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

[Audio Gap] Third Quarter of 2024 Earnings Call. We have Mr. Fernando Perez, Chief Executive Officer; and Anderson Hiraoka, CFO and Relations Officer of the company. I'm Leonardo Furlan, Executive Manager. So we will start, and then the recordings will be made available. And then we will have the presentation by the executives of our earnings. So I'll turn it over to Mr. Fernando Perez.

Good afternoon, everyone. Thank you very much for coming. We will show you our earnings in the third quarter and some additional information. Okay. Let's now move on to the slides. Just a minute, I apologize. We're having a slight technical problem. Okay, very good. So I'll be discussing our strategy. Then Anderson will discuss our operating performance and our financial and economic performance. Our main strategic drivers. First, of course, we have resumed our launches in Jardim das Perdizes. In the first 9 months of the year, we launched -- resumed the launches, and we had BRL 1.6 billion. So that was the strategy in Jardim das Perdizes. So we're reaping the good part. It was in a standstill for a while, but everything has been sold. We should remember that we purchased BRL 250 million of CPAC for all of them to avoid any type of risk. So we now continue at full steam. By the way, today, we have 3 building projects underway, Pitangueiras, Figueiras and Oliveiras, and we are expecting to start the Cerejeiras project. And after December 1, we will start the Flamboyant building project. So we are expecting to finish -- we'll definitely complete the year with 5 building projects underway. So we concentrate in the Jardim das Perdizes, that BRL 4.8 billion and Tecnisa, it's BRL 2.7 billion. That's our share. Our focus is still very strong on our commercial and marketing strategy. We had an increase in our gross sales as compared to the third quarter of last year. Then control of administrative expenses, this is a continuous concern. We also have data of our operations. As you will see in today's presentation, our accounting result, earnings are still negative as many -- as a result of what took place in the past, also with our debt interest rates. But the operation shows that we have a backlog gross profit of BRL 190 million in quarter 3. And we are also generating cash, and that's BRL 86 million up to -- in the first 9 months of the year. Always very concerned about innovating as well. We have a lot of innovation. In more details, we have Flamboyant that was launched in September 2024, and the PSV is almost BRL 600 million. Our share is 52.5%. The typology, 210 units from 155 to 186 square meters. And we have 6 2-level order units from 304 to 365 square meters. This land has 5,000 meters, a little more, 5,600 square meters, almost 5,000. And in this development, we had wanted to have 2 towers, and then we made the decision to have just 1 tower. The idea was for this project to have wonderful leisure, a great area with cinemas, gyms, spa, Pilates, recreational courts, swimming pools. So it's a very, very special, very high-end tower. Guidance, now, you might remember, we have offered a guidance for Jardim das Perdizes. And in 2024, we said we would launch BRL 2 billion, and we're now saying that we've already reached 95% of this -- we've achieved 95% of this. The guidance was BRL 1.7 billion, and we are now at BRL 1.6 billion. And then we have BRL 1.5 billion in '26 -- BRL 2.1 billion in 2026. And the margins grew before the launch. The total of the 3 years, BRL 5.3 billion, BRL 2.8 billion to Tecnisa. And as this land was purchased a long time ago, our margins -- gross margins are again very interesting, up to 50%. Then some information about our new brand, low-income brand, it's Tencasa. So the first launch was made together with Plano & Plano in July. The PSV of the first phase, BRL 198 million, our share is rather small, 10%, 917 units in the district of Interlagos in a partnership with Plano & Plano, a great partner. This slide is about how solid our business is, our PSV of BRL 4.8 billion and BRL 2.7 billion is attributable to Tecnisa. We've already approved BRL 935 million, and we have an additional BRL 816 million that have already been approved. And the variation of our land bank, I have my notes here, I'm just checking them. So it decreased for 2 reasons. This BRL 331 million, this was launched with the Reserva Flamboyant. We also launched the Meu Plano development project. So it also led to a decrease. Now Belaterra, and we might discuss this today, so what we did was we aborted that launch. So we now have the BRL 180 million for our profitability. That's why it is BRL 2.7 billion. This other slide is about gross sales. Up to date, we have BRL 244 million in gross sales, and that accounts to 51% in year-over-year. And our SoS that we can see here, it's BRL 244 million. So in the 3 quarters on the right-hand side chart, we have -- we can see an increase of 87% again year-over-year. You might ask me questions about this, and I'll try to answer it in anticipation. Our speed of sales decreased a little because our great success, Flamboyant. It was launched on the last day of September. And as a result, it changed the calculation of our sales speed, but this will be recovered in quarter 4. This shows our profit. We have over BRL 190 million in balance. As the projects continue, we measure all the data, and we had a growth of 24%, again, compared to the quarter of last year -- the same quarter last year. And then Jardim das Perdizes and the other projects are -- we have a breakdown of them. So Jardim das Perdizes' balance, it was BRL 122 million, and the other projects, BRL 69 million. And in total, we have BRL 190 million. Now our backlog gross margin, it's at 46% in the third quarter of '24. We're expecting to grow with Jardim das Perdizes, which is a very promising venture. So with the next launches, we are expecting that these margins will further increase. I'd also like to highlight our AI, which is Isa. We will probably have someone like us. We know that this happens, but we are currently unmatched. Our AI is the most effective. It answers questions. It speaks many languages. It sends floor plans. As consumers, we don't like to talk sometimes to a robot. Sometimes, you ask a broker a question. And then Isa has been really a huge success. It's there 24/7 speaks many languages, answers many different questions with all the information we might need. So we have been awarded a prize that was held by Aberimest for the development of Isa, our artificial intelligence, which is highly effective to serve our clients. I'll now give the floor to Anderson, who will discuss our operating and economic -- financial and economic performance.

Good afternoon, everyone. I'm moving on to our next slide. That's our operating performance or sales performance in the third quarter, BRL 160 million, and this is our share, Tecnisa's share, and that was a PSV of 16%. There was a decrease in the third quarter of '24 because of the launch of Flamboyant, as Fernando mentioned. Now on the right, we have BRL 565 million in gross sales, that's an increase of 62% in the 9 months as compared to the same period in '23. Net sales, we have reached BRL 87 million. And then with the Belterra project, as announced in the previous call, we have won a lawsuit that was promoted by the Public Prosecutor's Office. But before a decision is reached, we cannot start construction project. But if you take away all the other quarters, this was already provisioned for Tecnisa's earnings. And then the year-to-date results, BRL 471 million in net sales, and that was a 43% increase year-over-year.

One more thing I would like to say. As Anderson explained, this development, it was approved by all secretariats and all departments of the local government. But then the public prosecutor, which was encouraged by local dwellers led to -- or decided to start this process. And there was even an injunction for us to stop selling, but they were not successful. And so we hired lawyers specializing in the area and also architectural firms. And so the situation is under control. It will take 2 years on the first level and maybe another 3 or 4 in the second level of the judiciary. This is why we decided to stop it or interrupt it for a while. In other words, it was not the clients who canceled it. It was us. And our clients, they love these apartments. They're really good, and they wanted to continue, but we believe it was more cautious this topic, return their money, wait for the situation to be solved. This is what I wanted to add.

Next slide. We started the semester with BRL 885, sorry, then we had cancellations. And then with Bellatera, we made the adjustment. So from BRL 885 million, we finished the quarter with BRL 881 million. And on the right-hand side, we see our geographical distribution, that's 99% in Sao Paulo -- located in Sao Paulo and underneath our distribution for construction phase. So 53% were not started, and then we have 2 projects that started, one in November, the other in December, Figueiras and Flamboyant. And the others, they were completed -- the remaining is under construction. So only 4% have been concluded -- completed. So we have very little inventory. Moving on to our financial and economic performance. So we see our net revenue at the top left. That's BRL 148 million in quarter 3 2024, a decrease from the third quarter -- sorry, the second quarter because of the sales, without which we would be even better. In the year-to-date, we have BRL 494 million, a 39% increase year-over-year. And then below, we have adjusted gross profit in quarter 3 '24, that's BRL 25 million. And that was -- there was this reduction because of the budgets we needed to make. But again, we are stable, and we had a -- this 14% increase. And in the year-to-date, the adjusted gross profit was BRL 75 million. Now our schedule of receivables and debt amortization. Again, in the short run from 2024 to '25, we have [ 3 ] in receivables. So it's BRL 335 million and then we have BRL 244 million. In other words, we have much more receivables, cash plus receivables, BRL 522 million. And when you -- after 2026, although the debt is greater than the receivables, we have a significant inventory level that's more than enough to pay that debt off with BRL 881 million in inventory. Next slide, our net earnings. So we had a loss of BRL 43 million in quarter 3. And as Fernando mentioned, our backlog gross profit, BRL 190 million, considering our -- the construction works, and we are speeding up the process. Then cash, again, at the end of third quarter, we have BRL 255 million, a decrease again because a debt was paid off. And then we had our net debt. There was a reduction of our net debt with this adjustment of BRL 3 million. Now our shareholders' equity shows this. And then cash generation in operations, we reached BRL 86 million in cash -- adjusted cash generation. So this is the end of our financial and economic performance. And we are now having our Q&A session.

[Operator Instructions] As we have no questions, this is the end of our call. We are at your disposal if you have any questions. So we can close our conference call now.

So thank you, thank you, everyone, for attending. We are here at your disposal for further information. Thank you. Have a great afternoon.