3Q08 Presentation

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3Q08 Presentation

  1. 1. Third Quarter 2008 Results Earnings Conference Call Investor Relations Contact Julia Freitas ri@gafisa.com.br 1
  2. 2. Overview of 3Q08 Results - Wilson Amaral, CEO Financial and Operational Performance 2
  3. 3. Highlights of the Quarter 3Q08 launches increased 79% over 3Q07 Launches increased to R$762 million in 3Q08 from R$426 million in 3Q07 Pre-sales increased 37% from 3Q07 Pre-sales increased to R$504 million in 3Q08 from R$367 million in 3Q07 Net operating revenues rose 19% from 3Q07 Net operating revenues increased to R$373 million in 3Q08 from R$313 million in 3Q07 3Q08 EBITDA reached R$64 million (17.2% EBITDA margin) a 40% increase from 3Q07 Net income increased to R$38 million in 3Q08, a 5% increase from R$36 million in 3Q07 Gafisa consolidates presence in low income segment, with Fit showing R$187 million in launches and R$124 million in pre-sales in 3Q08 In this quarter, Gafisa completed five projects totaling 820 units. Fit completed its first development, Fit Jaçanã in São Paulo. Note: 2007 adjusted for capitalized interest and land swaps. 3
  4. 4. Recent Developments Leadership in Low Income Segment Enhanced: On October 21, the merger of Fit Residencial and Construtora Tenda S.A was approved by 98% of Tenda shareholders present at a general meeting. Gafisa now holds 60% of the total capital and voting shares. Strategic Investor Increases Participation: Gafisa announced that Equity International (“EI”) had acquired an additional 3.3 million Gafisa ADRs representing 6.6 million shares. The new stake brings EI ownership of Gafisa outstanding shares up to 18.7% from 13.7%. Strengthens Accounting Practices: We have started to account for land acquired through product swaps, which previously did not flow through our financial statements. This has increased our revenue and cost recognition. SAP and SOX implementation : The implementation of the SAP management is on track and will serve as an important tool in managing the company’s operations. In October 2008 we began the SOX certification testing period. Moody’s Ba2 international rating and Aa3.br Brazil national scale rating. 4
  5. 5. Gafisa now controls Construtora Tenda, a leading low income real estate developer that incorporated Fit Residencial. 98% of Tenda shareholders present at the General Meeting on October 21st approved the incorporation of 100% of Fit's shares into Tenda. Gafisa owns 60% of Tenda's shares after the transaction. Tenda will continue to operate as a publicly traded company, listed on Bovespa. Tenda has: The strongest balance sheet and cash position in the segment, One of the largest land banks, Strong distribution platform, Housing for the 4-20 time minimum wage segments. We expect this transaction to be highly accretive. 5
  6. 6. Increased Mortgage Penetration Pre Sales financed by Gafisa vs. financed by Banks 16% 14% 34% 12% 54% 20% 32% 74% 30% 64% 34% 16% 2005 2006 2007 9M08 Gafisa direct financing longer than 36 months Gafisa direct financing up to delivery of keys Mortgage Loans  Reduction in accounts receivables duration, improves Gafisa’s working capital  Higher returns  Higher asset turnover  Improving terms for clients with lower rates and longer payment periods 6
  7. 7. Mortgage Lending Expanding Rapidly Strong growth in mortgage lending still does not meet pent-up demand Housing Credit (R$ bn) Savings Accounts SBPE Balance (R$ bn) CAGR (2003-2007): 43% 28.2 Sep 2008 Savings grew 19% from Sep 2007 25.3 5.4 55% 80% 6.9 16.3 15.7 57% -1% 3.7 10.4 7.0 205 51% 27% 98% 46% 22.8 15% 187 6.9 18.4 6.0 41% 5.5 3% 90% 90% 12.0 150 3.9 63% 9.3 135 3.8 36% 126 4.9 115 2.2 3.0 Savings up to Sep 2003 2004 2005 2006 2007 Jun-07up toJun-08 FGTS June 2003 2004 2005 2006 2007 Sep-08 2007 2008 Mortgages using resources from FGTS Mortgages using resources from Savings Accounts Sources: ABECIP, Central Bank of Brazil, CEF and FGV. 7
  8. 8. Delivering on Growth Strategy: Diversification and Expansion 3Q Launches (R$ million) New Markets Rio de Janeiro 76 2 953 São Paulo Bairro Novo 3% 79% 334 Gafisa 69% 42 Fit 24% 6 471 188 243 Alphaville 7% Gafisa 66% 87 151 185 3Q07 3Q08 8
  9. 9. Delivering on Growth Strategy: Strong Pre-sales 3Q Pre-sales (R$ million) New Markets Rio de Janeiro Bairro Novo 3% São Paulo 504 37% 367 250 Fit 25% 134 Gafisa 61% Gafisa 62% 68 64 Alphaville 10% Fit 25% 165 189 3Q07 3Q08 9
  10. 10. One of the Most Geographically Diverse Homebuilders Vision - Gafisa States where we already launched projects. Campo Belo – São Paulo, SP 10
  11. 11. Diversified, High-Quality Land Bank Provides Strong Platform for Growth 220 different sites, in 21 states, in 66 cities Potential Future Sales Potential Units Swap Segment Units % Gafisa % Gafisa Agreements % 100% R$ mi Gafisa 26,422 22,182 7,754 47% AlphaVille 32,953 16,365 2,914 99% Fit Residencial 13,887 17,796 1,633 16% Bairro Novo 24,326 12,163 802 82% Total 97,588 68,506 13,103 73% 73% acquired by swap agreements. Low income represents 44% of potential Gafisa units in land bank. 11
  12. 12. Dedicated Management Teams for Each Market Segment, Product Line Mid, Mid High and 60% owned by Gafisa 60% owned by Gafisa Low Affordable Entry 50/50 JV with Odebrecht Own Sales Force High Mid High and High Low Affordable Entry Level Vertical Level In São Paulo, Rio de Horizontal (lots) Horizontal / Vertical Janeiro and Northeast Metropolitan areas Metropolitan Areas and Horizontal / Vertical Outside Metropolitan Outskirts Metropolitan Areas and Selling Machine Financing: Banks Areas Financing: CEF and Outskirts Management of Unique Projects Financing: Direct Banks Financing: CEF and Banks Channels & CRM Unit Prices: > R$200K Unique Projects Standardized Projects Standardized Projects Management of Unit Prices: R$50K – Unit Prices: < R$100K Unit prices: R$70K – Outsourced & Local SC R$200K R$500K 12
  13. 13. Our Differentials Professional Management and Established Organization World-class Shareholders Industry Leadership and and the Highest Strong Brand Recognition Standards of Corporate Governance Geographic Diversification Supported by Strategic Growth Through Land Bank Product Diversification 13
  14. 14. Overview of 3Q08 Results Financial and Operational Performance – Duilio Calciolari, CFO 14
  15. 15. 3Q08 Operating Highlights Net Revenues (R$ million) Gross Profit (R$ million) 35.0% 19% 29.0% 44% 131 374 313 91 3Q07 3Q08 3Q07 3Q08 Net Revenues Gross Profit Gross Margin Adjusted EBITDA (R$ million) Adjusted Net Income (R$ million) 17.2% 14.7% 11.6% 10.2% 40% 64 5% 46 36 38 3Q07 3Q08 3Q07 3Q08 Adjusted EBITDA Adjusted EBITDA Margin Adjusted Net Income Adjusted Net Margin 2007 adjusted for Capitalized Interest and land swaps. 15
  16. 16. Strong Pre-Sales Positively Impact Backlog of Revenues to Be Recognized R$711 million of results to be recognized (69% growth compared to 3Q07) 3Q08 2Q08 3Q07 3Q08 x 2Q08 3Q08 x 3Q07 Gross sales to be recognized 2,045.1 1,927.5 1,208.6 6% 69% Sales net of 3.65% sales tax to be recognized 1,970.4 1,857.1 1,164.5 6% 69% Cost of units sold to be recognized (1,259.9) (1,190.1) (743.5) 6% 69% Backlog of results to be recognized 710.6 667.1 421.0 7% 69% Backlog margin - yet to be recognized 34.7% 34.6% 34.8% 14 bps 23 bps 16
  17. 17. Land for Product Swaps This quarter we began to account for land acquired through product swaps in our income statement, targeting best accounting practices Previously, product swaps did not flow through our income statements, but financial swaps did 9M08 3Q08 2Q08 1Q08 2007 Swap Effect on Gross Revenues 27,175 5,313 9,008 12,855 20,088 Swap Effect on Net Revenues 26,184 5,119 8,679 12,386 19,355 Swap Effect on COGS (18,538) (3,664) (6,318) (8,556) (13,414) Swap Effect on Gross Profit 7,646 1,455 2,361 3,830 5,939 Net Revenues including land swaps 1,149,879 373,632 444,380 331,868 1,191,529 COGS including land swaps 762,273 242,839 298,392 221,042 810,328 Gross Profit including land swaps 387,606 130,793 145,988 110,826 381,200 17
  18. 18. Gafisa’s Strong Financial Position Will Allow it to Execute Growth Strategy and Access Credit Markets R$250 million in securitizable receivables in addition to R$790 million cash. R$3.5 billion in construction finance lines of credit provided by all of the major banks: R$1.6 billion signed contracts R$1.2 billion contracts in process R$682 million additional availability 3Q08 2Q08 Total Debt 1,377 1,084 Obligation to Investors 300 300 Cash and Cash Equivalents 790 775 Net Debt & Obligation to Investors (Cash) 887 609 Shareholder’s Equity 1,689 1,637 Total Capitalization 3,066 2,721 Net Debt & Obligation to Investors / Equity 52.5% 37.3% 18
  19. 19. Outlook for 2008 Tenda consolidation starting in fourth quarter 2008 Launch guidance for 2008 maintained at R$3.5 billion, equivalent to R$3.3 billion excluding R$200 million of Fit 4th quarter launches EBITDA margin guidance maintained at 16% to 17% for 2008 19
  20. 20. Safe-Harbor Statement We make forward-looking statements that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of our management, and on information currently available to us. Forward-looking statements include statements regarding our intent, belief or current expectations or that of our directors or executive officers. Forward-looking statements also include information concerning our possible or assumed future results of operations, as well as statements preceded by, followed by, or that include the words ''believes,'' ''may,'' ''will,'' ''continues,'' ''expects,'‘ ''anticipates,'' ''intends,'' ''plans,'' ''estimates'' or similar expressions. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Our future results and shareholder values may differ materially from those expressed in or suggested by these forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. 20

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