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

Good afternoon, ladies and gentlemen. And thank you for waiting. Welcome to Helbor's First Quarter 2023 Earnings Conference Call. This webcast is being recorded and simultaneously translated. If you need translation, this tool is available clicking on the interpretation globe icon, located at the bottom of your screen. There, you can choose your preferred language. For those listening to the conference in English, there is an option to mute the original Portuguese audio, just clicking on mute original audio. [Operator Instructions] Before proceeding, we would like to inform that any statements made during this webcast related to the company's business perspectives, projections and operational and financial goals are based on the beliefs and assumptions of Helbor's management and on information currently available to the company. Forward-looking statements are not guarantee of the company's performance. They involve risks, uncertainties and assumptions, because they relate to the future events and therefore, depend on circumstances that may or may not occur. General economic conditions, and other operational factors can lead the future results of the company that differ materially from those expressed in such forward-looking statements. Now I will turn the floor to Mr. Henry Borenstein, President of the company.

Good afternoon to everyone following this webcast of Helbor's results. Along with our Sales Director, Marcelo Bonanata; and our Finance Investor Relations Director, Franco Gerodetti, we will present the company's results for the first quarter of 2023. It is worth mentioning that this period was favoring, so we ended it with positive operating and financial indicators, continuing the recovery cycle of the results reiterated by the company, which has been reaping the fruits of it's strategy. Concerning launches, we closed the quarter starting sales of the third phase at the Reserva Caminhos da Lapa development, which had a net PSV of BRL 212 million, a volume of launches that is in line with the company's strategy and remains a tentative to economic and market indicators before making the decision to launch new projects. Speaking of sales, we totaled BRL 354 million in the quarter, of which 92% corresponds to finish and under construction units, reinforcing the company's effort to reduce its inventory. Before closing, I'd like to highlight that we released our first sustainability report this week, present the actions we developed in [indiscernible] social and corporate governance areas, reinforcing our commitment to transparency and accountability to our shareholders. In addition, the report also highlights our achievements and challenges supporting our continuous pursuit of sustainable practices in our operations. Franco Gerodetti and Marcelo Bonanata will present Helbor's main operational and final data -- financial data.

Thank you, Henry. Good afternoon, once again. I will go briefly on the highlights of the first quarter, and then I'll give the floor to Marcelo. As we mentioned before, we had a good quarter of sales with a volume of BRL 354 million, 9% above the first quarter of '22 and 32% higher in relation to the fourth quarter of '22. Approximately 91% of the sales account for the commercialization of the ready units and in construction that help us on projects that we will deliver this year, next year. We have the SoS with 10.4% in the period, 1.2 pp above the first quarter and 2.8 pp compared to the fourth quarter. We had another event called Só a Helbor Tem with a very [ impressive ] volume of sales, BRL 128 million and in São Paulo, we had a record for this event. As for net operation revenues, we had BRL 270 million in the first quarter, an increase of 28.4%, compared to the first quarter and 25.7% higher than the fourth quarter of '22. Another important point is our gross margin that reached 29% in the first quarter, proving once again the recovery -- margin recovery over the last years. Now I will give the floor to Marcelo to talk about our operational performance.

Thank you, thank you. Good afternoon, everyone, who is participating in this event. We will talk about our land bank. Our potential landbank is BRL 10 billion, Helbor's’ share is BRL 6.3 billion, that units of 34 projects. Then if you see 73% are distributed in São Paulo and 21% in the metropolitan area. Landbank, as Henry said, is the most valuable asset that a developer has and we have a landbank of great quality, giving us good developments. We distribute our landbank in the city of São Paulo, we see that we have BRL 7.5 billion of total PSV, BRL 4.6 billion for Helbor share. And talking about quality of landbank, we have -- we are in the best neighborhoods in the city with -- and I think that one of the points available is the geographic decertification in the city of São Paulo. We are in all regions -- and with the diversity of products, we go from studio to very high standards. So this gives us flexibility to embrace several segments in several locations. I highlight here some neighborhoods that we are transforming, but we have in our landbank Jardins, Moema, Chácara Santo Antônio, Itaim with very diverse products, reaching several brackets, social brackets and in the very primary regions in the city of São Paulo. In Slide here, we talk about the first quarter launches. We have 1 launch that was the opening of the third phase of Reserva Caminhos da Lapa. This development is part of conglomerate we have in Lapa. In [indiscernible] a new neighborhood is being built. We started in 2016, and we had more than 1,000 units delivered, and we launched more 2,000 units transforming the neighborhood and even other intervention with a new ]. So it's a new phase of this new development, one of the best we have and this is one of the few developments of urban transformation. The PSV was BRL 212 million, units from 90 to 150 square meters. And at the end of the quarter in March, we had a very speed in this sales. And in this slide, we show the 2 important deliveries we had for the company, one in the city of Mogi das Cruzes, Passeo Patteo Mogilar, also urban and in real estate development that we have some large areas, and this has about 100,000 square meters. We developed commercial part, a square with the private investments, one of the best use of squares in the city with something and with cell phones, smartphone charger. So this is one of the developments we delivered in the first quarter with 324 units, well sold, 83% sold, 80% Helbor's share. Another development, which is My Square is at the ]. We are almost trying to develop this region. We had commercial to 2 dorms, 3 rooms, and this is a development with 3 -- 2 and 3 bedrooms with a service area for the region. So it's an iconic development, beautiful with high acceptance, 50% is Helbor's share, 87%, sold, 252 units, a medium-high-standard development. In business line, we show our Só a Helbor Tem. This is the largest event of sales of real estate inventories. Nobody reaches this number of events. We reached 109 editions. We had a good expectation, but this event surprised us. We had 3 Só a Helbor Tem in the same day. One is São Paulo and Curitiba and Mogi das Cruzes. We reached BRL 128 million in 1 weekend. We sold 35% more than the first event of last year and 18% more than the second event in the second semester of last year, showing that Helbor has sold their inventories without putting the value down just the opposite adding value and with a great partner of us, Bradesco, providing special conditions for the client to -- with only 10% of cash pay and with a long financing term. So we saw people -- the anxiety of clients, in Mogi das Cruzes, we had people arriving to this end at 8 a.m. And so all we had one client arriving at the 3 am, so anxious to acquire the unit. We would like to have 1 event of this every month, but we can't, but it's a great success of real estate sales in Brazil. In the next slide, the contracted sales with total BRL 374 million (sic) [ BRL 354 million], 9% above the first quarter of last year and 32% above the last quarter of 2022. BRL 223 million of Helbor's share and the others for partners. Only 8% of this launching, 92% of everything sold in the quarter was the sales of inventory in ready developments. Now is our SoS. We had an SoS -- a total 1 in the first quarter that was 9.1% (sic) [ 9.2% ] last year and 7.6% in the fourth quarter of '22, so a very robust SoS. We harvested the fruits that we planted. We were concerned with the country, but the market showed to be very positive for real estate sales. Many people are concerned with the moment of the country, the instability moment, and they know that real estate is a very safe or secure investment. This is to show our inventory. The red unit, we see a drop in relation to the first quarter of '22 to '23 of 41%. In 2022, we didn't deliver anything during the year. And this year, we had 2 deliveries in the first quarter. So this drop of 40%, including the 2 developments we delivered in the first quarter. So we have only 14% of the total inventory only for ready units. So the company is concerned with the ready inventory, we are concerned in selling it, but much more than producing new developments. We will launch, we are prepared. We did our homework, but we will do this in the right time according to the market. Well, now Franco, it is for you to talk about the financial indicators.

I will go very quickly to the financial part to open the Q&A. As we've seen net operating revenue is a very relevant number. And here, because of the sales in the first quarter, the sales of ready units and products under construction in the average, we had incurred costs for the units being built, and this is already in the pipeline. Now going to the next, this is very relevant. We've been insisting on this subject in the last quarters. But it's important to highlight, we are recovering our margins once again. This is a result of the mix that we had the legacy products with a very -- with a more squeezed margin vis-a-vis the new cycle with margins above 30%, 35% or even more. We've been seeing this and that's a movement that we expected to happen. We still have a space or a short room for this, because we have much smaller inventory legacy. From now on, we will have this value around 29%. In the next slide, this is the backlog in line with our margin. It is 29%. The Helbor history is 32%, 33%. We are following this number and also within what was expected and were scheduling for the future. In the next slide, I will go fast here. As we always say, the company is very comfortable. We see the last 12 month. If you compare in the first quarter of '23 or '22, we have an increase of 4.1%, very below of the inflation. The expectation continues to be the same with a very rigorous policy for expenses and control. The next slide, the net results. Once again, we had a positive quarter. Maybe is slightly below the last ones, but within expectations. And we will always have a fluctuation depending on what we saw in the quarter. Sometimes, we have a higher participation in money in the development, in others, it's a shorter participation. So depending on this, we have a better or worse result for our parent company. Now this indebtedness, if we look 1 year against the other, the gross debt increased. In 2022, this was expected. The 2022 was a year with no deliveries. And looking ahead, we'll have in '23, '24 years with strong deliveries, especially '23 more concentrated in the second half and also at the end of the year, where we will have a higher movement concentrated in the beginning of '24. After delivery, we have a delay of 30, 60 days. So that's I'm saying that we'll see this more in '24. And during '24, again, a great number of deliveries, and we believe we will reduce the leverage and bring the company to a reasonable level and have an effect to recover the prices of our shares. And here cash burn in the first quarter of '23, we had BRL 1.480 million. We have investments to use. We had 2 deliveries in the first quarter, but the effect will be seen in the second quarter. Once again, we were expecting this decrease, but these numbers, we will change over the months. So basically, this is what we had. I thank you for your attention, and now we will open the Q&A session.

[Operator Instructions]

[ Alexandre ] I'd like to congratulate you for the disclosure of the sustainability report, it was time of our to do one. Very interesting material. As for the financial issue, why with a high level of indebtedness, the company is still distributing dividends.

Thank you, [ Alexandre ]. We work a lot in the sustainability report. But the above was responsible for this, and we were able to give a good result that we published this with. As for the dividends, we had deliberated since last year with our Board, and we did it again, we decided to distribute the minimum dividend value. It was not a relevant value, but even though we decide to continue distributing it, especially because we believe that we have this leverage is being '23 and '24. So we also wanted to give this message to the market. This quarter, despite of the cash burn for investments, but is much -- is smaller than the other quarter. This year was BRL 71 million. And we were able to hold the purchase of landbanks and...

I'd like to -- more color on the company's inventory advising dynamics and how the demand side is feeling in the market?

Thank you for the question. Talking about the inventory. Today, the company's inventory is very small in relation to the last 3 years. The under construction and ready unit, we are reversing the minimum of ICC. And with price, we [ reprice ] above MCC in several cases. And this reflects on the gross margin of the company. If you saw, we reached 29%. This margin was almost 11% in the past. So with this, months we gain in price and not only in construction units, but also ready units. When you have the launches of the new faces and legacy, the legacy of these developments in the past, and then we have that arrangement crisis. But even with this, we were able to be positive. So we understand that we were able to [ reprice ] the real price. In these 3, the legacy account for 25%, so almost 2 points in relation to the previous period. And talking about market, what we've seen, the numbers of the first quarter show that unlike the beginning of the year where we had high interest rates. We know that the revenue -- the real estate market is not compatible with high interest rates. But even though we had a surprising first quarter, the event for selling the inventory showed these very people -- much people interested in the real estate market the credit grant to facilitate this. We are gaining price in price in our inventory. This is relative to the launches, but the inventories is so attractive. So we are very excited. But when we opened, it was surprising. We had very strong sales in April and in May. So it will live 1 month at a time. We know that many things are not so -- with not so favorable wins. But even though we see a greater demand, greater than we thought. We are excited, but very -- with our foot owners -- so looking to the market. Consequently, with the drop in the interest rates, we will be better in what we were able to do up to now really surprised us. And to hand to Marcelo.

This was a year of less launchings in the market, and this collaborates to sell the inventory -- we see that this is [ scored ] in the first semester. So we are now absorbing our inventory, which is a good position.

asks, the landbank that is up with a project is marked in fair value or by cost?

This is our market-based study done for each development. So we see the potential. And I can say that is the market value. If we have a development in a certain region of São Paulo, I put the [ VBG ] [ per base ] square meter of the region. It's not neither fair value nor cost. And just to remind you, we will not see these values in the financial statements of the company. For those, who are restructured, we do see -- but we have many things that were exchanged, and then these land is only -- it goes to the conditions ahead. Usually, it's very close to the launch because in the case of exchange it's not interesting to transfer to the financial statements, because we pay many expenses that are not necessary at that time.

The next question is from Marcelo .

What is the number of deliveries forecast for the second, third and fourth quarters of 2023?

In the first quarter 2 developments, in the second quarter 2 more. And as I said, good concentration in the second half, 3 more developments in the third quarter and the rest concentrated in the last quarter. We will have the return of what we are delivering in '23 will be seen in '24. .

Next question from Smith.

Why the margin of new projects is greater than the legacy? Is it for expansion of revenue per square meter or the cost decreased?

Well, this legacy is related to the metal remissions -- so these are the projects that suffer more and we had a cost reduction and this legacy brings a smaller margin because of this. And the new cycle that is started at the end of 2018, projects concentrated in the metropolitan area, projects with this less number of units and projects with the margin always above 30%. We don't go with no projects with a margin below 30% before this crisis of the recession, our gross margin was always around 30% to 35%. And we are able to deliver the new launchings with a gross margin of 29%.

us, so do you see the dynamic of real estate prices in São Paulo? Are the differences due to typology and location?

Yes, there is. We launched last year development in Itaim and the square meter is 47,000. And Jardins, we worked BRL 45 million the square meter and this -- that we have at Lapa, a wonderful development and beautiful and it is BRL 11.5 million, BRL 12 million. So we have neighborhoods in São Paulo that are much larger than some cities. They say that São Paulo is a country. So we have this diversity, large territory expansion, and we have big differences. So we have a great differentiation according to the region.

Next question is from a personal investor, Philippe.