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

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to Helbor's Second Quarter 2023 Earnings Conference Call. This webcast is being recorded and simultaneously translated. If you need the translation, this tool is available clicking on the interpretation globe icon located at the bottom of your screen. There, you can choose the language you prefer, Portuguese or English. For those listening to the conference in English, there is an option to mute the regional Portuguese, just clicking on Mute Original Audio. [Operator Instructions] Before proceeding, we'd like to inform that any statement made during this webcast related to the company's business perspective, projections and operation 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 future events and therefore, depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operational factors can lead to future results that differ materially from these expressed in such forward-looking statements. Now I will turn the floor to our presentations.

I'm Franco Gerodetti, Financial Director. And here, we have -- we are here to talk about the results of the company for the Second Quarter of '22. We closed the First Quarter with financial and operational indicators that are positive that kept the results of the company. That is the strategy adopted in the last quarters, the semester, BRL [ 71 ] million, being 93% related to the ready units and in construction, the result of a certain strategy of the period that focus on the sales of the stock units. We reduced more than 30% of the inventory of unities of our legacy. We also would like to highlight one more events, Só a Helbor Tem, that had simultaneously, in São Paulo, Mogi das Cruzes, Curitiba, with a total sale of BRL 116 million. We will continue focus in selling the ready unities, focusing on the continuous improvement of our operational indicators and our leverage. Now I will give the floor to our partners, and then we will give the floor to Marcelo Bonanata, who will talk about the operational results.

Our sales -- the total gross sales reached BRL [ 376.7 ] million, and in the second trimester of '22. 100% of this value accounts for the sales of ready unities. We have a VSO of 12.2% and also above the first 3. We have the 110th edition of the Só a Helbor Tem event that totaled BRL 116 million of PSV sold. Of this, 23% was in the second 3 -- sorry, the operational net revenue was BRL 334 million, at 24% than the first quarter of '23. The net profit was BRL 32.5 million, and the controller registered BRL 7.1 million of net profit. Now I'll give the floor to Marcelo Bonanata, who will talk about our operational performance.

Good afternoon, everybody. We thank you all for your participation in this call. Here, we present your landbank -- a potential landbank of BRL 10.65 million, BRL 6.8 [ billion ] for the Helbor share, and we see in the city of São Paulo. This, in my opinion, is the most interesting drive concerning our landbank is the distribution of our landbank in the city of São Paulo. As most of you must have heard, we have a change in the master plan of the city of São Paulo. And here, most of our land were positively affected by this change in the director plan. This land will have at least 20% in the solidarity portal. In some piece of land, we had real gains in the construction potential. One of the best piece of land is the one located in at Parque do Ibirapuera facing the Ibirapuera [ port ]. In this, we had a 2x potential of the area with a proposal of 7 floors. Now we have 4x and breaking this pattern. So we have a real gain because in addition of being a very well location, the square meter of that area is high. So this [ 10.5 ] being of the landbank, we will increase in the future because we'll have real gains. This translates the quality of our landbank, well located, close to subway stations, leveraging this gain that we had in the city's master plan. This was necessary -- this change was necessary. And the market was demanding it, and this change happened benefiting several companies, and we will have a real gain in this. So now we had an event. If I could, I would have every month, Só a Helbor Tem is the largest event of inventory sales. We are doing this since 2015, every quarter. So every year, we have this event all over Brazil. And today, this was concentrated in the large São Paulo. We had it in São Paulo, Mogi das Cruzes, the Curitiba. We sold BRL 116 million, almost 200 units, inventory units. We didn't take any unit in launch, only in stock, and this translates into an increase in our revenue. This shows our focus on inventory sales. So this event showed us that 8 years ago, we took the right pathway holding an event like this. It's very good to see the results confirming what we expected. People reaching us at 10 a.m. to buy a unit. Now we see the sales of the second quarter of 2023. We had a total of 374 sold. 4% above the first quarter. And I'd like to highlight the sales of the quarter, 3% of 2022. But it's important to highlight that here, we had just 1 launching. The launching of the last unities of Reserva Caminhos da Lapa. So against 7 launch in the first semester of 2022, an increase of 3% with only 1 launches. This is really very significant concerning the strategy that the company adopted for 2023. This translates our strategy and what we achieved in results in a year of high interest rates, changing the federal demonstration. So it was a good result. In the next slide, we ratify what we mentioned. We had a significant increase in our gross SoS. SoS had 12.2 total and the Helbor share also increasing in relation to the previous quarter. And talking of our inventory, we had a reduction, of course. We closed the quarter with BRL 2.6 million and BRL 1.6 share. If I'm not wrong, we started with a 3-point something and now we are at 2.6, a significant decrease in relation to our inventory. We are very concentrated in the Southeast region and border region. And also to highlight our inventory of ready unities, last quarter, it was BRL 700 million. And today, we have BRL 336 million of finished, with a total of 12% of ready inventory, very significant showing once again the assertive strategy of the company to focus the sales in its inventory. The first semester was very significant. We were very happy, but we harvest the fruits of what we did over time, showing the quality of our products because they're having 1 launching. But selling our inventory, I'd like to highlight the significant sales of the W Residence with the W Hotel that will be delivered in the third quarter. The hotel will start operating next year. We sold 42 unities this year. In 2022, we had a problem with our decorated unities. And we faced difficulties because of the pandemics, but we always believe in the product. We sold 12 unities in '22. We sold 42 unities in the first semester of 2023. And with no changes in price, there is no discounts, but we were able to show everything that the product we have people can enter in the development and see the beauty of it. So in addition of Só a Helbor Tem event, I'd like to highlight the significant sales we have. Now it's with you for the financial data.

Thank you, Franco. You're very precise, and I will go quickly over the numbers, but we see the results and the effect of this strategy of this concentrated sales of our inventory. First, the effect in the net revenue. We see the focus in the ready and construction unities. So we have a greater revenue over the sales, as you see, BRL 334 million, an increase of 56% over 2022 and 24% increase compared to the first quarter. And here in this slide, we see the gross profit and gross margin. People said, "Well, our margin dropped." Naturally, it would fall due to the strategy focused on ready and in construction inventory. We still have our legacy that every quarter has a smaller value. I don't want to talk about the past. But 2, 3 years ago, this legacy was more than BRL 2 billion. And today, this legacy is much smaller. And yes, it brings a smaller margin to our balance sheet. But this is positive. So the ability of selling the inventory, we see that we have a new cycle pulling the margin upward. We have the same margin of the 6 first month of '22, for now, '23. And depending in what we sell in our legacy, some developments had a very narrow margin. We can see our gross margin increasing a little. In this next slide, we see the backlog net revenue and margin. We have a mix of revenues that were within the quarter. They were part of the first quarter. And with these deliveries, I have a 2 [indiscernible] in this value, and the same happens with the margin. But the important message here is it is within the projections of the company. We are very certain to say that the current cycle, the development of launch as of 2019 continue to bring a significant margin, and we will continue to see this effect from now. And now, going to the DGA. We see the last 12 months, comparing '23 and '22, we see a slight moment in SoS. This is -- what I'd like to highlight, the discipline that the company has in looking at costs. This is part of our DNA. So the same, we will continue to be very careful with our expenses. This is the result of the parent company, BRL 7 million in the quarter. We closed almost at 14 in the 6 first month. We were impacted by the interest rate here. The volume of financial expenses had a negative impact on our results. But the important here is to keep our operational strong, and the result will be a consequence of the macro and [ nickel ] factors, but we are sure that we are going into the right direction. Now this is the debt profile. As we mentioned before, this first semester was of very little deliveries. And this does not allow a greater leverage in our numbers. We had 2 deliveries in the entire semester, and the higher volume of deliveries, talking financially, will be in the last quarter of the year. What we will see in cash generation will be positive and more robust as of the last quarter of '23 and over the year of 2024. In 2024, we will also have a significant volume of deliveries, around BRL 1.6 billion. These 2 factors together will help us to leverage, which is our strategy, number one. This is where the company is putting all of its efforts. The cash burn, again, we had a cash consumption within the expected, following what I'm mentioning, and the quarter that we still had the debt service due to the [ Selic ] that was very challenging and a great investments in SPS, initial investments for the work and the investments in the prelaunching phase and investments in marketing and publicity. So basically, this is it. We will see an improvement in this cash burn figures as we have our deliveries with a positive movement. So basically, that's what we have. Let's go now to the Q&A session. We will open the session.

[Operator Instructions] Our first question is from [ Ogo Grassi ]. Ogo is asking -- well, first, congratulations for the results. With the review in the master plan, how do you see opportunities for new acquisitions? And the second, relating concerning the existing landbank, is it the case to review some of them to approval under the new parameters since is it possible to have an idea of the PSV of the existing landbank?

Thank you, Ogo. Well, we have launched landbank of high quality. Today, we don't -- we are not thinking about acquiring new piece of land. We have 2 goals here: first, to reduce our inventory and then the consumption, the use of our landbank a long time. So with the land bank of this today, we don't need to worry in the first momentum. Now concerning the change in the master plan, yes, we are reviewing all our lands. So we will change it. Of course, we will keep this potential for an increase. If you have a ready measure, how much of this will increase in our landbank? We don't know because these reviews are still ongoing. We had a meeting. We are briefing it. There were projects that would build a larger apartments with the new -- you can generate part not at every 60 meters. You can generate one. I can't -- I don't have to run these studies. So some projects could be efficient only of this name. So we are reviewing all of this. And soon, we will be able to measure this gain. But today, I cannot tell you. And relating the acquisition of new land, only if it was extremely good. We've been creating a landbank that is in the city of São Paulo. And when we look to the map, we see that we have this central regions and the most important neighborhoods. So you said that for some of it, we will review the parameters, and we are doing this for most of them because many, many of them were impacted by the change in the master plan.

The next question comes from Pedro [ Dovato ] from Bradesco.

So how do you expect the evolution of financial leverage in the second semester of '23 and '24, due to the pipeline and deliveries of the company? And you had expressive increase, but this can reflect in the margin in addition to the potential PSV.

As we mentioned, deleverage, we believe it will be a common process as we deliver. It's good to remember once again that we spend almost the 5 previous quarters with no deliveries. The first semester also we had -- in '23, we had reduced number of the deliveries. So we have this leverage over this year and next year. Now concerning to the change in the building potential, as we see, this will happen for some projects because in some of them, we had a significant improvement in the building potential, and the cost base will not increase at the same proportion because you have a ready land. And the land, the square meter is very expensive. You have already the land. So if you increase the potential, your margin will improve. In a project like Republic Deliveroo, you double the potential. So we will increase or improve the margins adequating the projects to the new law. We have many people working on this in the company, the commercial, their suppliers. So we still don't have a defined number for that, but the news are very positive.

The next questions come from Elvis Credendio.

The first question is about the master plan. You mentioned that the company's landbank, you should benefit with this review. We have covered this already. The second question concerns the sales of the inventory due to the success of the event, so I would think and since the company is focusing on the sales of the inventory, are you going to hold more events over the year? And what other strategies are you taking?

Thank you, Elvis, for your questions. The first question was already answered, that concerns about the potential of the landbank. Now talking about Só a Helbor Tem, I said I would like to hold it every month, but we need to create demand for this. So we create the demand. We first fill up the pan. And then if you do it monthly or in the short term, the effect is not so good. The strategy of Só a Helbor Tem is 2 events over the year, 1 in the first half and another in the second half. So we had designed 1 for the second quarter of 2023 and 1 for the fourth quarter of 2023. But we have the structure ready. So we go according to the moment opportunity. There is no launching. The sales team is -- they're selling the inventory, but there is no boom. We saw all this uncertainty because of the new administration. So we decided to anticipate Só a Helbor Tem. And it was a great success, so hold it in March. Now we saw again an opportunity because we saw many people saying that they were buying because of the uncertainty of the -- economic uncertainty. So they decide to invest in real estate because it's a safe investment. So we didn't schedule any launch for the second semester. So we had -- this cycle had another Só a Helbor Tem. Now the strategy comes back. We will have Só a Helbor Tem in this third quarter. We will lead it to October or November. The strategy and working on each development alone focus on this development, our teams, our sales company. If I can say quickly, we have our house with almost 400 brokers working in large São Paulo and Mogi das Cruzes. We have our partnership channel that is increasing in 2021. We had a share of only 7%. Today is about 28% going to 30%. The partnership increased this share, analyzing the sales in other states with a road show in Espirito Santo, [indiscernible]. We had more than 80,000 brokers registered. And we closed a partnership with a new company called [ Voicy ]. It is exclusive with us. It does not belong to Helbor, but it sells Helbor exclusively. We have more than 100 brokers working with us reinforcing our sales team. This is the best strategy to make our team stronger, investing in our human material, bringing more people to work with us and also training more people. We have a training program for new brokers in our company. So we are reinforcing this according to the product, selling well, we have -- July was a very good July. I think that things are doing well. And in the fourth quarter, we'll talk more about Só a Helbor Tem. Thank you. The last question from Elvis relate to real estate funds. The market is again being recovered. And is the company going to benefit for the recycling of assets for piece? I think so. In the last years, we had launched recycling. We use the -- if he -- especially for commercial developments, renting these developments and then packaging the real estate with the rental agreement. And this volume of commercial units is reduced, but we are with an eye on it. There is an opportunity. And we do believe that this market can benefit us as it did in the past.

The next question is from Marcos Antonio of [ Jacana ].

This Helbor has a commercial in this rework?

Yes, we do have some real estate rented to rework. The obligations are undue. They are really usually revenue share. So it's well allocated because of the credit risk of rework is -- does not impact the company. It's important to remember, it is a very good asset, very well located. So maybe if we have a problem, we will continue to have a good rental performance. This is one of the examples that we can benefit on this [ FIEs ] market.

[indiscernible] What plant of inventory can expect Helbor to return to launches? With the decrease in INCC, do you see any savings possibility?

[ Maria Angela ], thank you for your question. We are not linked to inventory levels to launch. Last year, we had 10 launches. So last year, we have an expressive number of launches. So it wouldn't be a recovery, but a continuation. And we have launches scheduled for next semester. We will continue focusing on our inventory. And we have launched to -- for the second semester, less than last year, but we do have launches because we have products with the quality. So for sure, it's not a recovery. It's a continuity. And the second question relates to the drop in INCC. Well, what happens, [ Maria Angela ], is that we had, in the last years, a significant increase in the cost of construction. With this drop in INCC is deacceleration. We are going to a more balanced level. I don't believe this will reflect on a drop, but we have left that moment of a high increase. And the market was surprised with this increase above inflation. Franco has the statistics. The increase, the actual increase of the works were above INCC. But INCC is very important to have a balance and not to have a high increase, because this is the index that adjusts the installment of the client. When it's too high, you inhibit the client to pay or to buy it. And with this accumulated in year, I think it's slightly 3% with these levels that we reached 5%, 6% at the end of the year. This is very nice and the client and will be also easy to buy in the preconstruction phase. Well, we saw [ Maria Angela ], the level of construction increasing in the last years. I don't see it coming back. But at least, it is stabilized now, ending quarter now is to have a good landbank where I can -- I will be able to have a gain in some regions. And this will be possible with the projects that are located in the prime regions. That's what we have with our landbank. We are well prepared for this challenge and to keep our margins in a high level as we did last year and the previous year.

The next question is also from Marcos.

With the new master plan and the new financial limits of the Minha Casa Minha Vida programa, some companies are in the Helbor's radar.

Well, Marcos, we do not work with Minha Casa Minha Vida. Last year, we had 2 launches of the housing of social interest. This is of opportunity but Helbor does not think of going to Minha Casa Minha Vida. We are not in this program, Minha Casa Minha Vida. And we have 2 projects with HIS and some projects that is -- as it was the rule for HIS. And with the new master plan, it contemplates a clarification for the rules of these programs. When we launched our 2 projects, we're consulting a legal team, and we are exactly has been master plan is establishing for these 2 activities. We will have some projects in this segment, which is not Minha Casa Minha Vida cash economic, but of social interest.

The next question is from Francisco Silveire from [ Darwin ].

Any launch expected before the second 3, but I think the second semester.

Thank you, Francisco. As I said previously, we have some launch scheduled for the second semester, and it depends on much -- well, we are working for it. It depends if we reach a moment that there is not sales enough, if there is no demand for the product. But we are already working on it. And we have a demand for what we are scheduled to deliver to launch in the second semester. So only if a catastrophe happens and you see that there is no demand. Otherwise, there is no thing that will impair this project.

Well, the next question is from [ Usa Brair ] from [indiscernible].

Concerning partnerships and participation of no controllers in the revenue, how the company see the strategy of new partners -- partnership?

We always use our partnerships in strategically. Helbor does not build. We outsource this activity. And when we outsource, we always invite the partner to have [ equity ] participation. So when we look in our balance sheet, we have about 2/3 of participation in our projects. And we have the intention to increase this participation. When we make this decision, it takes some time to happen because my projects are ongoing with the current participations. So we need a new cycle with a higher participation, but we are doing this in this more recent landbank that we acquired. We have a higher participation. This will reflect in the balance sheet as we build what we have in my pipeline. And that will be replaced by this more recent development with a higher participation from Helbor.

The next question is from [ Adema De Lozari ] an individual investor.

Could you comment on the final results distribution, the parent share and non-parent company share?

Well, let's remember one thing. We have more than 200 of active projects. And I don't have the same participation in all of them. In sum, the participation is 90%, 100% in others, 50%. So over the quarters, what do we see? Depending on this mix of sales, if I sold much more projects with the smaller participation, Helbor's participation, the profitability will be offered to the other shareholders. In the quarter that we have a more significant sales, we see this participation more relevant in the parent family balance sheet. So it depends on the mix of sales. Each of these projects, they have different margins, and this also have an impact. Some with a smaller margin, other with a higher margins, so the combination of these factors creates this fluctuation in the net profit total of the parent family -- parent company, sorry.

The next question is from Paolo Sammarco, also an individual Investor.

Recently, we saw MRD doing a follow on, trying to decrease the leverage. Does Helbor has something similar?

Well, Paolo, we constantly analyze our possibilities of fundraising in the effects of variable income. So this is constant in the company. We understand that the value of the Helbor's stock or share is far beyond what the company has. So maybe at this moment, it doesn't make a change to go to the market or access the market with such a low value of the shares. But the actual price of this share is much higher than what we are seeing now. But we are doing this, constantly discussing this possibility.

The next question is from [ Marcelo Bonjour ].

In what quarter of 2024 shall we see a significant reduction of the debt?

Well, Marcelo, as I said, now in '23, we have a high concentration on the last quarter. When I deliver, I still have the process of landing that takes 30 to 60 days. Every time we see -- every time we have a delivery, both for the on-landing operation to an individual, it takes 60 to 90 days. So the deliveries of this year will fall -- will be in 2024. And in 2024, we have many things concentrated in the second semester. So it will depend on the deliveries and the speed of this on landing operation.

Next question is from Watson Xavier.

Accessing the Helbor's website, we saw a launch this month. Is it the Helbor Open Mind? How was the acceptance of this by the market? And about the deliveries in 2023, we see a release where we have a high percentage of evolution.

Well, Watson, thank you for the question. In the first question, answering it, we didn't launch Open Mind in July. It is scheduled to be launched by the end of August. In July, we had a great demand from some clients. There -- so we serve these clients. We were selling for this flight, but we did not go to the market, and we shall do this in August. And we have a good acceptance. Without any type of publicity, we had a very good acceptancy. So again, a good evidence of our good strategy. If you have the demand, we will launch, and this is happening with Open Mind. The second question, according to it, we did not have any delivery in July. We will have a delivery in August, a development in Vila Madalena. And yes, all development are within the contractual terms.

The next question is from Diego Lobato.

I'd like to understand the main reasons for the last quarters, the participation of non-controllers to have higher in relation to the general percentage. And why the best projects have such a relevant participation of not parent handling.

We have different participations in this process. In some, we have a smaller participation. In others, it's higher. Some of the legacy, we have a higher participation. And since they have a smaller result in the balance sheet, this decreases the part of the parent company. But most -- more important than that is to be able to sell these inventories. And in the next quarter, we will see the participation equal in the same projects with no contamination, so to say, from these projects where we have a smaller participation. So this mix of sales will change, and will bring participation equivalent to the parent companies.

Next question comes from [ Paulo Voralis ].

Considering Helbor's expertise in outsourcing the building activity in itself, is it in your radar, [indiscernible] buyers of a Latin landbank?

If I understood, we provide the consultancy for the buyers to build their own houses. No, no. Our Fazenda Itapety, we launched 1 year ago is a standard allotment. We will deliver the entire infrastructure, a very robust infrastructure. If you don't know it, I invite you to go there. It's a unique development in terms of allotment. So no, Helbor's will be the standard. We will deliver the infrastructure. But Paulo, within our expertise, we do have conditions. But as Franco mentioned, we are selling the lot, but not the building, right? So we can sell the ready house to sell the project. Providing this consultancy to the client, we see some clients, especially investors, who do not have time. Time is the most precious asset we have. So I'm going to buy, but do you help me? I need someone to manage this real estate. We do have this expertise. So it depends on the development. Depending on the moment, we have a total expertise to give this consultancy to our client. We don't see any need for that. But if the need comes, we are here. We answered all the questions. We are always talking, and we have this commitment to answer 100% of the questions. So we are coming to the end of our presentation. I'd like to thank you for your participation and invite you to follow the company in the next quarters. We will have some novelties in our area at your disposal, Chago Luis, our email [email protected]. And please, contact us for any questions you might have. I'd like to thank you for coming, for your participation, for your questions. And all, every time we have these questions, these enrich us. It's an input. And I'd like to thank you, Franco, Luis, Chago giving the support. And to all our collaborators from Helbor, the sales companies, everybody who worked with us to make Helbor a very big and large company, delivering what it promises and delivering the way we show in our publicity. So let's go to the third quarter, and we see you soon. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]