All air contains water in the form of vapour. The maximum amount of water vapour that can be held in air varies with the temperature of the air. As the air temperature falls, so does the amount of water vapour that the air can hold.
That is why you get dew on the grass in the morning. On a still clear evening warm air (from the daytime) comes into contact with the ground which is cooling down. This cools the air down and then some water condenses into liquid form.
What happens in a compressed air system is similar to this. Ambient air (including water vapour) is compressed which raises its temperature (due to the law of physics). The high temperature air can hold this amount of water in the vapour form. Then the air leaves the compressor and enters the pipework system and cools down. This causes water to condense out.
It is this liquid water that causes damage to pneumatic components and air tools.
So, if your compressor is making water it is not the fault of the compressor! It is due to the laws of physics plain and simple.
The amount of water that results will vary with atmospheric conditions.
There are many different ways of dealing with this water problem. Some more and some less expensive. The correct one for you often depends on the application.
Some of these drying methods include: