Tecnisa S.A. (TCSA3) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to the earnings call of the Second Quarter 2022 of Tecnisa. We have Mr. Fernando Tadeu Perez, President; Flavio Vidigal, Financial Director and Investor Relations Director, and all the other C suites. We inform you that this event will be recorded and transmitted via telephone and Internet through the IR webcast platform, available on their website. [Operator Instructions] I'd like to give the floor to Mr. Perez. He will start the presentation. Mr. Perez, the floor is yours. .

Good morning. It is a great pleasure to be here with you once again. And let's talk about the results of the second quarter of 2022. Based on the changes that we've done with our commercial structure and our marketing strategies, we have achieved an increase -- a significant increase in our sales. This is very interesting, regardless of the challenging scenario that we are all facing. We are certain that we are moving in the right direction. So we can reach the breakeven and start with the -- receiving the profits that we hope. As we have done before, I will talk about a few issues, and then Flavio will provide you with further details. Slide 3, I'd like to start. With some of our macro guidance, our corporate strategy, we're going to talk about the land bank, we're going to talk about launches of new projects. I'd like to have a word with you with -- about on the issue of innovation, also operational efficiency, the management of the company, which is a base for our results, also the sale of some assets. And therefore, we can regain our profitability. So now on the Land Bank. Just to confirm, I have a few minutes -- okay, let's go back on Slide 3. As you can see, this is issue 2. I'm not going to comment on the Land Bank, okay? Well, talking about launches, slide 4. As you know, we just launched Astral Saúde in the neighborhood of Saúde at the Street Carneiro da Cunha. We have VGV PSV of 107 million, 100% Tecnisa share. We have the typology 91 apartments between 69 and 95 square meters, 39 studios and 1 store. There are a few differentials for this enterprise. It is 500 meters of walk away basically from the Saúde Metro station, that's key. And we have the well-being and comfort for the family space. So the residents can reserve that area can bring guests. It is -- well, it seems -- it gives you that homely feeling. You live in an apartment, but you can receive your visits as if you lived in a house. Also, we have the bike rack, the gym, the party and the games room. It is an enterprise that has had a lot of success. It's being sought out a lot, and we've done great with sales. Next one, Slide 5. We have in the next -- well, the portfolio for the future, we have the launch coming soon, Bosque Pitangueiras, Jardim das Perdizes. We have the PSV, and we are adjusting it. But still, we are going over BRL 212 million. Our share is 57.5%. We have as our partner. We have the 50 apartments of 79 square meters, 50 apartments of 97 square meters and another 50 apartments of 136 square meters. Look at the differential. It is located in the neighborhood of Jardim das Perdizes. Facing the park, you will get the feeling that you are at the park. So you have that -- well, it seems like a club. That's the differential for Jardim das Perdizes. Our enterprises, they emulate clubs. Slide 6. I want to show you another launch coming soon, very important, high-income building Lorena. It's in the neighborhood of Jardim's and Consolação Street. The PSV preliminary BRL 350 million. The share is 100% Tecnisa, and the typology we're going to have 27 apartments of 353 square meters and 1 duplex of 707 square meters, 3 stores as well. This is a high income building, projected by the Athié architecture office with the decoration of Anastassiadis. And there is the garden design of Habbud. The privileged location, everybody that works in this project is at the forefront of their work, we've had a lot of people inquiring. We've done a few businesses. We're just waiting for the launch, so we can make the sales official. Another one, Slide 7. We will discuss our strategic Land Bank. We have a land bank of BRL 5 billion. At Jardim das Perdizes, well, 3 billion is at Jardim das Perdizes. So we have this land bank that has been paid for and most of it paid in cash, 80%, 85% cash. And the other part is with exchanges. We have almost BRL 800 million in approved projects, and we have BRL 1.6 billion under approval for future projects. This is a key sign that we will have future launches in our pipeline. And in the third quarter, we can start talking about this more. In the Western area, as we mentioned, 10 plots of land; Southern area, 7 plots of land; and Eastern, 1 land plot. This is a situation that provides us with comfort for the next 2 years. Next slide. This is the eighth slide, and we've reported before, we've tried to sell a few nonstrategic assets. Let's highlight. We have good plots in the state of Ceará at Fortaleza, if you remember, we sold a plot for BRL 74 million that generated BRL 50 million in profits. Our new Board is working diligently. We have entrepreneurs from the city of Fortaleza, and they want to see either we will sell this plot or we're going to do something there. Maybe this -- well, this is going to be a business either by selling or by enterprising. And there is that plot in Curitiba. We have the -- already the sale instrument signed under due diligence, and we're just finishing up the details. Now let's go to Slide 9. Let's talk about innovation. As we know, innovation is key in today's world for any market. Innovation in our sector is key, and we are paying attention to it. We have implemented the new modeling practices for Building Information, BIM. We have actually been talking with our designers, our architects so that they also start using the BIM technology. This is a technology that ensures quickness, quality that is infinitely better. We are also concerned about the ESG. We have a committee devoted to this. You know that Tecnisa has always been talking about that even before ESG was not a thing was not a fad. We had our actions that we have implemented for many decades in ESG. Also, the implementation of a platform where we make our processes automatic for document flows, making the paper work digital, this brings forth automatization, digitalization, quickness. It reduces fixed costs, and we will have productivity improvements and resources rationalization. Let's talk about Slide 10. You can clearly see two things. Taking into consideration this strategy, the assets, and we are focusing in marketing and sales. If we compare the first semester of 2021 with the first semester of 2022, you will realize that we have grown 49% in sales. And at the same time, we reduced in 11 percentage points our G&A expenses. So it's clearly stated that we are more efficient, we are more effective. Slide 12 -- Slide 11, sorry. let's talk about the results. What do we do to regaining this profitability? And then my colleague, Flavio, will provide you with further details. And let's remind ourselves that we have reported to you -- in the first quarter, we've had when you compare the first quarter of '21 with the first quarter of '22 -- comparing the first quarter of '21 and the first quarter of '22 that we have already reported on last week, we have reduced a lot of the losses, the liabilities. When we look at the second quarter of '22, that's a trend for the reduction. We've actually had liabilities or losses at BRL 54 million, and we've just reached minus BRL 9 million. We are almost at a breakeven point. When you consider the first 2 quarters of '21 and the first quarter of '22, you can see the recovery of BRL 65 million. When I look at last year, the first quarter, we've had had a negative result of BRL 81 million this year with our effort with -- and even in this adverse economic climate, we've gotten to minus BRL 16 million from BRL 81 million. We are excited and hopeful that we will have great news to provide you in the next quarter of 2022. Therefore, I will give the floor to my colleague Flavio. He is our CFO, and he will talk about the operational performance. I remain on your service during the Q&A session. Thank you.

Thank you, Fernando, Good morning. Let's talk about the operational performance section, slide 13. Let's talk about what Fernando has mentioned. We closed the second quarter of 2022 with BRL 91 million in gross contracted sales, growth of 65% over the second quarter of '21, with an expressive improvement when we compare the first semester of '21 with the first semester of '22. We closed the first semester of '22, BRL 166, in gross sales, we saw a growth of 50% on the same period of '21. We have recovered and shown consistency in sales. We have to highlight in the slide that our sales per unit has -- have been of work that has -- that have already started or launches. And our stock, I'm going to anticipate has -- our inventory has decreased. So this helps in the expenses, as you can see. We don't have the expenses with the apartments that are ready. So Slide 14, I wanted to congratulate our sales team, specifically our real estate agents. We have had a great quarter in sales. It was a very -- it's still a very difficult moment in the market. Our inventory totaled BRL 755 million. We've closed the first quarter with BRL 841 million. We had sales of BRL 91 million. And a few adjustments, that's the change in inventory. We got to the end of the quarter -- second quarter in BRL 755 million in terms of inventory. Geographic distribution, mainly located at São Paulo. We have very few enterprises. Outside of a São Paulo, we have Paraná where we have the hotel. But we are at an advanced stage of sales, and we have the status -- stage in works. We have the same version merchant was applied to what we sold. And the message in management, we will finish at the end of June and other works in and Highlights Pinheiros. That should contribute with our objective of generating more revenue and more gross income. These represent BRL 455 million of PSV total, and there is some stop here as well as some inventory. Let's talk about the next session, the economic financial performance. First page, we have the revenue. It's been very stable. And now we have the trend, as Fernando has mentioned, with the start of the works, that volume should increase. There is also other factors that will contribute. We have the new launches that Fernando has mentioned, which should contribute to the result. All of that is backed by a network structure of G&A that is very controlled. As you can see, we've gone through an inflation that has risen drastically. We implemented improvements in headcount and processes, and we've kept our G&A stable for BRL 14 million. And the first semester of '21 when you compare it to '22, we've had a reduction of 20% approximately. So net income, we are stable in comparison to the first quarter of '21. When we start the work, we have the stance for sales. So we have the nonrecurrent effect of the spend of approximately BRL 4 million within the BRL 9 million. This is an important data. It's not only it will be nonrecurring, but the start the works will contribute to the results because of the accounting artifact. Let's go to the next section, financial position. So we have an asset of BRL 663 million, BRL 574 million is Tecnisa equity, BRL 89 million noncontrolling interest in subsidiaries. Our receivables portfolio has increased because of the sales. So we went from BRL 207 million to BRL 226 million, and we have an expressive volume of receivables maturing in '23, '24. Obviously, quarter-on-quarter, this value will increase because of the new sales of the projects that will be sold over these next 2 years. I'd like to highlight one thing. We had BRL 57 million receivables that can be used for monetization and transform them in cash for the performed receivables. When you look at the next slide, cash and financial investments, we have a great -- more cash. This is key for -- we kept BRL 161 million. Our total indebtedness is stable as we have reported. And the indebtedness, which tends to increase because most of our sales, we've done them with shorter tables, maybe the clients, the customers will now use our entrepreneurial plans. Nonetheless, facing the corporate risk that Tecnisa has, we have subcontracted with -- in all of the works that we started. We have after our Saúde, we have the project financing in place. Bosque Pitangueiras project finance in place. We have closed -- very closed with a bank and we're going to make it official. And we have been working with the next portfolios. It shows the position -- a very solid position of Tecnisa facing the risks, and this was incorporated by S&P. You will see in the next slide. But before we go to the next slide, since I was talking about '23, '24, we have a great volume of projects growing. We've done an important work, specifically of our debt amortization where we reduced materially the risk of the -- that's maturing in '23, '24 in about BRL 70 million, a cash of BRL 61 million. And from '24 onwards, we have higher volumes of indebtedness that are due. And this is when our projects mature and that therefore, we should get a cash return for our projects. So we are comfortable in the position -- in the cash position of the company. Next slide. Net indebtedness over equity 63%. And the receivables, we have a trough when we see the net of corporate, the indebtedness [ plus receivable ] for equity, it dropped to 5%. And S&P Global Ratings reaffirmed the rating at brA with a stable outlook. This is a recognition of all the work that we've done at the management level. Last slide, the management is focused on the creation of value for the shareholders when we look at the net assets of the company. We have a number of BRL 10.67 per share. Remember that when we launched the probability, we have that action per share. As Fernando said, the probability and restructure is that we're going to have a quarter, future quarters with great launches. So we have commented on that based on the previous quarter. This is the end of this part of the presentation, and we are open for Q&A.

[Operator Instructions] If there is no questions via audio, we will answer the questions received via the web platform.

Thank you very much. This is Anderson, the Manager of IR of Tecnisa. We have a question via webcast. Could you tell us the percentage of the enterprise that were already sold of the enterprises that are in launch already that started the works.