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

Thank you very much. Welcome to our conference call. I'm going to share with you the economic and financial performance of the company during the fourth quarter 2020. I'd like to start by sharing my presentation. Fourth quarter '20, RNI is a company that belongs to Rodobens. RNI3 -- our DNI3, I mean. So let me share with you the highlights. I have first to explain the performance of the company in the fourth quarter, also making reference to the FY 2020. Let me go over our main highlights. We launched BRL 240 million in the fourth quarter '20 which means 88% over the third quarter 2020. And in the year 2020, BRL 584 million, over 57% and compared to 2019. Showing here a very consistent growth in our company. Net sales amounted to BRL 178 million in the fourth quarter, 222% over the fourth quarter '19. During 2020, the whole year, it amounted to BRL 560 million, which means 133% over -- increase over 2019. As you can see, the performance of launches and net sales for equivalent, whatever we launch has been sold as we are going to show you with the inventory levels under construction. The lending of the company has reached BRL 7 billion in the fourth quarter in PSV, which means 42% over the fourth quarter '19, during the whole year '19. And another characteristic of our company in all the regions where we work 100% of the landbank was through swap agreements, maintaining our company's cash and then the landbank owner is part of the business performance. Backlog revenue, we amounted to BRL 242 million in the fourth quarter '20, which means 100% above what was the performance in the fourth quarter '19. Gross margin of 29.1%. Adjusted gross profit of BRL 22.7 million in the fourth quarter, 44% higher than in the third quarter '20. Adjusted gross margin of 22.3% (sic) [ 29.3% ], just similar to our backlog revenue or 6.7 percentage points above the third quarter '20. Net income, our bottom line of BRL 15 million the fourth quarter, 584% over the third quarter '20. During the year 2020, we had a very significant change. We transformed that into profit, BRL 4.3 million to 244% above what we had done in 2019. So the company has shown its growth and it's improved performance to launch sales and results, and we start 2021 following the same line of growth. Three key points for us, which have supported our economic financial performance. So first of all, COVID preventive measures, we have implemented a very rigorous vertical against COVID-19 at construction site, sales and administrative offices. We haven't discontinued any construction work. And we are now offering the possibility of our staff working from home, really to ensure safer operations for clients and staff. In terms of technology and sales strategy, we have invested in a digital platform and also real estate e-commerce. We have a very strong digital footprint, really favoring sales and business activities. We have launched projects with [indiscernible] 100% digital customer experience 360 vision of customers. Our sales agreements have been signed with 100% digitally. And we have also updated our consumers' portals. It's called RNI Home app. So with self-service portal. Customers may run a number of procedures just by themselves. So renegotiation, issuance of payment fleet, request of both sales, asking questions, everything through the portal. It shows a very strong technology touch with our clients, reducing operational costs. Now let's talk about environmental, social and governance aspects, ESG. We were reaccredit for ISO 9001:2015 and PBQT. So a company, which has been reaccredit with no kind of relevant comments. So we have been also sit certified , Caixa. It confirms how concerned we are about all the pre requirements to be certified as . It involves compliance, sustainability, social responsibility, environmental responsibility, a number of requirements that really bring our company to a very high level in terms of social-environmental performance. For 1 more year, we have supported [indiscernible], which is a group that support children and you with cancer. And we are going to maintain our contributions in upcoming years. So these are the key points, and now we are going to go into details in each of our strategies. So Casa Verde e Amarela, it's PCVA and SBPE. A new strategy. The company has been growing and expanding all its activities. The business plan has been very carefully performed very responsibly, which end up translating into numbers as you are going to see. Launches, we have really performed well in terms of launches over the third quarter '20 over fourth quarter '20. We have 219% increase. So year-to-year comparison, we can see a consistent growth, which will be maintained in 2021. BRL 323 million launched in 2019, BRL 246 million in 2018 and BRL 466 million in 2020. It means 44% increase over 2019. So we have almost doubled our performance. Here, we can see all the different launches, all of them focusing on the new strategy. And here we have the quarters in which they were accounted for. Since we have launched it in 2018, when we replanned our company and repositioned it, so from 2018 to 2020. We have won first project, Green Life Sao Marcos, BRL 663 million of PSV at that time, fully sold, similar to others Moradas Flores, first phase, which is a SBPE horizontal counter with houses, very economical. We have been consolidating our strategy to launch products for classes 1 and 2, Casa Verde e Amarela, where we have a combination also of Level 3, which means up to 25% of those units with a SBPE at a very economic levels, a product that has been well accepted in all different regions where we operate. [indiscernible] Origem. It started in 2018 and then also in 2019, and now in 2020, there was one more launch. So recent content. I'm going to tell you later, we have really outperformed our sales, similarly to other products at RNI. Here you can see some of our projects, some of our launches as part of Casa Verde e Amarela, PVA. Nova Jaan, San Paulo BRL 74 million PSV, and is the Sani in Goiania, so City of São Paulo on the left and city of Goiania on the right, both were launched in the beginning of COVID pandemic, April last year, and we have performed quite well, thanks to digital. Both of them were launched in 100% digital platform, providing sales and still offering safe conditions for our staff and for our clients to really keep on doing business. We have also launched RNI in out of the Ciuaba in the south of Brazil, 491 unit of houses, 8-million PSV. Regardin in Goiania, it's in Parana Goiania, 496 apartment units. So all Casaideas Goreva Houses and Vega chains are apartment buildings. You can see some highlights, some launches, which really outperformed our expectations. RNI in Anatolia in Belarus we sold 20% within the first 30 days. So it's also BCVA with excellent VLE performance, and it has a number of possibilities to clients. Great performance offering a leisure area. And this is why we have such a great performance. And also, a region is a product, which is somewhat more expensive than ], it's in Rondonopolis. It's a house project, 226 houses. We sold 80% within 40 days. Now it's 100% sold, and it was launched between November to December. And now in January, we sold all our units, all the remaining inventory. It was launched and within 60-days sold 100%. It shows resilience in the countryside area of Brazil, the importance of the macro regions where we are operating, whether it's angry business. So really where we decided to pick up the growth of the company. And this is the strategy we are going to pursue fully focus. All of our landbank, as I'm going to show you, is all focused on this macro regions. Now speaking of landbank, there was a major growth, as you can see, an inventory. And here, the land bank so that we can keep on doing business. So 2018 over 2020, we can see a huge growth, BRL 2.7 billion in 2018, BRL 3.5 billion in '19 and BRL 6 billion in 2020, after the launches of landbank, which are about to be approved. It creates to our company a very favorable environment for our launches, up to BRL 1 billion PSV for the upcoming period, although this is not a guidance. And in 2021, we have already increased our landbank. 87% of the landbank is focused on casa verda Morella those horizontal and vertical projects, 100% financial change swap. And here, we can see we are distributed in the inland, in the countryside area of Brazil in Agro business, equibase and agriculture and cattle raising. When you go close to in state of Goias, there are many companies that operate in cattle raising and also and swine racing. As well as in the south of Brazil. And Brazil is really performing quite well in agriculture and cattle raising consistent growth on a yearly basis. And we are represented there. Let me now show you our financial performance. So getting close to our accounting revenue. So net sales showed significant growth in an increasing trend, fourth quarter '19 net sales was BRL 27 million, 6% of SOS. 2020 was 21% fourth quarter, BRL 146 million. You can see it's an increasing trend, which will be maintaining 2021. 2020 over 2019, we have a 242% increase, BRL 104 million to BRL 336 million. What does it mean? 1,665 sold units, BRL 336 million in net sales, showing the improved performance of our company. Inventory at market value. The inventory is really important, 99% of it under construction. There is just 1% of constructed or finished units, which we have already sold now in the beginning of 2021. So 100% of our inventory is under construction, and it shows our concern in offering launches based on market service, qualitative, quantitative analysis, socioeconomic investigation to make sure that the customers can afford the units so that we can have a performance such as this one. Whatever launch is being sold. So then we have inventory under construction and very little inventory, which is concluded. This means 3,158 units under construction. Now financial indicators. We've already said that we have doubled our net operating revenue. And here, we have all constructions when we compare 2020 to 2019, there were BRL 59 million to BRL 198 million in 2020 of net operating revenue, 236%. Adjusted gross profit it used to be BRL 60 million in 2019 to BRL 65 million in 2020. Gross margin, fourth quarter '19 over the fourth quarter '20. It went from 29% to 31% from 7% to 22% -- or BRL 22 million rather. In terms of growth, we can see 311% increase on a year-to-year basis. G&E, of course, with the significant expansion of company businesses. It means that expenses have to increase somewhat, but always under control. As you can see, they haven't grown as the business has grown. And with digital operations, we have reached a high level of automated processes and digitalization. And you can see that the increase of G&A from 2019 over 2020 should follow a reduction of G&A and legacy. That part of activities which are being discontinued. With the vertical, SBPE, and this is -- the decrease there was higher than the growth we have experienced here. So 17% increase here and a decrease of G&A over 40% in the legacy operations. It has led to net income and net margin. So in 2019, we had net loss of BRL 7 million to a positive net profit of BRL 20 million here. So that's 350% difference, 9.6% net margin. It means that we have been conducting the business of the company within the rating that we have brought to the market, between 9% and 12%, getting as much as 13% in net margin in our new strategy. Okay. We've already talked about Casa Verde e Amarela and SBPE Horizontal, which is new strategy. Well, let's talk about SBPE vertical and also subdivision. The fourth quarter, no launches remaining this line of business. 2020 or over 2019 and 2018, we've launched more than in previous years in the strategy of monetizing lens that we had in our land base. So now the landbank is going down for these operations, so we are just launching where there is a guaranteed profitability. In some of cases with partners to help us manage the business so that the company can concentrate all its best efforts in executing our strategy, Casa Verde e Amarela and SBPE horizontal. To observing net sales of legacy, SOS has been somewhat maintained, stable. Second and third quarter of '20, we sold all of our completed units inventory. We have nearly what 81% on the construction, which is this launch here in 2020 and 19% remaining concluded units that are currently being sold. We can say that the legacy or brief strategy has no carryover cost. Comparing year-over-year, we had an increase in 2020 because we sold all the inventory units that we had completed. So inventory at market value, BRL 107 million, nearly all of it under construction. So going down year-over-year, and it tends to keep on decreasing until we no longer have the landbank. So the landbank used to be BRL 1.3 billion in 2019 and we closed the year with BRL 918 million PSV, and it's going to keep on decreasing 2021. Launching products, which are absolutely sure or maybe selling some of the units and some of the lands. So this is the execution of the strategy. We are following exactly what we have designed as being essential to maintain the company in operation. Here, we have a financial indicator of the legacy, 261% in 2019 to 219% in 2020, as expected. Adjusted gross profit going down. In terms of adjusted gross margin, it's in line, but the volumes are going down because of the reduction of the legacy operations, BRL 80 million to BRL 35 million. And as a G&E, we can see here there was an increase there of [ 17 in our new strategy and here, a reduction of 46%, showing that everything that we have been reducing is much more important than what we are adding. Which shows our efficiency in execution of strategy. We used to have in BRL 8 million. And this year, we have reached BRL 40 million in loss. Of course, because we started selling our concluded units. But in the fourth quarter, the result was positive as we are going to show you. Now let's see consolidate the date, net debt, cash and receivables. There was a small reduction in cash values with significant growth in the fourth quarter. Even though 100% of the lands are a swap. Otherwise, we would have really impacted our cash. In terms of indebtedness level, there was a decrease over the third quarter and second quarter. And even though we have contracted and executed a number of projects, it has been maintained under construction funding. So construction loans had a small decrease. CCBI and CRI are in line, just minor reduction over 2019 first half BRL 190 million and the CRI, which is BRL 142 million. As to bank debt, BRL 113 million, which is aligned with what the company has been performing. And working capital once shown here. When we had the net debt, therefore, we're talking about BRL 354 million, which is fully aligned with what we expected. So this is the performance of the company, which has full control over its operations. We have launched a lot, and we haven't increased our net debt significantly. It was just somewhat higher, which is expected, whenever we are really developing. So 7.3% is our net debt over shareholders' equity. 56.6% of net debt over shareholders' equity. 73% of our total debt concerns construction funding. So it shows our company focus on executing only the operations at the construction level. So that we have a consistency in generating cash and obtaining cash consolidation, something that has been happening in the company, thanks to new launches that we are offering now. 7.3% with the net debt over shareholders' equity. Cash flow of RNI, we show a consistency maintaining and also generating some positive points also here, our so-called production debt or that without SFI, without major changes based on what we had initially foresee. Now that and consolidated receivables. Here, in the consolidation, total assets over so that over assets, we can see in the new strategy, Casa Verde e Amarela and SBPE Horizontal, 14%, BRL 136 million. 61% in SBPE, vertical and subdivision. Of course, the legacy has really taken more capital, something that is turning to us, thanks to transfer and monetization of assets. When I have a total consolidated debt, 30% is what we have, BRL 422 million, 32%, of which is Casa Verde e Amarela and SBPE horizontal. 1/3 of that, it's not anything major, considering the total amount and 16% is the legacy operation. So it shows that our strategy has been very carefully executed so that we have no cash drainage. And here, we have consolidated results fourth quarter '19, BRL 15 million net income as opposed to the third quarter, we have BRL 2.2 million and 3.2% in net margin. Here we have compared in 2020 to 2019. 243% improved performance with the fourth quarter '19, it is almost 145% improvement comparing quarter-over-quarter were the projects concluded in the first half of 2020. A volcano with also PSV of BRL 38 million on units. There are no units left, Green Club in Mato Grosso also the area of Agri business. Almost no stock, BRL 140 million. Green Life Sao Marcos, this is Casa Verde e Amarela, also 100% sold, 571 units sold and delivered. I would like now to stop my presentation, and I would like now to open for the Q&A, so that you can submit your questions to us to clarify any points you might want to hear further. This is my presentation, and I'll be glad to answer any questions you might have. Thank you.

[Operator Instruction]. There is one question asked by [ Marc Antonio ] from webcast. Do you anticipate the impact of inflation and interest rates?

Well, good morning, Antonio. Thank you very much for your questions. Yes. There are 2 points a bit to take into consideration. First, let me talk about interest rates. The interest rates we do have some expectations in Brazil about the increase in interest rates, the curves are showing some positive isolations. So Selic 2%, and we expect probably the double of the interest rate. And the increase of interest rate will bring us back to a very positive environment because when the interest rate was 9% to 11%. In the past, we used to perform quite well, 9%, 8.5%, 8.8%, we performed quite well. If the interest rate goes up to 4.5% to 5%, Brazil will have created a very positive environment for the real estate market. And why do I say that? Financial cost of a real estate funding and loans considering the funding plans offered by cash economic and other banks are affordable because it's -- they caught as much as paying rent especially in the macro regions where we are represented because we work out size the largest centers. We are more on the inland area. And this is the area where we have agribusiness and cattle raising, where more jobs are offered. It has been happening for the past 10 years, and I expect it to keep on growing for the next 10 years. And we offer good funding lines, good loans conditions, offer few Caixa Econmomica. And it means a possibility of people buying their own home within a safe environment. Today, it's amazing. But in the near future, even with a higher interest rate, I'm sure we'll keep on expanding like that. Now concerning inflation and interest rates, we know they were hand-in-hand, even though there is now a miss match. There has been some minor oscillations in direct cost, but everything has been mitigated in all our projects. All our projects are set up with the necessary conditions to maintain gross and net margins with our own construction and technology and all of that. So inflation and controlled cost, and inflation and interest rate, still at very attractive levels, much lower than we have always worked and still performed quite well.

The next question comes from [ Gustavo de Faro Cantara ]. Could you please talk about financial revenue of the fourth quarter and talk about the cost dynamic?

Thank you for the question. Financial results. In the fourth quarter, we had a significant financial recovery of everything that we have had in the previous quarters because of some interest rate reversion, of some specific portfolios, everything was regularized. We have canceled and resold them in the third quarter -- second and third quarter. So in the fourth quarter, we had better performance. In addition to that, in the fourth quarter, there was no financial loss, which drained results, but we've maintained some indexation of some clients, also our portfolio of subdivision. It has been quite robots. We have started some negotiations, some debts were renegotiated and paid. So that decreased our financial costs. In addition to maintaining a cash value which was still very healthy. Now the second point of your question is what I have already answered to some extent. Costs are closely monitored by us. We have performed some let's say, global negotiations, which help us maintain costs within the ranges that we consider to be under control, reinforcing once again that we operate outside large centers. So we end up having access to interesting partnerships in addition to landbank, which is going to help in terms of cost. One of the main issues of adding construction is, of course, the price of land. And also, of course, concrete and still but these items are not essential in cost composition. They are important, but they don't impact in terms of fluctuation of costs. So we have been able to accommodate all the variations that we have experienced, and all our margins have already been forecast for 2021.

The next question comes from [indiscernible]. Any changes due to an increase in cost of raw material?

No, not really. Thank you for the question. No changes in our strategy. The definition of macro regions helped by some external consulting support intended to operate within different markets. So we thought that by working in different regions, away from large centers, not that we would be seeded, but we would have control over really all the variation of both direct and indirect costs. I can confidently say that we are okay to deal with the cost ranges, all within what we had anticipated and planned. For example, labor, contracted labor. We work with contractors. So of course, labor of a service provider in Rondonopolis or in Cuiaba. It's not what would be the cost and the quality of labor in a large center. So we really end up having a benefit, right, by a positive benefit cost. Of course, it also impacts my PSV margin. It is different from São Paulo fine, but it all depends on how you set up the product as a whole. In addition to that, in Casa Verde e Amarela, we also have a flexibility of placing up to 25% of our units outside the program Casa Verde e Amarela or what we call super economic, not in the fourth quarter. But in all the earnings releases that we have been sharing with you since we changed our strategy. I've always said that we wanted to be in levels 2 and 3 as a priority and offering a combination an additional quality of our products. We used to be a company where we had a high level of different products for Minga, Casa Verde e Amarela to they called Casa Verde e Amarela. So we offer a mix of products with a higher quality so that we can attract the potential clients from SBPE to have an equal profitability in our projects.

There are no further questions, I would like now to hand it over to our main speaker to make his closing remarks.

Well, now my closing remarks here. I would like to start by thanking all of you for your questions. Very important questions. Henrique Ravazzi, who is our Investor Relations manager, is available to answer any questions you might have to share with you about our case, about the experience so that you can learn more and be closer to our business. And we are always open to your feedback and questions. Let me sum up RNI in 2020. We have maintained with our expansion strategy in the regions outside the large centers. Rodobens started and has developed for the past 70-years in these regions where there is a good business. And we want to keep on executing our strategy, rely on our history and the reputation that was created throughout the past 7 decades. So we have access to landbank, to clients through our digital wealth operations, e-commerce. So clients can be absolutely sure, they can start negotiation and conclude negotiations through the digital channel because they know RNI and they know Rodobens. We've also had a unification of leadership. We have excluded the position of a co-CEO. So today, there is just one CEO, myself, and I am also the IR Officer of the company or the IR officer of the company exactly. It has really provided a faster decision-making. And we are fully prepared to keep on growing, growing through the execution of our strategy. We had a reduction of 80% of headcount. If we compare the company today over 2010, we have had an increase of 81% of our infrastructure. And we are performing at a PSV level very close to what we used to have 10-years ago. 65% of operating costs were reduced in the past 5 years. It also means a lot. For the growth of 2021, which we have just started, we are going to see that translated into numbers and offering a much better performance. Which will also mean an improvement in the bottom line. We are now operating 6 macro regions. They were fully consolidated in 2020. And now it has come to execution. We have a BRL 7 billion landbank, so BRL 6 billion of the new strategy and BRL 1 billion of the legacy. Our net income of BRL 15 million, which has a net income that we want to keep on improving. So 145% over the fourth quarter '19. Now the increasing backlog revenue. Every single day, we've been increasing our backlog revenue. We have closed BRL 241 million or 29% gross margin, which has doubled if we compare to 2019. If we compare here the 2 main blocks of strategy shows a new strategy, PSV and SBPE Horizontal as opposed to SBPE Vertical and subdivision. Fourth quarter, we had sales of BRL 145 million, 82% growth and profit of BRL 9.8 million in the fourth quarter '19. So BRL 9.6 million from the strategy and BRL 5.5 million from legacy. This is the company growing every single day in its new strategy and maintaining our legacy operations. So that it does not hinder growth, rather, but it can really reduce its impact and end up not consuming energy from our main initiative. So thank you all very much for your attention. Thank you for your participation, for being here with us, and feel free to contact us at any time. Herique Ravazzi, who is our Investor Relations manager is open to talk to all of you. In addition to myself, Carlos Bianconi. I wish you all a great day. Be healthy, and let's move on. Thank you all very much. Thank you. Have a good day.

The conference call of RNI Negocios Imobiliarios is completed now. Thank you very much for your participation. Have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]