Pandemic and increased rainfall to impact Watlington Waterworks
Bermuda’s piped and bottled water supplier has warned that the ongoing Covid-19 pandemic and increased rainfall in the first quarter of the year will adversely impact the company’s results.
The directors of Watlington Waterworks Ltd, in an annual report to shareholders filed with the Bermuda Stock Exchange, said “2021 is expected to be a significantly weaker year than 2020”.
The company earned a profit of $2,404,469 in 2020, a drop from the profit of $3,189,719 recorded in 2019.
The directors wrote: “Apart from Covid-19 continuing to affect demand for our products and services, Bermuda has received above average rainfall for the first quarter which has further depressed demand.
“Last year we had the benefit of a very strong pre-Covid first quarter to provide a solid foundation for a satisfactory result. This year is very different with weak demand from the beginning of the year.”
They added: “Providing Bermuda reaches herd immunity later this year and we can ‘reopen’, we anticipate a recovery starting later this year. How long it will take to return to pre-pandemic demand is unknown.
“The company is positioning itself to be able to meet future demand with financial flexibility that allows the company to make appropriate timely, targeted investment to successfully adapt to market conditions.”
The directors said the company’s first quarter last year was “one of its strongest starts to a year ever”.
Sales reduced substantially when Bermuda went into “shelter in place”, but operating expenses also declined as less production was required.
The directors wrote: “Fortunately, demand remained stronger than initially anticipated in part due to below average rainfall and changing life patterns as people adapted to working from home.
“Sales from March onwards declined relative to previous years however, they remained stronger than forecast after the onset of the pandemic for much of the year. This has resulted in a much more satisfactory performance than initially forecast at the beginning of ‘shelter in place’.”
Shareholders were advised that an accumulation of cash and investments in short-term deposits over the past four years occurred due to the lengthy process for acquiring land and approval to build a new reservoir and satellite treatment facility in Southampton.
The directors wrote: “There was a decline in annual infrastructure investment during this period which resulted in the substantial cash and investments recorded on the balance sheet.”
The WWL board said it is “taking a long-term approach to infrastructure investment since the life of assets well-built will last more than a hundred years and views the effects of the pandemic as a short-term negative”.
The company entered into an agreement with D&J Construction Ltd late last year to build a three million gallon reservoir and phase one of a future treatment plant building on Luke’s Pond Drive in Southampton.
Work commenced in February and is expected to be complete by June next year.
The construction project, together with associated infrastructure is budgeted to cost $16 million, the directors said, adding: “This will be financed by use of cash resources and liquidating short-term investments. The cash and investments accumulated on the balance sheet over the past four years will be drawn down over the next 18 months.”
The company has this year committed to installing a new water main in Middle Road from Belmont to Barnes’ Corner as part of a shared trenching project with Belco, who are leading on the project.
Upon completion of the Middle Road pipeline project, the company said it will have water mains from Devonshire to Somerset with redundancy to distribute via South Road, Middle Road and Harbour Road.
The directors wrote: “This will augment operations with the new reservoir. The company will be able to distribute piped water either from Devonshire westwards or from Southampton eastwards and westwards.
“The company will finally achieve a long-term goal to have up to five days’ reserve water supply on hand to provide a more secure future customer water supply for the western half of Bermuda.”
The company said the new reservoir will have more than 20,000 square feet of flat roof area, adding that it has been designed to be able to support a solar farm on the roof.
The directors wrote: “The company is mindful of its carbon footprint and intends to invest in future supplementary renewable energy supplies to offset its energy demands in Southampton and elsewhere.”