Watlington Waterworks is reporting a significant increase in profit for the first half of the year - but a drop in demand since the September 11 terrorist attacks is expected to adversely affect profit in the second half of the year.

The company's six-month interim report - for the period ending June 30, 2001 and released on Monday - shows marked improvement in profit, over the same period last year.

Net earnings from the first six months of 2001 show an increase to $432,470. Net earnings for the first six months of 2000 were $206, 037.

The increase is being attributed to lower rainfall in the first six months of 2001. Rainfall in 2000 exceeded normal averages by a significant amount.

Higher margin activity is also being cited as reason for the increase.

President and CEO Allan Rance said demand for the company's products and services remained strong throughout the summer, but that has now been reduced significantly.

Mr. Rance said of the drop in demand: "The events of September 11 and the immediate curtailment of travel and tourism have resulted in an abrupt reduction in demand.

"The winter period with its lower level of activity traditionally commences in October or November, but it is clear that we have already entered this phase and the company's peak period has been significantly reduced."

Mr. Rance said that results for the second half of the year would be seriously affected, which will impact results for the year as a whole.

Meanwhile, the company reports the plant's infrastructure continues to be upgraded with the replacement of power trains for the reverse-osmosis plant.

These units, Mr. Rance said, are more efficient and have reduced operating costs.

Mr. Rance added that a policy of reviewing the company's assets continues and amortisation of Goodwill is currently under consideration with a view to decide whether amortisation rates adequately reflect present competitive conditions.