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Edited Transcript of RDNI3.SA earnings conference call or presentation 9-Aug-19 1:00pm GMT

Q2 2019 RNI Negocios Imobiliarios SA Earnings Call

São Paulo Sep 2, 2019 (Thomson StreetEvents) -- Edited Transcript of RNI Negocios Imobiliarios SA earnings conference call or presentation Friday, August 9, 2019 at 1:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Alexandre Firmo Mangabeira Albernaz

RNI Negócios Imobiliários S.A. - Co-CEO & Development Officer

* Carlos Bianconi

RNI Negócios Imobiliários S.A. - Co-Chief Administrative, Chief Financial & IR Officer

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Presentation

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Operator [1]

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Good morning and welcome to the RNI Two Quarter '19 Results Conference Call. Today, here with us, we have Carlos Bianconi, co-CEO, CFO and IRO; Alexandre Mangabeira, co-CEO of Development; and Felipe Rodrigues, Investor Relations Coordinator.

We would like to inform that this event is being broadcast and recorded. (Operator Instructions) We will start the Q&A session only for analysts and investors. (Operator Instructions) This event is also being broadcast and may be accessed at IR website, rirny.com.br.

We would also like to clarify that any mention to the forward-looking statements are based on the belief and assumptions of RNI management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and, therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results for RNI and could cause results to differ materially from those expressed in such forward-looking statements.

I now turn over to you, Carlos Bianconi. Please, Mr. Bianconi, you may proceed.

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Carlos Bianconi, RNI Negócios Imobiliários S.A. - Co-Chief Administrative, Chief Financial & IR Officer [2]

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Good morning, everyone. We're now going to talk about RNI real estate businesses for the second quarter of 2019.

First of all, we have the launch of 1 project with a total PSV of BRL 71 million, and then we had net sales in the order of BRL 54 million. While in the year-to-date, net sales reached BRL 134 million, advancing 37% growth compared to the first half of 2018, whereas the market grew 30% and, therefore, were 7 percentage points higher than the market average. And in terms of cancellation, we fell to another record low since the IPO of BRL 19 million in the second quarter 2019.

The net revenue totaled BRL 66 million in the second quarter '19 and BRL 145 million in the first half, up 59% when compared to the first half of 2018, and this is also quite significant.

The adjusted gross margin was 26.3% in the second quarter 2019, expanding 7.6 percentage points when compared to the first quarter of 2019, reflecting the higher quality sales and the contribution to the result from MCMV products. And therefore, we can already see the margins of the new strategy for the company.

The net financial results have a positive margin, and we reached BRL 5.2 million -- sorry -- which results from the recovery of the adjustment rate and the low debt of the company. This is very interesting, and these rates are very low, and therefore, this is a significant financial result. And then we had a net financial income return to positive territory of BRL 5.2 million. And we had a record result in terms of the net debt-net equity ratio falling to minus 21%.

There was an expansion of 4.9 percentage points when compared to the second quarter of 2018 and the gross margin of the earned -- unearned revenues, which amounted to BRL 156 million in second quarter of 2019, reflecting entry of good products to the current model. As I mentioned before, this has to do with the new launches for the quarter.

And now let's talk a little bit about the operational results and the launches. In the second phase, we had an economic growth of houses. And then we had some launches in June 2019 with 221 units in BRL 10 million. When we talk about the launches, the company has launched BRL 173 million. And this quarter, we had also horizontal sales and -- again, [the 12] for Minha Casa, Minha Vida. And this all follows the strategy of the company. We also had a vertical project.

For the second quarter, we had BRL 71 million, and when we compare the first half of 2018 to the second -- to the first half of 2019, we have different projects included in the different maturities, which is distributed for this year.

And now we're going to talk about the operating results and sales. In the first quarter, we reached BRL 170 million and it has to do with loan sales. For the -- net sales were BRL 50 million, and that's already reflected in the company's production volumes. And when we compare this to the first quarter of 2018, you can see that we had some leaning, and we generated BRL 48 million of net income. And then for 2019, when we analyze according to the different quarter, we can see the net sales of BRL 40 million, and we have superior values for 2019. And we had BRL 80 million of net sales, BRL 91 million in total for this quarter. And all of these values are very important. These are important for 2018 and even better for 2019.

We had BRL 78 million in terms of net operating revenues and BRL 37 million of net sales. The evolution of net sales when we compare the total for the first half of 2019 was the net sales that -- and compare that to 2018 when we had a significant growth, we also had growth in the first quarter of 2019, actually, 2017, and also when compared to the first quarter of 2016. And that was record growth that the company has reached in the last few months, and we intend to keep it like that.

In terms of gross sales, we reached BRL 179 million -- BRL 24 million. And within Minha Casa, Minha Vida, BRL 35 million. So there was a growth in Minha Casa, Minha Vida more specifically. And we also had the beginning of the launches, which are now marking the regrowth of the company. We have BRL 130 million of CPA; in Minha Casa, Minha Vida, BRL 30 million; BRL 45 million in total for the quarter. And when we look at all of the data, we can see that there are negotiations going on and there are some cancellations reaching BRL 22 million. Minha Casa, Minha Vida is basically not significant because of the sales strategy of the product, which were more efficient. And obviously, credit maintenance for new purchases.

The operating and financial results. Evolution of this task in the first quarter of 2019 when compared -- I'm sorry, when compared to the first quarter of 2018, you can see the evolution on the slide and it is more concentrated in S&P. We had some launches and BRL 122 million for Minha Casa, Minha Vida. So the launches, we have in stock, which is basically located in -- [14] in 2019 and some in 2017. And when we look at the stock and we're only talking about [131] of return to stocking, so 26% means what is readily -- to go, and we have some corporate expense and BRL 47 million delivered in 2019, BRL 7 million in 2020. And then after that, BRL 43 million. And therefore, this company has a low anticipation of concluded stock.

Now the operating and financial results. Let's talk about our DRER and R&D, we closed the first quarter with a net revenue of BRL 144 million. And there was a growth of 59% and gross profit was 22% versus the values for 2019.

We have business sales and the maintenance of expenses, the rationale intelligence used for resources with a trigger of sales we closed in 2019 with BRL 2.8 million against BRL 14.4 million in the first quarter, and therefore, there was a 9% decrease. And also keeping the same total control line, we have BRL 20.9 million when compared to the values in the second quarter of 2018. And therefore, once again, you can see the intelligent use of the company's resources. And whenever we talk about equity with our partners, (inaudible) and Goiânia, we can see that we have BRL 3.5 million for 2019 against losses of BRL 1 million in 2018 -- to the same period in 2018. And here now you can see the consolidated -- in the first quarter of 2019, we do had some losses against BRL 29 million in 2018, which means an important [flow] reduction here. And then we have the profits when compared to 2018, when we had BRL 9.1 million losses. And therefore, the net losses were reviewed when we compare year-by-year. There was a reduction of 7%.

Now let's talk a little bit about our cash and debt. Today, we have a condition for the second quarter, which is very interesting and has to do with the company's strategy for development. So the total control of finances, and therefore, we have a net cash of BRL 177 million, the debt of BRL 384 million and when open this, we can see BRL 377 million -- sorry, BRL 337 million for construction spending. And then we have bank debt of BRL 47 million, and this is our only structural debt, our only bank debt. And now the next debt. As it comes to BRL 207 million, and you when we compare that to the next equity, you can see that this corresponds specific defense of the company's equity. And this places us at a very interesting position in terms of P&L, and you can see that our next debt shareholder equity is minus 21%. And so this is the position now of the company's debt, and I'd like to reinforce once again the growth strategy with a total control and maintenance of the company's cash.

Now in terms of our debt and payment of our debt, so we're not under pressure. And when we look at the distribution, basically, we can see that almost all of it is related to production, and then we can see BRL 42 million in the first quarter of 2022. And the rest is distributed according to bank payments and everything is done according to the good practices in this sector. Production debt represents 88% of the total debt, which is very important. And that's why we really give a lot of importance to debt so that we can be confident that the company is on the right track.

And I'm going to turn over to Alexandre Mangabeira so that he can continue.

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Alexandre Firmo Mangabeira Albernaz, RNI Negócios Imobiliários S.A. - Co-CEO & Development Officer [3]

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Good morning, everyone. So we're moving on to our closing remarks, and I would like to comment a little bit about the launches we had anticipated and our market strategies. Regarding the launches, and just to complement, we had an expectation of a larger volume by the end of the second quarter. We had a larger volume. But we had some difficulties obtaining approvals from the municipality, and therefore, we will have a higher concentration for the second half of the year. But our growth of -- but our target is to keep the same strategy, same goals.

Now regarding launches for the new strategies that we have hired McKinsey Consultancy to support us with the consolidation of the strategies we had already foreseen. The most important thing was that it helped us structure an implementation plan where we have the 6 macroregions that were prioritized so that we can operate and guarantee the control and the efficiency of the operation. These regions are already being implemented, and we have some people working in the regional offices, which gives us a potential growth, which is quite significant. And today, we have more than BRL 15 billion being negotiated. BRL 15 billion plus of the business volume, which has grown a lot so that, we can pave our plans for -- to reach the desired level of within 2 or 3 years.

In terms of product, we have already commented about this. But I like to reinforce that the long run, the main concentration is going to be in horizontal. And so we're going to have Minha Casa, Minha Vida horizontal and vertical. But in the long run, it's going to be more horizontal because Rodobens is planning on opening the cash flow. And we also have a horizontal SEC. We believe that a greater process means the regions where we want to work have tighter margins and we will no longer have a vertical approach for the South and the Southeast, and therefore, the idea is to be more horizontal. And Minha Casa, Minha Vida, horizontal and vertical.

In terms of the market, we can already see that the market is improving. There are better sales margins, and Banco do Brasil has operated normally. There is little bit more rigor in the analysis of credit and there's more difficulty to approve on, such that we have had no difficulties receiving payment, and it has worked very smoothly. We have had no problems with the release of money for the constructions. And maybe we always have some difficulty at the end of the year, but it has worked really well. So basically this is it, and we are available for the Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) If there are no further questions, I would like to turn over to Carlos Bianconi for his closing remarks. Please, Carlos Bianconi, proceed with your final remarks.

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Carlos Bianconi, RNI Negócios Imobiliários S.A. - Co-Chief Administrative, Chief Financial & IR Officer [2]

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As already indicated by Alexandre Mangabeira, the company's strategy has been followed. With the support of McKinsey, we have used it and structured it, and we are determined to develop the company to start regrowing in the century, and we're more prepared for growth than we were in the past.

Our RNI is available to view in case you wish to have any further information. If you want to talk about the business, the company strategy. And I would like to thank you all for another period together. My regards, and have a good day.

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Operator [3]

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Thank you. The teleconference for the second quarter 2019 is now closed, and please disconnect from the line now.