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 results concerning the second quarter of 2021. We have here Mr. Carlos Bianconi, CEO and Investor Relations Director; and Henrique Ravazzi, Investor Relations Manager. [Operator Instructions] This presentation contains forward-looking statements and information related to RNI Negócios Imobiliários that reflect the current views and our expectations of the company and its management regarding its performance, business and future events. And we use information that are available to the company right now. Future considerations are not guarantee of certainty. They involve premises because they involve the future. Investors should understand the general economic conditions, industry conditions and other operating factors may affect the company's future results and may lead to results that differ materially from those expressed in such future considerations. Now I would like to give the floor to Mr. Carlos Bianconi. Please, Mr. Carlos Bianconi, you may proceed.

Thank you. Good morning, all. I kindly do welcome to our release -- earnings release call concerning the second Q '21, and therefore, consolidation in the first half. Now our first slide, concerning our highlights. I would like to call your attention for the highlights in this second quarter and first half 2021, where I start by launches. Our launches in this first half, BRL 401 million, meaning 21.87% or better, 87% higher than first H '20, almost twice as much. In 2Q '21, totaled BRL 180 million, also meaning 20% higher than 2Q '20, therefore, consistent growth. Our gross sales from BRL 422 million in 1H '21, 30% higher than the first half last year. In the second quarter, BRL 236 million, consolidating 2% higher than 2Q '20. And I want to emphasize that in 2Q '20, we had 73 operation last year, and this year, we didn't have any. So it's only from our new version of the company and very consistent. Net sales BRL 322 million in first half '21, 36% higher vis-à-vis first half 2020. In 2Q '21, totaled BRL 175 million, 4% higher than into Q '20. The backlog revenue, future revenue, the units that have been [indiscernible] BRL 343 million, an increase of 175% vis-a-vis 2Q '20 and also 28% of margin. So the growth is consistent and constant, in preserving a margin profit of 21%. I want to emphasize here that is the part of revenue where we start the units. They are under construction through Park. They will then go to DRE. It's the system of the sector. The net sales, BRL 322 million in the first half of '21, 36% higher than last year. In 2Q '21, BRL 93 million, also higher than last year. The adjusted gross profit, BRL 56 million in first half '21, 25% higher than in the first half '20, adjusted gross margin of 30.7% in 2Q '21, increasing 3.8 percentage points as considered to last year, maintenance of 30.7% in 1Q '21. So our gross profit is preserved with our strategy, the regions in the mix of Casa Verde e Amarela and SBPE. The net income BRL 8.4 million, in this first half versus BRL 13 million loss considering last year. So really a change here in net profit. I call your attention to 3 items that characterize this quarter or better this half, especially the second quarter of '21. The first one, preventive measures COVID-19. Our construction projects are normal, no interruptions in this call -- in this half. And we had an acceleration of about 20% above our expectations. So we have our plans, and we were able to be quite efficient, 20% more than what we expected. In relation to physical financial evolution, the sales books were partially open, respecting all protocols and schedule restrictions. In relation to the stands, besides the construction, we have all the compliance with the protocols in order to preserve the health of our collaborators, partners and clients that are very important to development of the business. Definition is well advanced, where we act. And therefore, we can do our activities with safety and increasing volumes. In technology and strategy, our e-commerce platform is now fully deployed. We have -- we are -- we have finished implementation. We started 2020 with the platform already ongoing. And we have fostered it in the infrastructure operating sales. Success is significant, growing. It's responsible today for about 10% of sales in this first half. In the first quarter, we had 40% of leads directing. And automatically, sales were not yet significant. In the second Q, we achieved 10% of sales. This meant more than 60% increase in visits in the website. So our organic generation of leads and, therefore, negotiation sales has been growing consistently through this platform and all the infrastructure in the company to make efficient sales and cheaper sales. ESG aspects, we had an evolution. We achieved COVID-free certification. And now we had the progress of this certificate to excellent what means that this certificate certifies that the company fulfills more than 90% of the 71 requirements needed for establishments. There are many, 71. And we are -- we have fulfilled more than 90%. Our concern in the company in developing our business plan according to the strategy defined and established along with the company Board and the support of market intelligence companies granted us all this. So we have a technological business well established in -- under operation. We are concerned in relation to PSV to maintain the sales and business growth, preserving the health of everybody, collaborators, clients, partners and also growth in launching and sales volume and maintaining our profitability. We have been talking a lot about profitability because the costs have gone up, but our product mix has allowed us to progress with our prices. In our mix, we have Type 3 products and the very economic we also have. So we bring customers in a more consistent way and a more credit score and automatically, we preserve the margins of the company. Now I give the floor to Ravazzi to go on with the presentation.

Thank you, Bianconi. First of all, good morning to all participants. I thank you heartily for being here. I'll talk a little bit about our operational indicators, financial that are segregated according to strategic products -- in the products that are no longer so much relevant in our mix, in our legacy. Starting here with the launch on Slide 6. For Casa Verde e Amarela and SBPE Horizontal, as has been explained, we had very significant progress in this first half '21. The company reached BRL 401 million, launched for this product, 180 -- and 168% higher. And in the quarter, BRL 180 million launched, 20% more than last year. For the last 12 months, BRL 718 million, PSV launched for strategic products, a growth of 122% vis-à-vis the last period of 2020. These were the 2 launches on Slide 7 that we did in the second quarter. Bosque dos Ipês was quite successful in Campo Grande. The company sold 100% in 30 days, a project that today has a credit in the market. Demand is very good for this product. And the other one is RNI Reserva Igara in Canoas, Rio Grande do Sul within Casa Verde e Amarela program. These were the 2 launches of this quarter. Going on with Slide 8, landbank. We have been doing our launches every quarter. Currently, we have BRL 5.6 billion PSV for the strategic products. 90% of our landbank is for Casa Verde e Amarela program, Horizontal and Vertical. We had a growth compared to first semester 2019. We mentioned this because this is when the company started to change their strategic sales, and we have 144% growth as compared to the first half '19. Going to our sales and inventory for the strategic products. We reached very good sales in this semester BRL 313 million net sales, 167 -- 138% higher than last year. In 2Q '20, BRL 167 million of net sales with a growth of 138% as compared to 2Q '20, maintaining our net ITR in 20%. BRL 677 million inventory at market value, 100% under construction. And this is 3,675 units under construction. Now financial indicators, the net revenue also had quite a change. We reached BRL 92 million, 137% higher than 2Q '20. Our adjusted gross profit also grew a lot BRL 27 million in 2Q '21, a growth of 162% as compared to last year. And the adjusted gross margin, very good rhythm. We closed at 30%. And as has been commented, it's a percentage like last quarter. Our administrative expenses also were reduced 25%, and our net income is growing every quarter. In this quarter, we closed in BRL 9 million, 607% better than 2Q '20 with net margin of 9.8%, much higher than what was reported in 2Q '20. These are the indicators of the strategic products of the company. And now our indicators for nonstrategic products. This is our legacy products that come -- that have been losing the relevance, the volume is decreasing. The company has, for more than 12 months, has not launched anything on SBPE Vertical and Urbanismo, the subsection, subdivision. This reflects on the other indications BRL 8 million in Q '21 and 28%. So our volume is quite low. Our inventory at market value also was reduced regarding or considering what we had in 2Q '20, 49% decrease. And in this half, we closed -- our inventory was 66% units and finished inventory. In this 66%, 64% is concerning Recanto das Emas that I will talk more about later. So our percentage of finished jobs now is 76% and under construction 24%. Landbank also was reduced in this quarter, 38% reduction as compared to last quarter. The company did not do any acquisition of land thinking about this product. Financial indicators also maintain -- are also stepping back because of the volume that is not as expressive nowadays in the mix of products. We closed 2Q '21 with BRL 1.6 million of net revenue. The adjusted gross profit, BRL 1.4 million in 2Q '21. G&A expenses also went down 39%. And -- there is a trend that these expenses will decrease more and more and net income also dropped for what was reported in 2Q '20, minus BRL 7 million, nowadays is minus BRL 6 million, so 20% less. These are the indicators of our products, segregated products, strategic and nonstrategic. Now on Slide 15, consolidated, our debt. We closed the period with an investment of BRL 481 million. We had a growth from one quarter to the other one to capture the company debt for competitive debt. We closed the promissory note of BRL 60 million. And therefore, we could settle an operation that would be due in June 4131, and the balance will contribute to amortize debt that will be due in the second half. So total of our debt, 70% is aimed at production debt, which is the core of our business. Our net equity closed in BRL 633 million, and net debt over equity is 67% and net debt, excluding production debt 14.6%. Our consolidated results. It's possible to see indicators that are expressive in closing 2Q '21. So our net revenue is increasing at each quarter. In this half, we have a total of BRL 122 million, 80% higher than the first half of '20. As Bianconi has pointed in the beginning, in the same period of last year, we had a controlling operation. We sold inventory equivalent to BRL 73 million, inventory that was already finished. And we had this operation last year. And this year is the company at full speed within its strategy. The gross profit reached BRL 50 million, 44% higher than the first quarter of last year. And we grew 6.9 pp in gross margin from one quarter to the other. Our G&A expenses have been reduced in a relevant way. The company is more efficient as far as expenses is concerned, a reduction of 28% as compared to the first quarter -- first half. And our operational result, quite positive. Very good changes in this first quarter, in the quarter and the half. We had negative EBIT in the first half for a scenario, BRL 6.8 million. So the delta is quite considerable in this half. We closed the quarter with net results BRL 23 million, and the total of the first quarter BRL 8.3 million vis-à-vis, a loss of BRL 13 million in the first quarter -- in the first half, better of 2020. These 2 constructions, in Slide 17, were finished, and we have finished it 100% concluded and Origem Várzea Grande, where also we sold -- we were very successful in sales. BRL 195 million in gross PSV at launching and 1,581 units that have been concluded. So where we show our concluded inventory, the responsible for the inventory is Recanto das Emas because of the number of lots it has. Our presentation of 2Q '21 is this. And I would now like to open for Q&A questions that you may have about this presentation, so that I can answer them along with Bianconi. Bianconi, would you like to say anything?

No, it's perfect. I think evidences are the growth, maintaining profitability 30.7%, in adjusted gross margin, growth in net profit. So very different from last year. Now we -- our maintenance and growth, reduction in expenses, which is our obsession for resource -- to improve resource uses to make company grow with less expenses. And the EBIT, that's so important. We had an EBIT of the operation that was neutral in the first quarter, and now we are in a very good position, and we'll keep growing. So we're open for Q&A.

[Operator Instructions] Our first question is from Mr. [ Carlos Ferreira ].

Could you talk a little bit more about these figures that doubled vis-à-vis 1Q '21 in TCA SBPE? And second question, could you give more details on this other operational revenues of BRL 898,000 versus BRL 2.5 million negative in 1Q '21?

Thank you for the question, [ Ferreira ]. First, would be the sales. Yes, it increased a little bit. What is natural when the sector goes through financial adjustments on this cancellation. So the client, after sales, if the math is not done, we go and we cancel. So this happened and it's normal to happen in the sector, Casa Verde e Amarela SBPE. In relation to the other operational revenues, we had an improvement in this math, we have those events that are not our daily business. And specifically, in 2Q, we sold an area that gave a small result and that result appears there. So nothing extraordinary. It would be basically our routine business. It was better than first quarter because we had some adjustments made in nonrecurrent expenses or cost of jobs, and also business adjustment. But in this case, in this quarter, we had profit instead of expenses. And this will go on positive as we unfold our business plan.

[Operator Instructions] Since there are no more questions, we give the floor back to the speakers for their final considerations.

Thank you. So as final message from our presentation, I would like to highlight some points because our performance has been quite positive. We've been talking a lot about a drop in gross margin. I would like to emphasize that our company is growing. It's been growing consistently in terms of results and performance. In this first half of 2021, we have registered historical growth in our operational financial indicators. The products within the company's strategy have grown in an important way, the strategic products, but it's more important that the consolidated is growing, showing again our adjusted gross margin 30.7%, ratifying the first quarter continued in the second quarter. And this is growing. We are being quite resilient, and we'll go on with that. And we have used or update the prices because we have this mix, Casa Verde e Amarela Type 3, it is coincident with SBPE, which would be emergent of the Range 3. So we're growing without losing quality of that margin. We go on optimistic and pragmatic and confident in our business strategy, profitability of our products and the operational capacity that we have. We also envision continued growth in the agri business share. We are from the countryside of Brazil. We were born and grew connected to agri business. So we're very strong in our business plan and the strategies that are being executed, developing landbank with physical or financial exchange, but result exposing our capital. So this has preserved maintenance of our gross margin. Automatically, the net margin, when we look at DRE and RNEF, we see the consistency. We also believe in a limited effect for the basic interest in the financial system -- housing system. And this to maintain credit access in favorable levels in the market, always thinking that's evident that the credit capacity for our clients in the agri side has a plus. We have seen the loss of credit capacity, but we see maintenance of credit capacity in the regions where we act in the countryside of Brazil. Our construction projects are going on normally. We have no interruptions. And we even had a growth, as we pointed out, 20% above our expectation. So that demonstrates that we have total control on the company construction, considering product development, sales of products with some exponential cases like the Várzea, the Campo Grande launching that was 100% sold in 30 days. So that shows the resilience of the product that is SBPE Horizontal houses and the income of the region and also maintaining of the cost of material, especially in the first half and last quarter of last year, it has grown. The costs have increased, but we understand that with our strategy of not being a company that is in the [ 1.5 ] range, that's much more limited and contain the cost for the client. We have a more flexible product. And therefore, we capture and maintain -- in terms of prices, regularly, we update the prices. We have maintained this updating monthly. We look at this every month. It's not every half. So our practice of launching a project, that allows for cost accommodation and margin progress that is constant, and this has preserved the maintenance of gross margin adjusted 30.7%. We are aligned to what the market does and even a little bit above within the market's average. In terms of technical team, we maintain -- in alert, we review the budget every month, and we look for excellence in our projects. Excellence in the projects is the resilience of margin. Sometimes, a project deserves a lot of time to study it to get to the best math. So the units are very much analyzed. We work a lot in some products to reach the best math. And that reflects in our gross adjusted margin as was demonstrated by Ravazzi. And last, our RNI still presents many attractive items when we compare to the other peers of the sectors. And we are sure that we are a good option in the capital market. We adopted turnaround or better. We did a turnaround with a consistent business plan in our regions. These regions are well defined, and we are doing our business plan exactly as it was defined, with an expectation of exploring the market without much ambition. So it's 10% of the market available so that we avoid bottlenecks because we want to have margin. So this is our report. We have consolidated the company since 2018, and we'll go on to bring more and more the physical financial and profitable evolution of the company. Thank you all. And shall you all have a good week, a good day through our RI channel, Henrique Ravazzi and we are also available to exchange ideas and to bring more opportunities to all of you. Thank you all, and shall you keep in good health. Thank you all and excellent week to everybody.

The video conference of RNI real estate business is closed. We appreciate everyone's participation. Have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]