M&As will help make water supply assets more efficient, leading to further rate increases.
New York, NY (PRWEB) April 25, 2014
The Water Supply and Irrigation Systems industry's performance has been buoyed by high demand over the five years to 2014. Revenue is expected to increase an average 2.1% annually to $6.6 billion during the period. “Demand for water remained high since 2009, as droughts and other dry weather conditions created a need for it,” according to IBISWorld Industry Analyst Antal Neville. While water sales volumes shrunk, water prices have increased, leading industry revenue to grow in the past five years. These rate increases are expected to continue and industry revenue is anticipated to grow 1.1% in 2014.
Over the past five years, Canada's water rates have increased aggressively. According to Environment Canada's 2011 Municipal Water Pricing Report, at a consumption level of 25 cubic meters per month (the average consumption of a three-person household), rates rose 24.4% from 2006 to 2009, from $42.91 to $53.39. Industry revenue has grown alongside rate increases. These increases have been justified by the need to repair the country's aging infrastructure. According to Environment Canada, Canadian municipalities currently face $31.0 billion in costs in necessary repairs and maintenance of existing infrastructure, as well as an additional $56.6 billion for new infrastructure.
Private operators have gained market share in the industry through a flurry of merger and acquisition (M&A) activity. “During the recession, many public entities had trouble raising revenue from taxes and bonds and were unable to invest in operations that needed upgrading,” says Neville. Private firms stepped in to acquire these struggling operators and expanded their stake in the industry by upgrading aging assets for a profit. In turn, these firms increased rates, which helped sustain industry revenue growth.
The next five years are set to keep revenue flowing in the right direction for the industry. M&A activity will remain a major component of the industry as private firms seek to expand their interests and raise profit margins. While firms will acquire nearby struggling operations to benefit from economies of scale, they will also expand by adding new customers. Firms that buy struggling companies will invest in making water supply assets more efficient, which will likely lead to further rate increases for the industry.
For more information, visit IBISWorld’s Water Supply and Irrigation Systems in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry operates water collection, treatment and distribution systems for domestic and industrial needs. The water supply distribution activities conducted by this industry are generally supplied directly to end users. Companies that treat wastewater are excluded from this industry and included in the Sewage Treatment Facilities industry (IBISWorld report 22132CA).
Key External Drivers
Industry Life Cycle
Products & Markets
Products & Services
Globalization & Trade
Market Share Concentration
Key Success Factors
Cost Structure Benchmarks
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