Stronger real boosts Sabesp's 1Q

A stronger real versus the US dollar and an increase in operating profit helped Brazil's Sao Paulo state water utility Sabesp post a 172mn reais (US$57.9mn) net profit in the first quarter, a 54.5% jump from 1Q02, the utility said in a statement. A Sabesp official told BNamericas earlier this year that the company has systematically been transferring its long-term debt into reais from US dollars to lower its exposure to currency devaluation. Operating profit for the period increased 10.8% to 994mn reais due to a 3.5% increase in billing and an 8.2% rates increase that began in August. In 2002, Sabesp posted a 651mn reais net loss compared to a 216mn reais net profit the year before due to a 34% devaluation of the real versus the US dollar, higher inflation and an increase of the country's Central Bank key lending rate (Selic). Despite the adverse economic climate, operating profit increased 9.7% to 3.77bn reais and EBIDTA rose 4.2% to 1.86bn, which helped the water utility carry out an investment program of some 619mn reais in 2002. Sabesp's current five-year investment program calls for investing 550mn-600mn reais/year through 2006. The utility kicked off 2003 with three programs: cost reduction through a series of measures such as renegotiating power supply contracts and more rationing in the purchase of treatment materials, among other supplies; increasing income by combating fraud and expanding the operational base; and optimizing assets. Sabesp is Brazil's largest water utility in terms of users, serving 323 municipalities of Sao Paulo state's 645. The utility provides water to 25 million residents through a 54,000km network and sewerage service to 16.8 million residents through a 34,000km collection network. The Sao Paulo metropolitan region makes up 76% of the utility's income, while the interior and coastal areas make up 16% and 8%, respectively.