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

Ladies and gentlemen, thank you for waiting. Welcome to RNI Negócios Imobiliários S.A.'s earnings call pertaining to our results for Q1 2023. Today, we have with us Mr. Carlos Bianconi, CEO; Mr. Fabiano Valese, Financial Director; and Mr. Henrique Ravazzi, Investor Relations Manager. [Operator Instructions] Before we proceed, we'd like to clarify that any statements made by the company pertaining to financial statements may be made during this conference call regarding the company's business prospects, projections and targets. These are beliefs and assumptions of RNI's management as well as information currently available to the company. Investors must understand that operating conditions and other contextual conditions may affect the company's projections and are not guarantees of performance. They involve risks, uncertainties and assumptions related to the future. Now I'd like to introduce Mr. Carlos Bianconi, please.

Good morning, everyone. Welcome to our earnings conference call for the first quarter of 2023. Today, we will talk about all the items pertaining to our financial and economic performance, and we will also provide a number of details pertaining to our business, opportunities and some event that we had during this quarter. As we always see in the first quarter of every year, it could be said that we didn't have such strong growth, especially in the interior Midwest in Brazil, but we have had one of the best growth rates for our company. We always strive to prioritize and maximize all of our synergies to prevent any kind of environmental impact or financial impact. So now I would like to pass the floor to our CFO, Fabiano Valese, who is also Investor Relations Director. So now without any further delay, we will begin our financial statement call, and we will also describe many of these items as usual.

Good morning, everyone. We're all here together, as Bianconi mentioned, to talk about the first quarter of 2023. So let's begin with some highlights. For launches, we had BRL 255 million in launches in the first quarter, which is 23% higher than the Q1 2022. In the last 12 months, we have launched BRL 824 million, which is up by 10% from the same period in 2022. Net sales are at BRL 187 million, which is 16% higher compared to Q4 2022 and 9% higher compared to Q1 2022. Net sales totaled BRL 757 million, which is an increase of 15% more than the same period in 2022. The average price growth was 8% for My Home, My Life, especially compared to Q1 2022, where we see a rise from BRL 190,000 to BRL 205,000. This is 2% higher. The number of units that are financed totaled BRL 518 million in the last 12 months, which is 69% higher. And now in the first quarter of 2023, we had a total of 500 -- sorry, BRL 95 million in Q1, which is in line with Q1 2022. Our net revenue for Q1 was a total of BRL 132 million, which is in line with Q1 2022. Our adjusted gross profit was BRL 192 million, which is up 32%. In the first quarter of '23, it totaled BRL 38 million, which is also in line with Q1 '22. Our adjusted gross margin remains at the 29% level that we saw in Q1. Our EBIT was BRL 58 million in the last 12 months, which is up 120% from 2022. And in Q1 '23, our EBIT was BRL 15 million, which is 125% higher than Q1 '22. Our net income came to BRL 31 million, which is up 62% compared to the same period last year. And in this quarter, our net income came to BRL 2.4 million. I showed management some items to highlight. Bianconi already highlighted one. Our performance this quarter had a few hurdles, one of which we always have from January to March, a heavy period of rain in Brazil. But this year, we had more rainfall than ever in this historical period. This relatively heavy rain made us delay some construction deliveries. We also had some divestments that took longer than we expected, which was in an investment of ours called [ DBG ], and this took longer than we had forecast. The results, therefore, have a considerable impact on our results. The main reason why we have this divestment in that region -- actually, there are 3 reasons for that divestment. One is the country's interest rate. This investment was largely fold in 2019 or 2020. And at that time, the Selic rate was considerably high. This is also explained by the clients' own interest rates. It was much lower. Today, it is up to 10.9%. These factors meant a loss of our clients' ability to finance their purchases. Therefore, since their purchase capacity dropped, we found the need to go ahead with this divestment and had those results. Could we start talking about the indicators now, please?

Of course, Valese. Absolutely. Just to add the final item in our highlights, our backlog revenue wrapped this quarter at BRL 551 million, which is up 10% from Q4 '22 and is also up 19% compared to Q1 '22. And our backlog margin remains at the 31% level, which is up 2.6 percentage points. Moving on now, I'll talk about some operating and financial results. We break them down between our current strategy and our legacy strategy. First, let's talk about our current strategy. During the first quarter, the company launched BRL 255 million in potential sales value. This represents 23% more than during the same period in 2022. We reached a level of BRL 824 million PSV. And this, again, is up 23% as well compared to the same period in the last year. Now for the last 12 months, the company has currently launched BRL 777 million in PSV, which is up 22% compared to the first quarter of 2022. We should also highlight that we finished this first quarter with over BRL 500 million in projects that are ready to be released. These launches should occur throughout the year 2023. Now you see on screen the 2 developments that we launched in Q1 '23. On the left, we see Nações Life, which we launched in the city of Bauru in the state of São Paulo. The potential sales value is BRL 140 million, comprising 614 units in this condo. We also have RNI Porto Ravena, which we launched in the state of Goiânia. This has a potential sales volume of BRL 114 million, comprising 480 apartments. Our strategic land bank remained at a very, very interesting level for us. We wrapped at BRL 6.2 billion, and it remained in line with Q1 '22. The takeaway here is that the company launched a considerable amount of units, and it was still able to keep its strategic land bank stable. This land bank is 100% focused on agribusiness, and they are distributed here as you see on the map. As for sales and inventory or strategic products, the company finishes Q1 with BRL 177 million net sales. This is 10% growth compared to the first quarter -- to the previous quarter and also compared to the same period last year. This is strongly influenced by a number of launches that occurred in the past -- not only in Q1 '22, as well as Q4 '22. So this does have an impact on our results. This means that the company is now currently standing at BRL 718 million net sales over the past 12 months. This is up significantly compared to the same period in last year. Today, our inventory at market value stands at BRL 937 million, and I should mention that 3,951 of these are units currently under construction. Now moving into our financial indicators. Our net revenue remained in line with Q1 '22. We finished at BRL 126 million (sic) [ BRL 122 million ]. Our adjusted gross profit and adjusted gross margin remained in line with 2022 as well. We finished the first quarter at BRL 36 million. This is a 2 percentage point adjusted gross margin. Our EBIT finished at -- the period at BRL 20 million. And the net income and net margin wraps the current quarter at BRL 14 million. This also represents very satisfactory growth compared to the same numbers last year. Now moving into financial indicators for our legacy products. The company did not launch any of these products during the past 12 months. The last 12 months also do not include any launches in these products. Now I should mention that these products are no longer the focus of our company, but their absence does have an impact on the company's financial indicators. We finished this quarter with -- the last 12 months, where we can see that there has been a slight drop. Our inventory at market value also shows a 15% drop compared to the same period last year. We finished the quarter with only BRL 124 million, of which 51% is under construction and 49% is completed. Of the completed portion, 88% is a condo that we have in Goiânia. Our land bank has also dropped slightly by 37% compared to the same period in the last year. This is due to the sale of nonstrategic real estate that the company has sold. Our current land bank has -- is worth BRL 376 million. This is represented by 3 major areas, the nonstrategic land bank. For our financial indicators, we finished the quarter at BRL 10 million compared to BRL 6 million in the same period last year. Our adjusted gross profit remains in line with the last year. We finished the first quarter at BRL 2 million. Our selling expenses also dropped compared to previous years. Specifically, in this first quarter, the company finished with a drop in net income compared to the same period last year. We finished the quarter at BRL 12 million down. Now let's look at some consolidated results. This will include debt, cash and our results. For our debt and receivables, our current cash balance is BRL 57 million. This includes construction debt -- construction financing, I should say. This is our core business after all. Today, our total debt -- of our total debt, 73% is construction financing. Our net debt other than this type of debt remains at 19.8% -- I mean, our net debt minus SFH and SFI divided by the shareholders' equity. We have some highlights to show you in our indicators. As our President has told you, we are in an industry that is very strongly influenced by seasonality. One instance -- one example is the rainfall as we mentioned. Here, I'd like to highlight for you the drop in operating expenses. This is a 4% drop in expenses. Our EBIT continued to grow compared to Q1 '22. Our EBIT, therefore, represents consistent operating growth. This is up 125% compared to the same period last year. And our net results finished the first quarter with BRL 2.4 million. Here are the projects we completed during this quarter. RNI Moradas, located in the state of Mato Grosso. The potential sales value for this project is BRL 62 million, and we delivered 413 different units. This concludes our earnings results for the first quarter of 2023. Before we move on to our key takeaways, I'd like to give the floor to all of you and allow you to ask any questions you may have. Thank you.

[Operator Instructions] No questions were made through the audio conference channel. Mr. Ravazzi, if there are any questions asked in the chat, please proceed.

We also don't see any questions in the chat. I think that, as in the previous quarters, our presentation, I believe, has been quite self-explanatory. And so in that case, I will pass the floor back to Mr. Bianconi for his final thoughts.

Thanks. First and foremost, I'd like to thank everyone. As we always have, we bring the highest possible level of information, both in the lead-up and now in our call. As you all know, I believe, we are a company that operates especially within the interior of Brazil, interior of São Paulo, Mato Grosso, Mato Grosso do Sul and Goiás as well as Rio Grande do Sul, Santa Catarina, Northern Paraná and Southern Minas Gerais. As I mentioned in the beginning, I will quickly go back over the major highlights that represent the greatest portion of our results. Now historically, our Q1 has always been a little more timid than other quarters. This is partly due to all the rain and -- that we have here. And since we build gated communities and houses, we are especially subject to rainfall. And if we look at historical rainfall, this year, we had heavier rain than in the past 3 years since. If we look at an overall view, we can see that in this quarter, we had a higher level of divestments, especially in Mato Grosso. We sold a large number of units, that is after canceling certain contracts. We had, therefore, already forecast a lower level of sales, but it turns out that we realized a lower level than that. Something else that has been important for us is that 3 years ago, we designed a business plan, our [ PPE ], and it turns out that this did not consolidate, did not come to pass. Today, we have 13.75%, which represents an important drop in financing capacity of our potential clients. If they have a plan B, then they can proceed with the purchase, but this does have an impact on our bottom line. There is another element as well, which is the advent of the new My House My Life program. We are now reaching the conclusion of the first stage of this program's introduction. This means that during this first quarter, any units that were not eligible for the program remain ineligible for the program. And as a result, these units lost their so-called level 4 rating. And consequently, this results in an increase in debt overall. If we were to pass this price on, we would place these units at level 3 as a result. But as a result of the change in the federal program, we had an inversion in those numbers. Ultimately, we pass along a smaller portion, and this was done to control our financial positions. Now the company has been operating with production debt financing that is, and that is a strategic decision you've all been following along. We have not realized these investments currently because of a lack of opportunity, but we still have that option. And of course, we do expect to see this new program really ramp up over the next few months. We are actually very anxious, very excited for the return of level 4. Level 4 is a price point that represents a revenue level for clients whose earnings have increased considerably. So this is making us very excited because we have great business to do in the near future, and especially because we have some great options of homes specifically designed for the My House My Life program. And so what you'll see in the next quarter is that the company's financial portfolio should have a very significant reaction, a very positive reaction. Well, this has been the highlights of our Q1. And I'd like to take the opportunity to welcome Mr. Valese as our new IR Director, and he will definitely have lots of interaction with all of you, and he will be very clear in explaining everything that happens on the market. Thank you very much to everyone, and let's get to work. Have a great day, everyone. Thank you.

The RNI Negócios Imobiliários video conference is hereby complete. Thank you all for being here, and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]