I was relieved after reading the comment on page 2 of the 'Business Update' announcement yesterday that the company has been actively looking for work in Europe in the aftermath of that horrible blue-green algae situation that resulted as a consequence of the heatwave over the last northern-hemisphere summer. Reading over many of the reports on the situation in Europe over the past few months, I got a sense that this event has had a particular impact on the psyche of a number of countries, most notably Germany and the small nation of Luxembourg.
Indeed, the past tense isn't entirely appropriate here, as the situation is still continuing in places: earlier this month the Rhine River fell to its lowest level on record due to the continuing drought in Germany, and this is far from being the only river in that country to be impacted.
The Edersee, the second largest reservoir in Germany, has fallen to its lowest level in 15 years
The drop in water levels is resulting in major logistic difficulties in Germany, pushing up the price of heating oil, for example. According to one report, intense rainfall will be required to correct this situation, and it is likely that water levels will remain low into the new year.
Meanwhile, there is a similar situation in Luxembourg, as was noted in this report from last week, with the Luxembourg Water Authority describing the falling water levels of the rivers in that small nation as an 'extraordinary event', with some concerned that the country's drinking water reserves may fall short in the new year.
Note that this situation has significance for this company, because when the water-level of lakes and rivers fall, it means that the concentration of nutrients is higher, which in turn heightens the risk of recurring blue-green algae outbreaks over the next summer.
Some scientists also suspect that the abnormally warm conditions earlier this year could be repeated in 2019. French and Dutch researchers recently forecast that for 2018 to 2022, there was a 58 percent likelihood that it will be warmer than the average trend, and for the years 2018 to 2021, that likelihood is 72 percent. Of course, warmer temperatures also help promote the growth of blue-green algae.
In short, there is good reason for the local authorities in Germany, Luxembourg and other European countries to be concerned that in 2019 we could be in for a sequel to the blue-green horror that was experienced over the summer months this year, and I think the local authorities in these countries will be under significant community pressure to take appropriate preventive measures to make sure this doesn't eventuate.
Given this favourable backdrop, my feeling is that the company should be well positioned to win a number of those contracts in Europe that were referred to in the announcement over the next few months, and to be honest, I'd be disappointed if they came away from this empty-handed.
The drop in the share-price on Tuesday was disappointing, given it came on the back of the promising announcement of the previous day, but perhaps not so surprising.
Personally, I don't think now is the right time to sell: I'm not willing to part with any of my shares in this company until the market cap hits at least the $300 million mark.
What seems to be holding back the share price, however, as has been noted by others here previously, is a lack of delivery. Some may recall in the update of November last year, when the company made reference to a large pipeline of lake applications in Canada as well as in Europe.
We are nearly a year on now, and we are still waiting for an update on this 'large pipeline' of work in Europe and Canada. I can't entirely blame some holders if they are a feeling a little jaded.
But I think holders should try to hang on for at least a couple more months. I noticed in the Cash Flow Report that staff costs are projected to increase to $900,000 in the next quarter, and I think this is a good sign. I have wondered sometimes if the failure of this company to deliver on promises in the past might partly have been because the company simply doesn't have enough staff to keep on top of everything, and given the size of the company, and the scale of the problem, they really do need more people.
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