.5%.


SABESP reported a 2.7% year-over-year increase in its cost of sales and services while as a percentage of revenue it was roughly flat compared to the year-ago quarter. Gross margin in the quarter was at 41.9%. Operating expenses, including selling and administrative, increased 1.0% year over year and represented 14.4% of the total revenue.

Adjusted EBITDA in the quarter was around R$921.5 million (US$460.8 million), up 3.7% year over year with a margin of 34.8%.

Balance Sheet

Exiting the first quarter 2013, SABESP had a cash and cash equivalents balance of approximately R$2,127.0 million (US$1,053.0 million), up 11.0% year over year. Loans and financing, net of current portion increased 6.1% to R$7,990.4 million (US$3,955.6 million).

Cash Flow

SABESP’s net cash generated in the year increased 53.2% to R$643.3 million (US$321.7 million). Capitals spent on purchase of property, plant and equipment declined 38.8% to R$4.3 million (US$2.15 million).

Following its first quarter 2013 earnings announcement, SABESP maintained its position as one of the largest water and sewage services providers in the world, serving roughly 24.3 million customers for water and 21.1 million for sewage.

SABESP currently holds a Zacks Rank #3 (Hold). Another stock to watch out for in the industry is American States Water Company (AWR - Snapshot Report), with a Zacks Rank #1 (Strong Buy). The company is slated to report its first quarter, ended Mar 31, results on May 10. American Water Works Company, Inc. (AWK - Snapshot Report) reported earnings per share of 32 cents in the first quarter 2013, up 14.3% year over year while Aqua America, Inc. (WTR - Snapshot Report) reported earnings of 29 cents, compared with 19 cents reported in the year-ago quarter.

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