1q07 presentation
TRANSCRIPT
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First Quarter 2007Earnings Conference Call
Investor Relations Contact:Carlos [email protected]
1Q07 Earnings Conference CallSão Paulo May 8th, 200712PM (Brasilia Time), 11AM (US-ET)Phone: +1(973) 935-8893Code: 8740042Webcast: http://www.gafisa.com.br/ir
First Quarter 2007 Launches
ForestVille – Salvador Olimpic – São PauloFit Jaçanã – São paulo
ForestVille – Salvador Olimpic – São PauloReserva do Lago – GoianiaIsla – São Caetano Acqua – Nova Iguaçu Alphaville Campo Grande
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Overview of the 1Q07
Wilson Amaral – Chief Executive Officer
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Highlights of the Quarter
Launches increased 87.1% y-o-yLaunches increased to R$303.1 million in 1Q07 from R$162.0 million in 1Q06
Pre-sales increased 67.1% y-o-yPre-sales increased to R$254.5 million in 1Q07 from R$152.3 million in 1Q06
Net Operating Revenues rose 69.6% y-o-yNet operating revenues increased to R$224.3 million in 1Q07 from R$132.2 million in 1Q06
1Q07 EBITDA reached R$36.2 million (16.1% EBITDA margin) an 107.1% y-o-y
The Backlog margin in 1Q07 reached 37.7%The backlog of results reached R$371.9 million in 1Q07, a 91.2% increase compared to the R$194.5million in
1Q06
Gafisa is the first Brazilian homebuilder to be listed on the New York Stock Exchange
Entrance in five new markets: Goiania (Goias), São Caetano (São Paulo), Duque de Caxias (Rio de Janeiro), Nova Iguaçu (Rio de Janeiro) and Campo Grande (Mato Grosso do Sul)
FIT Residencial and CEF signed an agreement to provide credit lines to finance up to 6,000 units
FIT Residencial launched its first project in the neighborhood of Jaçanã in the city of São Paulo
Bairro Novo: JV with Odebrecht will focus on large-scale projects for the Affordable Entry Level (AEL) market
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Alphaville Shareholders Float► Proven track record in the Brazilian capital markets
– Submarino, ALL, Equatorial, Lupatech, among others
► Independent Board► Novo Mercado listing► US GAAP reconciliation► 100% tag along rights► No poison pill
► Only Brazilian homebuilder listed on the NYSE
► Required to comply with Sarbanes-Oxley
► Audit, Compensation, Finance and Governance Committees
7% 2% 77%14%
► Leading investor in real estate companies outside of the U.S.
► Portfolio includes Homex, Mexico’s leading homebuilder
► Founded by Sam Zell
Notes:1 Excludes treasury stocks
Post-Offering Shareholder Structure 1
► Shareholders since the Alphaville acquisition, completed in January 2007
► 33 years of unique knowledge of the community development business in Brazil
Successful Follow-on Offering in March
R$ 465 million cash injection
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2.2 3.04.8
9.54.5
6.0
9.1
14.0
2003 2004 2005 2006
Mortgage by Commercial Banks¹ CEF Mortgage Loans
6,7
9,0
24,0
13,9
Sources: ABECIP, Central Bank ¹ Total mortgage lending using savings deposits funding (channeled-lending requirement). ² Of the R$14 billion estimated for 2006, R$9.4 billion were entailed to FGTS.
Mortgage Granted (R$ million)
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CAGR 03-06 (%): 53%
+73%
+54%
+34%
36%
33%
52%
60%
96%
54%
1.6
2.9
0.6
1.3
1Q06 1Q07 March 06 March 07
Mortgage by Commercial Banks¹
86%
Significant Growth in Mortgage Lending
116%
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Gafisa Reports 87% Growth in Launches and 67% Growth in Pre-Sales
96 100
184037
114
1Q06 1Q07
New MarketsRio de JaneiroSão Paulo
83 93
166
79 44
1Q06 1Q07
New MarketsRio de JaneiroSao Paulo
Pre-sales (R$ mm)
Pre-sales mix breakdown – 1Q07
Launches (R$ mm)
HIG – High Income: > 3,600 MHI – Middle High: 2,800 < > 3,600MID – Middle Income: 2,000 < > 2,800 AEL – Affordable entry level: 1,500 < > 2,000 COM – Commercial LOT – Urbanized lots R$150< >R$800
Segmentation (Prices in R$/sq.m)
303
162 152
254
67%67%
10%
23%
48%
1%
11% 7%HIG
MHI
MID
AEL
LOT
COM
87%87%
71%
Launch mix breakdown – 1Q07
83%
6%11%
MID
AEL
LOT
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Projects Under Construction
Nova Iguaçu (RJ)
Duque de Caxias (RJ)
Goiânia (GO)
São Caetano (SP)
Campo Grande (MS)
Consolidated National Footprint
74 projects under construction in 13 different States; Launches in 5 new markets
22 projects (VGV ~R$500 MM) delivered in 2006 and an expected 26 (VGV ~R$800 MM) in 2007
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Maintaining a Diversified, High-Quality Land Bank…
82.00%2,683,05135,733AlphaVille Total
Gafisa
72.40%3,053,31512,942Gafisa Total
AlphaVille
79.50%1,364,60018,065Southeast
100.00%162,3071,730Northeast
83.00%1,156,14515,938South
74.40%1,480,1417,615New Markets
77.00%5,736,367 48,675 Gafisa + AlphaVille
% acquiredby swap
Future Sales (R$000)Potential Units
87.60%589,5022,489Rio de Janeiro
2,839 983,672 46.60%Sao Paulo
¹ As of 03/31/07
Combination of AlphaVille’s sizable Land Bank with Gafisa’s strategic reserves
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… and Tapping New Opportunities
Source: IBGE and Fundação João PinheiroNotes: 1 Based on 2006 figures2 Does not consider 2,8% of other households
Household Breakdown by Income Segments1,2
Total # of households51.6 million
3%
Affordable Entry-Level
Middle and Mid-High Income segments7%
17%
Class A
Class B
Class C
► New company, 100% owned by Gafisa
► Dedicated and focused management team
► Distinct brand:
► Primary target: outskirts of large metropolitan areas
► Five standardized products
– Mostly multi-story
– 200 / 300 units per development
– Replicated in high scale
– Unit price: US$25,000 – US$65,000
► First project launched in March: FIT Jaçanã
Affordable Entry-Level Segment (AEL)
Financing
► Primarily financed by CEF, a government agency, utilizing available and tested credit lines. On March 26th FIT and CEF signed an agreement to provide credit lines to finance up to 6.000 units
► Up to 100% of the project
► No credit risk involved
► Low monthly installment (starting at US$200)
Class D / E
Low Affordable Entry-Level70%
8.7 million households
FIT Residencial
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Household Breakdown by Income Segments1,2
Total # of households51.6 million
3%
Affordable Entry-Level
Middle and Mid-High Income segments7%
17%
Class A
Class B
Class C
► JV between Gafisa and Odebrecht, Brazil’s largest engineering and construction company
► Sole vehicle for both companies to operate in this segment
► Primary target: both metropolitan and rural areas► Large scale AEL projects inspired by the Mexican
real estate model– Both multi-story and single-family – Large areas: over 1,000 units per development– Industrial scale construction method – Unit price: < US$40,000
Low Affordable Entry-Level Segment (LAEL)
Why Odebrecht?
► Vast experience in implementing large urban infra-structure areas
► Know-how of implementing large scale real estate developments
Low Affordable Entry-Level
70%
Class D / E37 millionhouseholds
Source: IBGE and Fundação João PinheiroNotes: 1 Based on 2006 figures2 Does not consider 2,8% of other households
Bairro Novo
New Opportunities (cont.)
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Our Differentiations
ProfessionalManagement
and Established Organization World-class
Shareholdersand the Highest
Standards of Corporate
Governance
Growth Through Product
Diversification
Industry Leadership and Strong Brand Recognition
Geographic Diversification
Supported by Strategic Land Bank
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Financial and Operational Performance
Duilio Calciolari – Chief Financial Officer
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36.217.5
16.1%13.2%
1Q06 1Q07
EBITDA EBITDA Margin
12.6 17.6
7.9%9.5%
1Q06 Q07
Net Income Net Margin
1Q07: Operating Highlights
35.3
68.026.7%
30.3%
1Q06 1Q07Gross Profit Gross Margin
Net Revenues (R$ mm) Gross Profit (R$ mm)
EBITDA (R$ mm) Net Income¹ (R$ mm)
132.2
224.3
1Q06 1Q07Net Revenues
69.6%69.6%
92.4%92.4%
107.1%107.1%
40.3%40.3%
1 Adjusted Net Income, before follow-on expenses
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Productivity Indicators: SG&A
SG&A / Net Revenues
14,3% 14,0%
1Q06 1Q07SG&A / Net Revenues
34 bps34 bps
SG&A / Launches
11,7% 10,4%
1Q06 1Q07SG&A / Launches
130bps130bps
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Revenues Reflect Previous Years Pre-Sales
29.5%75,161Launched in 2007
100.0%224,316100.0%254,502Total
7.0%15,6873.2%7,968Launched up to 2003
15.9%35,6102.6%6,723Launched in 2004
48.7%109,35313.5%34,375Launched in 2005
28.4%63,66651.2%130,276Launched in 2006
% of RevenuesRevenues% of Pre-SalesPre-SalesDevelopments
1Q07 Pre-sales x Recognized Revenues (R$000)
80.70%
71.6%
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Strong Pre-Sales Performance Positively Impacted Backlogs
R$371.9 million of results to be recognized (91% growth compared to 1Q06)
Revenues and Results to be Recognized (R$ mm)
1 In order to increase transparency and visibility of future earnings, during the fourth quarter ended December 31st 2006, the Company changed the accounting practice adopted with respect to the costs and earnings to be recognized in our backlog.
1Q07(a)
1Q06(c)
Sales to be Recognized
Costs of Units Soldto be Recognized 1
Results to beRecognized
Margin to beRecognized
473.4
(278.9)
194.5
41.1%
985.7
371.9
37.7%
(613.8)
4Q06(b)
795.3
(497.5)
297.8
37.4%
(a)/(b)%
24%
23%
25%
(a)/(c)%
108%
120%
91%
1
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Strong Financial Position
Short Term DebtLong Term Debt Total Debt
Cash and Cash Equivalents Net Debt (Net Cash)Shareholder’s Equity
Total Capitalization
(R$ million) 1Q07
56299355
621(265)1,424
1,780
4Q06
94210304
481(178)788
1,091
Net Debt/ Equity -19% -23%
1Q06
3.6%
28267295
26629814
1,109
Gafisa is prepared to deliver on its aggressive growth strategy
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Outlook for 2007
Launches of R$1.65 billion => 60-65% increase over 200625% (R$ 250 million) Gafisa’s core busines20% (R$ 200 million) Fit Residencial20% (R$ 200 million) Alphaville
Consolidated EBITDA margin of 15-16%
Launches
EBITDA Margin
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“Safe-Harbor” Statement
We make forward-looking statements that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of our management, and on information currently available to us. Forward-looking statements include statements regarding our intent, belief or current expectations or that of our directors or executive officers.
Forward-looking statements also include information concerning our possible or assumed future results of operations, as well as statements preceded by, followed by, or that include the words ''believes,'' ''may,'' ''will,'' ''continues,'' ''expects,'‘ ''anticipates,'' ''intends,'' ''plans,'' ''estimates'' or similar expressions. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Our future results and shareholder values may differ materially from those expressed in or suggested by these forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict.