Thursday 16 June 2011

WaterFurnace Renewable Energy Inc 1Q2011 Conference Call

My investment pick (original analysis post here) of the environmental litter, WaterFurnace (WFI) finally issued (delayed by conversion to the IFRS accounting standard) its first quarter report covering the three months up to March 31, 2011 and held the conference call on the results.

Things, in a word, look rosy. President Huntington and Treasurer Andriano provided reasonable explanations and assurances that some quarterly report negatives are one-offs (like the extra taxes that really reduced profits), erring on the cautious side (the rise in warranty reserves despite better reliability of newer products) or taking advantage of an opportunity (the rise in inventories to get 2% price savings on input materials vs only 1.5% return on cash). The company also successfully (sales dollars are up) implemented a price increase to restore margins in the face of rising input costs.

More important for the long term is that despite the continued hapless state of the US residential market, WFI is making sales gains and solid profits. There was lots of talk of expansion in China through a joint venture, sales opportunity in new market segments from the Hyper Engineering acquisition, where they are hiring, and a renewal of sales increases in Canada after the promise of the Conservative government to renew the EcoEnergy retrofit subsidy program.

After the call, WFI's price went up in the broadly declining market yesterday, up to $21.50 (which is still way down from the $26 or so of last September when I bought some stock). Maybe speculators (or investors?) have taken a cue from the closing seconds of the call when Huntington said he was looking forward to a solid second quarter. Looking forward? The end of the second quarter is in two weeks!

I still have confidence in the long term worth of this company and still have my shares.

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