Rubicon Water (ASX:RWL) executives told investors its first-half performance was held back by a stronger Australian dollar and a freeze in U.S. government project funding, but said the company has seen improving conditions entering the second half, including stronger order intake, new international wins, and early momentum in corporate-funded “water stewardship” projects.
Management highlighted currency and U.S. funding as key drags
Chief Executive Officer Bruce Sutton said full-year FY2025 revenue of AUD 29 million was down about 9% from the prior year, with the first half of the current year “inordinately impacted” by currency movements. Sutton explained that several contracts were signed last year with costs and revenue recognized earlier, but cash was received this year, and the gap coincided with an appreciation in the Australian dollar. He said that impact flowed through to both reported revenue and the bottom line.
Financial results showed lower revenue and margin pressure
Chief Financial Officer Andrew Bendall said revenue for the half fell AUD 3 million compared with the prior corresponding period. He attributed AUD 1.7 million of the shortfall to the stronger Australian dollar translating offshore revenue, particularly against the U.S. dollar and Indian rupee. The remaining AUD 1.3 million reflected lower volumes in the U.S. and Australia, partially offset by Europe.
Bendall said gross margin percentage declined 6.7 percentage points year-over-year. He attributed 4.8 percentage points of the gap to the revenue shortfall, including an FX translation impact and volume effects. Bendall also cited a further 1% impact from the lack of new price contracts in the U.S. during the half, which limited the company’s ability to fully absorb tariffs.
Operating expenses rose AUD 1.2 million, driven mainly by higher employee costs. Bendall said the company also incurred additional legal expenses while resolving issues associated with exiting an old China joint venture and establishing a new one. Underlying EBITDA was AUD 4.2 million lower than the prior corresponding period, and the stronger Australian dollar also created an adverse unrealized FX impact of AUD 2.1 million related to intercompany loan revaluation versus the first half of FY2025.
The company reported a bottom-line loss of AUD 6.4 million, which Bendall noted was AUD 5 million less than the previous corresponding period.
Cash flow and balance sheet reflected the weaker half
Bendall said operating cash flow was an outflow of AUD 2.9 million despite reduced receivables and “solid collections,” including the final portion of debt from the Indian NLBC project. He attributed the cash outflow to lower sales and the negative profit result. Bendall said the company maintained investment in its next-generation software platform, NeuroFlo.
On the balance sheet, Bendall said cash and receivables decreased while stock and contract assets were stable, contributing to a AUD 6.4 million reduction in current assets since June 30. He said non-current assets increased due to higher deferred tax assets from the loss, and net debt rose by AUD 5.2 million to AUD 19.5 million as a result of operating and investing cash outflows.
International wins and pipeline movement supported the outlook
Sutton said the company offset some U.S. funding-related delays with new project wins in Chile, Costa Rica, and Italy totaling AUD 11.9 million in the first half. He also pointed to tender activity of more than AUD 30 million that management expects could contribute materially to FY2026 results if won in time, noting some tenders were due to close in March.
He added that the company saw an unusually strong start to the second half, with AUD 9.3 million in new contracts signed since January 1, compared with AUD 3.9 million in the prior comparable period. Sutton emphasized that January and February are typically slower order months for the business.
Bendall said the company’s “close” pipeline category expanded to AUD 61 million from AUD 42 million since the AGM update, reflecting the inclusion of the Chilean project and expanded scope in Italy’s Villarosi project, as well as multiple priority projects entering tender. Overall, Bendall said Rubicon was tracking 18 priority projects totaling AUD 189 million.
Corporate-funded water stewardship emerged as a new channel
Sutton said Rubicon had secured its first direct contract funded by a corporate entity seeking audited water savings tied to ESG goals. He said the corporate-funded project involved Glen-Colusa Irrigation District and included delivering audited water savings results for 10 years, with Rubicon contracted directly—an approach Sutton said corporates preferred for efficiency.
He also referenced two other corporate-funded projects where funding flowed to irrigation districts that then contracted Rubicon, citing Gila River Farms in Arizona and Bear River in Utah. Sutton said Rubicon was engaged with several of the top 30 U.S. companies by market capitalization on water stewardship initiatives, including a request from a sustainability leader at a large company for a summary of projects where Rubicon’s technology could drive material water savings across the Colorado River Basin by the end of March.
In Q&A, management reiterated that growth remained the core strategy and said it expected higher volumes in the second half. Bendall said the company was also taking operating cost measures to reduce costs in the second half. Sutton said Rubicon’s “unique end-to-end value proposition” provided pricing flexibility, though he noted pricing changes can lag because projects are often scoped and priced months or years before execution.
Management also discussed regional updates, saying it remained “very bullish” on India and expected the region to become a material contributor to near-term revenue, while Egypt remained a longer-dated opportunity after a significant pipeline project was pushed back due to a partner change. On FX risk, Bendall said the company was reviewing options, while noting the challenge of hedging translation impacts and emphasizing pricing over time as a primary lever.
Sutton closed by acknowledging the first-half result was below expectations, but said the company remained confident in the outlook for the second half of FY2026 and beyond, citing improving market conditions, a strong near-term tender pipeline, and expanding corporate and government funding avenues.
About Rubicon Water (ASX:RWL)
Rubicon Water Limited designs, manufactures, installs, and maintains irrigation automation software and hardware in Australia, New Zealand, Asia, and internationally. The company offers network control solutions, such as total channel control, low energy pipeline, site management, and water and energy efficiency solutions; flow, water level, and climate measurement solutions; and operations software solutions. It also provides surface irrigation, irrigation automation, and precise irrigation scheduling solutions.
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