SBS Earnings and Upgrade

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EARNINGS

SABESP's Net Income Grows 34.6% in 2007
March 28, 2008 11:48 PM ET
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SAO PAULO, Brazil, March 28 /PRNewswire-FirstCall/ -- Companhia de Saneamento Basico do Estado de Sao Paulo - SABESP (Bovespa: SBSP3; NYSE: SBS), one of the largest water and sewage service providers in the world based on the number of customers, announces today its results for 2007.

In 2007, net operating revenue totaled R$ 6.0 billion, an 8.0% increase compared to 2006. Costs and expenses stood at R$ 3.9 billion, 4.6% higher than in 2006. EBITDA moved up by 10.3%, from R$ 2.4 billion in 2006 to R$ 2.7 billion in 2007 as revenues outgrew costs.

Earnings before financial expenses (EBIT) climbed by 15.1%, from R$ 1.8 billion in 2006 to R$ 2.1 billion in 2007. Net income reached R$ 1.05 billion, 34.6% higher than the R$ 778.9 million recorded in 2006. In the 4Q07, net income totaled R$ 78.1 million, down by 2.4% the same period of the previous year.

Gross operating revenue grew by R$ 464.2 million, or 7.8%, from R$ 6.0 billion in 2006 to R$ 6.4 billion in 2007. The main reasons for this increase were: (i) the 5.7% impact derived from the 6.7% tariff readjustment in 2006, with a 4.7% impact in 2007, and the 4.1% tariff readjustment in September 2007, with a 1% impact in the period; and (ii) the 3.1% increase in billed volume.

The complete version of the release is available at the Company's website: www.sabesp.com.br

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March 31, 2008 4:09 PM ET
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NEW YORK (AP) - An analyst raised estimates and kept a strong rating on shares of Brazil's Companhia de Saneamento Basico do Estado de Sao Paulo Monday, saying the water and sewage utility will likely continue to provide high returns over the next several years.

Brean, Murray, Carret & Co. analyst Michael Gaugler now expects 2008 earnings of $5.70 per share, up from a previous $5.49 per share. He kept a "Buy" rating and $93 price target, implying he expects the stock to more than double over Friday's closing price of $44.17.

Companhia de Saneamento Basico trades on the New York Stock Exchange as an ADR, and on Brazil's stock market. ADR stands for American Depositary Receipt, which is a security designed to allow U.S. investors to trade shares of companies based overseas.

While recently announced fourth-quarter results were hurt by higher costs, the company was able to post gross margins of 51 percent, he said.

"We continue to believe considerable leverage exists within the business model to drive meaningfully higher returns for investors over the next several years," Gaugler said in a note to clients.

Gaugler warned that majority government ownership, water supply, environmental regulation and other factors pose risks to results.

During intraday trading, shares of Companhia de Saneamento Basico gained 19 cents to $44.36.

The Bank of New York Emerging Markets ADR Index -- which includes shares of companies based in China, Mexico, Brazil and more -- added 1.47 points to 336.13. The Bank of New York Composite ADR Index gained 0.65 points to 168.58 as the U.S. markets rose in afternoon trading.

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