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. Q4 2024 Earnings Conference Call. With us today are Mr. Gustavo Felix, CEO and IRO; and Henrique Ravazzi, IR Manager. [Operator Instructions] Before we proceed, we would like to clarify that, any forward-looking statements made during this call regarding the company's business outlook, projections and operational and financial goals are based on the beliefs and assumptions of RNI's management team and all information currently available to the company. Forward-looking statements are not guarantees of future performance. They involve risks, uncertainties and assumptions because they relate to future events therefore depend on circumstances that may or may not occur. Investors should be aware that general economic conditions, industry conditions and other operational factors may affect the company's future results and could cause actual results to differ materially from those expressed in such forward-looking statements. Now I'd like to hand it over to Mr. Gustavo Felix. Please, sir, go ahead.

Thank you very much, and good morning, everyone, for joining us this morning. So we'll share the results of Q4 2024, and 2024 full year. Now let me go over the agenda. So we're going to talk about the highlights, then operating results, financial results and net income. So let's start with highlights. I find it important to stress and to talk about CDI projection and our gross debt. It was different from what we had planned. So when we were working on our forecast for 2025, the third quarter, we considered 11% to 12% for the CDI or SELIC rate, but what we observed at the end of the third quarter was that, that number was actually above 15%. So a very unstable macroeconomic environment. And when we consider the current leveraging scenario, our debt is substantial. And because of that, we decided then to wait for new launches. So we took this very cautious approach. It's important that we protect cash, and we have been working on the monetization of receivables and also cash generation by working on our inventory. We expected to resume launches in the third quarter of 2024, but because of the macroeconomic scenario, we decided to wait until the environment is more robust and healthy. And we also have the SBPE projects that were delivered this quarter, and two others in the first quarter of 2025. As for SBPE, especially, we are now waiting before we launch new projects, SBPE exposes cash. We know that those transfers, they start to take place after we deliver products to our customers. And that's why we see a decrease in our debt, but at the same time, an increased cash exposure. After that, you will start to see cash generation and we expect to see that in the first half of 2025 and keep it like that for the entire 2025. For 2024 Q4, we delivered 574 units and especially for SBPE, one in the City of Campo Grande and the other one in Varzea Grande. 2024, we also delivered 6 projects. So totaling BRL 673 million in PSV and 2,838 units delivered. As for transfers, they totaled BRL 384 million, but I'd say that we saw an increase in SBPE products. So totaling BRL 153 million, and an increase vis-a-vis 2023. The average price of My House, My Life program, well, it totaled BRL 263,000 (sic) [ BRL 236,000 ] in Q4 2024, 6.3% up compared to Q4 2023; and for the full year, a growth of 8.9% and the price of BRL 231,000. Also resale of cancellations, we have been gaining and we gained 10.1% in Q4. And as for 2024, a gain of 9.4% or BRL 145 million. I'd say that these are the major highlights. Now let's talk about net cash and gross debt. As you can see, we have been very stable regarding net cash, BRL 50 million or 8.5%. So this is -- we need to be very resilient, and we need to be very disciplined. We also reduced our gross debt and as you know, we have been doing and we have been working in order to decrease that. So you can see that we were able to have that number down by 9.5% compared to the same quarter in 2023. And we will continue striving in order to carry on decreasing our gross debt. As for Landbank, we had some cancellations when we compare the third and the fourth quarter, but a very small decrease. And this is what we also observed for the full year. We see a trend in going down. So this cautious approach that the company adopted looking to preserve financial data, we start to see here some issues with the Landbank scenario. And -- but we will see this in the next quarters improving. As for inventory, we also saw a decrease from 403 to 377. So -- but if you go over the numbers, you may think that there was not an increase, but this is just SBPE products. And customers who are not able to keep on paying that. So we had some cancellations so -- although we saw cancellations were relevant in this last quarter. And that's why we see this number that seems to portray a small decrease in inventory. But when you go over the year, there was a decrease by 50% in our inventory. So I'd say that our inventory is now very low. As for gross sales, you can see here totaling BRL 132 million or 32.6%. And here, you can see cancellations. BRL 94 million compared to the previous quarter in which that number was BRL 49 million. So we see an increase in cancellations. And when you go over the blue line, you can see SBPE live, which reflects the deliveries I mentioned earlier. So here for Origem do Sol, 873 units delivered. It accounted for BRL 43 million or 46% of cancellations in Q4. And we had also two other products and these products were a little bit above Tier 2, and we moved that to Tier 3 of the Brazilian funding bank. So in the short term, that reflected an increased number of cancellations, but in the midterm for the next quarters, we expect them to see transfers, and that will also support and decrease our debt. So when delivering units, we don't see much impact of cancellations. We don't wait for deliveries in order to receive the funding. As for price gain on resale of cancellations, we keep this gain above 8%. For Q4, 10.11% and BRL 20 million and for 2024 plus 9.47% (sic) [ 9.4% ], accounting for BRL 145 million. Net sales, it suffers the impact of what I mentioned regarding cancellations. So from SBPE cancellations, and that's why you see negative sales regarding SBPE, so BRL 38 million, but minus BRL 32 million from SBPE, once again is an impact of the levers. And even without no launches, you can see that for net sales, the numbers are quite stable. This demonstrates the consolidation of the raw material available, quality and also transfers of funded units. So last year, in Q4 of 2023, those numbers were related to governance. So the impression was that we were not monetizing our inventory. So customers who were not committed to the purchase, but we changed our policies. We saw an increase in cancellations. And now, although the impression may be similar, this is more related to the delivery of SBPE units. This, once again, the blue line represents our price gain over the years. And the accumulated numbers, BRL 305 million and also a cost analysis here. So we still have a positive result, BRL 55.2 million. And this is more regarding price. So over the year, we are able to achieve a price gain, so above the INCC rate. So you can see how we are able to sustain that gain. And as we go over this dotted line, this is the accumulated gain, so 3.7%. Now as for net revenue for Q4, BRL 92 million. We see a decrease vis-a-vis Q3, but this is due to cancellations and also some budgetary adjustments that took place in Q3. And when we go over full 2024, you can see there was a 35% increase from BRL 401 million to BRL 541 million. As for adjusted gross profit previously, the number was 29.9%, and for the last quarter, 11.5%. Once again, because of cancellations. So that had an impact on our adjusted gross margin, but this will be normalized in future quarters. And when we compare year-over-year, you can see there was an increase of adjusted gross profit. Once again, we have this chart. So we are reporting a loss for the year of BRL 136.7 million, BRL 84.3 million that had already been reported to Q3 2024. And in the last quarter, another 52.4% (sic) [ BRL 52.4 million. ] So we would like now to explain these numbers. So first of them, interest rate. So this is for the CCBI and corporate, but this is just funding for our construction projects and we believe that, that is normal for our line of business. And everything else, our interest rates that could be mitigated. So CCBI is a type of a bridge, so we need to obtain that from time to time, but rarely. So we're talking about BRL 18.3 million and also BRL 34.4 million regarding the corporate level. We are decreasing revenues because we are not launching new units. So that's why interest rate and SG&I are the main reasons for explaining these results. So I'd say that fees are really the major issue. But as we resume launches, we expect to end with the new -- with the SBPE deliveries. We will see some changes. Also, budget update, BRL 34.6 million. So here, we also see this rebudgeting exercise and RNI has a history of doing that. So we see this need of having immediate cash, and this is now -- is being already considered. So we estimate this cost over time, so BRL 34.6 million. Now receivables advanced to operations mainly. One of them took place in 2022. And this is being diluted over the years. And the other one is related to selling assets in the second quarter of 2024, and there was a negotiation of receivables in 5 years. But we didn't receive that earlier, and that certainly led to a penalty. So there was a decrease in the financial value. And that explains this BRL 30.4 million. So legal policy changes, something very similar to what I mentioned about a budget update regarding our works. So this is also forecast for 5 years. So this is to protect the company. So it won't have an impact on immediate cash. Also cancellations that were not resold, so BRL 16.3 million then PDD BRL 9.9 million; and here, the Landbank, BRL 2.5 million. As for Landbank, there are very few plots of land to which we are committed to. But there were some investments in some of the plots that have been canceled. So legalization projects. So investment was made in some plots that were canceled, and that led to this loss of BRL 2.5 million. But you can see that if we remove all that, we would have a BRL 27.6 million positive results, but this is just to share to what has impact on our losses. And certainly, some of these events would happen perhaps with a lower magnitude. Now let's talk about our income statement to our financial results. So net operating revenue, BRL 541 million, last year it was BRL 400 million, so a 35% increase. Cost of projects sold increased by 27%, gross profit, 101% growth. Well, operating income decreased and they will also continue to happen in 2025. But now with this new reality, we will carry on decreasing that. So also, we have net interest revenue, 7%, considering macroeconomic scenario, the income tax and social contribution aligned and a loss before noncontrolling, you can see there was an improvement by 30%. Well, this is what I'd like to share with you. I'd like just to once again highlight the fact that 2024 was a very challenging year, but we strengthened our operations. We also reviewed our internal processes. We also worked -- also with -- restructuring our team. Also, we see a decrease now in our construction sites. So we are striving to improve our current structure and also pursuing best environment for new launches. We took a more cautious approach. So in order to focusing on reducing debt and increasing cash by selling our inventories and also by monetizing our assets, assets that are still available to the company. And now launching is related to some potential risks regarding cash because of the increase of interest rate, once again, considering SBPE units delivered. So we can see this cash exposure taking place. For 2025, RNI will maintain this very cautious approach, also financial discipline. And we will carry on decreasing our expenses, so streamlining our operations, also pursuing improved sustainability and cash generation in the long term. So this is what I had to share with you regarding 2024.

[Operator Instructions] Our first question from [ Nicola Lopes ].

What is the impact of PSV on the company's Landbank?

Thank you, [ Nicola, ] for your question. So for this first quarter of 2025, we estimate a decrease -- a significant decrease in our Landbank. As I mentioned, there is also a matter of timing of the land owner and which they may present some urgent requests that we cannot meet. So we are pursuing bilateral agreements in order to avoid any issues. And also understanding the counterpart perspective. Regarding geographic aspect, we understand that it's important for us to reduce. So we had to renegotiate. And there was also some resistance of some land owners for renegotiation. So there is a profitability and liquidity challenges. So we estimate a significant decrease regarding Landbank, some 40% decrease, I'd say.

[Operator Instructions] Now we'd like to turn it over to Mr. Gustavo Felix for his final remarks.

Once again, we'd like to thank you all for joining us. As I mentioned earlier, I'd say that we are being very cautious. And for 2025, we will keep this approach together with the financial discipline. We understand that, and we know we can achieve better results, but the macroeconomic scenario needs to be taken into account as well as our current leveraging and our needs to look for a more favorable environment, particularly regarding cash, still being cautious, but producing value and sustainability in the long term. Thank you once again for joining us, and we are available to answer any questions you may have after this call. Thank you very much.

Thank you. This concludes RNI Negócios Imobiliários S.A. earnings release call. Thank you for joining us, and have a great day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]