Direcional Engenharia SA

BOVESPA:DIRR3

Earnings Call Transcript 2023-Q2

[Paulo Henrique De Sousa, executive]

Good morning. Welcome to the earnings release of Direcional, 2Q '23. My name is Paulo. I am IR Director here, Jodie. And with me is Ricardo Valadares, our CEO; and Henrique Paim, our CFO. As usual, we are using the team's platform. And now we will begin with a presentation where we will talk about the results. And immediately, we will open for Q&A, and we will use the raise your hands to here below, and we will moderate the questions here. Okay? I would like to begin the presentation giving the floor to Ricardo, who will begin the works.

[Ricardo Valadares Gontijo, executive]

Good morning, everybody. It is a huge satisfaction to be here in this earnings release regarding the second Q '23. And now I'm going to begin by going through the main highlights of this quarter. I think there are many very relevant points to share with you. And also, I'm going to show you how we see the market, the impact on our operations. And then immediately afterward, I'll give the floor to Paulo so, who talked about operating data, and Paulo will give us the financial data. At the end of the person should now be here at your disposal to answer any eventual questions you might have all questions. So now I would like to begin with Page 3, where we address our main highlights quarter.

I would like to say, it's an enormous action to deliver in the first time in our history, a net profit of more than BRL 100 million. We closed with EUR 104 be profit and recurring, we already have and have executed in some previous quarters, which is the sale of SP this quarter were [indiscernible]. Invested cash in these lands and cash flow, which is a profit of that project at present value. This is a recurring event here in Direcional to maximize return to the company. When we consider this and the main one was the sale of [indiscernible]. We delivered a net profit of BRL 74 million.

If we time an ROE of 21%. So we exceeded 21% ROE annualized and the second one, 21% return over equity. And now I would like to do a disclaimer with regards to the sale of these SPEs. There are different interpretations here with the people we talk to, in practice, when we sell these SPs to anticipate and bringing back this cash allocated in land, when we bring it back to our operations with NEBA, we are not only -- we're not anticipating profit would be recurring in case these assets were not realized. This is a result of the quarter, and this ends up being perceived as a recurring event. But in practice, it was a result that was anticipated from a recurring operation. So it's important to have this disclaimer.

And I think the most relevant point to share with you is the gross margin we delivered in the first quarter this year, 36.5% adjusted according to the financial expenses and the interest rate effect. Our gross margin grew 1.1 percentage points compared to the second quarter last year. And to add this information, also highlighting that our REF margin future exercise grew in one quarter, the second quarter '23, when compared to the first quarter this year, 0.4 percentage points. So our future exercise margin, our REF margin, grew 3.6%, based on top of BRL 0.1 billion revenue. So with an increment of 0.4 percentage points, when compared to the previous quarter, clearly demonstrates a posted growth margin.

Today, if you're now in meetings in a moment, we see very controlled costs in the billion increments that comes from adjustments announced in June Canada program. And in spite of the fact that we have always catalyzed a lot of recurring gross margin to generate for I would export all of this that I'm showing to you, it is Mabel that will have the solid gross margin in a scenario that is very benign because of the cost of products. These products -- the costs are dropping. And so the perspective here of gross margins will be very positive, is very positive in this country sector and our operations.

This quarter also, it is a huge set of satisfaction. We had rapid launches. One -- and when I have a vein launches, and it's important to stress that the share of Papas BRL 1.100 billion here. And when we look at the future perspective, we've seen solid demand for our products. We have -- we believe that rates will drop, and this will impact the Hive segment that has performed very well even with higher rate scenarios. Tyre now here, the very relevant changes in [indiscernible]. And thus, the of all launches here is that our participation in new launches will have an increment relative to the share of the second quarter.

Sales. This was the first quarter now that we exceeded BRL 1 million in terms of gross sales, net sales, BRL 96 million. And when we consider the total amount sold including the share of pain projects, we don't have 100% share. And now I'd like to take some time to a very material fact, which is recent revenue recognized now, we had a relevant growth of revenue quarter after quarter. We reached a little more than BRL 600 million in terms of net revenue, and this net growth of 8.5% compared to the first quarter year after the rainy period when we began most of our works. So it's natural that there will be a growth revenue part for the moment the works begin, but I would like to highlight the fact that in some of our projects which works began recently and thus have an increasing growth of recognition of revenue. The control of these ASPs are shared with companies that are partners in this project.

So when we consider these ASPs that we do not consolidate for outing reasons, the control is shared. So the result of our share in these SPs enters in the equity equivalents line. If we consider the revenue of these SPEs plus the revenue of the consol revenue consolidated in our demonstration life. We get to BRL 809 million, and the growth was 18% compared to the first quarter this year, 18% growth in with a lag of 1 quarter, right? So this directly reflects the equity line. We grew 70%, 70% when we compare the second quarter this year to the first of this year.

And the first half of '23 to '22, the growth was 123%. I'd like to stress that oftentimes when we analyze only the net revenue recognized in our DRE, you might not see the growth in our operations and the growth of our projects that comes from projects that are not consolidated because the control is shared. But obviously, this reflects in a very relevant growth of equity equivalent. And it's important for you to see track this because of the relevance radio numbers in Larosa300 million and recognized revenue of EUR 2.8 billion when we have partners of which control is shared. I want to show you that we are launching 54% of what we are recognizing in terms of revenue. So when you notice and analyze our results, for example, comparing the second quarter to 1%, EBITDA, 2% net margin grew 2.6%.

So in the company, there is an operational leverage growth with SG&A expenses and financial expenses that is very relevant. The growth of the gross margin meant 2, 5% of the increment in the net mark with the respective of continuity of growth here because we are launching 50% more than the last 12 months. So here, there is a perspective that is very positive for the results that we will be delivering in the following quarters. Now I would like to give the floor to Paulo. So, thank you for your participation. And at the end of the presentation. I will be here to answer any questions you might have.

[Paulo Henrique De Sousa, executive]

Thank you, Ricardo. Good morning, everybody, once again. And so very quickly the operating results launches. In this quarter, we launched 15 projects totaling EUR 1.5 billion, which was the best quarter in this history, a growth of 84% compared to the second Q '22. And it's important to stress that 70% of launches was [indiscernible], 40% ever, demonstrating our growth capacity in both segments. And with this, we accumulated BRL 1 billion of launches in the first quarter -- in the first half, a growth of 49%, 4.3% in the last 12 months. And also it's important to stress here into the right-hand slide, after delivering 4.3 billion in terms of launches in 12 months, we delivered an average growth of 26% when I look -- when in these 8 years, from 2016 to now, and this shows our growth capacity and the capacity we have to capture the opportunities the market offered us in this period.

Next slide, sales. Here, the strong performance we had with launches. Gross sales reached BRL 1 billion. And after the cancellations, net sales, we delivered BRL 962 million in the quarter, a 15% growth compared to the previous quarter that the second quarter '22. And in this quarter, 21% over the first half last year. Here to the right, it is important to stress the consistency of our growth. We delivered 31% accumulated growth in this year, 8 years, and over what we delivered in terms of launches, which is very healthy. We grew more in sales than launches and this demonstrates the assertiveness of our products, launching and selling in the same speed.

Lastly, the next slide, where we see the net sales speed consistent, very consistent, oscillating between 13% in the worsen area of Hive, which was the fourth quarter last year, but now it goes back to 18%, which we believe is solid. Judis now stable. A straight line here between '18 and '20. And this is where we want an increment of 18% this quarter. because of the relevant on volume of launches and a concentration in the last quarters. In the next quarters, we can have an improvement. We expect to have an improvement of growth improvement here. So these are the operating highlights. Now I would like to give the floor to Paim, who will talk about the financial side.

[Henrique Paim, executive]

Thank you, Paulo, Ricardo. Good morning, everybody. Thank you for your participation in our earnings release with regard to the second quarter '23 results we consider memorable. We're very proud and happy with the delivery of these results and to present these results to you in the second quarter. Now to begin the first slide, with regards to financial data, I would like to highlight these numbers in net revenue that we have been consistently delivering with consistent growth. We always stress quarter-of-quarter that our business model first counts with launches and then with sales. And then we begin work. We recognize the revenue. We have been demonstrating by [indiscernible]. We have been able to accelerate growth. Sales almost married -- almost matched with launches. So we have been very good with the assertiveness of launches. So it's not to create inventory. And proved engineering capacity with work volume in a very positive pace.

And this really reflects in the recognition of the revenue where we observed a second quarter. When we add the SP revenues that is not consolidated in the DRE with the ones that are consolidated, we attained BRL 809 million, 17% growth relative to the second Q '22. And the first half was at 23% when we add the SDs that we do not consolidate with one start, almost EUR 1 billion total net revenue. To the right, you can see the results of our gross margin. Quarter after quarter, with very consistent growth of gross margin in the year. This is a result of our discipline with regard to price transfer. We have a governance to transfer these prices with an important time year to look at the price of each unit, each project, and very assertive year, and obviously, our management here of the world with the eye of Leona focused on the owner.

We are mid-low income. We sell to low-income families, and we see this here, right? So we see 36.4% important growth with regards to -- compared to the second half '22. And depending on the behavior of the cost of product, and it seems to us these costs seem to be good. And perhaps this gross margin certainly will be very positive in the next quarters. Next slide, please.

Operating leverage has happened quarter after quarter, we have had success in being able to grow our operations, maintaining SG&A under control with lower growth than the growth of our revenue and sales. You can observe to the left here, when we compare the S&A quarter after quarter, the first quarter is very -- the second quarter nominally is very similar to the first quarter, around 5% of the gross margin, G&A, 4.5% of net sales. And in the semester, we see a very stable behavior of G&A with a growth of revenue over the GA. Here, commercial expenses, we've done extensive work with regard to commercial expenses and marketing. We have been mentioning to you quarter after quarter about the work we have been doing, and the results begin to become very visible here with the reduction of expenses, a better management of our commercial expenses. In the first quarter of '23, we reached BRL 97 million, less 1% compared to the first quarter's '22, but very representative in terms of gross revenue, 8.8%, a drop of 1 percentage point here.

Next slide, please. EBITDA margin. We talk about this a lot, quarter after quarter. We got the final -- the vital signs of the business. They have been very positive. EBITDA margin between 20%, 22% quarter-after-quarter, and we noticed stability, the resilience of the business, and we have been able to reach BRL 255 billion, a little more than EUR 500 million EBITDA margin. So this is a growing business, very healthy, representing state code stability here in terms of management. We always say that we have this canal type of characteristics where we drink very little water and go through the desert.

We have gone through crisis, pandemic, the product -- and maintaining always the EBITDA margin under control. And here, this is more of the talk. We have been talking to you with you, and beginning here to the right side of the slide, how the share of the minority interest would reduce our results in the next quarters. And in the ramp-up process of our operations in a long cycle operation, obviously, you will have minority interest and when you enter new states, when you do new business, you went into new municipalities, this is natural.

We matured this partnership. We are in areas where we can have relevant growth. And now we are beginning to reduce this minority interest. And the money ends up going to the Direcional shareholder because all the back office work is concentrated in our hands. So we have been very successful here showing what we have shown quarter after quarter. We are delivering what we promised. To the left, the equity equivalents result. We see the growth of the revenue when we do this composition of revenue that is not consolidated. The results of this business like Los you, right? It goes through the equity equivalents, and we reached BRL 19 million, a 3-digit increment related compared to the first quarter '22.

And now the cherry of the cake where we have reached a net margin in the quarter of 12.3% in the semester 12.4%, increasing SG&E under control, growing at a lower level than the top line, and operating leverage increasing. We have reached BRL 144 million net profit in the first half, 23%. 55% growth related to the first half '22. These results are memorable, and we are very happy to present these numbers to you. To the right here, the evolution or the evolution of the net profit, we have been able to deliver more and more quarter after quarter until the second quarter '23, PL under control at the same level representing an ROE of 21% annual alignment. And when we compare the second Q '23, 74% recurring profit when comparing to the second half 30% capital structure. We always say we are a conservative group. Everything is conservative, the management, the shareholder, and the Board is conservative. So we have a capital structure that is very added to our growth.

Cash grew 4%, reaching 1.13% cash position, debt amortization schedule, very liquid in time, you can see a net debt of BRL 268 million, 16% over the equity. So when we maintain -- we still are AAA by S&P, only 2 real estate development companies have a AA rating by S&P. So we are one of them. For us, investments to pay decent, any kind of capital allocation movement. First, we look at the capital structure because we want to be here in the next 40 to 84 years. So we are here for the long term. Thank you very much for your participation. And now we will go to the questions and answers.

Just to add to an information sequent event, we did a follow-on. We stressed our net debt of 2.1 and net profit BRL 100 million. So just to stress the capital structure is even more solid than the slides. So now questions and answers.

[Bruno Mendonca, analyst]

The first question. Good morning, everybody. Thank you for the question. So we will begin with the competitive environment. We saw the -- all the improvement in the conditions, the promoted here in Sao Paulo, we've seen many development companies, mid-, and high-income companies beginning to it with Minha Casa Minha Vida. So do you already feel this in the dispute for landlords in Sao Paulo? And how does this movement compare to other -- have you seen this kind of movement in other cities -- so this is my first question. And the second one is about Hatch 1, which will go into effect and the hedge on. So how much your sale will be here and the potential impact it can have.

[Paulo Henrique De Sousa, executive]

Bruno, with regards to the changes of the confidence of the program, the impact of changes in a competitive environment and within the following: in the city of Sao Paulo, we have several companies, and we work -- we end up in partnerships with companies, with work at those drugs, and we're not developing the budget that they wouldn't do if they were alone. So this mixed reaction in the city of Sao Paulo was much quicker. In the rest of Brazil, definitely, at this moment, we see no change in the competitive scenario in the city of Sao Paulo, in spite of being expectations, we have been monitoring. Up until now, we have been able to buy land [indiscernible], good business have occurred, and our performance somehow has facilitated as being able to close good businesses in Sao Paulo, which is a state even after Demic where several companies went through a very delicate moment with leverages above deal level. In the rest of Brazil, we have competition dropping here, right? But colitis doesn't happen.

The between supply and demand is balanced, Sao Paulo has had the opportunity to offer units that are much greater than the rest of Brazil. So companies in Sao Paulo suffered less than other companies in the rest of the country. So things are still very healthy in Sao Paulo. What we can see is that we're not investing equity for the purchase of a [indiscernible] if the environment demands exceptional doubt [Technical Difficulty] in order to accelerate Gron where we see share gain perspective, sharing of our operations with important reflex in the increment of gross margin and commercial expenses reduction here. When we get to -- when we begin to mature this. If Sao Paulo remains as has remained in the last 12 months, it's great. We will continue with our policy of practice. We have an interest in increasing our share in Sao Paulo, which is a huge market. But if there is an imbalance, we will stop for a month 6 months, 1 month.

We have no pressure here. In order to operate in case the return dividend isn't a very healthy operation. Follow-on, which we have just done in July is because of the opportunities we see in terms of profitability gains relative to the announcement of the program, inclusions of several families that before had no conditions of buying a property. And now they have been included in this market and the competition, the supply is similar to what does. If you have more clients with a balanced supply, then we want this capital to put in place capital to work, which is an opportunity. Obviously, we're always going to allocate the capital way we have always allocated Hedge 1.

In a recurrent way, our operations for family low-income families, I would say it's 10% to 15% of our operation. Of course, the reduction of taxes, which is 4% to 1% makes our operations more attractive in order to offer products to this income level, right? It's a 2 percentage point of difference. So if we look back it's around 10% of our operations. In the future, our appetite to operate in this segment has increased, and it's most probable that we will go for a more relevant action here once H1 is regulated, and we began to apply this new tax overall revenue. So it's most probable that this is for growth. So I would say that the impact of H1 in our results is around BRL 10 million, BRL 50 million net profit. And then we will see how much of this we can hold in terms of margin or how this will fully reflect in our net profit. But the idea is to see 2 clients that wasn't seen before an increased working capital versus what is transferred in terms of results. It's early to say anything. But our appetite has on here with regards to the change.

[Unknown Analyst]

Good morning. Congratulations for your results. I have a question with regard to funding. This year, things are solved and apparently will probably increase done by the curating board of funding for housing. But next year, the rate -- they indicated they will sit at least funding for this, but not the size of the funding. So I want to understand how you see funding for next year. And I even believe over the next 2 years or 2? So this would be my question.

[Paulo Henrique De Sousa, executive]

We announced in July an increment of BRL 25 billion in the budget destined to social aspects in Brazil, social from Brazil. And also, it's very challenging the SBP segment is very challenging, right? So it's natural that with this increment post of the projects that previously were sold by SPP will now migrate to Miami as long as the income of the buyer is less BRL 8,000, so the need for funding will probably remain in '23. Now with this new things are okay. 24, I think it will be critical to see the performance of the second quarter 2023, second half '23 because the increment to BRL 350 million has in the volumes that is eligible for Minha Casa Minha Vida. And the main trigger and where we don't have a good visibility is income, the buy of the product, does it make more than 8,000, the ones that make less than 8,000 half, we'll have funding of Miyakaw that came from the savings account.

But we don't know the percentage of these customers that will be eligible for the Minha Casa Minha Vida program. So when I show you some data before these announcements to Hita product, only 11% was eligible for the program because of the sale pay. After these announcements to 67% of the HBA product from the land bank of HVA, more than 80% is eligible for the Minha Casa Minha Vida program. So we have a program, special allocation, vertical building, leisure areas, garage, and before this was only financed by SPP, but now we also have a possibility of using the FGTS resources for the same product. The demand will increase, I believe, we have to be very careful here. I think if conditions remain for '24. The way they are today, then it's natural that we're going to need an increase of budget relative to what had been originally seen for the FGTS multiannual budget. We see it's very healthy at the moment, right?

And in this period where the savings account is in a more delicate scenario. When we do our account our calculation scale with the public information that we use to FGTs maintain the condition to absorb this great value for next year. And so I think for, we have kind of tranquility for this year. We're kind of, okay, we see here a very important variable drop level of SELIC and its impact in relation to the savings account and bank funding because of the SELIC having a reduction of anos. I think that once this sale reduction occurs and bank costs drop for the loan to the SP segment. I think we got back to the 9 we were in '22, the level 3, this occurred with Level 3. So there were resources being loaned here. At that moment, it the things account, we're taking commute to use FGTS program. So we have to see for '24. I think the FGTS is solid. We don't have a yellow light here for this moment.

[Unknown Analyst]

Good morning, everybody. Congratulations for your results. I would like to know if the revision announced for Minha Casa Minha Vida is already occurring. Is there something they're still missing? And how did you see July here? And also with the change, right, or the changes, what are the differences you noticed here? And also a follow-up with regards to the sale of the minority interest in the FGTs? Would this happen after the follow-on, the discount levels here? Are we going to continue seeing this kind of actions in the next results?

[Paulo Henrique De Sousa, executive]

Maria, with regards to the FGTS adjustment announced since last year. And now until mid-'23, price, 420 is already on. There has been some adjustments specifically after the change of the payment of the operating agent, and this occurred recently, and this increases the appetite of the operating agent in order to work in the smolt with this modality. And parting from the beginning of August, also, we've seen an increment in the volume of units announced by price of 120. This is positive news. However, the future of the future FGTS.

So you don't -- but when we see the future FGTS, which in our perception is the measure that has the greatest impact in the capacity gain, the gain that the capacity has a purchasing right here. So I believe that the FTTS, the future FTTS impact in the inclusion of new families in the addressable market by Jadestone, the impact is certainly greater than price 420. Still, what is not operating with the necessary adjustment for this to happen? This is where this happened with the bill that was approved here. And we believe the future FTTS will be implemented and operating by Caixa Economics.

So we become very optimistic with regards to the inclusion of several families in our market, specifically the ones that are way more fragile. So from a social point of view, this measure is very positive with regards to future FGTS. Subsidies, cat prices, there are already normal operating have been operating for some time, but the FGTS have not yet. And B, which is a firm of focus will be an informal income family, or lower income balance, is not in operation, but I think it can have an important impact in our operations. So FGTS are not in effect yet, but I believe that there will be a perspective that they go into effect in the second quarter. Maybe Paim can talk about the sales of the SPEs the second quarter that happened before the fall on.

[Henrique Paim, executive]

The sale of SPE generates huge value for the companies and our shareholders. We have sold the SPS with discount rates that are well below the capital cost of the company. I don't even want to sell it how much we're selling and the return we have to discount it implicit because some of them also have a leverage. So discount rates for us is very competitive. And it may stand here, specifically in this period where access to capital was very limited to sector. So this allowed us to deliver a very healthy return increase in our operations, look at our business from 2023.

Our ROE grew. And this is a result of the sale of these SCAs with discount rates well below our capital cost, return rates well over the discount rate, of which the SPs were sold. And when we look in the pipeline, we have a cash position that is very robust with net hips, and we see -- everything -- the short-term curve closing spreads demanded for the sale of these assets tend to compress in the next quarters because of our current capital structure and the compression of the spreads in the pipeline, I believe that in this moment, perhaps we have less appetite to continue in the short-term selling assets.

Obviously, we always look for opportunities. But when we look at the current scenario, if things remain as was, certainly, we will hold things back because it makes no selling an asset here under these conditions, right? But once again, we generated much value here with these operations from the sale of receivables and assets where there was a huge amount of capital allocated here. And if there is an opportunity, we will see. But our appetite at this moment for selling is smaller, is less than last year where our leverage was very healthy.

Just to add to this car, in this care scenario, Mariana, where there was a drop of the interest rates, we begin to notice an inflow -- a potential inflow of real estate funds, an important amount of resources available here that will certainly need to buy new assets. So just this just confirms what Ricardo has just said. In the short term, it seems to me, it seems that we don't really need it because of the liquidity we have in balance, right? But when we look in the future, there will be opportunities. We have been contacted by -- we have been harassed in a very aggressive way by the fixed income market at rates I have never seen before to buy our credit.

The long-term operations for our cycles. So this only states now is not the moment to sell assets. Perhaps in the future, yes, if we continue. But in a regarding way, the company has always been a good allocator of capital. So we'll always do these calculations and take the best decision possible for the shareholder. Thank you very much for your answer.

[Operator]

Thank you, Manish. Now next question, [ Luma ], EBS.

[Unknown Analyst]

A follow-up. You just said that in the short term, perhaps it's not the best time to sell assets. We would like to know, in this case, when you begin to look at this again, right, how many SPs do you still have available to sell and how this can help cash. And because of the launches, is there a respective of cash burn here and cash generation? And also we got to echo I would like to understand how this is going to be and how this is going to be for Judicial now. And how will tax 1% or 4% in the same project?

[Paulo Henrique De Sousa, executive]

We have almost BRL 300 million equity allocated in land. So obviously, when we had this capital from the follow-on, we will always look at the possibility of the sale of assets for discount rates that makes sense. This generates value and is a differential for [Technical Difficulty] We are not here managing the company to carry account to generate value to our shareholders. So we want to take make sense. Now it's capital here because the capital structure based on the capital structure. We're not pressured to sell. We would sell when it makes sense, receivables. We have 350 million accounts receivable, Pro-soluto, among other assets to TDI rates with regards to operations.

We see a very adequate moment in the market. Demand is solid. We had a huge amount of projects, specifically of the Minha Casa Minha Vida adjustment has made things much lower cost and an increase in the amount of bias here. And it is natural that in this business when we grow, we consume capital and cash. And this is why we did the follow-on. So with the increment, a possible increase in case there is a demand -- continuous demand for operations, we have capital consumption, and we have no objective to operate with net cash. We want to work with a leverage level close to 20% of the net equity with the like we worked in the last years. So we will put capital to work that will probably be a cash consumption, and it is being allocated in projects but at very positive return rates. There is no cash for new operations or land. It's the consolidation of the operations we have and the fastest maturity of these states where we have room to occupy it.

Relative to H1, Paim can add to this. No problem with taxing here with giving -- adding a take H1, H4 of which buyers have higher income rates. This happened when is the best. This happened in the past. So with the same 0 problems here in terms of systemic point of view, there's no problem here. And we believe that those were going to, in fact, as we hope we do to effect the fastest possible because we want to increase working capital. Obviously, we won't gain in margin, but it was working at where we brought the greatest value to our shareholders. ROE has the greatest working capital component. And here, we're launching more than 3x the equity today. So we can see to the families, well away income, obviously, this will mean greatest speed of sales, greater working capital, and this will be very good for operations. So if they can set to these families, increasing working capital and not reducing the margin. I think that this H1 can have a very relevant impact. So we're very optimistic here. No problem from an operating point of view.

[Unknown Analyst]

Two questions here. First, if I can have the details of the launch strategy, the PSV for the first call at the conclusion, the follow-on. And I want to understand the areas you're trying to accelerate the launches. And the second, do you feel an improvement in terms of net sales of Hive considering the cap increase and more attractive rates for Minha Casa Minha Vida?

[Paulo Henrique De Sousa, executive]

Well, we don't have a guidance, but if you look at the seasonality of our business, the first quarter is always a seasonally less loan. It is because of holidays and Carnival. Second quarter on volume launch firms is always higher. And we believe this year, sales rehab and demand in as is, we should bet this level. We see a second-quarter closer to the segment -- the second half will be very similar to the second quarter. And we have a lot of products to launch in case there is the demand. It remains as is. So I believe that we should have a second half. We are very optimistic with the demand because of these adjustments. If there is an increase in demand, we can absorb launching more than 14 this year.

Eager also to add to this, to add to what Ricardo said, we had BRL 35 billion land bank, and we have noted this in states other than Sao Paulo lands appearing to feasibility committees and the conditions are very aggressive. There is very little demand for these lands. So we will continue maintaining this pace crop-based in the states we are in, specifically where the land bank is very well formed by a swap purchased via swap even. We have been doing a fine coming here to see what we can change in order to have the product within the BRL 350,000 level because before where before there was a change, right, or approved by the FTS, we already noticed that HIVA because of the quality of the land bank, the broad assertiveness has been a positive highlight, even where we been working with SGP with plus 10, plus 10.5% rate with more care plan into account.

We continued with HIVA in an interesting pace. And I think now there's a potential to review the project many things of HIVA already incorporated this and to have more things within this cap. I believe that this should accelerate ever from here on. The immediate result, once again, we have not noticed an impact on our product because we were very careful for Hive launches in the last quarters.

[Pedro Hajnal, analyst]

Good morning. Thank you for your presentation and questions. This is a follow-up on the first question by Brand, then Eagle. Could you give us the breakup of profitability per state you are in and how this is being considered in this new launch level that you're thinking of -- and also from here on, with the increase of the company volumes, do you see the possibility of having operating leverage in these areas? Is it possible with a greater volume, will you gain even greater profitability in these states where you will increase volumes.

[Paulo Henrique De Sousa, executive]

Well, I'm going to try to be very -- to answer your question. If we consider the more mature states of the company where we are very relevant, we operate with 4 percentage points of gross margin and less 7 percentage points of contributed margin in RFPs to be captured with the maturing of our operations and where we see the possibility to occupy space. I'm not saying we're going to capture all of these benefits, right, dematuring here, it takes a long time for operations in the state to mature. But this is an idea of the perspectives of what we're going for because we are using these resources in order to concentrate operations where we have all the structure where we know the market. So these are 7 percentage points difference between the benchmark operations where we are operating in states and the ones that are more recent.

And this is what we are going for in the next few years. I think we can capture value without pressuring our team an important and expressive gains of G&A. This is a maturing of the state without demand of people an increase in G&A because we're starting operating in a new state. And this is the value we generate. We capture gain in difference of margins between the more mature states we're in and the more recent states we're in.

[Operator]

Next question, Jorel, Goldman Sachs.

[Wilfredo Jorel Guilloty, analyst]

I would like to concentrate on the nonconsolidated SPE. Is there a difference between sales, total sales revenue? I'm sorry. I would like to understand how we should consider the SP -- the nonconsolidated SPEs from here on. Are we at the peak? Do we believe that this will continue increasing as a proportion of the total? And also, is it more focused on a product like HIVA or judicial, that would be my question.

[Ricardo Valadares Gontijo, executive]

HIVA and judice now practically nothing in our revenue in SPEs where we don't have the control and that we don't consolidate the total review of the project, the consolidated here. And representative is big, is the partnership with Lucio, where we have a volume of projects launched that is relevant and works are ongoing. Here with this joint venture, we are in the initial state of our works. There is a growth increase of the company here where equity equivalents line should continue growing once the works are ongoing. However, on the other hand, we see projects where there is 11% participation representing growth from here on. So if you look at launches and sales, I see the participation in the share of Judicial growing from here on. As a proportion of the sales decision waived works of which launches occurred in the last 2 months tainted of gaining relevance in the revenue recognition at this moment.

So here, you will see equity equivalent with increasing value in terms of absolute value going for our statement of DRE, right? And this value, this amount should go down in the next 2 years based on nominal values. In terms of percentage of the revenue, I believe it should remain in a level structurally similar to the ones we have today because the revenue of projects that are 100% consolidated by Judicial growing from here on. But in absolute terms, the equivalence line will continue growing in an important way.

[Wilfredo Jorel Guilloty, analyst]

A follow-up. For example, Cash. How do you see cash here? How do we see the cash receipt?

[Paulo Henrique De Sousa, executive]

Well, it depends on the sale price of the product. The higher the ticket of the unit, the greater is the liability of this customer wanting to work with a transfer at the end of the works. But what's important, is that 70% of what has been sold has been sold within the associative model approximately 30% out. And an important proportion of this 30% sold out of the associative model, the customer pays 100% of the price of the work during the works. So it's similar to the associative the format where we have 40% capture during the works and 60% is financed by the customer at the end of the work is around 15% or 20% of what HIVA does.

[Marcelo Motta, analyst]

Next question, Marcelo Motta. Just 2 questions. First, the partnerships, can we expect now that the company has done a follow-on? Has net cash? Should this be -- is the idea of having more partnerships in the short term? Is there no idea of doing this? But the land bank, right? Also, what do you see as IDOLandbank for you after years of? Is it as a launch bar? Or is it opportunistic? Do you do as much as possible? I'd like to understand these 2 points.

[Ricardo Valadares Gontijo, executive]

Marta, we've seen good business where return of capital is positive. And here, we analyzed the capacity of our engineering, carrying out these projects, where we have partnerships in that area that state, our growth capacity varies from the state we operate into the state in terms of return on capital or the capital and also are executing in that place. So if we have good business with execution capacity, it can be without a partnership, no problem. If we have execution capacity that is closer to what we have in terms of an optimal optimist operational point, then it makes no sense to have a partnership here because it will limit the percentage of the result that goes to our shareholders.

So if we have these 2 facts sent there is no reason not to have partnerships. What we abide of financing, we allocate capital and risk, and everybody has. So we believe that we are operating in a very healthy way. And obviously, good business, we're always looking at good business, right? There isn't really a rule here and we give up on forego a good opportunity. Here also, we had an acquisition of an area. We acquired an area, fantastic in Brasilia. Brasilia we have -- we are very relevant in Brazil.

Within the Minha Casa Minha Vida program. We are one of the greatest players in the program. When we consider our market share within the Federal Discrete and compare to the total amount financed by FGTS, this is very important. And this area swapped in the second quarter was a very relevant area, a little more than BRL 2 billion potential sale. So this is a specific land, which is very differentiated and fits in a position. And we want to continue here. So when we consider this on of acquisition, I would say we're buying when we considered -- this is we're just reallocating what we're doing, and we will continue in this same level.

[Operator]

Next question, Elvis, BTG.

[Elvis Credendio, analyst]

Two questions here. The first one, Pro-soluto, we had improvement in the affordability of Minha Casa Minha Vida. I want to see how you see the level of Pro-soluto you have here from here on? Will you focus in gaining size in the company, accelerating things? Second, could you give us an update on construction costs, perhaps it's too early, but we saw these rates slowing down. So I want to know how this talks to your budgeted cost. And will you recognize economy in savings in works with regards to everything that has been happening.

[Ricardo Valadares Gontijo, executive]

Elvis, when you look from here on, when we talk about Pro-soluto, no doubt there was an inability when we look lower income levels, [indiscernible] subsidy, LTV has not inched here, so banks continue financing 80% of the value of the asset. Pro-soluto is the result of this 20% nonfinanced by banks. So the reduction of Pro-soluto will occur with lower income levels, where there was an increase of the subsidy that combines part of this 20% not financed by banks. But it's not going to be so expressive where you will see a significant change in percentage in terms of Pro-soluto in the proportion of the volume. In the income families lower than BRL 3,000, then we will see an increase here. However, it will be 10%, 15% of our business, and there shouldn't be a big difference here. But the reduction of Pro-soluto will happen with weaker families where default is greater.

And here, it is very positive. So instead of looking at acetate, it's important to look at the quality, where things drop in families that have more -- that have -- don't have a lot -- much more conditions for. And in other, it's very important here that is important, but you know we have seen just at the government of the state of Sao Paulo as big, where the government gives a subsidy as well as the one rented by the FGTS, the state government has an extra subsidy for lower-income families. We have seen several municipalities going in the same direction. So I believe the interest of governments and local governments will be these extra subsidies to low-income permits and will have an expectation of Pro-soluto. Let's see how this is going to happen. This is happening in a very fast way. And I believe in the second half, we will have an idea of the speed of implementing of the surplus subsidy in those income levels where default is great. So we'll have a great quality of our produce because of this participant of the local public branch.

I forgot your question. Labor rises once a year at the trade decisions. Obviously, labor always buses and well inflation, which I think is fair and healthy. It's important that the DNCC rises less than label prices new potent of a buyer for our product is gaining purging power and wants to buy. So we want a country going in a healthy way, right? So we are happy with this. And I would say in [indiscernible] the cost of a product, the constructive process that is very industries and fast. [Technical Difficulty]. And once we see within after year, we gained competitiveness here where labor in those companies that have less productive labor. So when we can pick off in here we have labor rising more the price of material costs will be below TCC and we gain complete. So these are the considerations to be...

[Elvis Credendio, analyst]

[indiscernible] There was an impact of this change in the borrowers of the FGTS. So is there going to be a difference. [indiscernible]. So maybe there will be a definition here by the end of the year. And the second question or the competition in Sao Paulo. We see very high-income players, is some August, but low income is very different from the very high-income levels. You have aluminum malls to have off-plan transfers. So what is the point that are entrance barriers, the high-income player can enter in. So what is the competitive advantage of somebody that has been dealing with low-income families as a core business versus the average to high-income players that want to enter the program.

[Paulo Henrique De Sousa, executive]

Well, it is difficult for us to know the outcome of this definition that is being discussed here. Clearly, I think Abrainki's role in this process is to try to show the impact of any decision independent of the decision taken and how it will be resolved on those workers all the ones that need Minha Casa Minha Vida program to buy their own house. And for [indiscernible] to increase FTDs, benefits Timika. But a second analyst who predicts lower company weaker worse with great -- that have a great churn in my -- and they lose the opportunity to buy their own house with the reduction of the cities, and they will have to pay more and those that need left that have a great city.

And because of the higher income, they don't emit to Minha Casa Minha Vida. [indiscernible]? So it is this point that needs to become simply geared to society as an uncertain that mostly the votes didn't have a clear vision of the impact have on those family that molded and it's a social point -- this is extremely I think -- so they have this is what they need to be for the decision they can -- people have to know the comment is [indiscernible]. We come to perspective here, right in discussed. With regards to competition in Sao Paulo, I think it's natural when we have an increment of cap prices in companies that have competition with a little bit of the program, and they tried to develop problems to put the program, have access to funding that allows many to be included as purchase products. We've seen this in the past, we immediately know aside how happen from here on. I believe that with the drop of ligand the perspective in an inflow of savings account reforce or when we begin having a great amount because savings as net more than EUR 200 million in '21. It's 150 billion. BRL 50 billion drop, right?

So obviously, its natural market might reduce in size. And the new scale beta has an increase of 20 million this year to try to minimum employment impact, traditional economy growth. It's positive. We are not having SPP resources in the future die. You will see the adequate work in the program. I think it helps when we do an analysis here, very prepared companies working with the same bar in terms of the forested formalization of the labor. So this is the competition. The bar is the same for everybody. So I think it's a problem. But I think it's important to model the site and the impact, the appetite of those ones want in the programs. And certainly in Sao Paulo, where most are concentrated. But once again, we have a huge possibility of choosing where we'll allocate capital and concentrate increment our operations, the healthiest issue, and the competitive advantage we have. I wouldn't say that we have we have competitive advantages because it concentrates we work in [Technical Difficulty]. We will see what's happened here. But the perspectives are varied here.

[Operator]

Perfect. Thank you very much for your questions. I will the floor back to [indiscernible] his final comments.

[Paulo Henrique De Sousa, executive]

Thank you very much once again, everybody. Once we are where we're very satisfied with the results we are delivering. What is important to us is the consistency of our results, right? Very solid results with continuous improvement, really optimistic with the scenario we see lower inflation, interest rates dropping, many families being included because we can see to the works we have today. So we believe and we are here to work to use these opportunities to see to those families that most need. I think is a strong point. We have a team. We have the privilege to transform our society, property or houses or people want to improve their last basic sanitation. We offer something more here. And our business is very sustainable as well as being very positive from a social point to. It offers a return to our shareholders. So with it restored itself, right, this cycle.

And we do returns to the shareholder. With those that are interested in existing capital seeing the family as the most needed is very positive for our country, our society -- everybody works as all our shareholders. [indiscernible] to deliver constant results that have been improving in a recurrent way and being able to see a very relevant demand with a huge inventory. So once again, thank you very much. We are always ready to answer any questions you have. IR team is here. We're going to continue working always to deliver the very best results. Have a very good day, everybody.