By: Dylan Sikes - AllPennyStocks.com News

Wednesday, July 15, 2015

According to the Beverage Marketing Corporation, the total volume of bottled water consumer in the United States in 2014 rose to 11 billion gallons, up 7.4% from 2013. That equates to 34 gallons per person, which may seem like quite a bit, but it is actually a fair amount lower on a per capita basis than other countries – the U.S. ranks tenth according to BMC – meaning that there is still significant amount for growth in U.S. markets. As it stands now, bottled water is the nation’s second largest commercial beverage category by volume, but it is only about half as large as big as the carbonated soft drinks market and only nominally ahead of milk and beer consumption. Last year sales revenues in the U.S. bottled water market were about $13 billion in wholesale dollars, up 6.1 percent from 2013. Scottsdale, Arizona-based The Alkaline Water Company (OTCQB:WTER), a developer of an alkaline water product, is looking to capitalize on the growing trend towards consumer’s drinking bottled water. Alkaline’s proprietary, chemical-free process raises the pH in its water to 8.8, a level that proponents claim delivers many benefits to the body as we touched on in this article in 2013, including lower risk for cancer and heart disease and acid reflux as well as increasing energy levels.

Incidentally, in that article, Alkaline’s main product was Alkaline84 because the pH level was 8.4. Today, the flagship product is Alkaline88, as it achieves a pH level of 8.8.

On Wednesday, Alkaline Water Co. released their results from fiscal 2015 ended March 31, 2015 and provided guidance for fiscal 2016. Revenue for the year was up 570 percent to $3.7 million from $552,699 in the prior fiscal year. The company attributed the jump in sales to increased distribution to retailers and continued sell through to consumers. As of the end of the year, Alkaline’s products are found in more than 16,000 stores spanning all 50 states, including nearly half of the top 75 retailers in the U.S., including Safeway, GNC, Costco and Whole Foods. The product has a particular presence in Southern California where it is the number one selling alkaline water.

To meet growing demand, Steven Nickolas, CEO of Alkaline Water Co, said, “[We] have increased our production capacity threefold over the prior year by adding new co-packing plants and machinery throughout the country. This increase in capacity should soon allow us to produce and sell up to $2,000,000 of water wholesale per month. We have also further expanded our product line to include single serving 500 ml, 700 ml, and 1 L bottles to be sold along with our original bulk size 3 L and 1-gallon products. We see the expansion of the single serving as a significant part of our growth going forward.”

Gross profit as a percentage of revenue also improved, in part because of reduced raw material expense, climbing to 31.6 percent versus 25.5 percent last year.

Operating expenses also soared with the expansion, rising to $8.08 million in fiscal 2015, compared to $4.42 million in fiscal 2014. The company cited $2.43 million in expenses related to stock option compensation as having a negative impact on general and administrative costs as part of the reason for the increase.

With that, Alkaline Water Co. swung deeper in the red with a net loss of $7.14 million, including stock and stock option compensation and professional fees of $4.38 million. In fiscal 2014, the net loss tallied $4.23 million.

Looking ahead, the company expects to be cash-flow breakeven by the third quarter of the fiscal year (meaning by December 31, 2015); for revenue to top $10 million for the full fiscal year; and to have its product in more than 25,000 stores nationwide. Importantly, Alkaline Water expects profitability in the fourth quarter of the year (ended March 31, 2016).

Shares of WTER have been on the upswing in 2015, starting around 8 cents and dipping as low as 6 cents in February before beginning a climb to a high on Monday at 18 cents. Shares are not responding positively to the news today, though, trimming 7.2 percent from Tuesday’s close to trade in the early afternoon at 15 cents.

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