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Edited Transcript of CYRE3.SA earnings conference call or presentation 15-May-20 3:00pm GMT

Q1 2020 Cyrela Brazil Realty SA Empreendimentos e Participacoes Earnings Call

São Paulo May 16, 2020 (Thomson StreetEvents) -- Edited Transcript of Cyrela Brazil Realty SA Empreendimentos e Participacoes earnings conference call or presentation Friday, May 15, 2020 at 3:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Miguel Maia Mickelberg

Cyrela Brazil Realty S.A. Empreendimentos e Participações - Finance Director & Member of Board of Executive Officers

* Raphael Abba Horn

Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO

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Conference Call Participants

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* Alex Ferraz

Itaú Corretora de Valores S.A., Research Division - Research Analyst

* André Chaves Mazini

Citigroup Inc, Research Division - Assistant VP

* Bruno Mendonca

Santander Investment Securities Inc., Research Division - Analyst

* Gustavo Cambauva

Banco BTG Pactual S.A., Research Division - Research Analyst

* Marcelo Garaldi Motta

JP Morgan Chase & Co, Research Division - Research Analyst

* Nicole Inui

BofA Merrill Lynch, Research Division - VP

* Renan Manda

* Victor Tapia Migliorin

Banco Bradesco BBI S.A., Research Division - Research Analyst

* Wilfredo Jorel Guilloty

Morgan Stanley, Research Division - Equity Analyst

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen. Welcome to Cyrela Brazil Realty Conference Call where we'll be discussing the first quarter 2020 earnings results. (Operator Instructions) As a reminder, this conference is being recorded and the audio will be available on the company's website, www.cyrela.com.br/ri.

This call has been simultaneously translated into English and is being broadcast over the Internet. Questions can be asked by participants connected abroad. The earnings release published yesterday, the 14th of May, after the close of B3 trading session can also be accessed in the company's website. Before proceeding, we would like to mention that the forward-looking statements that may be made during this conference call relating to the company's business prospects, forecasts and operating targets related to its financial growth potential are predictors based on the management's expectations about the future of Cyrela. These expectations are highly dependent on the domestic market conditions, the general economic performance of the country and international markets and are, therefore, subject to change.

With us today, we have Mr. Raphael Horn, Co-CEO; and Mr. Miguel Mickelberg, CFO.

I'll now turn the conference over to Mr. Horn. Mr. Horn, you may begin.

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [2]

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Good morning, everyone. The first quarter of 2020 was marked by the spread of the COVID-19 pandemic, which had severe impact on the global economy.

In Brazil, its effects could be felt as of March as authorities passed the first of decrees of social isolation. We understand that we are still facing a very uncertain scenario and therefore reinforce our conservative position, which always guides our actions. On the other hand, we're monitoring any opportunities that the crisis might bring, and we believe in the resilience of the real estate sector, even in the most challenging scenarios. Effect of the pandemic, notwithstanding, we had a positive operating performance in the first quarter with a total of 25 new product launches and the sales to inventory ratio of 38% in the quarter. The Minha Casa, Minha Vida segment was the highlight of our performance in the period.

From a financial point of view, during the first quarter, the company had an increased gross margin of 34.1% net profit and BRL 28 million and a cash generation of BRL 13 million. Let's now take a look at our operating results.

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Miguel Maia Mickelberg, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Finance Director & Member of Board of Executive Officers [3]

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Thank you, Raphael. Good morning, everyone. On Slide 5, we'll address Cyrela's launches.

In the first quarter of 2020, we launched 25 new products with a PSV of BRL 1.6 billion, a threefold increase year-on-year. Excluding swaps, the volume launched in Cyrela's share was 2.7x higher year-on-year. The company's share in the volume launched in the first quarter was 70% compared to 78% year-on-year.

On Slide 6 to 9, we highlight some of the major releases in the quarter. All of them were at least 40% sold in the quarter. On Slide 10, we'll talk about our sales performance. In the first quarter, presales were about BRL 1.4 billion, 30% higher year-on-year. Excluding swaps, presales amounted to BRL 917 million in Cyrela's share, a 23% increase year-on-year. The state of São Paulo accounted for 67% of sales.

On Slide 11, we'll address sales speed. The company's annual SoS was 53.4%. Looking at the sales speed by period, projects launched in the first quarter were 38% sold. On Slide 12, we'll address Cyrela's total inventory. At the end of the quarter, inventory at market value totaled BRL 6.1 billion, 4% higher quarter-on-quarter. The change in our inventory can be seen in the chart to the left.

On Slide 13, you can see a breakdown of our finished units. In the quarter, we sold 6% of the finished units at the beginning of the period. Adding the inventory of projects delivered along the quarter and pricing of units at market value, this inventory increased by 4% quarter-on-quarter.

On Slide 14, we'll talk about delivered units.

In the first quarter 2020, Cyrela delivered 10 projects, totaling 3,300 units and a launch PSV of BRL 672 million. On Slide 16, we'll present our financial results. Net revenue was BRL 765 million in the quarter, 38% lower quarter-on-quarter and 7% lower year-on-year. The gross profit in the quarter was BRL 261 million, 32% lower quarter-on-quarter and 5% higher year-on-year. Net profit in the quarter was BRL 28 million with a net margin of 3.7% compared to the profit of BRL 149 million in the previous quarter and BRL 48 million in the first quarter 2019.

Please go to Slide 17 now to see our profitability. In the first quarter 2020, our return on equity was 7.9%, and our EPS was BRL 0.07.

On Slide 18, we'll talk about our debt. Gross debt at the end of the quarter was BRL 2.5 billion. Our cash position was BRL 1.7 billion. Thus, our net debt was BRL 839 million. 16% of the total gross debt is related to loans for construction, 78% of it is long term. Our net debt over equity ratio was 16.1%, 0.3 percentage points lower quarter-on-quarter. On Slide 19, the company's cash generation. In the first quarter 2020, our cash generation was BRL 13 million versus BRL 245 million in the fourth quarter 2019 and BRL 150 million in the first quarter 2019. Yes. Well now we'll begin the question-and-answer session. Thank you.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from Victor Tapia, Bradesco BBI.

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Victor Tapia Migliorin, Banco Bradesco BBI S.A., Research Division - Research Analyst [2]

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The first point I'd like to discuss with you are regarding operations. So in the first quarter, we were really supporting on the Minha Casa, Minha Vida projects. But could you give more information around how the Minha Casa, Minha Vida has been behaving as well as the high-end market? I don't know if there was any launch in the period. Are you thinking about launches during this period of isolation and quarantine sales probably have gone down. They've probably gone down at least on a high end, but maybe on the low end, they have gone up.

So what is your understanding of the breakdown of the different segments? That's the first point. And the second point is around the bottlenecks in the Minha Casa, Minha Vida. The transfer now depends on the FGTS fund. For this quarter, we still had some impact in cash generation due to that. Finished units sales also went down. So that has an impact on cash. So what can we expect for the coming quarter? Should Minha Casa, Minha Vida figure go back to normal? Should there be a positive impact from the negotiations with CPPIB? Will there be a more robust cash generation in the coming quarter? What do you think?

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [3]

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Good morning, Victor. This is Raphael. I think that the changes in the market, and it's not new, were very drastic to some segments. As other companies have been saying, Minha Casa, Minha Vida has suffered a lesser impact. Other important companies have released their results with good results during the pandemic. Middle class and high middle class and high end had a much steeper decline in sales. What I think is important is the pandemic, the quarantine right, social isolation. I think what's important is that the meteor has hit the earth already. And that was in the middle of March, and then April had social isolation. And Brazil as well as other countries had a very drastic impact. So this social isolation, quarantine, lockdown, all of that will come to an end at some point and then we'll resume economy into this so-called new normal. People speak about a second wave, third wave of infection. Maybe there will be many waves, and people have been saying that the virus won't go away too early unless we have a vaccine ready for it. So the middle class and high-end scenario, these people have isolated in their homes. So the sales will decrease much more drastically in that segment than in Minha Casa, Minha Vida. We need to understand what this new normal is going to be like when social isolation comes to an end. And I think it will be a crisis market, whatever the post COVID-19 market is.

But I don't think it's going to be as drastic as scary as April was. We have seen many crisis Cyrela has in the real estate market in 2015, 2016, '17, and we have survived them. And we believe that the worst bit of it is the lockdown this quarantine right now. When this comes to an end, we'll come into a new normal that we don't know what's going to be like. We don't know if it's going to be -- we know that's going to be worse than January and February, but we expect to have sales and launches, and there will be a new normal. Of course, it will be Brazil in the middle of a crisis, at least in the middle of this resumption, right? But in isolation, economy has no life. I can't say that I'd like to navigate through crisis, but the team is used to it, right? So I think we'll deal with the crisis well enough as far as one can deal well with the crisis. Minha Casa, Minha Vida, as was said, responded better to this period. There will be launches. And Vivaz is going to have a launch in this period as well. As for middle class, we'll continue to launch as well. In April, we didn't. In May, we didn't either. But as soon as we get some more normality, then we'd come back into operation. Again, it will be a country in the middle of the crisis. But a country with life. If the GDP drops 10%, 90% of it still remain, right? We'll be selling, we'll be launching. But we'll have to see what the situation will be like, and we'll have to survive it.

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Miguel Maia Mickelberg, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Finance Director & Member of Board of Executive Officers [4]

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This is Miguel. I'll answer your second question around cash generation. The Federal Government general budget was solved, was addressed, right, and that helps the Minha Casa, Minha Vida segment.

But we struggle more due to these quarantine. Many notary offices are closed, and the process become more difficult. But Minha Casa, Minha Vida should be positive in the second quarter. Now for CPPIB, we expect to receive a substantial amount in the second quarter, BRL 150 million. And that will have a positive impact on the cash generation, but our cash generation is very heavily dependent on finished units, and it should decrease with this pandemic.

So it's difficult to speak about a good cash generation situation in this current scenario.

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Operator [5]

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Our next question comes from André Mazini from the Citibank.

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André Chaves Mazini, Citigroup Inc, Research Division - Assistant VP [6]

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My first question is around CPPIB. If I remember rightly, it was 4 projects, right? And it was only 20% debt. Have you increased that? Is this more than for projects or the BRL 33 million that were approved was it related to these 4 projects already? And if you could speak a little bit about the average prices for rent that you're hoping to get because these are central regions in São Paulo, right? Do the expectations remain the same around size and rent costs? And as for sales. Of course, Minha Casa, Minha Vida can be sold digitally, but high end, that is more difficult, right, for high class. What could maybe be done, so that we can increase sales with the high end online and digital? Could we take on a more aggressive commercial posture with discounts? What could we maybe do to get the high class into digital sales?

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [7]

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This is Raphael. I'll speak about your second point and Miguel will speak about your first point. Online and digital will be important channels for the low and average income as well as for high income segments. But I don't think we can say that. A low end is buying loads -- low income is buying load, but high end is not by anything. But high end is isolated at home. And his concern right now is not to purchase any real estate. I think that's the point, not the digital channel itself. The Minha Casa, Minha Vida buyer has more urgency. He has a dream that it's come true, but that's an absolutely necessary dream. It's not a choice that they have, they can't wait. But I think things will come back to normal. This isolation will come to an end at one point. The lockdown will be over at some point. And then in this new normal, people will go back to buying apartments. Of course, we had that panic in the first month. We had a couple of months where everyone was in panic. Everyone was panicking. So we can increase the online sales or increase our tools, but it's more about their mood, their -- how they feel about it. I think high-end customers are too scared right now to buy an apartment. As I said, I think we're going to have a crisis after the isolation, but then we're going to have sales, as we have always had sales. Even in the past when we had problems, we had gross sales that were good, even if net sales weren't that good. So when we have shopping malls open and street stores open, then I think we'll resume sales on middle class and high class. And again, this is a moment of crisis, but I think there is life in the crisis, but during an isolation period, there is no life. I think the point with the high-end customers is their mood and how they feel about buy apartment or not. It's like car sales. Car sales have been really low. No, it's not because he doesn't have the money to buy it. But if he's not even leaving home, why would he buy a car. We need to see what will happen after the crisis, after the pandemic, rather.

About CPPIB. That was the fourth project we acknowledge. We acknowledge each project when they overcame the result of the conditions. And about these 4 projects, we start with 1 bedroom and then you go up to 3 bedrooms. And rent prices is still difficult to know. These projects will need another 2 years to be finished. And only then we have a better idea.

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Operator [8]

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The next question comes from Bruno Mendonca from Santander.

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Bruno Mendonca, Santander Investment Securities Inc., Research Division - Analyst [9]

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Around Victor's question around launches. Well, other than Minha Casa, Minha Vida, we have the ultra-high end, which is normally more resilient. Correct me if I'm wrong, please. And speaking about this new normal that Raphael has mentioned, when we think back to 2015, '16, '17 crisis, there was also a segment that was selling more. In that sense, is there any sort of visibility, any project that you have in -- like there has been shelved that could be launched in this new normal? We have these 4 projects that will be launched and then when there's more optimism than maybe we could go into more. You said something about BRL 5 million. BRL 5 billion in PSV in volume, I said.

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [10]

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This is Raphael. I'm trying to convey to you what happened in April, well -- and what we perceived is that April was an abnormal month. In this new normal, I think we don't have any visibility into it. I just understand that visibility is -- sorry, isolation is the worst moment. And where the level is going to be after the isolation is beyond our ability to predict. But we do believe that's going to be better than April. And we're going to be launching interesting products for middle class and high-end projects. I think no one knows what this new norm is going to be like. No one knows what that means, not in Brazil, not in the United States and not anywhere. So we have any products that we have been looking at, and we believe that we'll have a market in this new normal. And larger players have some advantages in difficult markets, right? our plan for the year was really nice. It was really good. So I think without mentioning Vivaz and Minha Casa, Minha Vida it's difficult to predict because these are segments that will have less impact anyway.

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Bruno Mendonca, Santander Investment Securities Inc., Research Division - Analyst [11]

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All right. A question on cash generation now. Thinking about finished units. This will probably change your thoughts around dividends, right? Do you have any thing you can say about dividends at this point?

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Miguel Maia Mickelberg, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Finance Director & Member of Board of Executive Officers [12]

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This is Miguel. But with a more challenging scenario in finished unit sales, certainly, cash generation goes down, and that has a direct impact on dividends. We always say that our idea was to -- before the pandemic to continue to pay dividends, but looking at our cash generation as well. So if there's no cash generation, they will have an impact. We'll pay the minimum dividends. They'll be paid this BRL 98 million, and we don't foresee any other payment other than this mandatory minimum dividend rate.

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Operator [13]

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Our next question comes from Gustavo Cambauva from BTG Pactual.

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Gustavo Cambauva, Banco BTG Pactual S.A., Research Division - Research Analyst [14]

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Raphael, you've been speaking about this new normal, right, and that no one knows it and no one knows what it means. My question is around projects really. Internally have you been having any discussion around any changes in trends and the type of project that will be launched, maybe larger apartments because more people are going to be working from home, not only right now, but maybe people are going to be working from home permanently. So do you think that, that could have an impact? Even from a commercial perspective, you did a lot in the past, right, do you think that could have an impact on the types of products that you're going to be going into, have you been brainstorming, what changes there may be?

And my other question is around landbank. You purchased 7 land lots in this quarter. I believe all of that or most of it before the coronavirus pandemic. What do you foresee into the future? Are you going to be preserving your cash position? Or are you negotiating something after this initial impact? Have you resumed conversations around purchasing new landlords for the landbank? And that's basically it.

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [15]

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Stock market people ask very intelligent questions. But everything has been happening very fast.

It takes us 6 months or a year to buy a land lot and years to launch a product. And this has been happening only for 45 days. Our plan was ready for 2020 or 2021. We can't make changes that quickly.

What we were going to launch this year is what we had plan to launch this year already. We'll see whether lasting impact to consumption is going to be after COVID-19, but this is only the beginning of this conversation. There isn't much that we can say about this subject. Commercially, nothing has changed. We had nothing -- there's nothing new into our plan. As for compact units, they are normally use for Airbnb or hotels, and that's also suffering a massive impact in the short term. All hotels are empty. In this new normal, what this new unit is going to be behaving? I can't tell. But I think hotels, the hotel segment will kick back at some point. So I think this market will continue to exist. And we're not so focused into this segment and we'll continue not to be. But everything is empty right now. Airbnb and hotels occupancy have dropped dramatically. But I think it's still too early to know what the impact will be on the size of the units that people will be looking for. But it's a conversation that we have been having every day. And we'll have to wait and see what conclusion we will reach. But these changes to our plan take a long time and this meteor hit us too quickly and not long ago.

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Gustavo Cambauva, Banco BTG Pactual S.A., Research Division - Research Analyst [16]

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All right. And as for the landbank?

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [17]

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Sorry, I forgot about that. A 1.5-month crisis is not a crisis, right? You need time to see into a crisis. There isn't much happening in the landbank segment. We negotiate land lots sometimes for 2, 5, 7 months. So I think if the crisis lasts longer, there will be a lot of opportunities. But if it's a quicker crisis, then -- well, I don't think we'll be taking advantage in the landbank segment. And if the crisis last longer, then you can probably take advantage of that. Right now we have an acute crisis, but there's no time or a chance to do anything. From 2015 to 2017, the crisis lasted for years, so then you can really find the opportunities and take advantage of them. We would need to design a strategy for that, but we haven't had enough time for that. We have only been in this crisis for 45 days, as I said.

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Operator [18]

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Our next question comes from Renan Manda from XP Investments.

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Renan Manda, [19]

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You have been planning some launches for this period of the isolation, right, in quarantine. What is the commercial strategy for these launches? Are you focusing on the digital segment? Or are you going to have sales -- point of sales that are actually as a brick-and-mortar or on site? And what would you expect around sales speed for this period? Do you think it would be -- what would be a good sales speed looking at the period we currently have?

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Miguel Maia Mickelberg, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Finance Director & Member of Board of Executive Officers [20]

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Renan, I hope that is lockdown, isolation won't last this long. I was speaking about an actual lockdown in São Paulo. But I hope it won't be like 4 months time. Maybe it will be another 30 days. That's what I was saying earlier now. We'll need to see what the world will be like after the crisis in this new normal. But then streets will be open, right, the city will be opened. But I do think we're going to have fewer sales opportunities in this new normal. We'll probably be relying more on the digital and online channels. But let's not fool ourselves, right. Brokers are very important in our segment. They make a huge difference in sales. And if the point of sales is actually closed, then, well, we can't think that the importance of the broker is going to be replaced with the online channel.

The online channel is just a tool for the broker to use as well. The brick-and-mortar or the physical aspect, the on-site aspect of the point of sales should resume at one point. And we can maybe use online to attract more customers to engage them. Maybe if we sell 30% of what we launched, that's a good result, maybe 40% would be excellent. This is a guess really. So in this new normal, I'd say we'll be selling 20% to 30% in this new normal. But this is, again, a guess, just a guess. But there will be life after the crisis in this new normal. Of course, sales won't be booming. We won't have 60% sales. Maybe we'll have what we had in '15, '16, '17 scenario. We had a crisis and then we had a 12-month spring, that was good for us, and now we're back into a crisis. Well, this is a strong team in Cyrela. We have been working together for a long time, so we will weather this crisis.

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Renan Manda, [21]

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If I can ask the second question now, please, about the low income segment. We can see that sales are doing relatively well, that has proven to be resilient. And my question is about approving new projects with the city halls with municipalities. Is that still a bottleneck? Can this remain a bottleneck in the future?

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [22]

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We're selling units that we already have. And at one point, there may be too few units because there hasn't been any approval. Approvals are moving on. I don't think there will be a bottleneck now. And this isolation won't be 200 days. And not municipalities and city halls but shopping malls, everything will be open again. But city halls have been working remotely, and operations have been making progress. So I don't think that's going to be a bottleneck.

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Operator [23]

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Our next question from Morgan Stanley, Jorel [Ismas].

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Wilfredo Jorel Guilloty, Morgan Stanley, Research Division - Equity Analyst [24]

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I have 2 questions. What are the metrics that you're analyzing for you to resume launches? You're speaking about when everything reopens, right. But are you just looking at the end of the quarantine? Or are you waiting for consumer trust to rise again? What exactly are you looking at for that?

And the second question. Could you give us some color around the challenges for buyers to get credit? Are banks a bit more restrictive? This is basically it.

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [25]

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Thank you, Jorel. We haven't tried to launch anything in the past 45 days. The meteor hit, and we're just watching it, not spending energy. We'll need that energy after. So there are no metrics. We're not looking at metrics. We're just standing still while the wind was blowing strong, where the gales were blowing. As for launching something during or after the isolation period, we'll do it according to demand. We have products on the shelf. We'll look at what we think will make sense for Brazil, even if it's -- if the country is in a crisis, then we can work with the brokers. And we'll see if we think it's strong enough, and if we think it's strong enough, then we'll go ahead. We need to have good common sense, be reasonable, know our products, and Minha Casa, Minha Vida did well because people tried it and it worked. So we believe there will be products and that demand will be good for it, and acceptance will be good for it. But launches in sales is certainly a metric. If you launch something and something is bought then that's a metric. And we need to be sure. We know that if things improve, we'll be able to sell more. But we need more time. It's only been 30, 40 days. And Miguel will speak about credit.

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Miguel Maia Mickelberg, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Finance Director & Member of Board of Executive Officers [26]

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Jorel, this is Miguel. As for credit for individuals, banks have had a large appetite for now. We have 7%, 7.3%, depending on the bank for the loan rates. And credits with real collaterals they give a good situation. But with low Selic rate values, banks working with 7%. That's high. So it's attractive for the banks. And the banks don't show any sign of change, which is good for us.

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Operator [27]

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Our next question comes from Alex Ferraz, Itaú BBA.

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Alex Ferraz, Itaú Corretora de Valores S.A., Research Division - Research Analyst [28]

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I have a question about a point that always appears and this -- in these more difficult moments about contract cancellations, right, contract terminations. How are things on that front? Looking at April, looking at receivables, anyone trying to renegotiate contracts? Have you seen any changes?

Do you have any expectations that you could talk about maybe?

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Miguel Maia Mickelberg, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Finance Director & Member of Board of Executive Officers [29]

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We haven't seen a substantial increase in contract cancellation. So it is within normal parameters. Renegotiation, about 8% clients requested that and we approved a large portion of that. With the ones we didn't approve, most clients paid normally, and we're applying interest rates. So I think we're protected. As you said, it's a very different scenario, right. We don't have a high-volume of inventory or units in the market and interest rates are really low. And companies have less leverage than in the previous crisis. They're in a better cash position. 70% less is what we're delivering this year, excluding Minha Casa, Minha Vida. So we have felt less impact on this front.

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Operator [30]

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Our next question comes from Nicole from the Bank of America.

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Nicole Inui, BofA Merrill Lynch, Research Division - VP [31]

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You've already answered most of my questions. But I'd like you to talk a little bit about the -- sales after we have resumed activities, how it's going to be happening? Are we going to have more or fewer points of sales? What do you think could maybe change concerning how sales take place? And if we could reduce expenses in any way from here on. That's all.

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [32]

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Sorry, I didn't understand your question. Can you repeat it?

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Nicole Inui, BofA Merrill Lynch, Research Division - VP [33]

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Okay. When we react how sales take place, do you think there will be some sort of transformation, there will be more online sales from now on? Could it maybe a positive thing from -- arising from the crisis?

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [34]

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This is Raphael speaking. As I've just said, I think the broker plays a very important role. They make the difference. They make the whole difference. And I think that will continue. If there is a launch in the Ipiranga neighborhood and the broker will be there. They will work with our offer portfolio.

And if they're going to have a visit with everyone wearing a mask for their visit to the unit, well, this is a technical aspect of it. But if you say, well, we've changed the model into online without brokers, I don't think this is something we could say will happen very soon or soon at all in Brazil. The brokers make the whole difference. The online channel also has brokers. The online channel has the broker operating with it. It's always a client speaking to a broker, always. We may have virtual services, 260 platforms, and this and that, but it is the broker who makes a difference to convince the client. We'll believe in the brokers, but the rest we can adapt. Again the online channel is just a way to get to the client, but we need the broker anyway to turn that first contact into sales. But we'll certainly strengthen our online services and positions. I don't know if I have answered your question.

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Operator [35]

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Our next question is from Marcelo Motta from JPMorgan.

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Marcelo Garaldi Motta, JP Morgan Chase & Co, Research Division - Research Analyst [36]

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Two quick questions. Can you give me an update on construction sites? Are they open? With the impact on revenue, could that be impacted if there is a lockdown in São Paulo? Would that be impacted? What would change? Those who were working on construction sites, can they continue to work? Can they not?

And as for finished units, that's a point that has an impact on the balance sheet. You said that geographically situation is better than in the past. But do you have any other lessons learned from past crisis that you can use or apply now?

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Miguel Maia Mickelberg, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Finance Director & Member of Board of Executive Officers [37]

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Motta, this is Miguel. As for the construction sites, basically, all our construction sites are operating normally with over 90% of staff operating, so I don't think we're going to feel an impact there. As for the lockdown, we only have the information that the media has published, right? So we have nothing new to say there.

As for your second question. Let me just interrupt you, sorry. If construction works are prohibited in São Paulo and Rio that's going to be bad. In Porto Alegre, construction work stopped for 4 -- 3 to 4 weeks, now they have resumed, and that was not good, but they have resumed, that's good. But after the lockdown, you can resume the construction works. Sorry, didn't mean to interrupt you.

As for finished units, Motta, we have a lot less or a lot fewer units and finished units, and we'll basically start accelerating new finished units launches in the second half of 2021. The measures we'll be taking are the same as always. We'll be very careful with our products and do our best to optimize and streamline sales.

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Operator [38]

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(Operator Instructions) If there are no further questions, I'll turn the floor over to Mr. Horn for his final remarks. Mr. Horn, please?

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Raphael Abba Horn, Cyrela Brazil Realty S.A. Empreendimentos e Participações - Co-CEO [39]

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Thank you, everyone, for joining our call. As we wait for situation to go back to normal, hopefully that will be soon. As I said, I think the worst moment of it is lockdown and the isolation period. After that, we'll be able to do a lot more things. So let's hope and pray for humankind and for a cure for COVID-19 and a better future for humankind. That's it. Thank you very much. I'll talk to you on our next conference call.

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Operator [40]

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That concludes Cyrela's conference call for today. Thank you very much for your participation. You may disconnect. Thank you for using Chorus call.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]