Gafisa Reports Results for Third Quarter 2011
- Launches in 3Q11 totaled R$1 billion, a 15% fall on 3Q10, as the company deliberately slowed growth and implemented a strategic plan to improve profitability, generate cash and reduce leverage.
- Adjusted EBITDA was R$202.2 million in 3Q11, a 2.5% increase on 3Q10, due to higher margin AlphaVille and Gafisa products. The 3Q11 EBITDA margin improved to 20.1%.
- Pre-sales reached R$1.04 billion in the quarter, a 3% increase on 3Q10. While sales velocity of launches rose to 50%, indicating strong demand, the company will slow remaining 2011 launches to reach a year-end total between R$3.5 - R$4 billion.
- Contracted sales were R$1 billion in 3Q11, in line with 3Q10
- The company expects to become cash flow positive during coming quarters and achieve a net debt to equity ratio below 60 per cent over the next quarters, compared with 75.3 per cent in 3Q11.
SAO PAULO, Nov. 14, 2011 /PRNewswire/ -- Gafisa S.A. (Bovespa: GFSA3; NYSE: GFA), Brazil's leading diversified national homebuilder, today reported financial results for the third quarter ended September 30, 2011. The financial statements were prepared and presented in accordance with IFRS and in Brazilian Reais (R$). Further details of the Company's third quarter 2011 results may be found on the Gafisa website: www.gafisa.com.br/ir.
Commenting on the results, Duilio Calciolari, CEO of Gafisa, said, "We are pleased to report quarterly results led by a strong recovery in our operating margins, as the share of older lower margin developments continues to diminish in our overall product mix. Gross margin for the quarter was 29.5%, an increase on both a year-on-year and sequential basis. Subsequently, our EBITDA margin also improved to 20.1% for the third quarter."
"Despite these improvements, we expect to continue to see some pressure on the EBITDA margin during the coming quarters as we complete the delivery of the higher cost legacy Tenda projects and lower margin Gafisa projects from our geographic expansionary period as well as implement some aspects of our new strategic plan."
"While sales velocity of launches during the quarter was 50%, indicating strong demand for our projects, we have deliberately decided to slow the growth of launches for the remainder of 2011 and stabilize 2012. This change is part of a more comprehensive strategic plan we are in the process of implementing, that will help us to achieve improved profitability, positive cash flow and a reduction in our overall leverage."
Calciolari added, "While the Brazilian economy has moved into a more rational growth phase, overall the fundamentals remain sound to support long term growth for the homebuilding industry. We are confident that our strategic plan will allow us to focus on the strong pockets of opportunity for our brands and set the stage for continued market leadership in the future. We fully understand that this strategy may impact the size of our firm for some years to come. However, these are necessary actions and we believe will prove a highly successful trade-off in the longer term."
Third Quarter Results
- 3Q11 launches reached R$1 billion, a 15% decrease compared to 3Q10. Launches for the first nine months of 2011 totaled R$2.9 billion, representing 56% of the mid-range of full-year launch guidance of R$5.3 billion. This has resulted in a downward revision to 2011 guidance to between R$3.5 billion and R$4 billion.
- Pre-sales reached R$1.04 billion in 3Q11, a 3% increase compared to 3Q10, reflecting better sales of launches in 3Q11, which reached 50%. Consolidated VSO was 23.1%.
- Net revenues, recognized by the Percentage of Completion ("PoC") method, reached R$1 billion, a 5% increase compared to 3Q10, due to higher recognition coming from recent launches.
- Adjusted Gross Profit (w/o capitalized interest) was R$297 million, 8% higher than the same period of 2010, with a 34% Adjusted Gross Margin.
- Adjusted EBITDA reached R$202.2 million with a 20.1% margin, a 2.5% increase over R$197 million in 3Q10, due to the delivery of higher margin products by AlphaVille and Gafisa.
- Net Income was R$46.2 million for 3Q11 (4.6% Adj. Net Margin), a 60% decrease compared to 3Q10.
- Net Debt/Equity ended the quarter at 75.3%, supported by a securitization of part of Gafisa's receivables totaling R$200 million.
Details of strategic plan
A new strategic plan designed in consultation with management consultants Bain & Co, and based on an evaluation of each of the Gafisa, AlphaVille and Tenda businesses which commenced in July, will foster long-term sustainability and profitable growth by improving margins, generating cash flow and reducing leverage.
Key elements of the strategy include:
- A new organizational structure establishing P&L owners by brand in order to enhance the focus on and exploit the unique qualities of each business line.
- Expansion of highly targeted regions of the country with proven potential for profitable development of each brand segment through 2014.
- A turn-around strategy for Tenda which conserves capital by only launching units that can immediately be transferred to CEF and developing a scale advantage to optimize the use of aluminum mold technology which facilitates a lower cost structure.
- Expanding AlphaVille, which boasts gross margins of approximately 50%, significant barriers to entry and competitive advantages, in the product mix.
In order to achieve these goals, Gafisa will slow the rate of launches in 2011 to between R$3.5 and R$4 billion. The company will continue to launch Gafisa products as long as the sales environment is strong for each product. Tenda launches will be based on Gafisa's ability to immediately transfer the units to the Caixa Economica Federal (CEF). Additionally, Gafisa's focus at Tenda will be to deliver units in progress. Gafisa has some R$400 million yet to transfer to CEF from finished units. Gafisa also intends to expand AlphaVille in our product mix and allocate the capital necessary to leverage the competitive advantages it has within this brand segment.
Outlook
Gafisa is on track to achieve a full-year EBITDA margin within the previously stated guidance range of 16%-20%. In the first nine months of 2011 the EBITDA margin reached 16.1%.
The company expects to finish the year with total launches of between R$3.5 – R$4 billion. The 2011 forecast equates to a 30% drop on previously stated guidance of between R$5 – R$5.6 billion, reflecting a more conservative strategy which focuses on long term profitability and cash flow generation.
Gafisa expects to become cash flow positive during coming quarters and to achieve a net debt to equity ratio below 60% over the next quarters.
Conference Call
The management of Gafisa will host a conference call in English on Wednesday, November 16, 2011, at 9:30 p.m. US EST/:12:30 p.m. Brasilia time. To access the call, dial +1 (516) 300-1066 from the United States and other countries and enter the code Gafisa. A live webcast of the conference call will be available on the internet at www.gafisa.com.br/ir.
Consolidated Income Statement
The Income Statement reflects the impact of IFRS adoption, also for 2010.
R$ 000 |
3Q11 |
2Q11 |
QoQ |
3Q10 |
YoY |
9M11 |
9M10 |
QoQ |
|
Net Operating Revenue |
1,005,490 |
1,041,344 |
-3.4% |
957,196 |
5.0% |
2,847,190 |
2,792,223 |
2.0% |
|
Operating Costs |
(708,614) |
(822,424) |
-13.8% |
(681,275) |
4.0% |
(2,146,626) |
(1,984,154) |
8.2% |
|
Gross profit |
296,876 |
218,920 |
35.6% |
275,921 |
7.6% |
700,564 |
808,069 |
-13.3% |
|
Operating Expenses |
|||||||||
Selling Expenses |
(68,298) |
(61,970) |
10.2% |
(53,887) |
26.7% |
(181,773) |
(166,321) |
9.3% |
|
General and Administrative Expenses |
(59,711) |
(60,389) |
-1.1% |
(59,317) |
0.7% |
(176,407) |
(171,860) |
2.6% |
|
Other Operating Revenues / Expenses |
(10,395) |
(8,649) |
20.2% |
(2,187) |
375.3% |
(30,025) |
(11,392) |
163.6% |
|
Depreciation and Amortization |
(21,855) |
(22,754) |
-4.0% |
(8,305) |
163.2% |
(56,974) |
(27,324) |
108.5% |
|
Operating results |
136,617 |
65,158 |
109.7% |
152,207 |
-10.2% |
255,385 |
431,172 |
-40.8% |
|
Financial Income |
31,619 |
21,697 |
19.0% |
36,417 |
-13.2% |
77,980 |
101,275 |
-23.0% |
|
Financial Expenses |
(89,740) |
(50,563) |
66.0% |
(56,432) |
59.0% |
(195,965) |
(181,816) |
7.8% |
|
Income Before Taxes on Income |
78,496 |
36,292 |
116.3% |
132,192 |
-40.6% |
137,400 |
350,631 |
-60.8% |
|
Deferred Taxes |
(5,858) |
10,147 |
-157.7% |
(823) |
611.8% |
10,592 |
(27,649) |
-138.3% |
|
Income Tax and Social Contribution |
(17,958) |
(11,590) |
54.9% |
(9,661) |
85.9% |
(37,698) |
(27,384) |
37.7% |
|
Income After Taxes on Income |
54,680 |
34,849 |
56.9% |
121,708 |
-55.1% |
110,294 |
295,598 |
-62.7% |
|
Minority Shareholders |
(8,463) |
(9,737) |
-13.1% |
(5,108) |
65.7% |
(25,259) |
(16,911) |
49.4% |
|
Net Income |
46,217 |
25,112 |
84.0% |
116,600 |
-60.4% |
85,035 |
278,687 |
-69.5% |
|
Consolidated Balance Sheet
3Q11 |
2Q11 |
QoQ |
3Q10 |
YoY |
||
Current Assets |
||||||
Cash and cash equivalents |
912,359 |
1,163,080 |
-21.6% |
1,231,143 |
-25.9% |
|
Receivables from clients |
4,002,213 |
3,653,708 |
9.5% |
2,727,930 |
46.7% |
|
Properties for sale |
2,130,661 |
1,988,093 |
7.2% |
1,447,266 |
47.2% |
|
Other accounts receivable |
146,461 |
201,492 |
-27.3% |
155,795 |
-6.0% |
|
Deferred selling expenses |
30,493 |
20,588 |
48.1% |
38,028 |
-19.8% |
|
Prepaid expenses |
13,599 |
9,533 |
42.7% |
16,423 |
-17.2% |
|
7,235,786 |
7,036,494 |
2.8% |
5,616,585 |
28.8% |
||
Long-term Assets |
||||||
Receivables from clients |
1,867,969 |
2,171,302 |
-14.0% |
2,411,275 |
-22.5% |
|
Properties for sale |
416,717 |
346,658 |
20.2% |
388,649 |
7.2% |
|
Deferred taxes |
353,212 |
353,445 |
-0.1% |
367,788 |
-4.0% |
|
Other |
215,695 |
187,536 |
15.0% |
252,324 |
-14.5% |
|
2,853,593 |
3,058,941 |
-6.7% |
3,420,036 |
-16.6% |
||
Property, plant and equipment |
74,939 |
81,135 |
-7,6% |
63,825 |
17,4% |
|
Intangible assets |
219,490 |
215,624 |
1,8% |
209,687 |
4,7% |
|
294,429 |
296,759 |
-0.8% |
273,512 |
7.6% |
||
Total Assets |
10,383,808 |
10,392,194 |
-0.1% |
9,310,133 |
11.5% |
|
Current Liabilities |
||||||
Loans and financing |
475,969 |
689,412 |
-31.0% |
789,331 |
-39.7% |
|
Debentures |
206,336 |
153,788 |
34.2% |
214,561 |
-3.8% |
|
Obligations for purchase of land and advances from clients |
469,642 |
526,560 |
-10.8% |
460,470 |
2.0% |
|
Materials and service suppliers |
185,185 |
225,692 |
-17.9% |
292,444 |
-36.7% |
|
Taxes and contributions |
291,649 |
294,716 |
-1.0% |
234,394 |
24.4% |
|
Taxes, payroll charges and profit sharing |
75,140 |
66,772 |
12.5% |
69,594 |
8.0% |
|
Provision for contingencies |
27,770 |
21,598 |
28.6% |
8,001 |
247.1% |
|
Dividends |
102,767 |
102,767 |
0.0% |
52,287 |
96.5% |
|
Obligation for investors |
148,000 |
143,000 |
3.5% |
0 |
||
Other |
180,055 |
90,339 |
99.3% |
171,417 |
5.0% |
|
2,162,513 |
2,314,644 |
-6.6% |
2,292,499 |
-5.7% |
||
Long-term Liabilities |
||||||
Loans and financings |
975,751 |
1,013,961 |
-3.8% |
371,843 |
162.4% |
|
Debentures |
1,740,673 |
1,736,027 |
0.3% |
1,551,407 |
12.2% |
|
Obligations for purchase of land |
194,654 |
183,619 |
6.0% |
177,412 |
9.7% |
|
Deferred taxes |
401,071 |
395,440 |
1,4% |
483,373 |
-17,0% |
|
Provision for contingencies |
123,950 |
126,811 |
-2,3% |
126,327 |
-1,9% |
|
Obligation for investors |
312,000 |
317,000 |
-1,6% |
380,000 |
-17,9% |
|
Other |
560,609 |
454,349 |
23,4% |
195,702 |
186,5% |
|
4,308,708 |
4,227,207 |
1.9% |
3,286,064 |
31.1% |
||
Shareholders' Equity |
||||||
Capital |
2,734,155 |
2,730,789 |
0.1% |
2,729,187 |
0.2% |
|
Treasury shares |
-1,731 |
-1,731 |
0.0% |
-1,731 |
0.0% |
|
Capital reserves |
267,159 |
262,970 |
1.6% |
251,489 |
6.2% |
|
Revenue reserves |
741,212 |
741,212 |
0.0% |
422,373 |
75.5% |
|
Retained earnings/accumulated losses |
85,036 |
38,818 |
119.1% |
278,687 |
-69.5% |
|
Non controlling interests |
86,756 |
78,285 |
10.8% |
51,565 |
68.2% |
|
3,912,587 |
3,850,343 |
1.6% |
3,731,570 |
4.9% |
||
Liabilities and Shareholders' Equity |
10,383,808 |
10,392,194 |
-0.1% |
9,310,133 |
11.5% |
|
Consolidated Cash Flows
3Q11 |
3Q10 |
|||
Income Before Taxes on Income |
137,401 |
132,192 |
||
Expenses (income) not affecting working capital |
||||
Depreciation and amortization |
56,974 |
8,305 |
||
Expense on stock option plan |
12,789 |
3,075 |
||
Unrealized interest and charges, net |
117,130 |
62,805 |
||
Warranty provision |
7,160 |
5,272 |
||
Provision for contingencies |
34,672 |
15,462 |
||
Profit sharing provision |
6,425 |
6,538 |
||
Allowance (reversal) for financial instruments |
6,385 |
- |
||
Allowance (reversal) for doubtful debts |
(5,990) |
|||
Decrease (increase) in assets |
- |
|||
Clients |
(605,178) |
(593,100) |
||
Properties for sale |
(314,861) |
18,636 |
||
Other receivables |
(33,718) |
(61,342) |
||
Deferred selling expenses and prepaid expenses |
5,133 |
(17,436) |
||
Decrease (increase) in liabilities |
- |
|||
Obligations on land purchases and advances from customers |
121,485 |
(4,279) |
||
Taxes and contributions |
45,160 |
83,933 |
||
Trade accounts payable |
(5,276) |
47,899 |
||
Salaries, payroll charges |
(10,000) |
|||
Other accounts payable |
(56,465) |
(82,636) |
||
Cash used in operating activities |
(470,774) |
(384,676) |
||
Investing activities |
||||
Purchase of property and equipment and deferred charges |
(60,597) |
(11,008) |
||
Withdrawls |
416,814 |
380,786 |
||
Cash used in investing activities |
356,217 |
369,778 |
||
Financing activities |
||||
Capital increase |
4,957 |
16,288 |
||
Follow on expenses |
- |
- |
||
Capital reserve increase |
- |
40,722 |
||
Increase in loans and financing |
708,729 |
272,118 |
||
Repayment of loans and financing |
(876,601) |
(456,951) |
||
Assignment of credit receivables, net |
373,600 |
19,785 |
||
Proceeds from subscription of redeemable equity interest in securitization fund |
(10,405) |
(4,000) |
||
CCI |
(37,698) |
- |
||
Paid taxes |
80,000 |
- |
||
Net cash provided by financing activities |
242,582 |
(112,038) |
||
Net increase (decrease) in cash and cash equivalents |
128,025 |
(126,936) |
||
Cash and cash equivalents |
||||
At the beginning of the period |
256,382 |
353,008 |
||
At the end of the period |
384,407 |
226,072 |
||
Net increase (decrease) in cash and cash equivalents |
128,025 |
(126,936) |
||
- |
||||
About Gafisa
Gafisa is a leading diversified national homebuilder serving all demographic segments of the Brazilian market. Established over 56 years ago, we have completed and sold more than 1,000 developments and built more than 12 million square meters of housing only under Gafisa's brand, more than any other residential development company in Brazil. Recognized as one of the foremost professionally managed homebuilders, "Gafisa" is also one of the most respected and best-known brands in the real estate market, recognized among potential homebuyers, brokers, lenders, landowners, competitors, and investors for its quality, consistency, and professionalism. Our pre-eminent brands include Tenda, serving the affordable/entry level housing segment, and Gafisa and AlphaVille, which offer a variety of residential options to the mid to higher-income segments. Gafisa S.A. is traded on the Novo Mercado of the BM&FBOVESPA (BOVESPA: GFSA3) and on the New York Stock Exchange (NYSE: GFA).
Only financial data derived from the Company's accounting system were subject to review by the Company's auditors. Operating and financial information not directly linked to the accounting system (i.e., launches, pre-sales, average sales price, land bank, PSV and others) or non-BR GAAP measures were not reviewed by the auditors. Additionally, financial statements and operating information consolidate the numbers for Gafisa and its subsidiaries, and refer to Gafisa's stake (or participation) in its developments. To view a more detailed review of third quarter results filed with the Brazilian Comissao de Valores Mobiliarios ("CVM"), please visit Gafisa's website www.gafisa.com.br/ir.
This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to growth prospects of Gafisa. These are merely projections and, as such, are based exclusively on the expectations of management concerning the future of the business and its continued access to capital to fund the Company's business plan. Such forward-looking statements depend, substantially, on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors; therefore, they are subject to change without prior notice.
Contact:
Luciana Doria Wilson
Investor Relations
Phone: +55 11 3025-9297/8404-2500
Fax: +55 11 3025-9348
[email protected]
Media Relations (Brazil)
Debora Mari
Maquina da Noticia Comunicacao Integrada
Phone: +55 11 3147-7412
Fax: +55 11 3147-7900
Email: [email protected]
SOURCE Gafisa S.A.
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