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

Ladies and gentlemen, thank you for waiting. Welcome to the video conference of RNI Negócios Imobiliários S.A. to discuss the earnings of the first quarter of 2021. Here with us, we have Carlos Bianconi, CEO and Investor Relations Officer; and Henrique Ravazzi, Investor Relations Manager. [Operator Instructions] Before proceeding, we would like to clarify that forward-looking statements that may be made during this conference regarding business prospects, forecasts and operating and financial targets of the company are based on beliefs and assumptions of RNI management as well as on information currently available to the company. Forward-looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions. [ They refer ] to future events and depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the future performance of the company and lead to results that are materially different from those in such forward-looking statements. Now I would like to turn the conference over to Carlos Bianconi. Mr. Bianconi, you may start.

Good morning, everyone. Most welcome to our release conference where we are very pleased to disclose the performance of the company in the first quarter of 2021 and I will ask [ Ravazzi ] to please share the presentation. And we are here to talk -- to make a disclaimer about the performance of the figures of the company and to get -- know more in depth the figures of the company, and we can discuss what has happened in the first 3 months of 2021. So [ Ravazzi ], let's go to the highlights of the company's performance in this first quarter. We have in a summarized way the highlights of our performance. So first, launches. Company launches, we amounted to BRL 221 million, which is a figure that's 241% when compared to the first quarter of '21. In the last 12 months, we reached BRL 740 million, so we have improved a lot in this front. Net sales of BRL 157 million, which is 108% higher than the first quarter of 2020. So in the last 12 months, it amounted to BRL 641 million. The backlog revenue amounted to BRL 207 million (sic) [ BRL 307 million ], still growing and will continue to grow. So in the first quarter of '21, it's BRL 307 million, which is an increase of 27% when compared to the fourth quarter of 2020. And when we compare to the first quarter of 2020, then it's 161% growth and maintaining the margin of 29%. The SG&A in the first quarter had a reduction. So it's different from the growth. We had a reduction of 18% in SG&A when compared to the fourth quarter 2020, which shows our concern and attention to the company's expenses, an 18% reduction. Reminding you that during the year of 2020, we also had an important reduction due to the automation because we used a robot and automated many processes, which allowed the company to grow the business volume sales without growing the company as a whole in terms of staff. So we have growing profits and SG&A going down. The adjusted gross profit amounted to BRL 27 million in the first quarter of 2021, which is 21% higher than the fourth quarter of 2020. The adjusted gross margin also reflects a growth of 5.8% -- percentage points when compared to the first quarter of 2020. The adjusted gross margin amounted to 30.7%. Now the net income is BRL 5.4 million in the first quarter of '21 when compared to the first quarter of '20. We used to have a loss of BRL 6.8 million. So the delta amounts to BRL 12 million. It's an important growth and the performance of the company has reflected that in its income statement. It's worth pointing out that the backlog revenue goes down as the construction was finished. Okay. So these are the main pillars of the company in this first quarter, showing our attention and compliance with the strategic plan, considering other points that the market has shown, opportunities and points of concern, especially regarding the cost of materials that has varied a lot. Below, we see the 3 pillars that are the foundation on which we based our action plan and business plan. So COVID-19 preventive measures, we did not stop any construction works within this quarter, we actually had an acceleration, and we measured the construction pace, and we had a small growth, let's say, a gain in productivity. Of course, we're taking all the necessary precautions for sanitization and respecting other protocols. In similar experience, especially in the second half of March, we're partially open, and we had to work with prescheduled appointments and following all restrictions in terms of our safety protocols and working hours' restrictions. We used the e-commerce platform a lot in order to support this moment of restriction in terms of in-person visits to the stand. So our e-commerce platform has continued to grow at a fast pace in terms of implementation. We had several -- we rolled out 2 more modules and at the second quarter, we'll have the full platform, e-commerce platform, in operation. This is -- the customers are adopting it very much. That shows that the volume of e-commerce platform has grown its usage by 40%. So it has -- it's very efficient and post aftersales also, it's done digitally. Of course, let's never forget that on the other end, there is a human being, and we interact to them in a very respectful manner in meeting the needs and expectations of our customers. And ESG aspects on the right. They are very important for us to be able to evolve and continue with our growth, respecting all social and governance aspects. And in compliance with the responsible development, we were awarded a "Covid Free" certificate granted by the Brazilian Institute for Excellence in Health , IBES, attesting to the good preventive practices implemented at construction sites to fight coronavirus. And of course, that also includes safety measures for our employees, outsourced service providers, as well as for the public in general. Of course, we have to evolve and we always go further [ interesting ]. So I just went through the main highlights of the company. I'll now turn the floor over to Henrique Ravazzi, the Investor Relations Manager, because he will make the performance and will talk about the financial performance of the company.

Okay. Good morning. Thank you all. Thank you, Bianconi. It's a pleasure to be here to share the development of the company in this first quarter. And continuing now and with the presentation and talking about the indicators, I'll talk about this new -- we continue with our new strategy. The company maintained a very good growth rate, reaching BRL 87 million last 12 months, which is 114% higher than in 2020, and in this quarter, we have BRL 221 million of PSV. These were the launches made in the quarter: Garden RNI with Horizontal development of Casa Verde e Amarela, the old Minha Casa Minha Vida. We also have Smart Haus, for example, in Blumenau, and all of them are within Casa Verde e Amarela program. Our landbank also has a good growth pace. We have reached the level of BRL 5.9 billion in the end of the first quarter with a growth of 52% when compared to '20, and the 91% of our landbank is targeted to follow the company's strategy of Casa Verde e Amarela program, both Horizontal and Vertical. In this month we had launches and the landbank remained at a considerable volume for launches in following years. All the launches are based on swap deals, which is something that's very good. We like to stress that, because that's very favorable for our strategy and this is possible because of the regions we are present, that is the interior of some states. And talking about the net sales within our strategy, we also maintained a very significant growth rate when compared to previous quarters, especially compared to last year. In the first quarter, we launched BRL 146 million, which is equivalent to the last quarter. We had a growth -- the 274% and year-to-date, our last 12 months, 296% growth. We remain between 19% and 20% with a slow decrease because of the launches we made in the end of March. The inventory at market value reached BRL 649 million. All this is units in construction, which totals 3,718 units in construction. All of that is in accordance with the strategy of the company. Financial indicators show significant growth when compared to the first quarter of last year. Our net revenue has grown at 193%, going from BRL 32 million forecast presented in first quarter '20. And now, it is at 92%, a very significant percentage growth. Our adjusted gross profit presented an important growth as well and reached an increase of 195%, totaling BRL 28 million in the first quarter. And what's very important here is our margin, which remained at 30%. We had a reduction in our selling expenses. This is an important point because the company is growing and the volumes are increasing every quarter and the administrative expenses are being reduced. We do know that this is not going to be capped forever, but we have reached a very interesting level for the company, especially during growth periods. The net income and net margin presented significant growth from BRL 2 million reported in the first quarter of '20 to BRL 12 million in the first quarter of '21, and the net margin doubled almost to -- growing from 6.9% to 13%. Now going into the SBPE Vertical and Urbanismo product. This is the group of products that, as time goes by, loses significance in their mix of products, because these are products that the company is not stressing so much in the new strategy. So unfortunately, we have not made any launches of this product for 6 months now, 2 quarters in which launches are 0, and that influenced other indicators, especially when we look at sales. So there was a reduction in launches of 53% in the last 2 months. Our net sales also dropped. We totaled BRL 10 million net sales in this quarter. Our inventory at market value dropped significantly, a reduction of 67%, totaling BRL 102 million in the first quarter of '21, [ and amounting ] inventory to 22% under construction -- or rather, 22% completed and 78% under construction. The landbank was reduced by 25% and totaled BRL 864 million at the end of the first quarter of '21. Our financial indicators in the first quarter are the following. The significance, the fact that this product is no longer part of our portfolio, also shows some reduction. In the first quarter, we had a chance to cancel some agreements and providing some oxygen to our portfolio, especially Urbanismo 1, and we could cancel the contracts of some units and make new contracts due to the adjustment of prices. So we went from BRL 24 million to BRL 2 million negative. The adjusted gross profit and adjusted gross margin were reduced. We had a reduction in the adjusted gross profit, going from BRL 4 million to BRL 624 million negative, but the gross margin increased that went from 17.8% to 23.4% when compared quarters last year and this year. General and administrative expenses, SG&A, set a reduction of 19% and the net income also was reduced when compared to the first quarter '20. It was reduced by 26%. It went from BRL 8.9 million to BRL 6.6 million. Now talking about our debt, cash and consolidated cash flow. The company maintained an accelerated growth rate. So it's normal to have cash -- some cash burn. We had an increase in debt. Our current debt amounts to BRL 446 million -- BRL 444 million and 75% of that refers to construction funding, which is the core business. So it is normal to have a certain growth during this period. Our corporate debt has remained the same, our bank debt. And at the same volume, there was a reduction in the first quarter. This reduction happened according to the renewal of a corporate debt of BRL 50 million that was made with Banco ABC that was supposed to fall due in this fourth quarter, and we were able to renew the debt to fall due in 2023 at the lower cost from CDI plus 3.9 to CDI plus 2.88 per year. And finally, the income statement, consolidated income statement, that also shows significant growth. Our net revenue had an increase of 60% when compared to the first quarter of 2020. The gross -- adjusted gross margin and adjusted gross revenue -- profit had an important growth. The gross profit grew by 98% and the adjusted gross margin went up almost 6 percentage points quarter-on-quarter. The EBIT presents now a positive scenario. We were talking about that last quarter, but the trend was for the losses to decrease in the operating scenario, and this is something we can see now in the first quarter. And the net income, we went from a loss of BRL 6.8 million in the first quarter to a profit of BRL 6.5 million in this first quarter. So these are indicators that presented a very significant growth in the 1-year period. Now let's open for the Q&A session. And I also turn the call over to Bianconi. Do you have any other comments you would like to make?

No, it's perfect now, Ravazzi. Thank you.

So let's look at the questions and answer them. The questions that are sent to us, so that we can bring further information of [ our financial ] performance. So we are available to all of you to answer any questions you may have.

[Operator Instructions] The first question comes from Carlos [ Pinheiro ].

I'm Carlos [ Pinheiro ] from [ Carmen ] [indiscernible] . I have 2 questions. First, thinking about the second quarter of 2021 until now, what other trends that you see for this quarter and how do you see the end of the year? Do you forecast a recovery of activities?

Great. Thank you for your question, [ Pinheiro ]. Well, first, we are in the execution right now of the second quarter, and we noticed that the volumes of business are maintained. The only thing that calls our attention in this quarter, and that also applies to the second half of the year, is the costs that are varying a lot and we have to mix that -- manage that in our product mix. We operate Casa Verde e Amarela in Levels 2 and 3 and the low-income segment as well. So we ended up offsetting in these price changes, and we've had a good -- maintained the levels of -- flows have been maintained. When we talk about the second half of the year, we believe that we'll continue to grow, and we also think that there will be some accommodation in terms of cost of materials and supply now that the vaccination is growing. We're still moving slowly in that area, but the production environment is a bit safer. So if we could summarize the 2 questions in one, we remain very optimistic in terms of business development in the quarter and for the rest of this year.

[Operator Instructions] The next question comes from the webcast. What is your expectation about the trend of Urbanismo SBPE Vertical losses in the fourth -- in the next quarters?

Okay. Great question. Our expectation is already calculated. We had the expectation and the plan for execution. The trend, also based on the figures that we have presented, the impact is being gradually reduced almost -- inventory of finished units are almost 0 now, and the inventory of units under construction is made in partnership with other partners. So this is for SBPE Vertical and middle and high income. In the case of Urbanismo, we're only managing the portfolio. We no longer have that business. We only have the remaining units in our portfolio that we are managing. So the trend is for a reduction of the proportion of these units with regards to the new strategy in every quarter, because in the new strategy, we are growing and the remaining units of these products are becoming smaller. So the trend is to have [indiscernible] bottom line, so to speak. And that will be reflected in the figures of the new strategy. We have the BRL 307 million of backlog revenue already.

Since there are no further questions, I return the floor to the speakers for the final remarks.

Thank you all for your participation. I would ask Ravazzi to share this last slide.

So as you could all see, the performance of the company has changed. We started 2021 at a rhythm and pace with figures much higher than the beginning of 2020, and this shows that 2021 will certainly be an important year for the company in terms of growth, and we'll be able to deliver the business volume that we proposed to deliver, according to the strategy of Casa Verde e Amarela strategy and SBPE Low Income. And so if we could summarize it, as I said, the pace during 2021 is accelerated and our business levels have changed. We are now able to carry out a new strategy and with caution, bearing in mind that it's important to maintain profitability and, therefore, increase with a lean structure, maintaining a lean structure, always targeting the regions that are related to agribusiness in Brazil. Our focus, our business plan, is targeted at these agricultural areas that are the regions that are growing and that jobs are maintained, and the landbank is done with the financial swaps, with no need for cash disbursement. We have an important news, which is the renewal of credit limit at Caixa Economica Federal that -- that's the main bank that operates with Casa Verde e Amarela and SBPE products. So we had an exponential increase in the credit limit for that bank and the business has grown. It's worth highlighting that Caixa Economica Federal has been a great partner. They have evolved a lot in terms of technology, in terms of cancellations and transfers of agreements, and it's a great partner in Brazil for business development and also to support the launches forecast by the company. We have several construction works we have started. We have 18 construction sites. Last year, we had only 6. This year, we have 3x more. And in this first quarter, we started Alto dos Jerivás in Pelotas, Rio Grande do Sul, a very good Vertical development. There was -- sales were very good in Rondonópolis, it's a Horizontal low-income SBPE launch, very close to Nações Unidas and Nações Unidas in Bauru. Also in the state of Sao Paulo's Vertical development in RNI Vega Jardim in Aparecida de Goiânia, in Goiânia state. So all these projects account to BRL 328 million in PSV already in execution. We are in the infrastructure phase now, and that reflects in the backlog revenue. We have 2 main thoughts here when we talk about the new strategy, PCVA and SBPE Horizontal and super low income that from the migration of the program, the housing programs. We see a resilient margin of 13% in this first quarter. So that reflects exactly what we proposed to deliver and which means an increase of 6.2 percentage points when compared to the first quarter of 2020 and a positive income of BRL 12 million, 456% higher than the first quarter of '20. And that's why [ you hear that ] the new strategy is good in consistency. We're talking about 13% net margin and the growth in profit. And the backlog revenue from this new strategy is almost 100% from the BRL 298 million and that tends to grow until the end of the year. We intend to continue to launch and sell. When we look at legacy SBPE Vertical and Urbanismo, we see that it is shrinking and we'll remove the -- the inventory of legacy products has declined by 57%. So when we compare to quarter-on-quarter or when we compare to this last quarter of 2020, so it loses relevance or significance in the mix of products. In the past, we had a loss of BRL 9 million. Now it's BRL 6.6 million. So losses are decreasing, and it will continue to decrease until we come to a neutral bottom line, so to speak. And if you noticed, we reported 18% reduction in SG&A. We see that the G&A is being maintained in this new strategy and a strong reduction in the legacy, which shows that we're renewing legacy and we're not letting the growth of the new strategy contaminate it. Whatever is in the new strategy, we maintain the growth without increasing SG&A. Of course, we cannot grow so fast without having a necessary minimum structure. So in the future, that will change a bit. But we have a strong support from technology, especially e-commerce platform and also the repetitive activities are all done by robot now. So this is what we have to present to you. We thank you very much for your attendance and our channels remain open. We'll participate in other live sessions. There are a few going on today to talk more about our business and just stress that our purpose is to continue to grow and develop the company's business always within, according to the business plan that was developed for the company in 2017 and '18, with the support of a worldwide renowned company that helped us. Thank you all very much, and stay safe and healthy.

The video conference of RNI Negócios Imobiliários has now ended. Thank you all for attending, and have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]