Cyrela Brazil Realty SA Empreendimentos e Participacoes
BOVESPA:CYRE3
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
18.59
25.49
|
| Price Target |
|
We'll email you a reminder when the closing price reaches BRL.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
You don't have any saved screeners yet
[Operator Instructions] We also inform that this conference is -- will be conducted in Portuguese by the management of the company, and the conference call in English will be made by simultaneous translation. This event is also being broadcast simultaneously on the Internet via webcast.
Before proceeding, we would like to clarify that statements that may be made during this call regarding business process of the company, projections and financial operating goals are based on assumptions and beliefs of Cyrela's management as well as on information currently available to the company.
Forward-looking statements are not guarantee of performance and they involve risks, uncertainties and assumptions. They refer to future events and therefore, depend on circumstances, which may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors may affect the future results of the company and lead to results that differ materially from those expressed in such forward-looking statements.
Now I would like to turn the floor over to Raphael Horn, who will start the presentation. Mr. Horn, you may continue.
Good morning, everyone. In a challenging scenario, both in a global and local context that we had in the second half of 2021 continues a trend. Despite that, we continued with a good, solid result during 2022. Despite the seasonality at the beginning of the year, the launched PSV was 146% higher than the first quarter of '21, exceeding BRL 1 million with project Wave in Rio de Janeiro, with 82% of units sold. The presales of BRL 1.3 million, 27% up from the first Q '21 as a result of operating revenue. We had net revenues of BRL 1.2 million, and gross margin -- and ending at net income. We have a gross balance sheet despite the complex scenario will have solid cash generation. Let's talk about operating results now.
Thank you, Rafa. Good morning, everyone. On Slide 5, we would like to comment on the launches of Cyrela. The first quarter of the year, we have launched 6 new products with the PSV of BRL 1 billion, BRL 146 million above the same quarter of previous year and 59% lower than the fourth quarter of '21. The participation of the company that [ followed ] launch was 59% -- I'm sorry, 85%.
On Slide 6, we highlight the launch of Wave by Yoo in Rio de Janeiro with 82% of the units sold in the quarter.
On Slide 7, let's speak about the sales performance. In the quarter, sales reached BRL 1 billion with a reduction of 17% when compared to the fourth quarter of '21, an increase of 27% against the same quarter of last year. Including swaps, sales reached BRL 1 billion and the percentage of Cyrela. The sales in Sao Paulo accounted for 59% of our sales.
On Slide 9, we talk about the total inventory of Cyrela. At the end of the quarter, the value market inventory reached BRL 7.215 billion, a reduction of 3% with regard to the previous quarter, driven by the sales in the period. The movement of our inventory can be seen on the chart on the left.
On Slide 13, we talk about financial results. Net revenue of the company reached BRL 1.2 billion in the quarter, 7% lower than 4Q '21 and 23% higher than the same quarter of the previous year. The gross margin in the fourth -- first quarter was 31.1% compared to 33.4% in the previous period and 34.5% in the same quarter of '21. We had a net income of BRL 162 million compared to EUR 192 million in the first Q '21and BRL 218 million in the 4Q '21.
Slide 14 talks about our profitability in the quarter. Our return on average equity and the net income of the next -- last 12 months of our equity was 14.7%.
On Slide 15, we talk about the debt. The gross debt at the end of the quarter added to BRL 3.576 billion. With a cash position of BRL 3.2 billion, our net debt was -- net indebtedness was BRL 334 million. Total gross debt, 81%, is long term. Our net debt over equity is 4.8%, 0.7 percentage points above previous quarter. On the next slide, we'll talk about cash generation.
In the first quarter of '22, we had a cash burn of BRL 53 million compared to the cash generation of BRL 100 million in the 4Q '21 and generation of BRL 17 million in cash in the first quarter of '21.
Now Rafa and I will move on to the Q&A session. Thank you.
Thank you. We'll now start the Q&A session.
[Operator Instructions]. The first question comes from Elvis Credendio from BTG Pactual.
Can you hear me?
Yes, we hear you.
First question is about sales. I know that it's been a very good quarter on sales with many launches. I would like to know how our sales in the first half of the second quarter, if it's in line with the company's expectations.
And the second question is more related to construction costs because we heard about the new increase in steel prices last week. We heard some news about that high increase. So I would like to know what is your prospects regarding that topic and the company was thinking about reviewing something that does not kind of inform me. That's the question.
Elvis, this is Raphael speaking. Well, I believe that in sales, so far, so good. What we are launching and selling within expectations. About construction costs, Miguel will speak about it. Wave was a very important launch for us in Rio de Janeiro. And we said, the result of the gross margin was slow because it's a higher swap, but our OE is excellent and sales really surprised us. They were very good. We're very happy with the outcome.
As for construction costs, Elvis, as you said, pressures are high. We had a 12.5% adjustment to wages in addition to some increase in inputs that are important in our ABC curve. And we had an impact of BRL 21 million in our results to review -- budget reviews. It's hard to say how it's going to be for the future. It depends on how much -- because the actual variation of prices sometimes is higher in the input, the INCC or the inflation rate, and sometimes not. So we understand that the main budget reviews have already happened in our understanding.
The next question comes from Fanny Oreng from Santander.
My question is about Rio de Janeiro. I think this launch you made in Rio really caught our attention because it's a high-quality launch. But Rio de Janeiro, there have been so little launches. And so how do you see the pipeline of launches for Rio de Janeiro? And would it make sense to increase your position in Rio considering the company -- the number of companies that are already maturing the investment they made in the past? So what could you do to improve that area?
Fanny, this is Miguel speaking. Yes, in fact, Wave was very successful. But it's important to highlight that not something we can copy because there's 0 competition. It's looking at Yoo, it's at the ocean line so it's very hard to find land in the south area of town. But we do not have so many plots of land in our pipeline. Actually, at Baja neighborhood, we didn't do much. We did -- starting in 2020, we launched projects, but they did very well. It's a difficult market because it's limited in size, but we've been successful. So towards the future, we try to replicate that strategy as much as possible.
The next question comes from Aline Caldeira from Bank of America.
Can you hear me?
Yes, if you could speak a bit louder, though, that would be good.
How do you see the competition? If you could share your strategy about that.
Aline, in Caixa, it's according to schedule. It's a small company. It's a day after day. It's interesting. In the competitive dynamics, it's as usual. Every market -- there is competition in every market, and it's up to us to do something new. But that said, it's just an everyday usual business.
The next question comes from Pedro Hajnal from Credit Suisse.
Can you hear me?
Yes, we can.
I have two questions. First, I would like to understand more about margins for the rest of the year. You mentioned that maybe this dynamic would be different, but this -- there was an impact on this quarter by YOO. Without considering this project, the Wave by YOO, at what levels would be margins? And if this dynamic will continue towards the end of year? Second question, I'd like to understand more about the cash burn. Could you give us some more color of what were the main reasons for it?
Pedro, thank you for the questions. First, regarding Wave by YOO, the margin of the quarter would have been 1.2 percentage points higher than the gross margin reported, not adjusted. So 32.3%, if I'm not mistaken, and the partner was 1 or 2 percentage points on margin. It's worth highlighting to make a clear for everybody, the effect that a swap creates, this project has a 24.9% margin, which is lower because of the swap, which was higher. So if we maintain the current prices, the margin would be 29%, but it has a spectacular managerial reserve for us.
We do not take into account the swap revenues as being our swaps, but this margin has a margin of 24%, which is much higher than our minimum of 16.5%. It's 48%, which is very high, and it's already cash positive in the month of launch. So it had very little capital exposure, and the return would be very high. So this is a very successful project. We're very pleased with it. But on accounting terms, it does have a bit lower gross margin. The gross margin in the quarter was impacted by the construction costs as well a little bit lower than 1 percentage point and by Wave.
Compared to last year, last year, there was a positive effect of INCC, which pulled margins up. This year, we may have something like that. On the other hand, launches of the year had a gross margin of 34%. In the next quarters go up and margins go up, the margin of this launch -- of this quarter because the launch was lower because of Wave, then higher margins would be recorded. It will depend a lot on price dynamics, on our capacity to recompose margins under the next launches. But we believe that the gross margin on the year will be a bit higher than this one for the first quarter, although lower than that of '21.
Miguel, as for cash generation?
Oh, yes, I'm sorry. I forgot about that. The cash burn was BRL 50 million in this quarter compared to BRL 100 million of cash generation in the fourth quarter. The two main variations are: first, more disbursements of land -- BRL 200 billion of disbursement in land compared to BRL 100 million in the fourth Q '21. And also this fourth quarter, we had a lot of dividends received; dividends from Lavvi, significant [indiscernible] and CCP, a fund of which we have a small stake. Since dividend received were considerable amount, that generated an impact. That's what explains the -- these two factors explain the difference from the fourth quarter to this quarter. But we believe that this year, there will be a cash burn. So this figure in the first quarter is completely within our expectations.
The next question comes from André Mazini from Citibank.
Okay. My question is about the speed. Could we expect this figure for the rest of the year, June? Or let's say, variable compensation or the compensation of people could impact that?
Thank you. Well, there is some 60% in May; 20%, June; 20%, July; and there is a ceiling of compensation for salaries, and I think it's BRL 6,000. After that, it's a fixed amount. That decreases, but on the construction side, it's a small impact, which is most of our labor. So the impact is significant on the compensation on the budget of the construction.
Our next question comes from Marcelo Motta from JPMorgan.
Two questions. You had mentioned on the SG&A of cash [indiscernible] and do you plan to keep it at the same level on the -- for each quarter of the year? When we think about the increase in prices of the units, looking at the grid of inventory variation compared to the total inventory, the adjustments of price increase seems very marginal considering the inflation rates we have. So I'd like to understand, maybe this quarter was a bit lower than expected. What was the reason for that?
Thank you for the questions, Marco (sic) [ Marcelo ]. As for cash [indiscernible], the G&A is mostly or almost all of it recurring. We, in fact, made the operation more robust. We had 340 employees now, and we needed a stronger structure to face the growth that we imagine for the company. That's why SG&A is within our expectations. Also, we have been able to grow the portfolio considerably. As for pricing, we were -- have been able to transfer prices in most of our projects. We adjust our price table by INCC every month. Sometimes we made some specific adjustments to projects, but this line can also be adjusted by advances, it's nominal.
So if the customer anticipates payments somehow, it may seem like a change in prices, but it's just a change in the payments -- flow of payments. But in the -- when we see that the speed of -- the sales of the supply is suffering a bit with prices, we make some adjustments to keep it in a happy level.
Next question comes from Bruno Mendonca from Bradesco.
Follow-up on the margin. If you could give us some more detail because we saw the margin impacted by a project. What -- the half margin of the quarter, where is it offset to make it so stable? Looking forward.
Thank you, Bruno, for your question. The [ rev ] margin in this quarter has dropped a bit when compared to the fourth quarter. The main reason was Wave. Wave reduced this margin by 13 basis points. Other than that, it would have been 36.8% without Wave. The [ rev ] margin has a positive effect suffered by inflation because when inflation, we have more trade receivables than incurred costs -- construction costs to be incurred. And the [ rev ] margin does not translate the margin that will be posted in the balance sheet because there are also some accounts such as interest that are not taken into account in the [ rev ] margin. But we've had it stable, partially because, except for Wave, launches have had a healthy margin at launch time, and inflation also contributes to that.
This concludes the Q&A session. I would now like to turn the floor over to Miguel Mickelberg for his final comments.
We thank you all. We know that the scenario has been challenging, but we've done our best to navigate through it. And we've been able to provide a good performance, and we'll do -- work even harder from now on. Thank you very much, and have a good afternoon.
Thank you. Cyrela's conference call for the first quarter of '22 has now ended. Have a good afternoon.
[Statements in English on this transcript were spoken by an interpreter present on the live call.]