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 2024 in 2024. 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 the language you prefer. For those listening to the conference in English, there is an option to mute to the original Portuguese overview just speaking on milk original volume. Participants will only watch and listen during the company's presentation. After which, we will open the Q&A session. [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 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 a guarantee of the company's performance. They involve risks, uncertainties because they relate to future events and therefore, depend on certain instances that may or may not occur. General economic conditions, the industry and other operational factors can lead to future results that differ materially from those expressed in such forward-looking statements. Now I will turn the floor to Mr. Henry Borenstein, President.

Good afternoon to those following our -- together with our [Foreign Language] We will talk about the results of the company relating to the first quarter of 2024. We ended this quarter with the consolidated sales value of BRL 443 million, of which 85% accounts for the sale of completed units and those under construction. We launched a development in partnership with Cury in Rio de Janeiro. We furthermore, reflecting the position of using our land bank strategically to assist the company in the process of reducing financial leverage, we signed a contract to sale land located in the east zone of Sao Paulo for the amount of BRL [ 38 ] million. It is worth highlighting that for another quarter, we recorded net cash generation of approximately BRL 3 million, reinforcing the company's deep leveraging trajectory. Therefore, we ended the quarter with a net debt to shareholders of equity of 60.85%, a reduction of 0.9 percentage points when compared to the value recorded end of last year. we remain attentive to the macroeconomic scenario, focusing on selling inventory and committed to delivering the projects planned for this year, and thus, maintaining our focus on the company's deleveraging and cash generation. Now Leonardo Piloto and Marcelo Lima Bonanata will present Helbor's main operational and financial data. You have the floor.

Good afternoon, everybody. This is Marcelo Bonanata. I'd like to thank your participation, thank you, Henry. Thank you, Leonardo. In the first screen, we see our land bank. Today, we have BRL 10.9 billion and being the Helbor's share, BRL 7.3 billion in 34 projects and 73% of the developments are located in the city of Sao Paulo. In following the slides, we see our land bank over the city of the -- over the Sao Paulo City. And I'd like to highlight the location of our land banks, Noble and prime neighborhoods, [Foreign Language]. And we have one of the best land in the city of Sao Paul at the corner of [indiscernible], keeping the quality land bank that Helbor has. As Henry mentioned, the company is go through a funnel today, concentrating its efforts in directors we have in high level and very high level. On the next slide, we see the launching we had in the first quarter in the City of Rio de Janeiro, Americas 19 in partnership with Cury. And I'd like to mention in this case, this is a land that we have for many, many years, and we're looking for a partnership. And I think we were really happy in partnering with Cury, a partnership that is getting stronger for new projects with a PSV of BRL 349 million, 20% Helbor's share. It's a medium development. We have 22% of the units sold closing the first quarter, the sales are increasing. This out in the first quarter, and we are happy with the Cury's partnership. Here, we have the deliveries of the first quarter '24, and it's important to talk about this because '23 Helbor delivered very few units, and we were highlighting that in this year of '24, we have important deliveries and also in 2025. And we'd like to highlight that we delivered the W Residence in March -- at the end of March with PSV of BRL 460 million, 58% Helbor's share, 62% sold, and we've mentioned this that we launched in September '19. And with all the problems of the pandemics, we've resumed the launching last year with a very significant volume. And this year, we began the year with sales evolution. And it's worth knowing it. The residence is a differentiated one. It's selling well. And when it's an inventory and you have a price just with a brand like ours. We will have the last phase of Passeo, Mogi das Cruzes, Caminhos da Lapa is also very important. It's a new neighborhood, Caminhos da Lapa. W as I mentioned, and about Window Moema a case to our company. In the next slide, we see the contract sales in the first quarter. If I'm not wrong, this is the first quarter with the highest sales of all. I'd like to highlight once again, the event of inventory sales, saw a thing one, Mogi das Cruzes; another in Curitiba and in the city of Sao Paulo. They break records for all the previous items, this is almost our 120 edition. And this of March, broke all records in the 3 sites, showing that we are on the right path holding that is well known and consolidated. So we closed the first quarter with BRL 443 sold total and 20% more in relation to the first quarter, '23 and 4% more than the fourth quarter of '23. So a good behavior, a good performance. With this performance within our SoS above. We closed with a 14% against 13% of the fourth quarter '23 and 10.4% and the Helbor share, 2.6% against 2.5% or a full quarter of '23. Now our inventory. We have a total inventory of 2.7% in Helbor's share, 1.5% located at 95% in the Southeast. This is per segment. Medium high and ultra high standard and [ 70% ] of our inventory is construction. In the last slide, we show our -- the composition of our inventory. It's important to mention that the ready inventory goes to 6, 5, 7, but we have a high delivery in the first quarter. And most important, the legacy that today is BRL 192 million is decreasing every period and here is concentrated basically in 3 projects, 1 in Santos, that will be a hotel, it changed it's category from hotel to residential. We are almost at the end of the hotel pool. And then we'll have a different for sales and opening for sales, and we have a good expectations. The other is a project in Alphaville hotel. And with the residential, we are selling and commercial in São Vicente slightly lower, but we are decreasing this inventory gradually. But the most important, our legacy that used to be very big is decreasing and the inventory we have now are -- is of high-quality in gain price. The legacy inventory is an inventory all over Brazil and focus in commercial rooms, hotels, products that at that moment was difficult to sell. And today, our inventory is also in the city of Sao Paulo, residential and basically with a final consumer with margin and gain price. So this is my participation. Now Leonardo, it's up to you.

We start with Slide 14. We start with our net operating revenue comparing -- 10% over first quarter of '23. We have a decrease of 15% compared to the fourth quarter of '23. For 2 reasons. First, sales index with a -- with more evolved works and the second, the seasonal factor in the first quarter when compared to the fourth quarter. So these 2 factors explain this 15% drop when you compare both quarters. The next slide, we show the revenue and margin, we have a reduction from 28.8% to 26.8%. This backlog -- developments that are not concluded, but can be appropriated according the development. As we deliver, we won't have -- these development being delivered is a backlog margin. And these 5 developments we delivered in the first quarter do not belong to the backlog margin. And the future sales go directly to the results in this delivery cycle. We took 2 developments from the backlog margin. So this shows this drop of 2 PPs. So they are caught in cold, the pains of the deliveries. Backlog margin will reduce and this will increase again as we launch new projects. This is the explanation for you. The next slide. We also talk about gross margin and net margin. Gross margin of 31.2% aligned with all -- with what we're signaling that we can deliver for gross margin recovery between 28% and 30%. Net margin, 11.2%, when compared with the fourth quarter. It seems that this is bad, but it's not. In the fourth quarter, we reevaluated some assets, and that's why the margin has this number. Nothing new. Everything is going according to our expectations. Next slide. These are the general and administrative expenses, we had an increase 3% quarter against quarter of some values, especially in the -- 1 for employees/benefits, especially health that is really hurting the results of some companies in the first quarter. We had 2 legal agreements, and we have recognize this in its integrality. So we had an increase in these expenses. In this slide, we are talking about the net result of the parent company, net result, BRL 7 million in the first quarter. And I'd like to spend 1 or 2 minutes to explain the context of it. We received several questions on why the net results of the parent company is always smaller than our shareholders. It seems that we are minority, but it's not. Helbor has participation higher than 50%. But our partners, they are our shareholders at the SPA and not holding. We take our net result in our part, but this net we also paid the debt. That's why the net revenue attributed to the parent company is lower. It's like you compare Helbor's net revenue or profit with the gross profit our partners. This has been clear, we can go in more details in the Q&A session. Now this is the debt profile, the gross -- it went from BRL 1.923 million to BRL 2 million. We had an expressive capture in the end of the first quarter, of BRL [ 350 ]million. So this would increase, but we just consider this effect and then net debt. We see a drop in the net debt of almost BRL 2 million, very in line the first 3 and the fourth quarter, we had a decrease of [ 1. ] percentage when we compare the quarter with the year of [ '23 ], the ratio went to [ 3 pps ]. And this will show the trend, the first quarter of 2023 with BRL 71 million in cash. In the fourth quarter, we reported after 8 quarters, the first quarter, we generated again a low value. The trajectory for the entire year is decreasing. We estimate that 2024, the debt trajectory will be decreasing, we'd like to affirm that quarter after quarter, it will be negative dropping, but this figure depends on delivery performance. If we deliver 15 days later or 20 days, it is enough to go from 1 quarter to the other. So I'd like to emphasize that this leverage over 2024 will happen, but we don't -- we can't write on stone that this will be quarter after quarter, okay? With this, we close here, the financial and operational session, and we will open for the Q&A session.

We are opening -- open for some Q&A. And the first question is from [indiscernible].

During 2023, you reinforced that 2024 would be a deleveraging year generation of cash recovery of margin and increase in the percentage of profit. But what we saw was an increase in gross marketing, cash burn nothing with 21% of the consolidated, what to expect for the next quarters?

Thank you for your question. I think it's a great opportunity to clarify your question, about deleveraging and net profit attributed to the parent company. Every time we give this information. Everybody has a feeling that Helbor is minority in the project, no. It is a reason that you need to compare oranges with oranges. The net profit is basically the partners in their companies they have debt that we don't show here. Our part is the net profit of the [ SBS ] less financial debt. We pay for this alone. That's why you have this feeling that the net profit of Helbor is very small in comparison to the parent company. The second is that the company is talking about increase in the participation of every project. This is not overnight. The projects that were going through our results, our launches that we did 3,4 years ago and we create the partnership 5 years ago. What we are seeing there is a great -- the manager is willing to increase the percentage of the new launchings, okay? I don't know if it is clear. Your other question about the cash burn return. No. In this quarter, we generated BRL 3 million in cash. So it was not cash burn, but cash generation. This -- if there is something that we did not answer, please tell me.

Now I'd like to complement. This is Henry. The most important is that the company is focusing on deleverage. And as Leo said, this year, will be net debt to reduce during the year. But unfortunately, the water does not show this indicator. So our commitment is that until the end of the year, we will have this net debt is smaller because the developments are being delivered. The repass is very strong. we have a target that is the highest 14 developments being delivered and many in the second phase and many things delivered in the next 3 quarters. And important development, so not only W, W was in the final of the first quarter. We'll see that reflects on the next one, and highlight Klabin, which is a very important development that will be delivered this year with cash generation that is very good. We are focused on the deleverage that will come in several ways, somewhere repass delivery of new developments, sales of land bank and we are not selling land, but we changed our focus. That's the reason. And we understood that right now, some land is not a priority for the company. We prefer to focus on other lands in our land bank at Republica do Libano [ Goiânia ] -- so this strategy of selling part of the land bank will help us with this deleveraging.

Next question [ Herman ] from sell side.

You were in a moment of delivery projects from the past cycle. The rebates are being positive. The [ SVP ] scenario is hurting.

Well, yes, we are in an intense delivery cycle, not only us, but the market many hasting has been said about this saving. I care scenario, the great, but we haven't noticed this. The fund available of the savings account to the individual. So sometimes, we and other players will get the funding in [ CVI ] but the final buyer takes in PR plus. It's plus 7 as the pandemic we had. Today, I think it's around 9% high 10% below, but the economy is more closed. The rate is a little higher, and we won't decrease so soon. So new -- no negative news in this point, and we are following very attentive. So thank you for your question.

I'd like to add, the events because we have many things ready. And we have a partnership with Bradesco is a proof that the client, the end users see some even buying now. We are up with a strong repass, we -- and shortening it more and more and the banks are making it easier and the consumer sees that is an advantage to buy our inventory is lower than the launch -- new launch. So it's a very positive moment. And we see a good response from the end buyer and the banks.

The next question is from [ Matias Vergara ].