Retail water sales rose 12% to about $6.5 million, versus about $5.8 million in the quarter ended March 31, 2008, reflecting a 7% increase in the volume of water sold and annual price increases resulting from inflation adjustments. Bulk water revenues declined 7% to about $6.4 million in the most recent quarter, compared with about $6.9 million in year-earlier period, due to a 2% decline in the volume of water sold and a reduction in energy costs passed through to customers. Services revenues increased 87% to about $2.9 million in the first quarter of 2009, compared with about $1.6 million in the first quarter of 2008, due to higher relative project construction expenditures.

The improvement in net income during the most recent quarter reflects higher gross profits for all three business segments.

Consolidated Water gross profit increased 32% to about $6.0 million, versus $4.5 million in the prior-year quarter. Gross profit on Retail revenues approximated $4.0 million (61% of revenues) in the quarter ended March 31, 2009, compared with about $3.3 million (56% of revenues) in the quarter ended March 31, 2008. Gross profit on Bulk revenues increased to about $1.4 million (22% of revenues), compared with about $1.0 million (15% of revenues) in the year-earlier period. Gross profit on Services revenues approximated $0.6 million in the first quarter of 2009 and $0.2 million in the first quarter of 2008.

General and administrative expenses approximated $2.5 million in both of the first quarters of 2009 and 2008.

Interest income decreased substantially, from $452,690 in the first quarter of 2008 to $158,304 in the most recent quarter, primarily reflecting a reduction in the rates of interest earned on average balances invested in interest-bearing deposit accounts. Interest expense was relatively unchanged at $426,229 in the quarter ended March 31, 2009, versus $446,558 in the quarter ended March 31, 2008.

The company’s equity in the loss of its OC-BVI affiliate in the British Virgin Islands totaled $608,999 in the most recent quarter, versus $497,497 in the first quarter of 2008.

Our 52% increase in net income attributable to common shareholders in the first quarter of 2009 was driven primarily by improvements in gross profit margins, stated Rick McTaggart, chief executive officer of Consolidated Water. In particular, gross margins in our Bulk water segment expanded significantly, from 15% of revenues in last year’s first quarter to 22% in the most recent quarter, primarily due to efficiency improvements in our Bahamas operations. These improvements were the result of capital projects that we completed at the Windsor plant last October, and we expect to improve efficiencies further when we complete the replacement of RO membranes on the last two production units at the Windsor plant during the second quarter of 2009.

Our Retail water segment recorded increases in both sales and gross margins during the first quarter. The volume of water delivered to our retail customers rose 7% from prior-year levels and was up almost 37% when compared with the fourth quarter of 2008. We attribute the increase in Retail sales primarily to drier weather conditions in the Cayman Islands during the quarter ended March 31, 2009. Meanwhile, Retail gross margins expanded to 61% of revenues in the most recent quarter, versus 56% a year earlier.

Regarding the OC-BVI litigation, we are now able to report that a timetable is developing that should lead to a resolution of our affiliate’s dispute with the Government of the British Virgin Islands, added McTaggart. OC-BVI has been informed that the ownership lawsuit involving the Baughers Bay plant should proceed to trial in June or July 2009. Meanwhile, the Bar Bay plant in BVI began operating in January 2009 and is performing as expected. OC-BVI is now delivering, on average, about 200,000 gallons of water per day to the BVI government from the new plant. The BVI government will be required to purchase a minimum of 600,000 gallons per day when OC-BVI completes work on the pipeline to deliver water from the Bar Bay plant to the government’s reservoir in the second quarter of 2009.

Consolidated Water is a Cayman Islands-based developer and operator of desalination plants and water distribution systems.