Helbor Empreendimentos S.A. (HBOR3) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to Helbor's Third Quarter 2020 Earnings Conference Call. We would like to inform you that this audio conference is being recorded and translated simultaneously. The video and the slides are being broadcast on the Internet at our IR site. [Operator Instructions] Before proceeding, we'd like to inform that forward-looking statements in this conference call relating to the projections and operational and financial goals of the company are based on the beliefs and assumptions of Helbor's management and information currently available to the company. Future assumptions is not a guarantee of the performance because they refer to future events and depend on circumstances that can or not occur. Industry economic conditions and other operating factors can affect the future results of the company and could cause results that materially differ from those expressed in such forward-looking statements. Now I will turn the conference over to Mr. Henry Borenstein, President of the company. Please, you have the floor.

Good afternoon of those together with us, with Marcelo Bonanata; Roberval Toffoli; and Franco Gerodetti. We are here to talk about the results of the company in the third quarter 2020. With the surprising recovery, the third quarter was a period of recovery, positive recovery of this sector, it started at the end of 2019 and temporarily interrupted by the coronavirus. After the agenda of launches, we can ratify this scenario. The recovery of sales in June strengthened over the quarter. The period sales had 112% increase and 36% over the same period of '19. The -- especially the ready developments that totaled BRL 211 million and the Helbor part, BRL 149 million. And the 2 launches of the year, Helbor Window Moema and Helbor Supreme Pinheiros in the second week of September. BRL 215.7 million overcome 60% of sales in the first week. These developments mark the recovery of the projects that were ready and were not launched particularly in the first quarter. In this quarter, we also delivered Helbor Visionist Cabral, a midsized, mid-pattern development with 200 units and up to BRL 2 million in Helbor part. In the year, we delivered 5 developments totaling sales of part Helbor BRL 427 million, 1,000 net units. On the financial perspective, the third quarter had numbers that ratify the efforts of the company. It's worth to highlight that net profit of the BRL 15.1 million accumulated of the year, with a positive result reverting the losses presented in the 9-months losses of BRL 77 million, a 78% increase in the net revenue compared to the second quarter and 18% compared to the same period of last year. These results contribute with the improvement of the gross profit, a high of 138% and 35.9% superior to the first quarter -- third quarter of '19. Margins also improved the gross margin and the adjusted one closed in 18.8% and 26.6%, respectively. And the margin to appropriate reached 36.8%, reflects on the improvement of the projects. The company is making no efforts to control -- make all efforts to control expenses. Administrative expenses was BRL 61 million in accumulated 9 months, with a drop of 3.9% when compared to the same period of the previous year, a 3.2% fall compared to the third quarter of '19, and the financial expenses registered an expressive fall of 65.6% compared to the 3 quarter of '19, and 68% fall in the accumulated of the year when compared to the 9 months of '19. Now Marcelo Bonanata, our Sales Director, will share the operational data from Helbor.

Now let's go to the operational results in the third quarter. First, I'd like to highlight that this quarter showed a huge recovery in volumes of sales, with the 2 launches in September. This scenario pushed us to regain the launchings. We now have the contracted sales, this [ BRL 1 million ] in the quarter. This number is 113% higher than the second quarter. Now looking to the 9 months of 2020. Even with the effects of the pandemic and lower volume, we reached BRL 1.036 billion, only 0.6% less in comparison with the same period of 2019. The part Helbor, since the beginning of '19, in the third quarter of '20, we reached BRL 319 million sales, 99% increase compared to the second quarter of '20, and 28% compared to the same period of last year of sales part Helbor. In the quarter, 48% corresponds to red units, showing our quality and efforts to sell the inventories. Now in Slide 5, now go to 6, Slide #6. Here, we see that this VSO, where we manage a part Helbor, reached 16.8% in the third quarter, superior to the one presented at the same period of 2019, registering 10.3% and the double in the second quarter of 2020. In the 9 months accumulated, we had an increase of 9.6 bps in relation to the same period of last year, reaching 36.4%. Now let's go to Slide #7. In this slide, we have the inventory of Helbor by segment and cities, where 88% are located in the Southeast region. This is very important, mainly in the state of São Paulo and Capital. This is well distributed among the segments, very high, high commercial, mid- and mid-high. In the next slide, #8, we show the evolution of the ready inventory that is being reduced every quarter. In the third quarter of 2020, we had BRL 1.079 billion. Now looking -- when we compare to the third quarter of '19, we have an expressive fall in our ready inventory of 26.6%. In Slide #9, we show how was the distribution of our land bank in September 30, 2020, predominantly in São Paulo and metropolitan region, accounting for 95% of the VGV part Helbor. Now I give the floor to Roberval Toffoli, our Financial Director. Roberval, please, you have the floor.

Thank you, Marcelo. Now let's go to the financial results. So on Slide 10, we show the evolution of the net revenue in the third quarter totaled BRL 322 million, with 18% increase compared to the third quarter of '19, and 79% of increase comparing to the second quarter of '20. In the 9 months accumulated in 2020, even with the pandemics, the net revenue reached BRL 761 million, 9.6% over the same period last year. On Slide 11, we see that the gross result of the quarter registered BRL 61 million, with a positive gross margin of 18%. This high is attributable to an improvement in the mix of sales, especially for units launched. The gross margin adjusted was 26.6%, a with an increase compared to the second quarter of '20 and the third quarter of '19. Slide 12 shows that we kept the appropriate margin with high levels in the third quarter, totaling 36.8%. This number ratifies the trend of the company of a significant improvement in its margins in the new projects that are being launched. Slide 13 shows that general and administrative expenses had a 3.9% drop in the 9 months accumulated, and the DGA and the SG&A of the third quarter of '20 had a drop of 3.2% compared to the same period of the previous year, and a slight drop of 1.8% in the second -- compared to the second quarter of '20, showing the efforts of the company to control expenses even in a scenario when we're returning the projects. Slide 14 shows The net results of the controller that was positive in BRL 15.2 billion in this quarter. In the accumulated of the year, the result is positive, reverting the losses of the 9 months of 2019. Slide 15 shows the total indebtedness of the company that significantly changed in its profile. In the closing of the year, it was BRL 1.6 billion when we had the same register of the previous year, a 10% decrease of the total indebtedness. And in the short term, it is 41%. Slide 16. We see a slight increase of -- in the relation of debt and net asset of 78.3% in the second quarter of '20 to 59% in the third quarter. When we compare it annually, the reduction was significantly going from 132% in the third quarter of '19, to 59% that we see on the graph. The reduction in this indebtedness when we compare the third quarter '20 versus third quarter '19 is a result of work of reescalation of the debt. We are improving the quality of our debt that is evidenced by the new cycle and the reduction of the legacy debt. In Slide 17, we show the cash burn of BRL 27 million in the third quarter of '20. This cash burn comes from the difference of the financing for the new cycle, and amortizations of the legacy funding. We are still at your disposal for any questions you may have. Thank you for your attention.

[Operator Instructions] Our first question comes from [ Lucas Fabio ]. Considering the results better than the same period of 2019, and the interest rate is better to the consumer, it simulates consumption and this results in this scenario of Helbor. Why the share value is so low? Do you believe that the scraping of shares was correct?

Well, Lucas, we've went through a strong pandemic period. The beginning of the year was very positive. The market suffered with this pandemic and the shares of the company reached a high peak, which determines the correct operation of grouping and, in our point of view, that this would happen. What we expect is that with this return, we will have a scenario closer to what happened last year, and that the results will naturally appear with this performance of the last quarter.

The next question is from [ Saloma ]. How many projects are expected to be launched in the fourth quarter?

Paulo, we have more 6 projects for the fourth quarter. We had 2 launches this last weekend, and the total VGV is over BRL 500 million.

And just complementing Marcelo, this is happening in the third quarter because of the pandemic. So these projects were ready to be launched, and then the pandemics came and the company decided to take a more conservative position and to hold them until the climate was better.

The next question is also from [ Paulo Marci ]. It was clear the recovery of the margin, and what is the expectation that the margins will stop hindering the excellent margins of the projects?

Well, Paulo, you are right. We are going back to have the margins that we usually had if you see our margins of 36.8%. But what I'd like to add is that the inventory of the legacy of the ready unit has also improved its price. And the combined margin is not the Helbor has always delivered, because you have new launches, but you don't see this revenue in the balance sheet. But if then, with the legacy inventory, we are able to gain the prices. And to answer you when we'll have a better margin, we have still 2 more launches. I think that in 6 months to 1 year, the company sold all the legacy inventory. Our projection to launch, the company will have a good volume of launches for next year. We have the land bank, we have a very well-located land, especially in São Paulo. So the company is ready to increase its volume of launchings. And if the market continues the way it is as this fourth quarter, we will be able to report better margins in a shorter time -- period time. [Technical Difficulty]

The next question is from Gustavo Cambauva. I have 2 questions. First, what is your expectations for the pace of recovery for 2021? And second, what is the view of the company for the other markets? We know that the market is strong in the state of São Paulo, but what is the performance in the other regions?

Well, 2021, the company is prepared to launch what we promised. The VGV part Helbor of about BRL 1.6 billion. We have a condition to see if the market continue this way to launch even more, but at least BRL 1.6 billion basic in the city of São Paulo and the other regions. But we have a building in Curitiba. It is a legacy development that suffered. But in spite of all the things, we have good margins, and the speed of sales is really surprising. So the idea of the company in a short term is to have -- is not to launch outside São Paulo, except for Joinville, we are having a presales. And in case we have a good response, we will continue, and also a small development, a low-risk range. But the focus of the company is prime in São Paulo and Great São Paulo. And to add, we had 2 launches in São Paulo in Moema and Pinheiros. Last week, a launch in Campinas that is already 100% sold, and we had other launches in Caminhos da Lapa, and now we have one more launch outside São Paulo. But it's Great São Paulo. It's in Mogi das Cruzes. So I share your comments, we work very well in the city of São Paulo and in the state in São Paulo. And we are well positioned. In addition to this volume, it's very important to say that the quality of our land bank and diversity of products. There is no concentration of one single product.