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Edited Transcript of RSID3.SA earnings conference call or presentation 15-Aug-19 5:00pm GMT

Q2 2019 Rossi Residencial SA Earnings Call

Sao Paulo, SP Sep 18, 2019 (Thomson StreetEvents) -- Edited Transcript of Rossi Residencial SA earnings conference call or presentation Thursday, August 15, 2019 at 5:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Fernando M. de Mattos Cunha

Rossi Residencial S.A. - Chief Financial & IR Officer

* João Paulo Franco Rossi Cuppoloni

Rossi Residencial S.A. - Vice Chairman, CEO & Member of Board of Executive Officers

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Presentation

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Operator [1]

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Good afternoon, ladies and gentlemen, and thank you for waiting. We bid you welcome to Rossi's teleconference to discuss the second Q '19 results. The audio is being translated simultaneously via web at www.rossiresidencial.com.br/ri where you can also find a PowerPoint for download. (Operator Instructions)

We'd like to clarify that any statements that may be done during this teleconference in relation to the perspective of business projections and goals are promises of the Board as well as based on information that are currently available for the company. Future considerations are not guaranteed. They involve risks, uncertainties and promises because it has to do with the future and hence, they depend on circumstances that may or may not happen.

Investors should understand that economical conditions, situations of the industry and other operational factors may affect the future results of the company and may lead to results that are materially different from those expressed in such future considerations.

I would now like to give the floor to Mr. João Paulo Cuppoloni, CEO. Please go ahead.

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João Paulo Franco Rossi Cuppoloni, Rossi Residencial S.A. - Vice Chairman, CEO & Member of Board of Executive Officers [2]

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Good afternoon all. I thank you for being here and I'm going to start with a quick message from the quarter. And then we go to the presentation with figures and then we answer questions.

In the second quarter '19, Brazilian economic activity had a slow pace with the reduction of the expectation of GDP growth in the year, reduced to 8% -- 0.8% according to Focus Survey. And this had a direct impact on construction sector, which performance had already fallen by 2.2% in the first Q Y-o-Y. And recovery remains largely dependent on the approval of the pension and tax reform in order to attract investments and expand job offers in the country.

In a controlled inflation scenario, however, the reduction of SELIC rate to 6% per year with further reduction expected by the end of this year. The reduction of SELIC rate makes rates and finances go down and loans go down and this would decrease consumption. With this and the approval of the reform, the economists project that the company should feel any improvements from 2020 on. And with the expectations that we have, and belief in our coworkers, we reinforce our commitment with the company looking for better results and preparing ourselves for the launching cycle.

In this quarter, the speed of sales reached 17% and it was aligned with the results that we thought for the previous quarter and above the performance that we had in 2018. And this is associated with the restructure of the area of customer service that brought together commercial area to -- with that area and that led to increase of resales of the units through this year. And we reached 81%, the highest stage of the last year. In relation to operational expenses, we had a reduction of 11% in the quarter Y-o-Y and the accumulated BRL 35.1 million, a reduction of 32% in relation to the same period of 2018.

And at last, we had the conclusion of one of the last jobs that was not being delivered as yet in Barueri, 500 units and the acquisition of one more land in Piracicaba, São Paulo. We hope that any of the projects acquired in the last quarters can be launched by the end of this year and we'll go on working for that. However, this will also depend on the dynamics of real estate market improvement in the sector and economy as I have commented. That will involve much risk in the business. Now we go to the presentation.

I'm going to start on Slide 2, which approaches what we sold. So on the upper part of the slide, gross sales reached BRL 42 million in the second quarter and BRL 39 million Rossi, and the accumulated BRL 93 million by far from Rossi. And sales for the quarter was 17.1%, aligned with what we have in the previous quarter, an increase of 2 points considering the Y-o-Y. At the lower part of that same slide, on the left side, we have the sales of ready units that represented 96%. On the right lower part, the geographic distribution, especially the ones in São Paulo because we deliver and there was an increase in demand in Barueri and Parque da Lagoa.

Now to the next slide, Slide 3. The upper part, we have some cancellations throughout the last quarters. In second quarter 2019, the cancellation [from] BRL 41 million, BRL 40 million for Rossi, a reduction of 34% Y-o-Y and 32% in accumulated of the year. That compares to the previous year. And the total cancellations, 81% of the units were resold on the same path, contributing to a high level of resales that the company has -- have had in the last quarters.

On the lower graphs on Slide 3, we see cancellations related to the stage -- of the -- or the status of the job. And again emphasizing São Paulo because of Parque da Lagoa and Barueri.

On the next slide, we present the profile of the company inventory, BRL 219 million for Rossi. In the graph on the upper right side, we have a detail of inventory according to the year it was launched. And in the lower graph of the slide, we see distribution between ready units, 88% of our inventory and to be delivered in 2019, 12%. Then at the last graph, to the right, we see geographic distribution of the inventory per region.

Now slide 5, we present the land bank of the company and its potential. The land bank with possibility to be launched until 2020 total of BRL 1.8 million (sic) [BRL 1.8 billion] in Rossi. On the lower part of the slide, we show that 28% has to do with projects that aim at low income public. On the lower right side, we can see that 100% of our land bank that can be launched in the next 2 years are in São Paulo.

Now I give the floor to Fernando, CFO, to present his considerations about financial assets of the company in this quarter.

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Fernando M. de Mattos Cunha, Rossi Residencial S.A. - Chief Financial & IR Officer [3]

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Thank you, João Paulo. Good afternoon, everybody. Going on with the presentation on Slide 6. We show the evolution through the last quarter, corporate debt, SFH. We reached BRL 1-point-some billion on the second quarter, as you can see on the upper left. And debt of finances to production reached BRL 484 million.

And in the same slide, we show the cash that has reached BRL 1.5 billion in the second quarter as compared to BRL 1.8 billion in the second quarter of '18. Besides impact of amortization of some agreements, this had to do with a consensus we agreed with Santander and Bradesco Bank and that was communicated already.

Now going to next slide, 7. We show on the upper part the history of jobs delivered in this last quarter and the cost to be incurred compared to the same period last year. And on the same slide, we show an evolution of transfer speed, SoS, 24% in this quarter, and cash inflow on the lower right, BRL 59 million, BRL 54 million for Rossi.

In #8, we see the evolution of the most important metric for results. On the upper left, we show net revenues, BRL 22 million in the first month of the year and the same (inaudible) as compared to 2018. It is because of the sales of the company and the company finished the jobs that we had and had a preservative stance. It had impact on the performance.

And also on that slide, we show on the lower left side, SG&A, IFRS. On the second quarter, there was a reduction of 88% and that reduction resulted in 11% in our administrative assets in the second quarter of this year in relation the same period of last year from 32% compared to the cumulative last year.

And now I give the floor to the operator to start Q&A.

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Operator [4]

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(Operator Instructions) Since there are no further questions, we'll give the floor to the company for their final consideration.

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João Paulo Franco Rossi Cuppoloni, Rossi Residencial S.A. - Vice Chairman, CEO & Member of Board of Executive Officers [5]

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On behalf of the Board, I'd like to thank you all for your presence. One more quarter that's over, so we go on towards our goals for the year, and we'll see you at the end of next quarter. Thank you.

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Operator [6]

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The Rossi's conference call has adjourned. We thank you all for participation and bid you and wish you a very good afternoon.

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