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

Good afternoon, everyone. Welcome to Tecnisa's Fourth Quarter and Fiscal Year 2022 Earnings Conference Call. Today with us, we have Mr. Fernando Tadeu Perez, Chief Executive Officer; and Mr. Flávio Vidigal De Capua, CFO and Investor Relations Officer of the company. I'm Anderson Hiraoka, Investor Relations Manager. We inform you that the recording of this event will be available on the company's IR website. As usual, we'll start with a presentation by the executives and then move on to the Q&A session. If you need support, please send a message via chat box on the platform. Now I'd like to turn the floor over to Mr. Fernando Perez, who will start the presentation. Please, Mr. Perez, you can proceed now.

Good afternoon, everyone. It's a great joy to be once again here with you to be talking about our results and our company. We have here a quick presentation to show you as Anderson mentioned, to be a support and maybe the most important part would be Q&A, and we'll be here to answer. Let's get started. Let me share the screen. We have here our presentation of the fourth quarter of 2022. We will split our presentation in a 4-step strategy to talk a bit about that. And my colleague Flávio, our CFO, will be talking about operating performance, financial economic performance and the financial position of the company. Okay. I would like to start to highlight some points of 2022. Despite all the challenges, it was a great year. We had the highest number of launches since 2014. We had an increase in sales that was significant in 2022. We had operational efficiency focus, where we emphasized the G&A expense reduction. We sold relevant nonstrategic assets for cash flow generation. That was quite relevant. And we -- finally, after years of losses, we reached a net profit in 2022. Okay. So we have BRL 1 billion of PSV, and we should say that we are back to the launch here in the Jardim das Perdizes. And we should also talk about Kalea Jardins, which is a one-of-a-kind building in the Jardins location in the proximities of Lorena. It has been well sold. And also here, we have 2 in the Perdizes region, which is Bosque das Perdizes (sic) [ Bosque Pitangueiras ], which sold quickly, and Reserva Figueiras, also with a good speed of sales. And also Astral Saúde, which we launched in the third quarter. Okay. So here's some information about the launch I mentioned. Reserva Figueiras, we launched in November with a PSV of BRL 200 million -- over BRL 200 million, where we have here a share of 57.5%. There are 34 apartments where we have 165 square meters and the other one of 188 square meters. You can see right here, the facade that is beautiful, right, facing the park. And one thing is to live close to the park, and one thing is to live right in the park as what we have here for those who live in Jardim das Perdizes, a project with unique aspects. But what we should highlight is that all of them, all the ones we have, but specifically here in Jardim das Perdizes, we want to have a pool club. So people who live there have a pool club, a leisure facility that is quite broad. Kalea Jardins, I was just talking about it. In December, we're talking about BRL 380 million of VGV -- or PSV, excuse me, with 100% of our share, 27 apartments of 268 square meters and 1 penthouse of 728 square meters. And this has already been sold, the penthouse. It was quite a dispute. But I mean, if there were so many willing to have it. So definitely, I mean, you can see how amazing the project is with all the images. And we also, to reach the goals, worked hard on restructuring our marketing and sales strategy. And that's what led to an increase of 122% in sales. We improved from third to fourth quarter, 158%. And when we compare the previous rate to this one, we had 122% increase. Okay. Here, I would like to mention the speed of sales. Even with the difficulties in 2022, we had a 35%, that is 11% over the previous year. And in the graph, you can see there, you can see the growth year-over-year, where the gray, you can see the speed from the previous year. It's -- actually, it's the quantity sold. He apologizes. So here, if you look at Auguri, we can see with a gray, we had 43% and now for 2022, we reached 85%. So the graph shows the growth year-over-year. And the other point that we should highlight, and I always say that we are very much keen on our expenses, costs, the whole work you've seen where we've been reporting to you. Quarter-over-quarter, the optimization of our structure and the reduction of the last year, from 2021 to 2022, where there was a reduction of 15%. Okay. So also I talked in the beginning of the presentation, where we sold land that were no longer strategic to us. So we sold some that we had in Ceará, in Aquiraz, the state of Ceará, this was BRL 74 million that's sold. And our share is BRL 19 million, which reinforced our cash and also in the city of Curitiba, in the state of Paraná, nearly 5,192 square meters with BRL 16 million, it was fully ours. And this was essential so that we could rebuild our cash. So this is something that we have in terms of the fourth quarter, we see BRL 16 million profit where we reached breakeven in 2022, which was our goal. That way, we're able to recover BRL 186 million. Let's recall that in the year 2021, we had a loss of 185 and we just closed now with BRL 186 million. And I'm sure that we are over the bad time. So our dogmas here are never lose money, and we're working hard to make sure we will never have that situation again. So now I will pass the floor to -- let's see the next slide. So now Flávio will carry on. He's our CFO, and he will detail the information I just mentioned to you in a summarized manner. Flávio?

Thank you, Fernando. Good afternoon, everyone. He talked about the mission, which was a tough mission, but we were able to reach the profit goal and congratulations for all that helped us reach there. It was great. The fourth quarter was really important for us, not only in terms of sales and the whole work that was made with sales really was very important. And this is for the fourth quarter of 2022, where we reached BRL 315 million compared to the fourth quarter of 2021 and third quarter of 2022. So we can see that it's a threefold growth where we have a -- significant money. So we can see that we nearly doubled our gross sales, and this definitely brings results over time. And a big positive as we evolve with our constructions. And also in terms of sales, there was important work. But we have now a small base that we will not have to redo, so our gross sales is pretty much similar to the net sales. And what's important when we look into what we have, I mean, there hasn't been much so for cancellations. It's something that is very low. So much of what we're selling is from those that are already on our goal. And for the fourth quarter, where we sold BRL 308 million and only [ BRL 7 million of those ]. In the next slide, you'll be able to see that our inventory is really good. We just have 4% on those that are concluded. We have, by the end, our inventory of BRL 1.1 billion. So we start with the BRL 600 million. We sold BRL 315 million, and we launched BRL 546 million, which was something that was important to launch Kalea, which was the diamond versus Figueiras. It's very important over the years or it will be. And also the stage of construction hasn't -- we don't have much that has been concluded where 60% of our construction haven't started, and we'll have this in the near future now. And this will give us an impact on what we have in terms of the numbers that will be increased on those that will be under construction. So next slide, here, the company's land bank. We have a land bank of nearly BRL 4.3 billion, where we have here in the Western area, where we have South, the area BRL 1 billion; Eastern area, BRL 277 million; and outside Sao Paulo in terms of PSV, BRL 67 million. But if we look at the results that we talked about in the beginning, we still have 46 hectares in the Aquiraz region, which is one that we can take into consideration and will contribute in our results from the next period. What's important to say that most of our land bank is already paid -- has already been paid for, so we don't need to demand any cash and expenses with land. Next slide, when we talk a bit more about our financial performance, in terms of net revenue, it's pretty much with the same as fourth and third quarter, where we have BRL 72 million, where we have the sales of a land was a bit more in the fourth quarter, if you take that into consideration. So we see that administrative expenses are flat, even in inflation environment, and the gross margin was 19%, BRL 44 million, but when we look, it's even better at 22%, representing BRL 15 million. And the big highlight was the net income where we have here BRL 16 million and 23% EBITDA. And what's important, we went from a loss of [ 131% '21 ] to a profit of BRL 1 million. Financial position. It's one we work with much the Board and the executives are really concerned with that. We know it's a hard work, and it's important to take that into consideration. Our equity at the end of the year together with the noncontrolling interest of BRL 622 million. It's important to see an increase in receivables. And I did not include the one that was consolidated. But we're talking about BRL 288 million, and much of this will be delivered 2023, 2024. So it will be monetized, I mean, in 2023, so we're expecting that. And we still have also the assets that we don't consolidate. And if you look at our receivables, we're talking about BRL 430 million to BRL 432 million. In terms of total debt, we have that in a long term, where we worked hard to reach there, where we have BRL 648 million of gross debt, where there is BRL 42 million for the beginning, for the debt of production. In terms of cash, we had a movement to reinforce our cash where we go there with BRL 205 million. We were very fortunate to have done that because it was in December. And that way, when we look at the graph as it's seen, we feel very comfortable in 2023, so BRL 51 million. And we're talking about BRL 205 million of cash in terms of 4x return debt. And if we think about the previous slide, we still have much cash of receivables from '23, '24, and that's why we have this schedule of debt. And then for the third quarter, we didn't have a very significant, although we increased the gross debt also of cash. So we are still having the right level of net debt, which we've been working on our breakeven when we talk about what we don't consolidate, they're BRL 14 million for the period. Next slide, we had a [ net indebtedness NPL ] for 71% by the end of fourth quarter. We don't include the debt of production, so we have an indicator of have of 57%. So we believe we are at a healthy level here in our corporate ratings, have been good with brA, which is stable. And just to close, we check here our net assets of BRL 9.17. Our share is under BRL 3. There's much opportunity. And I should highlight that there is still that point about those points where we're not considering about receivables, inventory, I mean, it's the result of Kalea, Figueiras, which will increase much value. Not only recognizing this in our balance but also in terms of [indiscernible] in all of them. For these projects, we'll have -- bring value to our shareholders. So now we're open to Q&A, and we'll be able to answer them.

Great. We're here, ready to answer the questions as much as you'd like to pose them. [Operator Instructions] The first question comes from Mr. Antonio Castrucci. Please could you introduce yourself and say what company you are from, if it's the case and ask your question. Please, Antonio. Antonio had a problem. Antonio?

Can you hear me?

Yes, now we can.

Can you hear me, Anderson?

Yes, we can.

So I would like to understand a bit more how is the sales performance for your project in this quarter. We can see more of a challenge for civil construction with some things, also increasing interest rates. So what you felt in terms of sales performance of the first quarter. I don't know if it's better than what you expected. How does that work with the strategy launch that you had set?

Well, I'll explain to you. It is hard now, the market, we all know that. And our reality is that in January, we sold quite well. It was a surprise. Actually, when February came around, it was a tough month. It's a shorter month. And then carnival was ripe mid-February. So we were under our goals. And for March, where we still have the typical problems with high interest rates, but we, I would say, are 70%, 80% to our goal for the month of March.

And this performance that it's a bit worse than expected for February. Does that impact the launches for this year?

Nothing changes. I mean it's a tough year, but this will just make us feel that we need to have more appetite, and there will be no change. I always say the future belongs to God. We don't know what is there to come. But for the current scenario and all that we can see in terms of our economy, we will keep the plan, the strategic plan. And let's remember that -- I mean, our company is one that has the structure to launch around BRL 1 billion per year.

Okay. And if I could just add one more question, it was about the results for the quarter. I want to understand about the fees of the compensation. Was there any change? Or is that something we can expect for the future?

Well, we all know I am a professional who came from the bank career. And in the last decade, before getting here, I was at Itaú Bank. And I am very favorable to variable compensation. And you can tell that when we weren't fully sure of how the year would close, we held all the provisions for that. And you can tell that for the year, when I get year-over-year, there was a reduction of G&A. And I'm sure you checked there, you and your colleagues, you saw an increase from the third to the fourth quarter. Why? Because when we realized that we would have a positive result, I asked to get the provision ready to share the results with my executives who are the ones that make things happen. I always say we're here to add value to shareholders, making our customers feel increasingly satisfied and that's what they delivered, so that's why they'll get that on their variable compensation.

Congratulations for all the recovery.

Our next question comes from Bruno.

So I have 2 questions also. The first is the continuity of Antonio. If you have a feeling with this macro situation that it's tougher, if the flow of visits is lower, if you've seen this. And again, the year is still pretty much the same, but customers are taking a bit long for their decision process or maybe they want to negotiate a bit more when we realize that it became a bit more expensive to finance. And second question, I mean, just to understand what is the dynamics of cost of construction. The first few months before that, steel and cement would be a bit slower. So I want to understand about the dynamics of this and how is it in terms of cost of Tecnisa.

Thank you, Bruno. Good questions. Well, our people here of marketing and sales reminds me every Tuesday, where I have a meeting with our commercial team, brokers, sales managers, marketing team. So what I've been informed is that the visits are still the same. But you are right, when you said that the decision-making period took -- is taking longer. Uncertainties, information, so you have the psychological -- in fact, a bank broke in Switzerland, and this makes the person here feel more cautious. And we always also understand. Sometimes, I joke, I mean there's no silly person anymore. It's like soccer. Other than the soccer team, São Paulo, there is no silly team. I cheer for Corinthians, but that was just a side joke. But as you know, people want to understand where's the advantage. So we understand that players and our competitors also bring greater negotiations. Sometimes, we do, so this brings a greater time for negotiation. But in terms of visits, it's the same volume. That was the first point. And the second, thankfully, we still see a cooling down in the pressure of costs. I believe we all know well that the cost of labor has always been higher than raw material. In the pandemic, that switched around where the raw material increased, especially concrete and steel. And our supply team starts to show that there is a cool down when it comes to that. So the trend shows somewhat a reduction. But what's important is to see that we won't see any abrupt increase as we saw in the previous years.

Now we have here a question. And I'm going to read to you. This is [ Antonio Araújo ], congratulates the company for the results. He's a shareholder of Tecnisa since 2018. He's very happy with what has been going on with the company. And the question, what will be the strategy to make Tecnisa be seen to great institutional investors and even for individual investors? I always thought that a company as Tecnisa is not much seen by major investors.

Antonio, thank you for your comment and to share all of that with us. We are trying. And we have the conviction, as I said. Tecnisa has a 45-year history. And when I started, I said, "Well, 40 years, there were many awards, innovations of Tecnisa. And then we had about 5 years of difficulty. And we are putting Tecnisa back on track as it builds its history for 40 years." So we have an area of new businesses that is led by a young man, Renato Nigri, who is a big talent. And together with his team, there has been many activities related to investors. And we've realized that we are more and more seen and also demanded, so we will carry on with this strategy. And I must say that investors are the one that give sometimes -- competitors give excess of discount. But in terms of investors, we're working on it. And even in terms of that, even as an orientation as the Chairman of our Board, Meyer, I mean, we are at a financial situation that is better. So we will start, and we are working more on marketing where we will have some ads in tennis matches that are much seen by the investors.

Thank you, Fernando. That was my last question. And that way, I'd like to thank you all and back to Mr. Fernando Perez for final remarks.

Well, actually, we are available here to answer a few more questions. This is a day of joy to us and sharing all of this with our employees. And it was everyone's efforts. Nobody can do anything on their own. And I want to tell you all that we have a team that is very competent. And I believe that we are very close as a team, we're nearly unbeatable. We have the experience, the technical experience of Meyer, the Chairman of our Board, with all members of the Board that are highly experienced and a new team of management with me. And this combination is unbeatable. And this is what has made the company thrive in terms of the points we reported today. So as there are no more questions, thank you very much for all your trust, and we would like to again show our commitment. Right from the beginning, I said we knew where we would be heading to and we would get there. And I want to say that we no longer will lose money. Maybe we can keep not necessarily the same profitability, but I can say that Tecnisa is back on track. We're in the game now. So good afternoon, and have a great weekend, everyone. Thank you. [Statements in English on this transcript were spoken by an interpreter present on the live call.]