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

[Operator Instructions] Participants will only watch and listen during the company's presentation. After which, we will open the Q&A session. If you need to help or want to ask a question, please use the Q&A icon on the bottom of your screen. Before proceeding, we'd like to inform that any statement meeting during this webcast related to the company's business perspectives, projections and operations and financial goals are based on the beliefs and assumptions of Helbor's management and on information currently available to the company's Forward-looking statements are not guarantee of the company's performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not support, generally from those expressed in such forward-looking statements. Now I will turn the floor to Mr. Henry Borenstein, our CEO. Please, the floor is yours.

Good afternoon, everybody following this Helbor [Audio Gap] also generated by the company that is being every quarter improving. We launched the 3 new -- that totalizing [ BRL 800 million ]. About the sales this year, we had another event Só a Helbor Tem in the cities of Sao Paulo, Mogi das Cruzes and Curitiba that accounted for 21% of the total sales of the period. What shows the efforts of the company in reducing its ready units and in construction. We also had the meeting to introduce Fazenda Itapety the first phase of the project sums -- a gross total PSV of BRL 500 million and represent a new landmark. Before closing, I'd like to mention that we will continue aware of the macroeconomic and market indicators before taking any decisions relating to projects. I'd like also to thank on behalf of Helbor, for the trust that investors have on us over the years, and reaffirming the commitment with the maintenance of this business model, the degeneration of the shareholder values and maintenance of the company among one of the largest in this sector. Now Franco Gerodetti and Marcelo Bonanata will present the major operational and financial results of Helbor.

So going quickly -- for the highlights of the second quarter, our total gross sales reached BRL 374 million in the second Q and 25.8% on account for the ready units, sales, 60% in construction and 13.6% of launches. The total VSO, we reached 10.4%. The VSO of launches, excluding those developments that had been launched previously reached almost 70%. In the second quarter. We launched 5 developments, totaling BRL 388 million. The net operational revenue totaled BRL 214 million, 1.7% more. Our gross margin is the same level of the last quarters, 27%. And in the second quarter, 27.3%, a 2.4% increase compared to the second quarter of '21. Our net profit was BRL 12 million, keeping the trend of positive results. Now I'd like to give the floor to Marcelo Bonanata, who will share with you our operational performance.

Thank you. Good afternoon, everybody. I will talk about our land bank total of BRL 10.3 billion, Helbor share, BRL 6.4 billion. But it's nice to highlight, we have 37 projects. We have enough for 3 and 4 years, most of them in Sao Paulo with 64% located in the city of Sao Paulo. Then in the Greater Sao Paulo, [indiscernible] Mogi das Cruzes, Campinas and Santos. So we have a great, good diversity. So a higher concentration in the state of Sao Paulo. In this screen, you see the distribution of our land bank in the city of Sao Paulo with a great potential of BRL 7.2 billion and Helbor share BRL 4.1 billion. You see that they are located in the best locations of the city in neighborhoods like Jardins, Itaim, Moema, Chácara Santo Antônio. In a recent survey in the city of Sao Paulo, the 5 best addresses of the city and among these we have land in 3 of them. This shows the quality and diversity of Helbor's land bank. Here are the launches of the second quarter of '22, we totaled BRL 388 million, Helbor share, BRL 289 million of the 5 development, 2 were the opening, 3 new launches. And I'd like to highlight the Duo Life life by Helbor in the neighborhood of Jardins. We launched on 31 of July. And in 1 weekend, we made -- so the 22% of the development. It's a complex with corporate rooms and apartments with 1 room. It's in the mid and high level, but we anticipated the value. So it shows when we have a development in a good location, we do a good job. These are the highlights of the quarter and 1 more event Só a Helbor Tem. And we total 103 editions of this event. This is the highest, the biggest real estate event in Brazil. Nobody has held an event like this. BRL 77 million in sales, 21% of we sold in the quarter, 124 units sold, 54% ready units and 46 in construction, changing the profile of other editions of Só a Helbor Tem. We did... [Audio Gap] we were already connected. The next slide we will see the sales contracted in the quarter, Helbor made BRL 374 million with a 15% increase compared to the 2022. In the semesters sales, we did BRL 699 million, a drop of 11% compared to '21. But in the first semester of 2021, we made 2 operations: one was the sales of a complete unit. So if we subtracted this, the value of these 2 operations in the semester, we will be very close, showing the velocity of sales of the company, even in a year like last year. Here, we see the evolution of our VSO, 10.1%, an increase in relation to the first quarter of 2022. In this slide, we see the inventory in relation to our total inventory is BRL 3.3 million between mid, high and high -- very high standard. And it was a highlight in our sales. Today, it's a very special line of this high and very high standard. So this is a very important niche. You can see how it is distributed in relation to in construction and in launching. Today, we reached 21% of our total inventory in relation to the ready units. So in 2019, we have 59%. Then we had BRL 65 million. And we see the situation of our inventory was what was launched in '21, '22, meaning that we have a very healthy inventory -- so the most important is that year-by-year, semester by semester, day after day, we are decreasing the ready units inventory but with a higher concentration in what we launched in '21 and '22 with -- in the best way. Now I will give the floor to -- have our financial data.

I will talk about our net operational revenue. This is a semester comparison the operational revenue was almost in the same level. When we look the slide, we see drop of 16%, but I'd like to remind you that at the end of the first semester of 21, we did a sale of a commercial building in -- so this makes sense because this is a very similar volume we had in 2021. In the next slide, this is where we've been talking to you for some years, the improvement of our gross margin, it continues at the 28%. And we look quarter-by-quarter, we see what the behavior of the margin depending on what was sold, what is being sold. So -- but in general, we continue with this trend of a high -- we intend that this drop in the secondary -- we will continue to increase or to keep the same level, 2 interesting points here. The first -- so this has proved that even in these situations, it does not impact our profit margin. The second point is that what was sold in this quarter of legacy gave a superior result. The debt is almost the same. In our next slide, we have appropriate margin slightly drop 34%. But once again, the result of what was sold in this quarter and the units in production is still positive, and this will give a space in our gross margin, which is very important so we can increase the profitability. In the next slide, this is our G&A -- it's interesting to show the results and comment on them. We had a slight increase of 10%. we are in a low point in -- but we had an increase in this moment, we reached the maximum point. Next year, we will see an improvement in the next period depending on what we have. Now the -- this is the main reason for having this slight increasing indebtedness. And it's important to highlight that in the second quarter, we had a position that is necessary to our development since the beginning of the project. So this will make it possible to continue with the project and reach what is necessary to keep the profitability of this project. Another point is since it is a different year, we have an increase in the works funding, but with a slight increase, but again, directed for the future of the project. With our cash burn was -- impacted by the delivery. We see a different trend in '23 in '24 if you look to December of '22 until December of 23, the company will have the same loans in this period almost BRL 1.3 billion. And for you to have an idea, these progresses when the projects reach their conclusion we will have more than BRL 600 million, just settling it. And in '24, we will see the settlement of all this production. And obviously, this will have a very positive impact in our indebtedness and in our cash burn. It's also important to highlight this for this has been directed to the projects because we have the [indiscernible] conditions. We also had the payment for land that we acquired 1 year -- 2 years ago. So these were already in our payment flow and the beginning of work. And now we will open the Q&A session. So please, as I mentioned, you can go to the Q&A.

The first question is from Bruno Mendonca, Bradesco BBI. Thank you, Bruno, for your participation and question. He has 2 questions. First, how do you see the competition?

Thank you for the question, Bruno. We are not participating in this land competition. The company has 3 to 4 years for this land bank and well-located neighborhoods in Sao Paulo. And many things in the high and very high level and differentiated products. We have different products in the market as the launching that we will launch again. So we are out of this competition because -- it does not make sense. So the company are not looking for land and land we pay. An example, the company had a repay of BRL 1 million. This year, the company will deliver 14 development. So we have many things to be sold. This is a year that will get some more financing priority for our works -- for the construction because these are long -- will be years of great -- a lot of deliveries and cash burn. [Audio Gap]

And delivered in May 23, -- is there any commercial strategy for this?

Marcos, thank you for your question. This is Marcelo. The W will -- we will start with the new campaign. We have already the material for TV and newspapers. So in September, in the first week of September, we'll have the entire structure. If you pass by the site, it is everything covered now, but we will open that with a new light and we'll be able to talk about the W again, very strongly with a new meeting, including... Well, it's in firsthand this week, without these elements, even without them, we have already sold 5 or 6 units. It is the result of the work of the team. It's a new moment. It's a new store. -- it's an asset of a high value. We opened with the price for the region and the price is very good for the region, and it's almost ready. Competition -- Cidade Matarazzo, which is another location, excellent standard with a value high above and many compare it -- clients compare, and this movement of sales even without going to the media is being very important. It's a very special moment. And your question was very, very good. I'd like to comment this work this development will give us the opportunity to sell it until the last year. It will have a sales speed very good. And this is a real estate development. It has a velocity of sales during the launching, some better, some worse than you have the moment when you start the works and then the sales naturally drop because you don't have a decorated department, you don't have a sales team. It happens with all developments and then comes the moment when you have the decorated in the tower, which is going to happen now. So I will be with Marcelo and the sales team with high expectations that we have to deliver next year because it is related to our cash generation. So we have well-located products in Sao Paulo with good margins and adjusted price. And this will reduce the leverage and take everything to the level it has always been.

The second question of Marco Antonio relates to Fazenda Itapety. What is the expected margin with the [indiscernible] initially forecast of BRL 350 million and now BRL 500 million.

Well, in margin, we expect something around 35%. This is a very important product in terms of lotting -- the strategy is different from in corporation. You see many launchings with exchange that was very important for this match -- and this is with good price for the square meter, and we have a very good expectations to launch this product. As I said, it's a differentiated product for the region. And what happened during -- because of the pandemic, we saw many -- all allotments valued into the market of lots surprised the real estate market as a whole, the prices increased and Helbor will serve this moment now because we had an increment in cost, but also in sales price. And in this allotment, the same thing when we -- the buyer of this product was priority of the state of Sao Paulo. Now we see people from around Sao Paulo. Guarulhos, the east area of Sao Paulo looking to this development. But just reminding you, Marcos, this is the first phase. We are -- we have -- we are waiting for the approval of more 714 lots. So this work, this development will bring very good news for the company.

The next question is from Ugo [ Granite ] Bank. Congratulations for the result. On margins and inventory management. How are you guiding the repricing of the inventory in the different segmentations of income. Do you intend to maximize margins? Or do you prioritize this velocity of sales?