RNI Negócios Imobiliários S.A. (RDNI3) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by. Welcome to RNI Negócios Imobiliários S.A. Conference Call to Discuss Results Regarding the Third Quarter 2020. Here with me are Mr. Carlos Bianconi, CEO; and Henrique Ravazzi, Investor Relations Manager. [Operator Instructions] Before proceeding, we would like to clarify that any forward-looking statements that may be made during the conference call regarding the company's business prospects, projections and operational and financial goals constitute beliefs and premises of RNI's management as well as information currently available to the company. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties and assumptions since they depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors could affect the company's future results and could lead to results that differ materially from those expressed in such forward-looking statements. Now I would like to give the floor to Mr. Carlos Bianconi. Mr. Bianconi, you may proceed.

Good afternoon, everyone. Welcome to our call and review to discuss the results of RNI, RDNI3 in the Brazilian stock market. It is an honor to have you all here. It is very important to bring the numbers of the company and provide details on the financial and economic performance of our company. I am going to present -- show you the presentation so that we can provide the clarifications. So let's start our presentation. So let's move on. So let's talk about the highlights. The highlights of the company include the main points. So I would like to start this presentation saying that since 2018, we focus on the segment of Minha Casa Minha Vida and SBPE Horizontal. So as of today, we're going to present the financial results providing segments of the new strategy, which is as MCMV and SBPE Horizontal and SBPE Vertical and the Subdivision of -- with urbanism. And the strategy is quite clear, and the execution has been making headway in the following line. The segment MCMV and SBPE are horizontal condominiums and buildings and range 3 and SBPE Horizontal-Economic, which is an upgrade of MCMV, has a focus which are in the interior regions of Brazil and agribusiness. And we can consolidate the ambition of growth and profitability, where we defined the strategy in line of the company as of June last year 2019. And we started its implementation, and we have been growing systematically with the launches in the regions connected to agribusiness. We're talking about the countryside of São Paulo estate south of Minas and north of Paraná, Mato Grosso, Mato Grosso do Sul, Santa Catarina and Rio Grande do Sul and Goiás. So the main point of our execution in those regions is very well funded. It is a segment who have accommodation. Debt is very high, so we try to meet this demand of housing for the social transformation. And we depend less on subsidies for these clients, so we use less subsidies. And the flexibility to make adjustments to the projects and the change of the range happens more easily. So we'd like to remind you that in the municipalities where we operate have more than 200,000 inhabitants. As for SBPE segment and urbanism is the second half of the company that we have been reducing every quarter. We have been reducing its relevance in our universe and gaining relevance on its place the new strategy, the Horizontal and MCMV. We're going to discuss the numbers of segments, and we nearly zeroed our inventories. We sold nearly 90% of the ready or completed inventory. So that means that we do not have the costs associated to this, and we just have the portfolio, and we are amortizing all the debt. This segment SBPE Vertical has some areas that remain in the land bank, and these are going to be developed with focused shareholders and partners so that we can monetize those areas. So we are going to monetize all those assets with profitability. The products of MCMV and SBPE Horizontal reached the figure of BRL 225 million in the month of September. That means that we are 217% higher than the same period of last year, and the net income of BRL 9.3 million in the same period as well. In the third quarter 2020, the net income of the segment surpasses BRL 5.9 million, so we are nearly reaching BRL 6 million. We have launched other projects after the closure of quarter, and we reached BRL 300 million of assets that have already been launched from the day the quarter was closed and the day today. For the project SBPE V and urbanism, we sold more than 90% of the completed inventory, and they're impacted by price adjustment due to the pandemic. So there was accumulated result which was negative. And we have been reducing its relevance in the portfolio of the company. And we have lowered the accumulated loss of BRL 20.2 million, which is partially offset by the launches with focused partners. We sold the last area for urbanism, so we have 0 land bank for urbanism. And we have launched BRL 118 million this year as well of this product. So when we sum the closure of the quarter in terms of number of launches, we launched BRL 343 million. And this is very relevant considering the volumes that the company has been operating within the past years. So this is a factor that stands out in terms of events and the last happenings of the company. So as a consequence, the consolidated result, because when we consolidate the company and we have a new strategy, new volumes of launches, sales as well as development of construction works, we still have a negative point of this legacy. So in the period in the first 9 months of 2020, we have a loss of [ BRL 10.8 million ]. In the third quarter 2020, we have a net [ income of BRL 2.2 million ]. So this shows the point where we have a new movement for the company. Let's talk about the details for each of the fronts so that we can analyze and evaluate the performance of each of those fronts. So first of all, the products My House My Life and SBPE Horizontal, this would be the new RNI. As I said, in the medium and largest areas where we have agribusinesses, these are the projects that have been launched, some of them that are in the regions with the agribusiness. We can understand that we are exactly in this area of the interior where we find the agribusiness, and the expectations have been surpassed continuously. And this gives us more safety as to the formality or continuity of income and the expectation of the future that can be ever better provided that the businesses are growing. So the GDP, 1.10%, and the GDP of agribusiness is 1.93%. This shows the resilience of the sector, and we are operating in this company -- in the sector. We can see what is the resilience of our product. As we have pointed out in some presentations of results, we did -- we chose those regions connected to agribusiness because we have our history connected to the development of the company that happened prior -- with priority in those areas. We have already developed a wide land bank, and our product is recognized by all regions. So it's easier for us to continue developing and continue with our new launches. Here, we can see our land bank that shows our capacity to generate results in the future. We'd like to point out that when we compare 2019, we recorded BRL 2.815 billion and BRL 2.9 billion. And today, we closed the quarter with BRL 6.3 billion, and we have already discounted all the launches. And the land banks is distributed in the regions that are defined as our focus of operation, consider other points that we have already mentioned. When we see the total land bank of the company, always add SBPE Vertical that we are monetizing. As we launch the new projects with partners, we have BRL 7.2 billion. It's historical milestone for the company. So for the generation of new businesses and for us to execute the projects and construction works, we have fit in here. 100% of this land bank is financial swap. So that demands -- that does not demand intensive capital for the company. And it does not negatively interfere with the ROE of each project. So every day, we increase the mix of the projects for this project. And this shows the horizontal -- the strength of horizontal projects. And this is the last launch that happened in the quarter in the city of Aparecida de Goiânia. The project is called Vega Jardim. It's characteristic of our project. These are apartments. And there are many opportunities in agribusiness for vertical projects because the approval is faster. And with that, as I said before, we used to have BRL 225 million that had already been launched. And now we have already reached BRL 300 million, so we surpassed the results of the previous year. So this shows our focus, the focus of the company in the execution and in the growth of the new strategy. And here, we have the main points of the positive characteristics of our product, our horizontal product. It meets MCMV and SBPE Horizontal. And it comes immediately after the MCMV, a client that would buy an MCMV would upgrade for SBPE Horizontal. This product that RNI has already developed for more than 15 years are houses made of concrete and we follow up on the development post sales, and we check what is the valuation that happens, on average, 6% above the inflation. So a client that acquired one of our units will have a gain above inflation. This is so good for the client, of course, because value will be added to our company and also to financial entities, Caixa Econômica, that will have a low LPV. We exceed expectations in the horizontal condominium. We offer all the infrastructure for medium -- middle-class condominium, of course, in an objective way, which is more compliant with the client's condition. But we have all the resources, and all condominiums have many courts, sports courts, fitness areas, Wi-Fi, kiosks, barbeque places. We provide all the infrastructure for the client to use and have enough conditions to live well and all the security and safety so that the client of this house can go to work and have their children playing with safety 24 hours a day. So this is what we offer our clients. We have already built more than 60,000 houses with those characteristics across Brazil. And today, we are focusing on the regions I mentioned before. And now speaking about our e-commerce platform. We are one of the first companies that started the sale by means of the digital channel when the pandemic started. And we managed because we had already covered 95% of our portfolio in the e-commerce platform. We managed to evolve, to perform so well. And now we are developing the definite platform of e-commerce, where we are going to offer the client all the positive experience of purchases that can be conducted totally digitalized. We are going to have the first delivery of the project in November and so that we can have all the sales mechanisms ready, including all digital channels, namely Facebook, Instagram, WhatsApp, Google and everything else. We have all the resources and SAP system. And all the clients, all clients are going to be working on their -- they are being improved. We identified the social condition of that client, that family so that he can make his dream come true, that is to buy his own house. And then we have the credit score with Caixa Econômica Federal and with approval and completion of the sale. And now about our sales performance. We had net sales, still talking about MCMV and SBPE Horizontal, we had BRL 70 million (sic) [ BRL 80 million ] of net sales. Compared to the same period of 2019, we can see that we have grown by 145%. So every day, we launched more and we sell more products in the regions that we chose. And following these strategies that has been ratified and that we offer the market since the middle of last year, so the sales of the third quarter specifically exceed 262% same period of last year. So this is a very important performance. There is another point here showing that we are, again, so as to say, young or new in the segment. But we can see during the history of the company, we had all the support to develop the program My House My Life. So we have 100% of inventory under construction. So all we have had such good performances. And so we haven't been able to bring relevance to our accounting results because 100% are under construction. So we are going to have the first delivery in the first quarter. So this is a very important addition to consider. So we do not have the cost of ready inventories without being sold. Our inventory turnover ratio is 15%. And REF has been growing, and this is what we are expecting. And this curve has to continue steep up to December. So we closed third quarter with BRL 157 million, already reaching the margin levels that we expected. I wouldn't say ideal, but I would say 30%, which is the company average. We are no longer working on 22% or 25%, and we have already reached 30%. And this 30% will be even better as we launch more projects up to December 2020. We will start '21 at full speed with new launches in the defined regions. In summary, this is the financial performance. We saw the results of this new RNI. We can see BRL 6 million as net income, breaking this to the bottom line. So we want to work at bottom line with a minimum of 10%, and this is what we are seeking all the time. We can see the growth when we compare with the third quarter, BRL 1.2 million as profit to BRL 6 million. So when we compare to the same quarter 2019, we had BRL 4 million of loss, obviously, because they were not -- there were no launches at that time back then. When we look at 9 months year-to-date in 2020, we are BRL 9.3 million in profit against BRL 7.1 million as loss in 2019. So the delta here is nearly BRL 17 million as improvement. And we closed the chapter of My House My Life and SBPE Horizontal. We have grown and we are going to continue growing ever more. And we're going to be working at much higher levels together with the best practices in the market. And now we are going to talk about the products of SBPE Vertical and the Subdivision products. And these are the products whose products we have been reducing its share. Summarizing, we have increased sales. We have increased sales. We sold BRL 192 million in the first 9 months of 2020, 78% higher than the same period of the previous year. So we reduced the inventory of finished units to 11% with PSV of BRL 21.7 million. So the inventory is no longer relevant to the portfolio of the company. And we will reach BRL 500 million of inventory under construction. We increased the launches with our focused partners since those assets can be monetized. So we have launched BRL 118 million of the products that belong to this segment. And we had no launches in the previous period of last year. So we had made some adjustments to the margin, and that made the growth difficult. When we summarize launches, net sales and inventories and land bank, we observed that launches have been happening because of the monetization, BRL 118 million. Net sales increasing because everything we have launched, we launch at a very high speed. It reduced inventory, and land bank has also been reduced. That shows the focus of the company when we invest in the strategy that we have defined and the reduction of -- relevance of where the company decided not to have as the main focus. So as a result, we have reached 28% of REF in comparison to the main segment of the company. So that shows the focus of profitability. Of course, REF has been dropping, so -- but we have the focus on monetizing. When we look at the financial view, on the third quarter, we have BRL 3.7 million as loss because of the points that we have already mentioned against BRL 7.5 million as loss in the second quarter. So we have reduced the inefficiency of the segment, and we are going to make the reduction even further. We are also going to bring positive results here even considering that this is a segment whose relevance is being reduced. So -- but we still wanted to be profitable. In the same period of 2019, we recorded some profit, and the condition was a bit differentiated. Here we have Subdivision portfolio that comprises this front. And at the moment of the pandemic, we divested it because some clients could not pay for that. And we canceled and we resold to other clients. So this portfolio is healthy. We start to record good performance as to monetization. We have no Subdivision segment being launched. So this shows once again our focus on the new strategy. When we talk about the consolidated results of RNI, we analyze the debt. So we know this very important point. We are launching more and speed higher than that of the previous year. However, we are not, for the time being, consuming cash. We have generated cash, and we have reduced our level of indebtedness. So the sale of finished units have allowed us to reduce indebtedness so that the company can follow its growth strategy in a strong way without consuming cash. So we show here a quarter with the preserved cash even in a company that is having -- that have been developing the defined fronts. When we look at the debt, we can see that MCMV and SBPE, we can see the level of indebtedness is very low because everything is executed with a lot of diligence and with good use of the funds. So 100% of our projects are launched, and they are already contracted by the corporation, Caixa Econômica Federal, so we can have the proper transfer to the individuals. So it's not -- in terms of capital, SBPE and Subdivision concentrates most of indebtedness, and this has been liquidated with the amortization of the assets. So the amortization is much stronger here because the capital is more intensive. And this is an older strategy. When we analyze the assets, focused and not focused portfolio, we have this ratio of 33%. And moving on to the total consolidated results of the company, a unified view. The third quarter 2020 with BRL 2.2 million of profit, and this reflects -- and we can see the profit today. In the same period 2019, we have profit which was a bit higher, BRL 3.7 million. That was driven by the points that I mentioned in the previous slides. Year-to-date, because of the results of the first and second quarter, we still have a loss of BRL 10.8 million against BRL 5 million as loss of the previous year. And we are further reducing the relevance of this loss. Our target is to reduce it and to put the company on the track of constant generation of profit. I would say that my presentation gathered information related to the financial and economic aspects of the company. And I would like to open the Q&A session now.

[Operator Instructions] Our first question comes from [ Pedro Zanol ] with [ Condor ].

I couldn't attend the whole call. But I would like to know how the launch schedules need to happen in the future. And what about the land bank situation in the countryside of São Paulo? So I would like to know what's the land bank in -- for your assets.

Okay. Thank you for your question, [ Pedro ]. First speaking of our launch schedule, in the fourth quarter, as I had said before, we have already launched the project this week in Rio Grande do Sul, in the city of Pelotas. And this project has a high SOS. And we are going to continue in November and in December with other launches. So we are likely to bring a significant volume of new launches. We have nearly BRL 500 million in launches in 2020. And I believe that the volumes are going to be quite significant until the end of December. Our land bank is located in the areas in the interior of São Paulo. When we talk about the interior of -- interior areas of Brazil, especially connected to the overall business, we can make negotiations, which can be considered to be interesting because they're connected to financial swaps, which is different how it behaves in major centers, in the center of agribusiness, where they -- there is higher demand for areas. So we always try to find the lands in the fringes of the city, so as to say. So we have made interesting negotiations that would not adversely affect the cash of the company, okay?

Okay.

[Operator Instructions] We have a question from webcast from [ Gustavo de Faria Alcantara ]. What could you say about the profitability of the BRL 199 million of the units in the inventory in the SBPE V and urbanism?

The profitability of the BRL 199 million, as I mentioned when I talked about the REF, it's a profitability that it will meet the demand of our ambition to conduct the launches which are medium economic class, so as to say, and it will meet 28% or 29% of gross margin and 9% to 12% of bottom line. So we will be able to monetize projects that we launched this year. And we're talking about 2 undertakings. We sold nearly 100% within the year. So these are projects that are transferred when the key is delivered, and we can monetize those assets with the profitability according to that expected by the market. This will not make us turn our focus to this product. So this is a product that we have been developing and launching with a partner so that the focus of the company will be focused on Horizontal products like My House My Life.

[Operator Instructions] We have a question from the webcast of [ Gustavo de Faria Alcantara ]. When can we expect to -- the legacy that you referred to stop generating losses?

[ Gustavo ], we are considering the hypothesis of having a low length of influence of the so-called legacy. It has become quite prevailing in this first half year of 2020 because of the pandemic, because of -- how can I put it, in a transition process and the launches had not reached higher volumes because we have launched the minimum necessary. But considering all the results that have been reported, we see that there has been a reduction of the importance of this loss. Of course, all those negative aspects are connected to a guarantee, a cancellation of a client that will lose credit level condition. So this may be -- may have some value. But this is very small considering all the launches that we are conducting. A launch would add results 9% to 12% of bottom line, as I said. And they are to go against it, and we wanted to offer a surplus in relation to the negative points. We expect that the new strategy continues growing for our company. And in 2021, we are going to have many launches so that the number of launches will be much higher than those of 2020, which more than doubled than 2019. So we are very focused in developing this way, a way that we would have relevance in both segments, one which would be more prevailing and the other a bit less.

Thank you. If there are no further questions, we'll turn the call back to Mr. Bianconi for his final considerations. You may proceed, Mr. Bianconi, with your final considerations. Thank you.

Ladies and gentlemen, I would like to summarize the presentation of our company to everyone. Our RNI has opportunity in relation to the fair value of the company. We are 0.7 of the book value, so it's a company that's focused on profitability and growth in where we operate, in defined regions, with a lot of resilience. So we have been able to grow consistently. We have already launched BRL 225 million in this period, exceeding 2019, and launching next year many more products. And net sales have better results than 2019 245%. As to inventory, no completed -- finished inventory, so all the inventory is under construction. And we were not building, and that's why we had reported some negative results. 100% of the inventory have transferred the floor plan, no debt. And we use the clients' resources, a land bank that we didn't used to have. Today, we have a land bank, and 90% of the projects that comprise the pipeline of the company of -- for '21 and '22 are under approval phase in the agencies. And it's a land bank of BRL 6.4 billion. And it has been highly focused on in terms of launches and 57% in Horizontal segment and growing ever more. The adjusted gross margin is 40%, quite significant, very significant expansion in relation to the third quarter 2019 considering all the launches. And net income of BRL 9.4 million, so it's a profitable company with a land bank which is very well positioned, very solid, whose characteristic is related to financial swap and not -- and that makes us much more certain of our strategy. So that cash will not be relied on. Resilience of low-income projects, bringing the assurance that the company will continue growing sustainably. And Rodobens group has been in the market for over 70 years, so we have a history, a solid history. And we have a rating at those regions, and we are renowned in those regions. And this is the reason why we managed to sell those projects and can sell -- make those sale or negotiations smoothly. The e-commerce platform is growing every strong so that we can bring the client to this platform so that client will have a choice to purchase as he wishes. And as I said, there are -- we have -- we see an opportunity for attractive multiples. We are a company under development, and we belong to a group that has been in operation for 70 years. And we hope we can improve the conditions in our stock market with our share of RDNI3. And this will be -- it will become tangible in the future. And we are going to see as our operations progress, and we'll see you in 2021 to discuss the results of the year.

Thank you. The conference call of RNI Negócios Imobiliários has come to an end. We'd like to thank you for having participated in this conference call, and have a good day, you all. [Statements in English on this transcript were spoken by an interpreter present on the live call.]