“s” : “sbs,ve”,”k” : “a00,a50,b00,b60,c10,g00,h00,l10,p20,t10,v00″,”o” : “”,”j” : “”
Zacks Equity Research, On Thursday June 30, 2011, 11:00 am EDT
We recently downgraded our recommendation on Companhia de Saneamento Basico do Estado de São Paulo, or SABESP (NYSE: SBS – News) from Neutral to Underperform. SABESP is a public water and sewage services provider in the State of Sao Paulo, Brazil.
The company is one of the largest players in the industry having distributed water to approximately 23.6 million people and provided sewage services to more than 20.2 million people as of fiscal year 2010.
Long-term prospects of SABESP seems bright as the company targets to add roughly 1.3 million new water connections and 1.7 million new sewage connections, improving its sewage coverage to 90%, through 2019. Water loss ratio is expected to be 14% by December 2014 compared with 26% at the end of March 2011.
The company makes a constant effort to improve its services and coverage over time. Investments over 2009-2013 period would be roughly R$ 8.6 billion, with R$ 1,753 million targeted for 2011 and R$ 1,748 million for 2012.
Despite these positives, concerns over rising expenses and mounting debt levels have forced us to downgrade the stock. Higher cost of sales and services together with rising operating expenses were the prime reasons for a 39% decline in the company’s first quarter 2011 profit.
The company intends to fund 46.5% of its targeted investment through cash flow and the rest 53.5% via financing. With existing loans and financing of approximately R$ 7,207.1 million (US$ 4,341.6 million) at the end of the first quarter 2011, the burden of additional debts will increase the company’s financial expenses and hurt its performances over time.
The company’s aggressive investment policy and continuously increasing financial burden from higher debt levels, however, are posing a threat to SABESP’s margin and bottom-line results in the quarters ahead. Exiting the fourth quarter, the company’s loans and financing, net of current portion soared 8.1% sequentially.
Moreover, SABESP’s over dependence on weather conditions and political interference on its affairs are disconcerting. Also, the company is in direct competition with peer companies like Veolia Environnement S.A. (NYSE: VE – News).
Follow Yahoo! Finance on ; become a fan on Facebook.
Yahoo! Finance: Waste Management Industry News
From our Blog
- Why You Need a Dumpster September 21, 2016
- Neighborhood Togetherness Matters & Clean Up Does, Too September 19, 2016
- What Waste Should You Recycle And Throw In The Trash? August 3, 2016
- Dumpster Rentals for Business Owners August 1, 2016
- Picking a Dumpster for Your Next Roofing Project July 19, 2016
- Consequences of Illegal Dumping and Littering July 13, 2016
- How To Dispose Of Debris? June 14, 2016
- When Is A Good Time To Clean Out Your Waste? June 13, 2016
- How to Dispose of Construction Waste May 2, 2016
- Why You Should Share Rental Dumpsters With Your Neighbors April 29, 2016
2011 2012 Announces best Call Clean Company Conference Connections Covanta diving dumpster dumpsters Energy Ewaste Garb garbage Harbors Holding Identity Inc. Industry Landfill Management Plant power Present Progressive Recycling Release Rental Reports Republic Second Services Solutions Stericycle stock Third TRASH TriTech Veolia Waste yard Year
- Dumpster Diving for Gourmet Pig Feed – Novella Carpenter July 10, 2011
- A Shout Out To Eating Garbage: Dumpster Diving on CBC September 17, 2011
- MythBusters – Dumpster Diving Trailer July 16, 2011
- Kris Kemp: Dumpster Diver August 21, 2011
- What should happen after my character gets beat up? June 6, 2011
- Frugal TV – Dumpster Diving for Coupons June 11, 2011
- Dumpster Dive (Director Commentary) September 24, 2011
- Dumpster Divers Spark Palin Probe September 11, 2011
- Auburn-Placer 1 yard dumpster June 8, 2011
- Can Opener? We don’t need no stinking can opener! June 19, 2011