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Edited Transcript of GFSA3.SA earnings conference call or presentation 8-Nov-19 2:00pm GMT

Q3 2019 Gafisa SA Earnings Call

Sao Paulo Dec 4, 2019 (Thomson StreetEvents) -- Edited Transcript of Gafisa SA earnings conference call or presentation Friday, November 8, 2019 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* André Luis Ackermann

Gafisa S.A. - CFO, Investors Relations Officer & Member of Board of Officers

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Presentation

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Operator [1]

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Good morning, ladies and gentlemen, and welcome to Gafisa's Third Quarter 2019 Results Conference Call. Today with us are André Luis Ackermann, Investors Relations and Chief Financial Officer; Iris Rubins, Director of Planning and Control; and Fernando Nogueira, Investor Relations Manager. We'd like to inform you that this presentation is being recorded. (Operator Instructions)

Before we begin, I would like to inform you that the management's statements involve risks, uncertainties and may refer to future events. Any changes in macroeconomic policies or laws and other operating results may affect the company's performance. Please, Mr. Ackermann, you can proceed.

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André Luis Ackermann, Gafisa S.A. - CFO, Investors Relations Officer & Member of Board of Officers [2]

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Good morning, ladies and gentlemen. Before starting the presentation, refer to the 3 quarter 2019, I'd like to thank you all for your presence.

In our restructuring process in 3Q '19, we had some relevant facts. We finished the capital increase. Actually, the second tranche was completed in October 2019, with BRL 272 million cash inflow. After the first and the second tranches, the capital increase amounted to BRL 405 million, and 75% of the shares were subscribed in the preemptive rights in the second tranche with the new investors, too.

Still about capital, the Board approved the hiring of a financial institution for the structure of issuance of mandatory debentures up to $150 million, which allows us to have a strengthened capital structure to assess new opportunities.

Still in 3Q '19, we started restructuring our sales department. We hired a new market officer, who's helping us review our processes. And we are also going to implement a new sales model, which will have an effect on the next quarter, bringing results in our numbers, better results. And the results will be even more positive throughout 2020 with the new launches.

We would also like to communicate that we are committed to our customers, and we have resumed our works. We have 17 sites currently. We, therefore, believe that the company's operations are now stable.

Now let's talk about the future and new businesses. We signed 2 MOUs, nonbinding MOUs for studies -- valuation for future projects in Rio and Osasco. And we'd also finished the acquisition of a plot of land in the high-end area in São Paulo. And with that, we are going to resume launches in the second quarter of 2020.

Another important fact that happened in 3Q '19 was the divestment operation from Alphaville. It is subject to some precedent conditions amounting to BRL 100 million by means of credit offset and delivery of assets. After this transaction is concluded, Gafisa will assess a creation of its own urban development department.

Now let's talk about the operating results. The company did not launch any products in 2019. Our sales in 3Q '19 -- our net sales amounted to BRL 30 million, a result of BRL 40 million in gross sales and BRL 10 million in dissolutions. From these sales, 42% came from units under construction and 58% from projects that have been delivered.

Now let's talk about inventories. Our inventories totals BRL 966 million, mostly located in [residential] units, which amounts to BRL 730 million. Our inventory is concentrated in the city of São Paulo. So out of the BRL 966 million, we have most of that amount in São Paulo. Also, 40% of that amount -- 42% of that amount, BRL 405 million, are finished units and BRL 562 million are under construction. From this inventory of BRL 562 million, BRL 5 million will be delivered in 2019, BRL 309 million in 2020 and BRL 248 million in 2021 onwards.

We are also going to talk about our landbank. Our landbank today allows us to have a PSV of approximately BRL 3.81 billion, with 33 projects and potential phases and 6,751 Gafisa units. Our landbank is concentrated in the state of São Paulo, mainly with BRL 750 million in [Rio Jan], BRL 550 million in [Porto Alegre], [BRL 43 million] in Curitiba. We believe that our PSV will allow us to have profitable launches.

Now let's talk about the financial results. In 3Q '19, we had a net revenue of BRL 89 million due to the progress in our works and resumption of those works. We had a gross profit and adjusted gross profit of $45 million, which reflects a gross margin of 51%.

Our SG&A is in line with the previous quarters, about BRL 15 million. We should remember that in 3Q '19, we had nonrecurring expenses with some consultants that have been working with us in our restructuring process. Our net income is stable now with a loss of BRL 1.6 million.

Still about financial results. Our cash generation is consistent over the past 4 quarters, with BRL 70 million in the past 12 months. And for the 3Q '19, we had BRL 24.4 million.

Now our net debt. And our net debt over shareholders' equity ratio, we made an important progress due to our cash inflow and capital increase. So we went from BRL 588 million to BRL 357 million in 3Q '19, with a ratio of 46% in comparison with 102% in 2Q '19.

Considering our cash inflow from the second tranche of the capital increase in October, the pro forma net debt figure will go from BRL 357 million to BRL 291 million, and our ratio will go from 46% to 37%, strengthening our capital structure.

Still about debt. Our gross debt amounted to BRL 751 million. It is important to notice that from this debt, 90%, that means 70 -- BRL 670 million are related to projects. As transfers happen, we are naturally going to reduce our debt. And we believe that with the interest rates (inaudible) in the new financing processes, we believe that we are going to be successful in that process, too.

With that, I would like to conclude our presentation. (inaudible) and state my conviction that we are treading the right path, and we are now open for questions and answers. Thank you.

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Operator [3]

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(Operator Instructions) We now conclude the question-and-answer session, and I am transferring the floor over to Mr. Ackermann for his final remarks.

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André Luis Ackermann, Gafisa S.A. - CFO, Investors Relations Officer & Member of Board of Officers [4]

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Thank you very much for your participation. As my final remark, I would like to strengthen the message that we are treading the right path to Gafisa, focusing with our team, which is very determined on bringing Gafisa to a whole new level in the real estate market.

This concludes Gafisa's conference call. Thank you very much for your participation. Have a good day.

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