Brazil builder MRV sees Q4 project launches speeding up

Reuters

SAO PAULO, Nov 12 (Reuters) - Brazilian homebuilder MRVEngenharia e Participações SA plans to increase thepace of new project launches in the fourth quarter and beyond asthe company sells off existing inventory, Chief ExecutiveOfficer Rubens Menin said on Tuesday.

MRV, like many of its Brazilian rivals, has revampedmanagement processes and cut costs over the past two yearsfollowing an overly aggressive expansion. Part of its strategyhas included cutting down on new project launches and sellingdown inventory to increase cash flow and reduce debt.

The company posted a 13.2 percent decline in quarterlyprofit from a year earlier late on Monday, although strong cashgeneration helped reduce debt levels and cancellations declined.

While most of the third quarter's sales came from existingstock, project launches "should begin to return to normallevels" in the fourth quarter and beyond, Menin said on aconference call with analysts to discuss earnings, adding thatprofit margins should grow over the next three years.

Shares of MRV rose 0.56 percent to 8.96 reais in afternoontrading in Sao Paulo.

MRV's gross margins remained stable from the previousquarter at 26.6 percent, but declined from 28.7 percent a yearearlier. Return on equity (ROE) fell to 11.9 percent from 12.7percent in the previous three months and 17.4 percent a yearearlier.

"Even though there is still a significant way to go in orderto fully restore profitability, these set of results were in theright direction, in our view," Credit Suisse Securities analystsled by Nicole Hirakawa wrote in an investor note on Tuesday.

The company generated 208 million reais in cash in the thirdquarter, helping lower its net debt-to-shareholder-equity ratioto 33.8 percent from 39.3 percent in the previous quarter. As aresult, MRV remains one of Brazil's least indebted homebuilders.

Earnings before interest, taxes, depreciation andamortization, a gauge of operating profit known as EBITDA, fell14.8 percent from a year earlier to 196 million reais.

In coming quarters, the company should generate cash atlevels that exceed both net income and operational earnings,Menin said on the call.

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