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

Good afternoon, ladies and gentlemen, and welcome to Helbor's Fourth Quarter 2023 Earnings Conference Call. This webcast is being recorded and simultaneously translated. [Operator Instructions] Before proceeding, we'd like to inform that any statement made during this webcast related to the company's business perspectives, 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 the future events that depend on circumstances, [ General economic ] conditions, industry conditions and other operational factors can lead to future results that differ from materially from those expressed in such forward-looking statements. Now I will turn the floor to Mr. Henry Borenstein, President of the company. Henry, you have the floor.

Good afternoon of those who follow us with our Financial Director, Leonardo Piloto and Marcelo Bonanata, our Sales Director, we will present the company's results for the fourth quarter of 2023. Over the past year, we have reinforced our strategy to reducing the inventory of complete and under construction units. We reached a consolidated sales value of [ BRL 1 point billion ] of which 87% correspond to the sales of complete units and those under construction. We ended the year with the 10 real estate launches of which 3 are new projects totaling a total PSV of BRL 1.2 billion. It is worth highlighting that the company's maintain land bank Helbor share worth BRL 7.7 billion reinforcing our positioning in strategic regions of São Paulo that can be used tactically to accelerate the company's deleveraging. On the financial side, over the past year, we've been reducing our cash consumption quarter after quarter, achieving a net cash generation of approximately BRL 24 million in this last quarter marking the beginning of the company's deleveraging trajectory. As a result, we ended the year with a net debt to net equity indicator at 69.4% and a lower value than the one recorded last year. 2024, will continue to be a challenging year. We will continue to focus on selling the stock of completed units and those under construction, and we'll be committed to delivering the 18 projects for this year. This way, we will focus on deleveraging and generating cash for the company. Before closing, I would like to mention that we have another event [ only Helbor has ] in Mogi das Cruzes, Curitiba and São Paulo, on the last weekend of March. The event once again was successful totaling BRL 170 million in total PSV. This result will be part of the sales recorded in the first quarter of 2024. We remain confident in reducing our stock of completing and construction units and remain focused on the continuous improvement of our operational and financial indicators and deleveraging. I would like to thank on behalf of ever for another year the trust placed by investors over the years and to reaffirm our commitment to maintain the business model, generating value to the shareholders and maintaining the company among the most prominent in the sector, focusing on responsible and transparency management. Now Leonardo Piloto, Marcelo Bonanata will present the main Helbor's operational and financial data.

Good afternoon. I will start with the highlights of 2023, starting with sales in the fourth trimester, we reached [ 440 million ], 80% of the 3 -- the first quarter and 8% above the next year. The year accumulated, we were 7% above the relevant part of our sales stock at the end of the year, 87% , was related to [ stack ]. We had a good result of 5%. The net operational revenue, we will discuss in the financial records reaching 1 -- the net income was BRL 51 million the controller report in line with the 2024. Now I give the floor to Marcelo to talk about the operational performance.

Thank you, Leonardo. Thank you very much. We'll talk about our land bank. We have a potential land bank of BRL 11.2 billion Helbor's share, BRL 7.5 billion, but most interesting is that 81% of this land bank is in the city of São Paulo and 16% in the metropolitan area, 36 projects in total. This is the land bank to distribute in the city of São Paulo, where we have a potential of 8.7 [indiscernible] and Helbor's share BRL 5.7 billion. What we always highlight is that our land bank is our best asset. Helbor has a high-quality land bank in places in sites where we have the subway, easy access, places with potential valuation. We have land banks in Itaim, Moema, Chácara Santo Antônio [indiscernible] located in the East area as well. So our land bank is the most important point to start a new development. Now the launches of the fourth quarter, we had 2. One was Roya in Perdizes, we call Perdizes [indiscernible] is on the Homem de Melo Street, close to the university 200 square meters [indiscernible] floor. We launched in the beginning of December. We had this forecast because it's a high standard. And at the end of the year, we know that the sales slowed down. But today, we are already selling, and we will have tomorrow a meeting for this development. Another launch we had was Trinity at Vila Mariana, its development with 2 and 3 rooms, a studio. We launched it at the end of October. We have 20% sold. But today, we are selling faster. So we have 2 developments very well located, Vila Mariana, or Vila Clementino at Borges Lagoa street. So these are 2 developments we've been projecting as we were launched at the end of last year. In this slide, we tell you what we launched in 2023. I'd like to highlight that we had 10 projects, but out of them, only 3 are new projects, Open Mind that we launched in the third quarter and 2 launches that we've just mentioned. The other were phased development. Reserva Caminhos da Lapa, third stage; Patteo São Bernardo, the last one; Patteo São Paulo, My Place, the last stage. So what makes up this 10 launches in the year are 7 phased and only 3 new developments. So in this BRL 1.150 billion only BRL 400 million of new developments, showing again that the company is concerned in selling the inventory. We launched at the right time, this phased developments and now with the biggest 1 also staging at the right moment every phase. So once again, we've been very assertive in these developments. Now we talk about the contracted sales. We reached in the fourth quarter, BRL 426 million and is nice to highlight that in comparison with the fourth quarter of 22%, we have an increase of 59%. And in relation to the third quarter of '23, 8%. So we closed the year 7% more in sales. And again, in 2022, we launched 38% more. But if it take the phases, this percentage increases much more. So this is very important. We have an increase of almost 60% in sales, launching less. So the company focusing on the sales of stock. In SoS, this is work we are doing. We had a significant increase from the fourth quarter of 2023 comparing with 2022. We had 7.6%, we went to 13.2% in line with the third quarter of '23, closing the year with 35.8%, also a 3.5% increase in comparison to 2022. And our inventory, this is very important to shows where we had an expressive number of ready units and only 12% today is of ready units. Most of our inventory is under construction. We can see the segments, which is very important. We are concentrated in what we really know to do, ultrahigh standard. We have a potential of 2.6 [ billion ], but Helbor shares is 1.7 [ billion ], 85% located in the Southeast region. Now I give the floor to Leonardo Piloto with the financial data.

We here have the net operating revenue with a strong increase year-by-year, basically reflecting the advanced stage that we have in our works. So we have several developments that we will deliver in 2024. Every sales we do is very advanced in the development. This is explains this 41% in the revenue increase. Here, we show our gross profit and our gross margin and net margin. We closed the year with 29.7% gross margin, 13.5% net margin. This had an oscillation during the year, but we accelerated the work so the margin increase in the consolidated. We can go to the next slide. This is the backlog and margin, we had a drop to 28.8%, reflecting several developments that we will deliver in 2024. Here, we show general and administrative expense year-by-year. We had an increase 8%, inflation in the period was 24%. We were in line with other effects of expenses that explain this reaction, but we consider this controlled and in line. What is important to highlight is that the expenses increased in absolute numbers but it was lower than 2023 when we compare to '22. In '22, it was 6.9%. So we had efficiency increasing. Now in Slide 17, results and quarter-by-quarter, year against year, we were in line and quarter-by-quarter, we had a substantial increase from the third to the fourth quarter of '23. This is the most important part of the company. We entered the fourth quarter with deleveraging a slight leveraging, we have the impact of the conclusion of works. We have 2 impacts. The first one, we stopped investing and expanding, and this number of the fourth quarter starts to reflect this change in the operational level. Below, we are showing the longer-term of the third quarter to the fourth quarter, we had an increase in the total debt, basically because we see some things we [indiscernible] in '24. We are delivering projects and these numbers explain this increase in the short term. we will settle this with our financing and repays. And here, we show that we are able to reduce marginally the deleverage. The company went from 66.9% to 69.4%. We started -- we will reduce, and we got to the end of the fourth quarter with a lower number than the fourth quarter of '22. And this is, again, quarter-by-quarter, the cash burn. We went to a cash generation of BRL 24 million in the full quarter of '23, conclusion of works and beginning of repays. And now I close my presentation, and we can open to. Q&A.

So with the first [ quarter ] is the analyst of Bradesco.

I have 2 questions. First, can you explain the margin for the third quarter? And the second, the repays with the delays.

I will answer the first question. I mentioned the margin. It's basically the composition of the index and the revenue we had increased, and we also extended the works to deliver in the beginning of this year. And we have another composition in this project accelerating it. So basically, it's in line. The second about the repays. We haven't seen any obstacle or any difficulties in improving the credits of our clients. This concerns us, but we haven't seen any impact. What we are doing to minimize this risk is to accelerate their own lending. We intend to do this, but it also depends on the agreement. Up to now, everything is okay, and we will focus on this strategy of onlending.

The next question from Francisco Cortez.

Following your strategy of selling ready units, we saw that some strategies harmed the results to the shareholders, how to expect this for the next year? Is it going to be better?

This is Marcelo. In 2023, we had some projects Open Mind. we launched 85% of share. This year, we increased the share in new developments. I think it is important to show what we have at home and adding to what you said, the selling in the fraction, not the onlending service when we have it in the inventory. We sell these units automatically with onlending. This is important, and Francisco, typical because last year, we had some developments. We had a higher share. This year, we will have as well. This is important to have this onlending in the fraction. But the client that is receiving the key now. The real estate has valued, so it's of great interest to have this onlending, the faster the possible. And adding to what you were saying in the beginning, Henry mentioned the event Só a Helbor tem, and it is latent when you have an inventory no matter how much you do onlending. Even slightly above the inflation, the launches today are higher than any inventory we have today. This is important because those who bought a development 2 years ago, if you get what he paid even correct, he won't be able to buy anything. So the client wants to this onlending the faster because today, the developments are much more expensive than before.

Next question is from Gustavo Biage, investor.

I'd like to know what is your forecast for cash generation for 2024?

I will answer this. This year, Gustavo we will deliver many projects. We will deliver 14 projects. So it's a year that we work a lot to bring money back to us, and this money will pay this debt and then for the holding. So this year, we estimate to have a deleveraging with the -- which is really retained. We don't see a very expressive cash generation. This we expect to have in 2025 -- in 2024, deleveraging of the company with cash generation towards holding not yet.

The next question is from [indiscernible].

On the comment made about the margin -- gross margin improvement. I'd like to understand why is it extraordinary?

Normalizing these effects, what should be the gross margin historically, the margin of the company has been 28%. And we imagine this will continue even after the deliveries and onlending of all units. We don't estimate a substantial drop. And just adding, if we get the [indiscernible] development that will be delivered part this year and part of next year. It has a very good margin as good as the W. The company has always worked and with the gross margin around 28%, 30%. This is what we have delivered in the past. And I would say this, our margin and our objective is of about 30% again.

The next question is from Pedro Lobatto.

What is the percentage you sold from W? And what is the perspective of delivery?

75% sold on W. W Residence was delivered in March around the 15, W Residence and we expect the hotel to be ready in 6 months.

We have no more questions, so I will give the floor back to Henry close.

I'd like to thank you for participating in this conference call and reinforce the strategy of the company. Helbor's strategy is to sell what we have in inventory under construction and reduce deleveraging. We know it's a long process, but I'm sure that we will harvest the fruits this year. As Leo mentioned, this is a transition year. We will deliver these developments will have a reduction in the corporate plans at the end of the year, we project a reduction in our net debt, but next year will be different. I'd like to thank all of you the IR and our teams for one more year, and thank you very much. [Statements in English on this transcript were spoken by an interpreter present on the live call.]