Direcional Engenharia SA

BOVESPA:DIRR3

Earnings Call Transcript 2022-Q3

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] Good morning. Welcome to one more video conference of our results. Now the third Q 2022. Together with me, Ricardo Ribeiro, our CEO; Henrique Paim, our CFO; and [ Andre ] from the IR team. My name is Paulo, and I'm a Director for [ Direcional ]. This event is for analysts and investors, and we will begin with a presentation. And then afterwards, we'll have Q&A. [Operator Instructions]

Now I will give the floor to Ricardo for the presentation.

[Ricardo Valadares Gontijo, executive]

[Interpreted] Good morning. It is a huge pleasure to be with you once again going through the main results of numbers relative to the third Q 2022. So in our vision, we're delivering very consistent results continuing with what we've been doing in the last quarters. So we delivered this third quarter '22, very solid margins, growth, and net margins. And very -- it's important to analyze the margin – RES margin with strong consistency. In this quarter, it's important to stress, we have overcome the annualized ROI of 18%, and we would talk about this further on in the presentation. We continue growing our operations in terms of launches, sales, net growth, and we have given a return of capital to share [ wood ] through the payment of dividend and very good leverage levels.

So in this last quarter, we had one more payment of BRL 70 million dividend. This continuity of the increment in the net profit with the return of capital to shareholders has allowed us to deliver a growth of the asset and has been the main leverage for growth in the company. And then in the next months, we intend to continue following this path. And this is a way of extracting great part of the value that we still believe can be created for the shareholders of the company. The main highlights now where we address net sales in the last 12 months, which reached in the third quarter, almost BRL 3 billion. It was a 30% growth when compared to the last 12 months of net sales, which was concluded last quarter last year. And also net sales, we overcame BRL 2.1 billion in the last month. It was a growth of 23% compared to the same indicated last year. So I'd like to stress that we have had an important difference between sales volume and revenue volume indicating a trend of continuation of growth of revenue when we look from here on, which is very important for us to have a gain in operational leverage in our business.

Page 4. Because of us having sales that were superior to revenue, this is very clear when we see the growth of our results in future revenues. The backlog revenues, this happens for the development of our growth. In our rep, we had a growth of 38% in the last 12 months, which reached at the end of the last quarter, more than BRL 1.1 billion. And I'd like to stress that our REF margin had an increment getting to 39.6%. This REF margin is not in this page, but we will see this in our presentation is an important indicator of the resilience expected for growth messages margins in our company. And this gives us strong comfort that our operations is on track for us to continue delivering growth increments for our shareholders.

Page 5, where we address our gross margin and gross profit. The third quarter, the gross margin was very solid, 35% in keeping with what we've always talked about in our earnings release. And also here, I'd like to stress in a very important aspect. We, at this moment, are trying to get the most financing to production for our projects. So from here on, it is always very important. So in order to compare the level of operational [ FMC ] with previous quarters, we look at our gross margin so that we have a greater difference between the adjusted gross margin and the one that is reported because we should have an increment with regards to the volume of rates paid in our projects because of this greatest representativeness of financings -- company financings.

On the other hand, one should expect a reduction of the level of the natural expenses in this company and this reduction will be superior to the difference that we should have between the reported gross margin and the adjusted gross margin. We can have -- generate significant values because we're increasing the volumes of financing our productions in our projects. So you should see a reduction of the financial expenses. So this change from one line to the other is very relevant for this system and where you always analyze the adjusted gross margin here from here on.

Page 6. The other very important aspect of operation is the increment of operational leverage that I addressed just a few minutes ago. When we analyzed 9 first months of 2022, compared this with the first 9 months of '21, it is very clear to see the value we have generated with the growth of our operations and maintenance of our expenses at very controlled levels. So in this chart to the right, the 2 bars, the first 9 months comparing '22 to '21. In terms of G&A and commercial expenses, we had an expressive gain, 1.3 percentage points of the revenue in terms of gains and 0.6% in terms of gains in general and administrative expenses as a proportion of the revenue.

This has allowed us to have an important increment of our EBITDA margin even in a scenario where we have experienced an important increment of the input, a slight compression of the gross margin in the company in the last month. All of this has been more than compensated by the operational leverage gain and dilution of expense lines of the companies. So in this quarter, specifically, you have seen an increment in the absolute value of our general and administrative expenses, which became wage bargaining that occurred in Sao Paulo in May. So the increase of wages impact the third month of – the 3 months of the third quarter.

Page 7. Just to show you what I talked to you about with regards to our operational leverage gains, we consolidated in our revenue, several projects where we have partners. So for this analysis of the increment and the gain this operational leverage has given us, it is important to compare the net profit before minority interest because we consolidated in our revenue, the total amount of the SPE and here, we have -- we don't have the participation with these partners in the project. So when we analyze the gross margin before minority interest, you can see in the last 7 quarters, the first quarter '21 to third quarter '22, we had an increment in this margin of 2.4 percentage points. And this is very, very important, specifically when we considered what I just said, a scenario in the last 2.5 years that has been very challenging in terms of input costs that we use in our work site. And in the last 15 years, I never saw this happened in Brazil. So it is very clear that even with this challenge increase of input prices, we have been able to compensate for this because of the growth of our operations.

And lastly, Page 8, we saw an important growth of the net profit of the company and the last line of the balance here. And when we compare net profit that we delivered this third Q '22 with the same quarter '21, we had a growth of 31% in our net profit in a scenario that was not simple nor obvious for the sector. This net profit increment that is so important, together with the return of capital to our shareholders, we had an important payment of payments for dividend payments in the last quarter. So we can continue growing our operations and our net profit and everything being very stable. And there's no doubt is what has led us to be able to increase return of equity in a very high speed, and we were able to go over 18% in the last quarter when we analyze the profit we deliver.

This increment in our return will continue being our priority from here on. And through these 2 aims a search to grow our operations, which should be concentrated in the growth of revenue because of what I said to you, we are selling an amount that is much greater than what we have in revenue. The trend of the revenue is growth because of the advance of our works. And we will continue working to return to all shareholders, the capital that we don't use in our operations. And this is what we have tried to do in the last years.

Now I would like to give the floor to Paulo Sousa, and I will be at your disposal for questions and answers.

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] Good morning, everybody. So very quickly with regards to operational highlights. We begin with launches this quarter. The third quarter, we launched BRL 1.2 billion in terms of projects launched, a growth of 50% quarter after quarter and 10% relative to last year. So this was our historical record in launches. So specifically based on sales growth and activities of our products. And to the right, you can see the evolution of sales. The quarter was also a record in sales, BRL 847 million in terms of sales, highlight to Riva segment, where there was a growth of 236 to 326 quarter after quarter, and the accumulated the up to date. 30%, BRL 2.3 billion, our best 9 months in the history.

So once again, stressing the assertiveness of our product, our capability of selling what we launch. When we go to the next slide, which is the VSO, the sales -- net sales speed, the level is very healthy, very solid. We reached 19% in the consolidated Riva and Direcional segment. This is the level we always see to the market. We've always said to you, we try to operate between 18% and 22%. So this quarter, we just launched some products at the end of last quarter, which impacted our sales speed. But still, it's in the volume we expect, and we will work to go over these numbers.

Now I'll give the floor to Paim, who will tell us about the financial highlights.

[Henrique Paim, executive]

[Interpreted] Good morning, everybody. Thank you for your participation in our early third Q '22 earnings release. So very quickly, we're going to go through the results so that we can go to questions and answers, which is the most interesting part of our call. Here to the left, we have the net revenue. We can see an evolution -- a track record of 26% in the first 9 months of '22 getting to BRL 1.63 billion and significant increase of the revenue. We have been saying in the last calls that the sales that we did and the advance of works we have noted clearly reflects on the increase of revenue. So our expectation in the pipeline is that this revenue growth will continue occurring and causing a very positive effect with regards to our operational leverage mentioned by Ricardo.

So we are very excited with the next quarters when we look at the revenue line. When we look to the right of the chart, we -- the partnerships that we did not consolidate, we can see here the result through equity income. We do all the work. We do the backups, relationships with customer, customer relations. And here, we have a significantly important revenue in terms of written results, which goes into the balance because we don't consolidate these companies where we have partners to be able to [ concede ] the control of this business with our partners.

Next slide. To the left here we have the behavior of the EBITDA. Here, this drop in the EBITDA margin is justified because of the marginal drop in revenue that we had in the quarter and the G&A, which was more challenging, it was because of the wage bargaining that was mentioned. And in the accumulated, we continued with very healthy EBITDA levels, around 20%, very solid. And the expectation from here on is to remain with very solid EBITDA margins and leverage versus EBITDA under control, reinforcing this thesis that this is the first metric that we look at before afterwards to be able to take decisions with regards to growth.

[Technical Difficulty]

[Unknown Executive]

[Interpreted] We had a technical problem. We will be back in a few minutes.

[Henrique Paim, executive]

[Interpreted] Good morning, everybody. I'm sorry for electrical problem. We had an energy peak and the Internet froze, our network froze. We would like to apologize and we will continue. We were talking about the equity equivalents results compared to the equivalents in the last quarter. So here, we can see the next slide, which is 15, Slide #15. Well, we've seen 14, Slide 15. Once again, we have the capital structure. We reached BRL 1.18 billion in cash in the first -- in the third quarter, BRL 1.471 gross debt, generating a net debt of BRL 298 million. We don't have to be a genius to administer the net debt of the size.

A very well-behaved leverage '19 of adjusted net debt over equity, reimbursing our conservatism here, a long-term conservative position, considering our finances and capital structure and amortization schedule, which is long, one of the longest in the second [ sector ], a duration of almost 50 months enough cash to pay 4 years of debt, and we concluded with success the issue of a CRI nil in the third Q, which was a success. We captured BRL 300 million financial settlement occurred in July at a very competitive rate, 1.22% a year, a 10-year operation and growth deadline and the capital volume here to the right, paying for the company at a sovereign capital market, several credit lines, several investors, a very pulverized profile of our creditor showing the quality and confirmation of this credit quality by the capital market. A very open market when we need to access this because of the recurrence and the growth, the acknowledgment that investors have of our part.

I would like to go to questions and answers, and I'd like to thank you for your participation.

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] So now we have the connection again. We've gone back to the video. So let's go back to our Q&A. Our first question comes from Bruno Mendonca.

[Bruno Mendonca, analyst]

[Interpreted] Two questions. First, with regards to cost environment. We saw the press, the concrete being billing in the last indicators. We saw the competitors talking about this [ fresh ], specifically, this affects companies like [ Direcional ]. So how do you see this? And what can you tell us about this from here on? Have you been able to hold on, have been able to deal with this in the last 2 years, specifically with regards to concrete now? And second one is for you Ricardo, with regards to change in potential programs with the new government. We have seen the people talking about [ Nicas and Mivida ] program coming back. And going back to the old group 1, I don't know if you have any details here, the details on the new program. But this is a question for you. Do you believe there is a scenario where Direcional can go back working on segments that depend on government subsidies and that has a fiscal impact like assets in the past in Level 1. So in your discussions, do you see a scenario of this being possible?

[Ricardo Valadares Gontijo, executive]

[Interpreted] Okay, Bruno, thank you for your questions. First one with regards to cost -- what we have seen is a very benign and very behaved scenario in terms of cost of products that we use in our work sites. It is not something that is concerning us. We don't see signs of price – cost increases that might impact us all concerns.

Concrete perhaps after this period where there was the beginning of the wall, perhaps this was the input that, in fact, had the greatest price increase, which represented for us the greatest challenge. But when we look at this third quarter, in spite of an increase here, we had cost reductions in several other imports that were more than enough for us to be able to have an increase – a 0 increase when you join everything in our inputs.

So when we compare this in our case, we did not have such a great impact and reflects of the slight margin reduction had nothing to do with cost. It was product mix that was being delivered, whether works with them with costs in the past before the increase of concrete because the concrete comes in the beginning of the works. And with the new work are beginning in a scenario of this greater impact because of concrete. So this loss of 35.0% was because of mix, not launches. So it is important to clarify this -- with regards to Level 1 all of the news that we see all the time.

For us, it is important to understand the policies, and it is still early to take any decision. There isn't a way of having an idea as to how the program is going to work because the country situation is still very delicate, a huge expenditure during the pandemic and the country is at a difficult level here, more difficult than in the past. So it is difficult to have an idea of what make a decision without knowing what's going to happen.

An important thing is a program that was presented in 2015, a series of challenges specifically with regards to delay payment of the works and all the rest. So this is a program that doesn't have any delay can't have because the delay in payments means that we'll be financing works through debt and Level 1 was not a program where the price established for units would be able to deal with any financial cost. So payments occurred according to our work, the advance of our works.

So we have to very clearly monitor how these things will work with regards to guarantee and payments being done in the scheduled dates because this really did hurt the companies that worked in the program. So today, we are more careful here, more cautious here when we eventually analyze the opportunities that we will have in the different segments we work in.

There is much that we have to be very careful with here in terms of analysis. And it's important to say that Level 1 is not something that in our vision will be relevant for our operations. We are at the launch and revenue level in the segment, for example, the segments that are possible to work in, which is Level 1, 2, and 3, the old 2 and 3, where we have operations level that allows us to deliver very satisfactory results. Although it's early to say this, we are very cautious today because of past experience before deciding on operating on new segments that can be created in this program.

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] Gustavo Cambauva, BTG.

[Gustavo Cambauva, analyst]

[Interpreted] I would like to ask 2 questions. The first one has to do with sales prices, everybody…

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] I think you froze – your audio has frozen. Your Internet has frozen, [ Cambauva ]. So next question, I will go to the next question. Cambauva's Internet also froze. Fanny, next question from Santander.

[Fanny Oreng Avino, analyst]

[Interpreted] I have 2 questions. So Ricardo you said we're going to get more loans for the plant, more financing. Do you have better conditions to cost funding – costs, the funding in the project, what generated this change at the interest rate scenario, for example, I'd like to hear from you. Now I spoke with Paulo, but with regards to default, you increased provisioning here and in line with what you said, there was a report in [ Valor ] that talked about this, the low income rate, very compromised. So what are you doing in terms of pró-soluto? How do you raise the bar -- strict the bay here a little bit?

[Ricardo Valadares Gontijo, executive]

[Interpreted] Fanny, thank you for your question. With regards to the strategy of incrementing the volume here, we have a gain of 3% or 4% when we compare the costs from companies and the -- what we have in terms of corporate debt so this strategy in mix change is to capture the possibility of having a gain of 3 to 4 percentage points to reduce the cost of the debt that we had in the company. So this is a very relevant value generation, once again stressing in some reports where people have analyzed reported gross margin in Direcional's balance sheet. In the last years, the corporate debt capture costs were low. So gross margin and reported margin were very close.

Now you will see the reported margin and adjusted margin with a slight difference, which will be more than compensated because of the reduction of financial lines, the net financial lines. So it makes sense to increment volume here. With regards to – we have tried to be conservative in this quarter, specifically, pró-soluto portfolio. We try to monetize these assets with very high frequency. So the short intervals where we're always monetizing these assets portfolio is slightly over BRL 200 million. And this semester that we had an increase compared to the last quarter of BRL 5.7 million, almost BRL 6 million provisions for this portfolio. And once again, it is what -- it is not what we believe to be completely it -- it is the correct because of the inflation that occurred in the past, which is going down, but still affects our customer. So we had this increment in provisions, which in our point of view, would not repeat in the same way from here on, but we have to monitor this and the profile of our customer, their income possibility so that they can pay for the installments that they have to pay with the things with us.

And I think things will improve. And we will route for this scenario because of wage increase is right, that should occur because of the past inflation. We should have an increase of wages, which should help the -- and this will lead to more income in the future, and we will be able to reduce this default that we've had. So this is normal. It's under control, but we did have this increment of BRL 6 million in the provisions for payment of the installments.

[Fanny Oreng Avino, analyst]

[Interpreted] A question. Going back to funding. Are we being able to capture SBPE for [ HIV ]?

[Ricardo Valadares Gontijo, executive]

[Interpreted] Yes, SBPE in the [ HIV ] segment and financing to protection in the Casa Verde e Amarela, where the funding comes from FGTS. So here, where it makes sense, we are having great amounts of this financing than we did in the past. And Fanny, if I can add to this, we have been able to do associative credit here with [ HIV ] transfers. So aligned to our business model where we have less capital exposure for us. This is important. It's associative credit. And this -- and here, this has led us to have good alternatives that are important in the financial market. Other banks are looking at this team of associative credit structuring us, structuring themselves to see to us here with regards to this credit.

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] Now I will go back to Cambauva. He's back in the video.

[Gustavo Cambauva, analyst]

[Interpreted] I'm sorry. I have problems with my connection. I would like to ask 2 questions. The first, with regards to average price of sales, you had a strong increment in the price of sales. I'd like to understand up to what point you have been able to increment everything in terms of prices. The recent change is in Casa Verde e Amarela somehow are reflected in this new price? Or do you see room for more increase? And also with regards to [ the debt ] the expectation that you have here. When you look at all the points, the interest of all the developers to offer you a portfolio, the sale of portfolio here. What you've seen here in retail in terms of rate and what we can expect for [ Direcional ] next year might results be more relevant with regards to [ Direcional ].

[Ricardo Valadares Gontijo, executive]

[Interpreted] The first question, the pricing of our products. In our vision, we still have room for adjustments. Of course, I believe that the increase occurred at a higher proportion in the last month, then will probably happen from here on. But in several products in certain states, we still see room for adjustments. So you saw our gross margin having a reduction this quarter. This reduction pace, it is important to stress that it dropped in the last quarter – compared to last quarter.

But still, we have been able to recompose what we had in terms of loss in gross margins. So in certain products and certain states, we will continue working with this price increment to remain with the net sales speeds close to levels that we have been able to deliver in the last quarters. It's always a balance between net sales speed and adjustments. So in the -- and we see perspectives of things happening. Increment should be lower than what we implemented during this year. With regards to [ Direcional ], it is important to stress on your side, for example, sales side and buy side, we prefer at this moment to talk about -- yes, let's talk about operations, but it's still early to talk about values.

However, [ Direcional's ] operation has surprised us a lot. It has been going -- doing very well, we overcome, we exceeded BRL 200 million in credits that was originated. And we look further on the perspective of capturing gain and financial value in [ Direcional ]. This will happen when this portfolio that was originated is sold in the secondary market with a rate compression when relative to the origination rate of these credits. [ Direcional ] doesn't consume rates anymore. And so in the last month, [ Direcional ] is doing very healthily is doing -- is being healthy. And now we have revenue that pays all of the expenses, specifically G&A. And from here on, we're going to try to grow without capital consumption. And I believe that the market, as it is today, which is very net, -- it is very net for things with regards to what we saw comparing the first to second quarter.

So we see a more liquid market. And when we see these assets, we can capture here results. When this is going to happen? We don't know. It is difficult to foresee, but we see a very liquid market, and we believe that [ Direcional ] does not consume cash anymore. So this -- the initial focus company has to be alone independent. And because of the opportunities – but in [ Direcional ], our main target was to revert and not consume cash, and we've been able to do this. And because of the business lines we have in [ Direcional ], we don't see the need to increment G&A cost of customer acquisition. So it's to have a strong cash consumption. The scenario is to be in the breakeven. So when we had the monetization of these assets, we're going to have this. We're going to work for this, but it is early to say when this will happen. And when this happens, we will give notice to the market and you will be able to see what [ Direcional ] can generate in terms of value for our business.

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] Next question, Pedro, [ Suisse ].

[Pedro Hajnal, analyst]

[Interpreted] I have 2 questions. Going back to pró-soluto. But in the company's uptick in terms of the EBITDA that you have here in pró-soluto, if it changed from this new default scenario compared to what you had been ranting until today, until then. Second question, the launches for 2023. I know it's too early to speculate what will happen in terms of changes for Casa Verde e Amarela or Minha Vida-- but in your pipeline, is there a visibility in terms of product and region considering the potential changes?

[Ricardo Valadares Gontijo, executive]

[Interpreted] Pedro, I would say -- specifically in the first semester this year, we had a greater detachment between real estate sale prices and evaluation value by banks. So when a bank appraises a guarantee, a credit that it is granting, it will look at the history of price and assets in the market. So when prices will increase because of cost decreases or a detachment here, this detachment was significantly reduced from the middle of the year to now, and apprises more in line with sales prices. We didn't have a change in our policies when we do an estimate of provision the possibilities when we approve a launch or a project, what we have noticed because of the improvement of assessment, a reduction, a natural reduction of the pró-soluto granted, and this is very positive.

So this amount as a proportion of the total amount sold by the company has been good. And the progressioning we do here for all the feasibilities has been superior to what we've had in terms of default. So this provision is enough or perhaps have increased or not enough to deal with the default levels we have seen in our daily work. With regards to launches next year, we have the projects being approved now. They're all in the pipeline, products, several of them approval and environmental licensing. So I would say in the first quarter, it is very difficult to have a change in the project that is being approved. So perhaps we'll have a project. It is difficult to change products here in terms of construction.

We have a long cycle. So changes do not occur in 1 or 2 quarters. But when we look at the semester next year, if there is a change, I would say, we have flexibility to change certain products that are under approval. In spite of this flexibility not being so big. Pedro, I don't believe that this will be necessary, really, we have been working with a premise, and there might be improvements or changes in the Casa Verde e Amarela conditions, even with the name of – the change of name of the program. But in case there are improvements, I don't see a need to change the product.

And also, we have to see the SBPE the perspective with regards to inflation and rates in the future. At the moment, because of the variables we have, we are optimistic with this segment, although interest rates has risen in the last months and stabilized in last coupon meetings. But when we look in the pipeline, the curve does not show much change. What we have been trying to do is to avoid capital exposure in the purchase of acquisition of land.

We're being very conservative here. We've been doing only via swaps avoiding capture of financing here so that in case there is a demand for a change of project, we don't have -- we are not very hurt here because generally, to change a project, it takes a year to be approved is not difficult, but we try to mitigate things, minimizing our capital exposure in our projects. And I think we've been very successful here.

[Unknown Executive]

[Interpreted] Pedro, just to add to what he can is saying with regards to pró-soluto, I think the -- Direcional has been very conservative because of pró-soluto. And this has been success, led to a success in the monetization of our port sales and the market is looking at this. So still, we talk about pró-soluto, the market can see the quality of this asset. So nobody better than the market to confirm, to acknowledge the conservative position that we've had with regards to the leveraging of our customers, a solid portfolio, which begins to demonstrate important recurrence with the same investors in the past -- from the past buying new portfolios. So this is an important point that acknowledges this thesis.

[Pedro Hajnal, analyst]

[Interpreted] Just a follow-up with regards to the launches question. Now looking in the short term next year, but the recomposition of land bank, do you have a change or a preference -- a preference per region for region? Well, we have noticed a very satisfactory performance with [ HIV ] products and Direcional products.

In all regions, we work in. I would say that [indiscernible] region, we have been very careful with looking very quickly, not because -- not only because of supply, but in Sao Paulo. So obviously, this is the state that has the greatest amount of works that are in progress and the demand for labor and equipment is greater here, not only in terms of supply but execution. This is a region state that demands more cautiousness, more care.

And we have tried to concentrate our operations in areas where we see regions where we see operations with less prices, and better balance between supply and demand. But I would say that nothing -- it's not too much of a concern. I'm just saying what we've had in terms of cautiousness. And I would say that this is the area we've been more careful with. This is the area we've been more careful.

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] Next question, [ Rafael, Safra Bank. ]

[Unknown Analyst]

[Interpreted] I think you've mentioned this. I would like to ask if you can show us -- can you give us a bit of light on the sales in October, the impact of elections because of elections, you had last 2 weeks of sales. So the end of September and beginning of October was a period where we noticed, clearly, the greatest challenge in terms of sales, customers waiting to take decisions here in the beginning of October was more -- even more difficult. At the end of October, we already noticed an expressive increment in the sale -- in the volume of daily sales. So before the first elections around until 15 to 20 October was a very challenging period. At the end of October, we noted an important improvement in terms of daily sales volume. And from here on, I would say we have the World Cup now, which is an event we have to monitor very closely the behavior of the customer. And in spite of the fact that we have an expressive amount of projects in terms of launches for the fourth quarter, we will do these launches according to how we perceive the market. But October was okay. November began well.

And now we will see the end of November and December, where we have World Cup. And another -- another aspect that I believe is important to share with you. Even at the end of September and October, where we noticed a greater -- a smaller sales volume, the volume of visits did not change much to the contrary. We had more visits than we had in previous periods. What changed was the visit and the decision-making to buy the real estate. So there was still a demand, but the conversion here decreased. So the visits are in our base, and we have worked these events that are trying to -- even trying to convert visits into sales. It is early to have a conclusion here, but this was the scenario we noticed during the election period.

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] Next question, [ Ugo ], Citi Bank.

[Unknown Analyst]

[Interpreted] Congratulations for results. We saw the expose the data showing the evolution, the track record of originations. You can see here the behavior of each income segment from 1,000 to 1,000 income level, BRL 1,000. In the case of Direcional now, this draws the attention income rates from 5,000 up had more substance greater than the upper part of Group 2, the superior parts. So I would like to ask a few [ doubt ] something in the stands. If you have a price point, we have a performance that is [ better ]. And if you can tell us the exposure that you have in each income level – for each income level? And also a third question, thinking of income levels that overflow that go over the Casa Verde e Amarela program, when we think the protest financing. So imagining a rise in financing rates and the SBPE financing. If the pro -- if this is in line, you can count on for absorption in '23.

In my view, this increment in the sale – in the volume of sales for over 5,000 income levels is the result of products that have been offered in the market. So in this period where there was an increase of costs of materials where they migrated to superior products where the impact of price increase was absorbed by company – that families with higher income levels. We saw this in the Group 3. And this great sales volume of Group 3 is the results of this. And we don't believe there's going to be the same amount of demand for lower income. So it's an issue of supply. And it is because of this, we continue seeing a huge opportunity to work with Group 2 families with income of up to BRL 4,000 and products of up to BRL 200,000. It hasn't been so as easy as was in the past, to render these products feasible because of the cost increase of materials.

But we try to maximize as much as possible, as much as we can have our exposure to this segment, specifically, when you look at consolidated numbers, where the possibilities -- greater possibilities are families with over 5,000 income level. So we've been looking at this segment. And we want to work with the Group 2 segment, although this is more challenging in certain regions, where we can have sales prices that -- where we can see to families that have lower than BRL 4,000 income levels. We are one of the few companies that are offering this kind of product. And we believe here, we will generate value. From here on, with regards to the [ pro cheat, the pro quotes ], we haven't noticed it represent – a large representativeness here when we deal with customers that are buying products that are not in the Casa Verde e Amarela program. We believe there would be a great representativeness because interest rates are lower than the SBPE segment. But currency, in spite of the fact that it grew, it grew less than what we believe would.

So if there is this difference in rates between [ pro costs ] and SBPE, the [ pro costs ] should have greater representativeness in because of operations. It is still interior what we expected, and it should gain more representativeness in the future in spite of the fact that the [ pro costs ] has some parameters and other customers cannot quite fit into this in terms of what Casa Verde e Amarela represents. I think that little bit, it will gain more representativeness and this might be a way out in case we have an increment in the SBPE interest rates. This is not a scenario we're working with. So we have to look at -- when we look at the other banks. We have to see the profile and behavior of these other banks like Casa. But when we look at the average, this is a scenario we're working with, but it's too early if the interest grows, this program certainly will grow more.

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] Ygor from XP.

[Ygor Altero, analyst]

[Interpreted] I have 2 questions. The first to understand in your minds with regards to the FGTS, if it's clear how this measure FGTS management will work and your position here all the way to BRL 2,400. If you see an increase of this measure for higher levels. Second, just to understand the competitive parent [ parameter ], I would like to see this competitive scenario. I want to hear from you. Did you see an increase in competition here?

[Ricardo Valadares Gontijo, executive]

[Interpreted] With regards to the consigned credit – at the FGTS consigned credit, it's not in effect yet. It is what we've heard of and should be a priority for lower-income families. My vision is that the impact of this measure for customers that fit in income level is very relevant. We have certain products where the target public is this customer.

The lower income 22,400 below. We have several things above this. But this one where pricing will allow us to see to these customs. We have 50%, 60% conditioning customers where the maximum income commitment is not approved.

So we have products to see to these company, although things are not in effect yet. If this will see to the income rate will be -- go to families with higher income levels, it is difficult to see because we have to see the impact of the capacity of these families being seen to and also the impact in the consumption of funding that has gotten some here of the [ GPS FTTS. ] So this has been considered and also a way of using this for the ones that need them more. So it's to have the least impact in the FTTS funding program. So we have to be able to try to do the best way to do this to see the greatest amount of families here. And the use of resources, if it is not very strong, it should perhaps expand. But it is difficult to say what's going to happen.

I think that the way things are being bought off is still very intelligent and very fair because these are the families that have the greatest need. And based on the previous question, these are families that vis-a-vis this cost increase scenario has gone through greater scenarios and have had great challenges of being able to buy their own home. So I think the way this is being done is very healthy.

And with [ HIV ], we have a scenario. Because of the construction process we use, the efficiency we have in terms of competitiveness and production costs, my vision [ hiv ] offers cost benefit to the client, which is very, very interesting and competitive. And this is why we've noticed a very healthy demand for the products that either have launched in the market. The cost-benefit is certainly unique.

It's very differentiated. And we believe that we have positioned here. Obviously, there are other companies working here, but we are very well positioned in a level in a niche where we have been able to offer relevant differential for our clients. So we are very optimistic here in this segment.

And I believe that the performance is greater than what we imagined in the beginning of 2022, where we had interest rate increase scenario, and we see an even better performance than what we believed that we were going to have this year. And in my view, this is because of this cost-benefit that [ HIV ] offers in the market and to our clients. Perfect. Thank you.

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] Next question, and perhaps just the last question. [Operator Instructions] But now this is Stephen from Goldman.

[Unknown Analyst]

[Interpreted] I would like to ask 2 questions. One easier one, simpler one, similar to what Pedro said, but long term here, how do you see the breakdown between low-income products and mid-income products in the long term. You launched 40% this quarter. So what about the long term here? This is my first question. And the second question has to do with measures that have already been implemented. You talked about the FTTS consigned credit, but we also imagine that you would have something – we would have margin to increase prices, but this public ends up being more sensitive to price. So because -- no, from what you see here, since the implementation, could you assess these changes? And just how much you benefited from these changes?

[Ricardo Valadares Gontijo, executive]

[Interpreted] Stephen I would say when we look at the long term, it is difficult to see the breakdown between [indiscernible] now is more -- it's easier to foresee things. Because the costs are not linked to market interest rates. [ Direcional ] now, the demand is well over what the program can produce. So there is a strong resilience in terms of demand and forecastability which is big. So we analyzed the program of 2010 and 2020 pre-pandemic. Everything was very stable every year with or without crisis, a certain amount -- a large amount of units were sold every month, every year. So it was very easy to forecast. With regards to HIV, we have a strong impact of interest rates in the country. Although in savings account with a cap of 6 and 6 -- plus 16, we know that the funding of banks is not saving as account. They're issuing other instruments connected to the CDI. So the weight -- the average weighted cost right between caps is not the difference between cap.

So the SBPE interest rate where funding is -- part of the funding is connected to [ Selic ]. When we look at the [ Selic ], the banks analyze the behavior of the pre-rate, I think we have more activities in the [ HIV ] segment. But the important thing is the flexibility we have to implement the segment, introduce Altus because of what we notice is an opportunity, gives us a very strong competitive advantage where we will continue operating without having to have a strong reduction of the size of our operations. And in a way, that can impact our capacity of giving a return to shareholders and also gives us a possibility to grow according to a scenario. This is very important as long as we have the pillars of our business, which is a transfer in the plant which gives us forecastability here to operate with levels that are very healthy, very low leverage needs to use leverages. We reduced default here.

The construction process allow us to minimize risks with this with off-plan transfers. So we can minimize the inflation impact here. The sales force is another variable giving us comfort and as well as sales force, own sales force, we may not advise the capital exposure of our business, which we have done in a very efficient way. And so dropping land, trying to minimize cash exposure, and this has allowed us to transform our business and the delivery to have greater returns to shareholders. With regards to your second question, the impact of measures implemented in Casa Verde e Amarela, our capacity of repricing the demand of our products, we are in a very competitive sector. There are a series of companies here. So it's not such an easy calculation. It is not easy to see how prices can be transferred here when you work on an operation. So this is a very important message to give to you who are here doing analysis all the time.

The market is very competitive. These adjustments did not occur the next day. We have to be very careful here because our market is very close to periods here when we see the impact between supply and demand and the capacity of translating this into price. This is not obvious. What we have, it is important to stress, we are working with margins of 35% gross margin. We have always shown the market that they should expect between 33% and 34%.

So we are already delivering margins that are above what we believe are recurring margins in our business. So I don't think a change in the program in terms of your analysis with regard to Direcional. I don't think there should be really big changes from what you should consider for the company. So this is not -- it's not a change in the program that should increase things.

Obviously, we're going to extract the greatest volume possible for our business, generating value for the customer, but also we need to have a return for our shareholders in our vision, variables and our operations in our operations are very healthy because we have been able to deliver results. So I don't believe this change in program should impact Direcional too much.

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] One more question now, [ Andre, Itau. ]

[Unknown Analyst]

[Interpreted] Which has -- this team has been addressed here with regards to possible changes in the program next year, stimulating other low-income levels here. So considering a scenario for example, a favorable here. How do you see the engineering capacity execution today? Do you think you can accelerate what you have in terms of production? Or are you closer to limit? Could you tell us a little bit about this?

[Ricardo Valadares Gontijo, executive]

[Interpreted] Andre, in the first slide presentation, we showed our sales volume in the last 12 months launch, sales and revenue years. In the first slide, we have sales and revenue in the last 12 months and showing how these indicators have grown. Our sales level is close to BRL 3 billion. Net revenue slightly over 2.1. So since with net revenue, you don't have income, perhaps one is slightly over the net sales here. But we have clearly revenue increment perspective that is expressive because we're selling more than what we have as revenue. So this revenue growth is connected to advances of our work because at the POC, the percentage of completion we adopt in our calculations. So naturally, there is an important growth of the volume of works ongoing.

And in our view, the focus and value generation leverage that we have, the growth of this revenue with the maintenance of our efficiency without growth, meaning loss of efficiency. We know there are challenges to grow in our sector. So we believe that greater value will be generated today coming from the growth of revenue, maintaining the efficiency that we have been able to deliver and using our operational leverage quality rates. So I believe that most definitely, you will have a volume launch volumes closer to stability and our focus will be the continuity of growth of works, engineering, maintaining variables under control so that this revenue growth translates itself into the capture of the greatest volume. Revenue growth is given here because of our business and the growth of launches is not something that can be a priority for the company because we are already in very healthy levels here. Is it clear to you?

[Paulo Sousa;Investor Relations Director, executive]

[Interpreted] Questions and answers. I don't think we have no more questions and answer here. So now I'd like to give the floor back to Ricardo for his final concentrations.

[Ricardo Valadares Gontijo, executive]

[Interpreted] So once again, I'd like to thank you for your participation and say that the challenges always exist. So we'll always try to overcome them, but we believe we are -- in the last years, we have been creating a very consistent journey delivering results and increasing results and value, not only to shareholders, but our clients, which is a priority here in our company. And their satisfaction is all success perspective in the future. So we're still working to generate the greatest value possible for everybody here. We see the possibility of continuity in this journey, continuous improvement with regards to whatever we can do. We're going to try to do the very best possible in terms of assets monetization, a return of capital for our shareholders.

We are very focused here so that we can have a growth in continuity of growth without impacting the booking of the book of the company. So -- this comes from -- we have been able to generate value with low risk in our business. We don't want to work with excessive leverage. So working capital margins, we will continue here. We're doing very good work or obsessive for improvement, and we want to deliver increasingly better and more promising results when we look at the future. Thank you very much. Once again, we are always at your disposal to clarify any questions that might have remained, and we will see each other in the next few months. Thank you. Have a very good day, everybody.