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Gafisa S.A. Message Board

  • invest2bfree invest2bfree May 24, 2012 4:10 PM Flag

    Brazilian homebuilder Gafisa eyes road to recovery

    Brazilian homebuilder Gafisa eyes road to recovery

    One of Brazil's premier homebuilders, Gafisa, has said it expects to be firmly on the road to recovery over the next few months and years.

    The company saw improved success during the first quarter of this year thanks to scaling back new projects following a year of delays and cost overruns, but it still posted a loss.

    Problems encountered by certain housebuilders in Brazil have been well documented but Gafisa's focus on existing projects in the first quarter look to have paid off.

    Many have been forced to shift away from the ambitious growth plans set down by the government following a sharp slowdown coupled with surging construction costs – both of which hammered profits across the board last year.

    This altering of direction has led to the doubling of deliveries from a year earlier to what stands now at a record 6,165 units, helping to limit losses.

    That said, sales fell by a half from a year earlier because of the reduction in numbers of new projects coming to the market.

    According to Reuters, Gafisa's chief executive Alceu Duilio Calciolari told analysts recently that the company was "heading in the right direction".

    The news service quotes him as saying: "We will soon return to presenting consistent results."

    The company was also hit by the reduction in project launches during the first quarter of the year with levels having dropped by ten per cent from a year earlier.

    However, by cutting launches from its lower-income Tenda unit and tightening credit standards for potential clients, the company looks to be at the start of the journey to fiscal stability.

    Another tactic employed by senior figures within Gafisa was to focus on the state of São Paulo in order to avoid runaway costs that have been evident in other regions.

    It was these costs that contributed to the company's net loss of 945 million reais in 2011.

    It certainly seems to be working too, given that shares of Gafisa stood at a healthy 3.81 reais recently, while the Bovespa stock index dropped by 0.5 per cent.

    Calciolari hopes that by taking his company "back to basics", it will stand a strong chance of reaching its target of between 500 million and 700 million reais of operating cash flow this year.

    The company really is in a state of flux at the minute and this can be mirrored in the mixed bag of financial results it has seen.

    For instance, the company's net debt actually rose by 76 million reais in the first quarter of this year which, although down from a 273 million reais increase a year earlier, will still be a cause for concern.

    It pushed Gafisa's net debt up to 122 per cent of equity.

    However, the company's revenue rose 27 per cent, managing to bring earnings before interest, taxes, depreciation and amortization to 105 million reais.

    This is up from 29 million reais a year earlier.

    As with much of the Brazilian property market at the minute, defining success is not always clear cut.

    However, what is clear is that the company has a long way to go before it can consider itself on solid foundations again.

    Tags: Brazil, Features, Real Estate

    May 23, 2012

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