Spotlight on ESG investors on climate change and water


As world leaders gather in Glasgow for the United Nations Climate Change Conference (also known as COP26), one needs to be aware that, as the world continues to suffer from more severe weather conditions, some of the things we take for granted can become more expensive and / or scarce. The impact of extreme heat and droughts could potentially affect the supply and availability of drinking water, as well as for irrigation and our supply of fresh food. Although COP26 is primarily focused on mitigating greenhouse gas emissions, we need to look beyond what the consequences of a changing environment might have on humanity. For years, if not decades, clean drinking water has been touted as an essential commodity whose time will come. Maybe now that the weather seems to be getting more volatile, we could finally see the start.

Today we are updating a favorite from InvestorIntel – H2O Innovation inc. (TSXV: HEO | OTCQX: HEOFF) which designs, manufactures and commissions custom membrane water treatment systems, provides operation and maintenance services for this equipment, and designs, manufactures and sells a range complete with specialty OEM products such as chemicals, consumables, fittings, fittings, cartridge filters and other components for several markets in the water treatment industry. Over the past 20 years, the company has designed and manufactured state-of-the-art integrated water treatment solutions for municipal, power generation and natural resource end users, specializing in applications for drinking water, water reuse, wastewater treatment and industrial processes. the water. Developed in-house, the company’s solutions are designed, adapted and built to measure for all types of applications.

The Company divides its activities into three operating segments: Water Technologies & Services (WTS), which designs and manufactures customized water, wastewater and water reuse systems; Specialty Products (SP), using a global network of more than 100 distribution partners to manufacture and deliver specialty chemicals, components and consumables to end users, with a particular focus on membrane applications; and Operation and Maintenance (O&M), for contractual operations for water, wastewater, water reuse treatment, collection, distribution systems, pump stations and associated assets for customers everywhere in North America.

At the end of September, the Company published its results for its financial year ended June 30, 2021, showing a 2021 financial year, turnover and record profitability. Highlights included annual revenues reaching $ 144.3 million, representing growth of $ 10.7 million or 8.0% year-over-year; net income of $ 3.1 million, or $ 0.039 per share, compared to a net loss of $ 4.2 million, or $ 0.061 per share, for the prior year; and a solid financial position with a net debt of $ 0.5 million at the end of the year, compared to a net debt of $ 10.5 million as of June 30, 2020. In terms of mergers and acquisitions, H2O Innovation made two acquisitions completing his Texas operations and maintenance services, and extended its presence in Spain and Latin America with the acquisition of Genesys Membrane Products, SL, a network for the marketing and sale of specialized products.

The company, however, was a little behind market expectations, despite the positive results, and the stock lost 10% when its figures for fiscal 2021 were announced. However, the buyout could be imminent when the results for the first quarter of the current fiscal year will be published on Wednesday, November 10.e. If we ask why an investor should be bullish, the answer is that since June 30e H2O Innovations announced an O&M contract for the Town of Laurel, MS, for a total value of $ 10.4 million over 4 years; it also won six new equipment projects in its WTS business line and completed six others, with new contracts valued at $ 4.8 million; its Piedmont business segment secured new orders for fiber-reinforced polyester cartridge filter housings and stainless steel duplex fittings for a total of $ 4.0 million, as well as the signing of five new distribution agreements in Latin America ; and its SP business line has been selected to supply scale control to the world’s largest reverse osmosis seawater desalination plant. This is important because one of the main goals of H2O Innovations is to generate recurring revenue in its three business segments, and it has reached a threshold of 87%. This suggests that all of the above announcements should be added to the coming first quarter results.

Fortunately, planet Earth did not descend into the harsh and inhospitable environment of the desert planet, Arrakis, setting the latest version of the movie “Dune”Based on the essential pound (s) of Franck Herbert. But as the reliability of fresh water becomes more and more of a concern, it’s good to know that companies like H2O Innovations are backing us. Maybe we are finally starting to see the commoditization of water that could make clean water stewards like H2O Innovations, which was named Water Company of the Year at the 2020 Global Water Awards, very important and valuable. In the meantime, this company with its recurring revenue, healthy balance sheet and a market capitalization of just over $ 200 million.

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