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

Thank you very much for waiting. Welcome to the conference call of Helbor, to present the results of the fourth quarter of 2020. This webcast is being recorded and simultaneously translated. [Operator Instructions] Before proceeding, we'd like to express that any statement referring to the business perspectives of the company, operational and financial goals, are premises of the Helbor Board with -- based on information currently available. So these are not any guarantee of development. They refer to future events and, therefore, depend on circumstances that may or may not occur. General economic situations, industry position and other operational factors may affect the results -- the future results of the company, leading to results that materially differ from what is expressed in this forward-looking statements. Now I give the floor to Henry Borenstein, the President of the company.

Good afternoon to all of you who follow this webcast. With our Sales Manager, Marcelo Lima Bonanata; our Financial Director, Roberval Toffoli; and IR Director, [Franco Gerodetti Neto]. We are here to give the results of the company in the fourth quarter of 2020. 2020 was very challenging for the building sector, oscillating between uncertainties and the launches. The strategy of the company during the year showed to be correct. In spite of the diversities generated by COVID-19, Helbor shown resilience ratified by the good results. In the fourth quarter, we intensified the launch of projects that were ready, waiting for the right moment to go to market. The total 3 were in the November and 2 in December, reaching BRL 436 million with Helbor's shares BRL 259 million. In 2020, we launched 7 development, totaling BRL 649 million and BRL 30 million (sic) [BRL 369 million] Helbor's share. The total sales of 2020 reached BRL 1.446 billion and BRL 955 million Helbor's share. It's similar to the previous year if we disregard the sales for the Fundo Multi Renda in the end of 2019. In 2020, the company delivered 6 developments, totaling PSV in 157 units and changes within -- on time. In 2020, we delivered Helbor Caminhos da Lapa, a mid-high standard development in the city of São Paulo of 200 units of total PSV of BRL 55 million (sic) [BRL 205 million]. We had consistent numbers. The net profit was BRL 26.5 million. This results ratify the efforts of the company and shows a new cycle of positive results. The gross profit of 2020 was BRL 122 million (sic) [BRL 192 million], 26.9% higher if compared to the same period of the previous year. The gross profit of the fourth quarter was BRL 56 million, with a significant increase if compared to the fourth quarter of '19 and a slight reduction of 8% as for the previous quarter. The margins presented a significative improvement. Gross and adjusted margin closed 2020 at 19.7% and 27.7%. The fourth quarter, the respective margins were 26.1% and 36.9% in this order. Issue about financial results. The financial results in 2020 reflects the correct strategy in reducing financial costs and elongation of term, which started in 2019 with CRI structured operations with the guarantee of ready units. In the period, we reached BRL 51.4 million (sic) [BRL 31.4 million], reversing the negative balance registered in 2019. This positive effect is the result of the financial revenue of the period that was BRL 86 million, and the financial expenses were BRL 54.7 million in 2020. The EBITDA of 2020 was BRL 66 million, with 199% if compared to the same period of the previous year. The fourth quarter EBITDA was BRL 34 million (sic) [BRL 31 million], with the negative value registered in the fourth quarter of '19. The EBITDA margin was 14.7%, superior to the same period in last year. When we compare the third quarter of 2020, EBITDA was -- had an increase of 7.8%, and the margin increased 5.7%. The appropriate margin is increasing constantly and reached 37.6% in the period, 2.4% superior to the same quarter of last year and 0.8% above the third quarter of 2020. We had an expressive number that of -- on lending, and the company is doing all efforts to control the expenses in the scenario to recover the project. The S&G expenses totaled BRL 84 million, representing a 0.8% increase compared to the same period of last year. In the quarter comparison, the administrative expense had a drop of 11.3% and vis-à-vis the third quarter of 2020 and an increase of 1.6% if compared to the same period of last year. Helbor thanks for the trust the investor has in us and reassure the commitment with the maintenance of its business model, generation of value to the shareholders, keeping the company one of the highlights in the sector focused in the responsible and transparent management. Now Marcelo Bonanata, our Sales Director, will share with you the operational results. Marcelo?

Henry, good afternoon. Can you go to the next slide, please? One more? Okay. In Slide #1, we share with you our land bank. Total land bank is BRL 8.3 billion. Helbor's share of BRL 5.6 billion, with 47 projects. 78% (sic) [68%] of our land bank is in São Paulo City, 26% in the Great São Paulo, São Bernardo Campinas and Mogi and only 6% in other cities. In Slide #2, we show the distribution of our lands in the city of São Paulo. In the novel or primary regions of São Paulo, you have development, Jardins, Itaim, Vila Nova Conceição, Moema, Chácara Santo Antônio. In most of our lands, we have urban mobility, public transportation, subway, all the infrastructure. One of the major points for Helbor is a good location. Location and location. Here, in Slide #3, some of the main launches of 2020, I'd like to highlight. The first one is Helbor Supreme in the suburb of Pinheiors in flats, that we have in 15 days, the selling of all units. It was really surprising, above our expectations during the pandemic, with all the restrictions we had and we're relearning what to do. Then we have Helbor Window in Moema, with some specificities. Moema is now -- is becoming a central suburb for launches. We had some products already launched. And with similar products from -- after the pandemics, we were relearning what to do. It was the first development where we had a digital meeting. We have a digital decoration apartment with more than 13,000 people in one night, and we open with all the restrictions due to the pandemic. The sales was with digital signature. And today, we have 94%. Every week, people come and say, Marcelo, increase the table, but we had a very important margin, 94% sold during the pandemics, with the product with lots of offer in the surroundings. But we were able to add new situations. Then we have Cruzes das Mogi. One week before the elections in November, and today, we have 40% of the volume sold. And Helbor Caminhos da Lapa is one of the best thermometers we had in the city of São Paulo. 85% of the units we delivered in the first phase, and we are going to deliver the second phase now. It was a phenomenal. Last year, we had more than -- much more units. We have a good concentration there, a strong sales team. We believe that this will be the new icon in the city of São Paulo. And today, we have 44% of the units sold. Just to highlight that Caminhos da Lapa is a land bank, very important in the city of São Paulo. It's in partnership with Toledo Ferrari. And the PSV shows the increasing this land has 130,000 square meter. So this is the entire set. And we can have plurality of apartments. We are not restricted with loft studios. No, we can go from lofts and up to 4 bedrooms. Just for you to have an idea, in the first launch, the sales price was BRL 7,500. And today, the price is BRL 9,000 almost BRL 10,000. We are creating a planned neighborhood inside the city of São Paulo. People will have their housing, convenience. This will be a suburb inside the city of São Paulo and causing all the reurbanization of the surroundings. So it is a very important development that the company has. It really deserves this highlight. And in addition to the investment, the municipality is developing the surroundings to have a total transformation. In the next slide, we have the contracted sales. In the last quarter, we had BRL 480 million, Helbor's share BRL 250 million. And in the year, BRL 1.433 billion. The sales of 2020 made us very happy. First, because this was a typical pandemic year, we started with a great first quarter, but then we had 100 days closed in our stands. The second point, we launched in 2020, almost of what we launched in 2019. And this taking into account the COVID. In 2019, we had an operation that was CRI handled, where we had several commercial units that we transformed. So we have potentialized sales concentrated in these units. So I want to highlight this BRL 1.446 billion was very important even beyond what was -- what we were expecting for the pandemic period. We worked hard to do that to transform launches and with our stock of sales. I'd like to highlight the graph at the left. If you look the second quarter of 2020, that was in the midst of the pandemic, we lost a quarter for sales and launches because nobody knew what would be the next day or the day after. So even considering the real estate fund, we didn't think about having a superior sales in 2020. So this was the result of the work of the company, and we sold the most difficult units and we enveloped with everything with the operation in the capital market. The next slide, please. We see the Helbor part, what is ready, what is under construction. And in this slide, we show you our SoS, showing that we are increasing every 3 months -- quarter. And you see the evolution. And today, we are flying quarter after quarter. And the increase of the SoS when you compare 2020 to 2019, we are growing with this sales. In this slide, we see our inventory, and you can see how we are in relation year after year. We started in December 31, BRL 1.075 billion ready units. And then we come every quarter of every year, you can see that everything that was launched since 1917 (sic) [ 2017 ], that is under construction, we have a very small inventory. You see a higher concentration today because we have more launches. So we have a total inventory of BRL 2.3 billion. This is the evolution of the ready inventory. You'll see the deliveries in 2019, we didn't have. So we have the ready units in 2018, BRL 1.9 billion. We dropped to BRL 1.3 billion. We didn't have any delivered and then the pandemic with 2020. And we had BRL 231 million units delivered in this year. If we take it out and compare '19 with '20, we go to 800 -- BRL 476 million, almost BRL 500 million in legacy sold. It's very important since the beginning of the crisis, Henry mentioned that we should intensify and put someone with experience in the ready units. And this work is being done every quarter, every year. And this is the snapshot of what we have in 2020, decreasing almost BRL 500 million in relation to 2019. And in this slide, we show the distribution of our total inventory in ultra high, high, commercial, mid-high, and mid standards. Helbor is a company where we have all the segments. We do not operate only in Minha Casa Minha Vida. We are not centralized with one type of a product. But in mid-high standard, when we have the highest concentration of inventory and high -- we have all types, studio, 1 bedroom, 3, 4 bedrooms. So we are very pluralized. We don't have concentration in the same place and not concentration with the same type. And then distributing our inventory by region, we have the highest concentration in the Southeast. And of what we have in the Southeast region, 61% is in the city of São Paulo. São Paulo is the biggest capital. It's almost a country, and we can have the best products. The better valuation per square meter. It's our city where we are located. So it's important to have the concentration in the city of São Paulo. I think Henry wants to make a comment.

I'd like to highlight that I always talk with Marcelo and the people here. We need to be concerned to what we are not selling because it's to sell with what we sell is easy. So we have Helbor's share BRL 254 million, I'd like to highlight is the value of 3 developments launched in the past that the company is giving a solution for this. I'd like to mention the development in Curitiba, Adagio Batel. It is classified as commercial and the company reapproved the project, and Marcelo will change this into residential with services development. The same thing is being done in another combo in the city of Santos and in Alphaville. So very soon, we will first -- will change this basis of commercial because we'll have residential units in these developments. We are focused on cleaning this area. I close my presentation, and now I will give the floor to Roberval Toffoli.

Thank you, Marcelo. Good afternoon, everybody. Well, let's see the financial results. We closed 2020 with very favorable and consistent numbers, showing clearly the sustainable recovery of the company. Now going to Slide #15, we have the evolution of the net revenue totaling BRL 213 million, with a drop of 15% in comparison to the fourth quarter of '19 and 34% reduction in relation to the third quarter of '20. In 2020, we had BRL 64 million of net revenue, 24% drop. It's important to highlight here that this revenue had a direct impact caused by the COVID pandemic. On Slide 16, this slide and the next one are extremely important because we see here clearly the gross result of the quarter, reaching BRL 56 million, with a positive margin of 26%. The positive variation show the trends of the company of constant results improvement, showing the result of this new cycle. The projects are being launched. And they have a more robust margins, while the old projects with a more compressed margin are in reduction process to 0 these inventories. The adjusted margin in the fourth quarter was 36%, showing an expressive increase in relation to the third quarter of 2020 and the fourth quarter of 2019. In 2020, the gross margin was 19.7%, facing 11.7% in 2019. In Slide 17, which is also very important, we see the movement of the margin to be appropriated. It's in high levels, in the fourth levels, totaling 37.6%. It ratifies the company of a very important improvement in the margins. In Slide 18, SG&A were almost unchanged in relation to the previous period and the G&A of the fourth quarter had a drop of 11% in relation to the third quarter of '20, corroborating the efforts of the company to control these types of expenses, even in a scenario of recovery of our projects. In Slide 19, which is also important, which is the results of everything is the evolution of the results of the controller that was positive in BRL 26.5 million in the fourth quarter of 2020. And in the year, the company had a positive result of BRL 26.5 million, compensating the losses of BRL 104 million in 2019. Slide 20 shows the total indebtedness of the company, that had a total change in its profile. In the closing of the period, reached BRL 1.4 million (sic) [BRL 1.4 billion] against BRL 1.5 million (sic) [BRL 1.5 billion] registered in the same period of last year, with a drop of almost 5% of the total indebtedness. In Slide 21, we show the cash consumption that in the quarter reached BRL's 25.9 million, resulting mainly from the payment of the investments we had in the lands we acquired and the difference in the payment of works, which is a value that is not covered. So we are still at your disposal for any questions you may have. And thank you very much for your attention.

[Operator Instructions] The first question that we have is from Alex Ferraz, Itaú. I'd like you to comment on the division of lands in the fourth quarter since the land bank increased even with the high volume of launches. And all these acquisitions of land is or not for high level development?

Alex, thank you for your question. The company acquired a land in Vila Clementino, close to the subway and Borges Lagoa Avenue. Marcelo participated in the launch last year. So we acquired this land in partnership with Construtora [indiscernible]. And we are also focused on other lands to change or to -- our land bank for the next few years. We are very -- we are comfortable with our guidance for this year, but we need to think about COVID. We are comfortable today, but we want to see what is going to happen to the market and the country after the vaccination. We are focusing for the next 3 years. And we have many things focused in São Paulo and regions for mid- and mid-high income. We have another land important to our land bank in the suburb of Jardins, Rua Haddock Lobo with Alameda Lorena. To increase this, we acquired 3 other properties to improve the size of this land. And we did this at the end of the year.

The next question is from Bruno Mendonca from Bradesco. Even with the sales of BRL 500 million of ready inventory, the company didn't have the same leverage in 2020. And he wants to know if you were keeping the same speed for lands, and if we should expect the leverage up to the end of the year?

Bruno, the first point is, naturally, we will -- we expect a decrease in our leverage. We expected below 50%, 55% until the end of the year. And we have 2 important factors here. First, we expect the sales of the inventories will help to -- in this decrease of leverage. And in spite of being a good performance in the ready inventories in 2020, we had some works. And one thing offset the other, generating expected movement.

Okay. In terms of land bank, as Henry mentioned, we are certain new opportunities, and we have the benefit of new acquisitions more calmly. We have well-developed the land bank, especially in terms of price. But yes, we expected the acquisition of other land, but within our goals of recovering the company in terms of image and bottom line.

Just to add something. It's Henry. And we are very focused in selling our inventory. We did it well last year. And in 2021, we will continue to sell this inventory, that will be a leverage. And this sales of inventories generate cash to the company because it's one more guarantee. When you release these units, the balance of it is money for the company's cash. And the company will deliver 11 developments this year financed by Bradesco. So Bradesco knows what is happening. So clearly, these deliveries will also generate cash for the company. We will have the -- on lending of our -- and with this cash for the company, the company will be comfortable to run its operation and acquire new business. One more point. We have the capital market operations with the credit with a building in Rio de Janeiro, this will be in the next quarter, that will significantly reduce our indebtedness. And there is another operation with an outstanding balance of development here in São Paulo with 1 and 2 bedrooms. That -- there is opportunity of acquiring these balances. So I will be the broker of the month. I will be the champion of sales this year. In addition, we are focused in buying land in cash and also to buy with exchange, okay? And this helps the company. Almost 90% of what we had, it's important that the other 10% are almost delivered. We have everything already settled.

The question is from [Guillame Osi]. What is the relation of [Barueri] and Helbor -- sorry, the HBR relationship with Helbor.

Thank you for the question. The company have the controlling in common, but they are different companies. Each company has its own business and own objectives. One is Helbor's focus in development, especially residential, and the other is revenue. There is an agreement between the companies and investments when they have a jointly investment, especially when it's not the business of Helbor, but is the HBR business. And in the case of Helbor, it's a solution. What have in São Paulo are ready development with stores in the ground floor without being commercialized and being object of swap and/or barter. And we believe that this will administer -- generate synergy with the development. And even with the increase in price, what happened with our Helbor Wide in Rebouças, that is being delivered. And 2 weeks ago with the Passeo clubbing it's development of 1 and 2 bedrooms. And the market has lots of offers but we were able to differentiate the product. And Marcelo can add more. And what is administered by HBR helped a lot in the decision in 1 week with the stand closed, but even though 2/3 of the units already sold. And it's interesting to say that HBR works with other developers in the city of São Paulo with this same partnership.

I'd like to add that today, the sales team ask us, this development has any agreement because it's important when you have an active. When you -- if you're going to buy a building over stores, it's important to know. We had a development that we sold the stores, and they put -- so it is evident that when you have a good store, we sold almost all units. So with no doubt, the sales team asks and the clients understand, and this adds a lot to our projects.

The next question is from [João Bosco Olivera]. He asks us to elaborate on all the projects that we have. And he wants some additional information?

João, we'd like to -- we are available to you. Any questions you have about any projects, you can contact us. Thank you, João. [indiscernible] that is partner of the holding company. And we launched -- last year, we launched development in São Paulo. That is an area of [Barueri], that is massive. So we headed this incorporation from the -- with the family owner of Suzano. The big business of is [Barueri] is what we call [Fazenda Modelo]. The first part is still to be commercialized. They are strong in allotment, and we will launch another phase of the allotment of [Fazenda Rodeio]. And this is not in our guidance. For allotment, the licenses take too long to be given. So we -- and we didn't want. But now we are in the final phase of the license and part of the work is being conducted. If you want, the IR team can send you some photos, some pictures of the development of this works. And we will start the selling at the end of this year of this last phase. And in addition to the residential, we'll have an important land bank for buildings and future incorporation. We need to go slowly, but it's a good city with almost 400,000 inhabitants. It's an important development.

Jon is also asking about our legacy. Is it still harming the margin of the company because the margin is negative?

Yes, Jon. It hurts our margin. The great change we had in 2019 is exactly what we are doing now. Participation in our revenue of the projects with a more robust margin in relation to our inventory. We will put the margin slightly down. But with this recent projects with a higher margin, we expected this to continue to happen. That's why we had a higher participation in the margin from 1 year to the other, and this trend will continue during 2021.

The question is from [indiscernible]. And he is asking to talk about the temporary nature of sales in the first quarter of 2021.

Thank you for your question. It's Marcelo. The first quarter, the sales were within expectations. January was slightly shy, but it exceeded all expectations. We closed February with the launching of Helbor Park clubbing. 70% of the units sold in 15 days. We were preparing 2 more launches in this quarter. And the second phase of Helbor Park clubbing with 4 bedrooms and another development with 3 and 4 bedrooms in Caminhos da Lapa. But then with the red phase came and now this is the most restrictive phase. We did a survey of what happened in this first quarter in the city of São Paulo. And we saw that we had only 10 launches in the first quarter, 4 of Minha Casa Minha Vida, only 6 of mid- and high standard, only 3 of public companies. So I think it is very difficult that within this next 15 days, we'll have any new launches. So sales were very good until now. The launches were above our expectations. We would like to have 2 more launches, but we won't do because everything is closed. But I think that even after all these adversities, we'll be able to deliver a good quarter. We have a digital platform working actively. We know how to work with this. All our contracts are digitally signed. We don't have any physical contract. And this make it much easier for us and for the clients. And it put us closer to the client. Last year, this was new. But even though, we sold every day. This year, we are selling every day, keeping the work we do. So I think we will deliver a quarter within all the expectations in spite of the difficulties we are facing.

The next question is from [indiscernible]. What is the gross margin ex-legacy for the fourth quarter and the expectations for 2021?

Thank you for the question. And the company is preparing the Helbor Day. And one of the objectives of this Helbor Day is to clear all these questions that you have. So if we remove, which is ex-legacy, our margin is 4.3%. It is close to the margin. For 2021, I would like it to close in this same level. But as we mentioned, we -- everything depends on the mix, how much we'll have of inventory sales and new works. So it depends, but the trend continues to follow the trend we saw from '19 to '20 and in the last quarters.

So gentlemen, we -- before closing, Helbor Day will be in April. Yes. So I'd like to make an invitation. We are waiting for this red phase, but we are going to open. I don't want to be modest, but it's the best sales unit in the city of São Paulo, where we used to have the Cafe Octavio. This will be a sales center with a high-standard products. It's ready. So I'd like to make an invitation. Maybe we can have this Helbor Day there live because this will be a very important sales point. It will be different. I won't say anything now, but this will be very cool, okay? Invitation accept, and we'll see you on the Helbor Day, and we will give you more details. Unfortunately, this meeting will not be in presence. But anyway, thank you very much for your presence. We close our call for the results of fourth quarter of 2020. And Henry, you have the floor.

Thank you very much for your participation. I'd like to say that 2020 was a very important year for the company because it consolidated Helbor's work and the team work in these last 4 years. It was hard work. It was like a transatlantic. We were able to change the route of this ship. And since the transatlantic ship is big, it takes some time. But Helbor did a very nice work. It balanced everything. It's generating cash again. It's launching new products, improved its margins and delivered results. It shows that 2020 was very important for the company. And once again, if it was not for the pandemic, the results would be much better. But this shows that we are back to the track. So I'd like to thank the entire Helbor's team and the investors who trust in our company. Thank you very much, and have a nice day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]