Direcional Engenharia SA
BOVESPA:DIRR3
US |
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
|
US |
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
|
US |
Bank of America Corp
NYSE:BAC
|
Banking
|
|
US |
Mastercard Inc
NYSE:MA
|
Technology
|
|
US |
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
|
US |
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
|
US |
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
|
US |
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
|
US |
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
|
US |
Visa Inc
NYSE:V
|
Technology
|
|
CN |
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
|
US |
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
|
US |
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
|
US |
Coca-Cola Co
NYSE:KO
|
Beverages
|
|
US |
Walmart Inc
NYSE:WMT
|
Retail
|
|
US |
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
52 Week Range |
21
33.29
|
Price Target |
|
We'll email you a reminder when the closing price reaches BRL.
Choose the stock you wish to monitor with a price alert.
Johnson & Johnson
NYSE:JNJ
|
US | |
Berkshire Hathaway Inc
NYSE:BRK.A
|
US | |
Bank of America Corp
NYSE:BAC
|
US | |
Mastercard Inc
NYSE:MA
|
US | |
UnitedHealth Group Inc
NYSE:UNH
|
US | |
Exxon Mobil Corp
NYSE:XOM
|
US | |
Pfizer Inc
NYSE:PFE
|
US | |
Palantir Technologies Inc
NYSE:PLTR
|
US | |
Nike Inc
NYSE:NKE
|
US | |
Visa Inc
NYSE:V
|
US | |
Alibaba Group Holding Ltd
NYSE:BABA
|
CN | |
3M Co
NYSE:MMM
|
US | |
JPMorgan Chase & Co
NYSE:JPM
|
US | |
Coca-Cola Co
NYSE:KO
|
US | |
Walmart Inc
NYSE:WMT
|
US | |
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Earnings Call Analysis
Q4-2023 Analysis
Direcional Engenharia SA
The company concluded the year on a high note with total launches amounting to BRL 4.8 billion, marking a significant 34% growth from the previous period. Both of the company's core businesses, Riva and Direcional, saw a healthy uptick in their operations, growing approximately 26-27%. Adding to this success, the company managed to secure an additional BRL 200 million in terms of PSV through the Pode Entrar program with the Sao Paulo local government. Prominent historical performance was underscored by an average cumulative growth rate of nearly 29% per annum since 2016, outpacing that rate with a 34% growth in the current year, demonstrating persistent upward trajectory and operational prowess.
The company's sales paralleled the growth in launches, registering a 33% increase, indicative of robust demand and effective go-to-market strategies. The fourth quarter closed triumphantly as the best in the company's history, with a consolidated net sales amounting to BRL 1.2 billion. Despite seasonal challenges leading to cancellations in December, particularly impacting the Riva segment, Direcional faced these headwinds successfully, closing the quarter with a net sales speed of 17.2%, one of the year's best performances.
Financial highlights for the year included significant revenue consolidation, with a 26% growth of almost BRL 3,200 million. The growth in deferred revenue indicates an expanding risk profile but also points to imminent revenue realization, with a growing backlog margin suggesting favorable future exercises. Gross profit saw quarterly improvement, with the fourth quarter's gross margin reaching 37.1%, while the adjusted gross profit for the year stood strong at BRL 856 million, reflecting the company's overall health and stability.
Commercial expenses were kept flat despite achieving the highest volume of sales at BRL 4 billion, showcasing disciplined sales expense management. General and Administrative (G&A) expenses were strategically diluted through digital transformation efforts, leading to a substantial decrease in back-office operations. These efficiencies contributed to an impressive EBITDA margin growth, up by 3 percentage points, reaching 24% in the fourth quarter. This trend is evidence of the company's ability to generate positive operating results consistently.
The company emphasized a strategy to reduce minority interest stakes in projects, allowing for enhanced growth without diluting shareholders' profits. This approach, coupled with reduced dependency on minority interests, ensures that a significant portion of results benefits Direcional shareholders directly. Execution of this strategy was significant in achieving a net margin of 15.4% for the fourth quarter and almost 14% for the year, underlining the company's focus on delivering shareholder value.
Good afternoon, everybody. Thank you very much for your participation here in this video conference of the results of the fourth Q, it is what we, firstly, as in every year, every quarter, we will go through the presentation of the results, beginning with Ricardo, and then Paim goes to the financial. [Operator Instructions] And this event, this is exclusively destined for investors. Our channel is open for journalists.
And I would like to give the floor to Ricardo who will begin the presentation of the results.
Good afternoon, everybody. It is a huge pleasure to once again begin one more earnings release with regards to the results, where we will address the main points and highlights, relative to our year of '23 and the fourth Q last year. Well, we closed one more year where we believe we have been able to continue with our operations within what we had traced as goes following our internal guidelines defined for our teams. And we believe our results have been even clearer for the market, very consistent, very resilient results.
And this has been a work of which we all in the company are very, very proud of. Obviously, we have the merit of our team, and I would like to use the moment to thank them and say we continue with this journey, the fourth Q last year, the closing of '23 was just one more chapter in this journey that we have been through and of which results have materialized and are still to materialize. And this is what I would like to share with you here in my initial presentation.
So now beginning with the main highlights, which is where I would like to give my contribution in this call. And obviously, I will be at your disposal during the question-and-answer session, questions that remain here. I would like to show you some very relative points. And are very, very important. And it is very important for this to be clear. We closed to '23. Specifically here, you can see in this top right corner with a total launch of BRL 4.9 billion, net sales of BRL 4 billion, and total net revenue.
This is the revenue that was recognized in our balances in our bank statement, in our financial statements and the ones the partnership with other companies that we do not consolidate in our statements, but they enter as equity equivalents. So when we consider these revenue from these revenues that we do not consolidate, we reached a total amount of net revenue of BRL 3.200 billion.
So -- and we have entered via equity equivalents. So when we consider the last 3 years, we doubled 2.75x. This is a very expressive growth. When we analyzed last year, I said latedly, launches was 52% more than our revenue. So there is a perspective of continuity of growth of our revenue, which is very strong in the following quarters because of this 52% gap, between what we have launched and what we received in revenue last year.
We recognized review, once our works could advance, right? That's why we have this gap between launch, sales and posterior recognition of revenue. And another thing that is very important to stress here, to highlight here was the expressive growth that we had in our future, our backlog margin, the deferred revenue. And December '23, when compared to December '22, there was a growth of 60%. It went from BRL 1.71 billion at the end of '22 and our revenue with our deferred revenue got to BRL 1.78 billion at the end of '23. So this information relative with regards to our margin or backlog margin, it's here in the slide.
So this once again demonstrates the perspective of growth, once our works continue. But even more important than the growth of the absolute revenue here is the expressive growth that we delivered in a deferred revenue or backlog margins. So the fourth Q '22, our margin -- our backlog margin was 39.7%. And at the closing of '23, our backlog margin was 42.5%. So we had an increment of 2.8 percentage [ rev ] in our deferred revenue based on a stock of revenue that was BRL 1.700 billion. This is very significant. It's a clear indicator that there is still a perspective to develop gross margins that are extremely solid in the following quarters.
With regards to our gross margin, which is one of the highlights of our operations. During '23, we had an important growth in our gross margin, 1.1 percentage point, 35.6% in '22, closing '23 with 36.7%. We analyzed our fourth quarter, when we analyze it, it was 37.1%.
This is a very healthy gross margin and a very positive perspective because we are delivering projects and works that are at the end of the last stage, they were launched in '21 and '22, where we had a high inflation and new projects launched at the end of '22 and beginning of '23 were those projects that allowed us to deliver this growth of our backlog margin.
These are the projects that are going to go through our balance -- our statement of accounts once we continue with the works. So we are very, very, very optimistic here with regards to revenue and healthy margins.
Another very important item to highlight here is all the results that we are having. With regards to our operational leverage. When we have this expressive growth of our operations. When we look at '23 and compare it to '22. And considering our total gross revenue, we had a G&A [ admission ] of 0.34 percentage points -- trade expenses, or commercial expansions, which is a highlight of our work.
As a proportion of the net revenue, we had a reduction of 0.7 percentage points in commercial revenue. And when we analyze net sales, our commercial had a reduction of 1.27 percentage points. So when we look at last year, if you analyze this, and we'll go see this further on, we had exactly the same amount in absolute value of commercial expenses, BRL 203 million in '22.
Last year, BRL 202 million, exactly the same amount. And we saw 33% more in '23, which clearly demonstrate the results that we have been having because we've had more products available for commercializations in the areas we work in areas where we have had been able to gain market share. And this is a clear example that the scale of our business is regionally concentrated, it is city by city. And the growth that we've had in these more recent areas that we've been working on, have allowed us to gain synergy gains that have materialized with this expressive reduction, we've had in our commercial expenses, right, as a proportion of our revenue and sales.
We believe from what I said in the beginning, that this 52% gap between launch and sales, it is most probably -- we will continue capturing the benefits of this gain in scale with continuity of synergy gains and dilution of our expenses, allow us to continue delivering net margins, which are increased more and more.
EBITDA margin. That 1.1 percentage point of gross margin gain, plus synergies and the dilution of our expenses allowed us to deliver an EBITDA that was 3 percentage point in '23, more than in '22. So our EBITDA margin went from 20.2% in '22 and reached 23.2% in '23.
And in the last line, our net margin, the gain was even more than that 5.1 percentage point. In '22, we had a net margin of 8.7%. And in '23, we delivered 13.8% net margin. Net margin grew 58% year after year. So when we analyze the fourth Q last year, isolated it. Our net margin was more than 15% -- 15.7% point which clearly shows that in the fourth Q we had a net margin much more superior than the consolidated year, which shows the continuity of gains in synergies, efficiency, where this gain translates into a much more superior gain in our net margin and represented a net revenue of more than BRL 100 billion.
Having said all of this, now I would like to talk about the beginning of the year, we can still see a very expressive demand for our products. We had January and February, where we concentrated in the commercialization of projects launched in the third and fourth Q last year. Where we had volume -- launch volumes, which were very expressive launches in the second Q last year, more than BRL 2.9 billion. And we began '24 to commercialize these projects, which were rented available for sales at the end of last year.
So we saw January and February with solid demand. And at this moment, maturing this moment where we have controlled inflation, the cost of our products are controlled. We've had comfort here. And with regards to this perspective of a net increase of costs. So within this context, we're concentrating all our efforts in net sales speed, so that we can deliver this growth of our operations with the least demand, in terms of working capital.
One of the main levers we have, in order to maintain this growth demanding a minimum working capital is net sales speed. So we have been strongly -- working very strongly. All our teams are really dedicated to increment our sales speed, and this is going to be the main lever to generate value to our shareholders in '24. This is our greatest priority. And with this growth of net sales a reduction of cash consumption in the delivery of this growth in '24.
The objective is to continue returning capital to the shareholders, always keeping our capital structure in a conservative way, everything under control. But this cash generation that comes from the increment in net sales is the capital we are going to try to return to our shareholders. So it's to increase even more our return.
So these are the main highlights. I tried to talk about the priorities for '24. And now I will give the floor to Paulo, who will address the operating highlights of last year. And then afterwards, Paim will address the main financial highlights.
Good afternoon, everybody. Once again, going over the operational operating launches. 2023 was a year of much growth. We would like to remind you, we began the year with changes in program Minha Casa, Minha Vida program, where the 2 main businesses in -- of the company, Riva and Direcional were impacted. Riva had an increase of the cap of the program, and we discussed this a lot during the year, more than 70% of the Riva inventory in the program. Relative part of the LandBank and showing the product.
So at the end of the year, we concluded the year with BRL 4.8 billion in launches, almost BRL 900 million, 34% growth. And it's important to see the growth of both businesses. They grew approximately 26%, 27% Riva and Direcional. And at the end of the year, we were still able to conclude the year by contracting another BRL 200 million, in terms of PSV in the Pode Entrar program of the Sao Paulo local government, that allowed us to -- that showed us -- that happened in the year.
Here, we tell our story. Those of you that have been tracking us for some years. We've had a lot of growth. We grew -- our accumulated average growth from 2016 to today is 29% a year. And it's interesting to compare with the year, we grew 34%. And after growing all of this in the previous years, and now we are growing another 34%, almost -- here, we have 2018 -- 2018, 2017, 2017 and all full of new growth. And when we see sales, the same thing, it grew 33% aligned with the launches.
Ricardo said something important. When we look at the net sales speed that where we always go after and increase. But during the year, sales and launches accompanied in terms -- the launch was grew 34 and sales 33. In the quarter, we closed the year as the best quarter in our history, [ BRL 1.2 billion, BRL 216 billion ] for Pode Entrar and it still was the best quarter.
And once again, in the last year, since 2016, we had 35%, 36% -- 35% average growth, which shows the capacity to operate our strategy, growth and get to a level of the company that allows to have a relevant operating leverage. And lastly, the net sales speed which is our challenge now because we're focusing in an increase in and net sales speed.
Our consolidated net sales per quarter was 19, considering Pode Entrar. Without Pode Entrar 17. In the last quarter, the net sales impact was impacted by the Riva segment that had an increase of launches, but it is December is a month with a lot of cancellation. So Riva suffered a bit in the fourth Q. But Direcional, because of the products we placed, we offered, and the improvement of the program and the effort of our team, we closed the quarter at 17.2%, as one of the best of the years.
This is a summary of the operating highlights. And now Paim will tell us about the financial results.
Thank you very much, Ricardo, Paulo. Good afternoon, everybody. Thank you for your participation in our earnings release with regards to the 4Q '23. Now let's see some more granularity here, the financial highlights for you.
So as Paulo showed us from an operating point of view, the launches is followed by sales, works advanced then, and then we acknowledge the revenue. We have been explaining this to all of you during all of these quarters, and this revenue is coming now. We did an exercise to present the revenue we consolidated in our balance sheet, which goes to BRL 255 million in '23 and the ones that are not consolidated. We have almost BRL 3,200 million, a growth of 26%.
When we consider that the projects that we do not consolidate in the balance sheet, we do this in works in back office. We do all this work, right? And so we -- and since we saw launches and sales, I think it is fair to show you the revenue that is consolidated considering the SPVs that we do not show in the balance sheet.
To the right, we can clearly see the deferred revenue growing substantially. This means that the risk growth. This revenue will appear in the statement very soon. We've advanced up the works. And we have a margin -- backlog margin for future exercise. We can see that there is a growth tendency here in this margin, reflecting a very promising scenario from the point of view of input negotiations, with our main supplies and with the continuity of transfer of prices for some products. So in fact, we have been able to show backlog margin, which is very interesting and strong, during all of these quarters, and the trend here is of growth.
Next slide, we show you the gross profit that we have managed to reach with a quarterly growth, gross margin in the fourth Q, reached 37.1%, compared to 37% in the year. And once again, this reinforces this comment with regards to this positive trend with regards to margins once we have, with the normal conditions, right, in terms of temperature and pressure, we know that the world is very volatile, right? We don't know what might happen in the near future, but the perspective is positive with regards to the maintenance of this trend. Also, we reached in '23, BRL 856 million, in terms of adjusted gross profit, showing the positive vital signs of our business.
To the right here, we see just how our business has -- has a stable margin, right? It looks like a Swiss clock, very stable margins, and we have been able to do all the -- to manage everything. We are acknowledged as a company in terms of operational execution, engineering with a very positive record. And this is clearly shown in the gross margins and the operating results of our business.
Here, in this slide, I would like to begin with the right, highlighting sales expenses. We have been able to do a fantastic work, in terms of growth of our operations and sales. We've reached the greatest volume of sales, BRL 4 billion. Even so, we kept the commercial expenses flat.
Here we have been able to have sales expenses under control without losing our sales pace. '24 is our main strategic driver of sales, #24theyearofthesale. This is what we discussed in our convention. And we are going to be looking at this point here.
Obviously, with the results of the management of sales expenses. Here to the left, the result of operating leverage, a reduction -- a dilution of G&A, much embarked technology here. We're almost getting to 200 RPAs in our back office operations. And we can see the results here of this digital transformation that goes to Direcional. Today, we have the G&A lines, a reduction and dilution here once the top line is growing, as we mentioned in the other slide, the SG&A is under control. And we then will potentially be able to see a bottom line that is growing in the next quarters.
EBITDA margin. EBITDA margin also a growth trend. We are delivering 2023, BRL 547 million in nominal EBITDA. This is an important growth relative to '22. 3-point percentage growth of EBITDA margin reaching 24% in the fourth Q. And when you look at the longer perspective, we can see our capacity of generating operating results, which is very positive, every single quarter.
To the left here, we present to you the results of the equity equivalents. Those SPS that we do not consolidate. And where we don't see the revenue, we recognize this equity income. The results through the equity income. And so this result is happening in an important way.
We grew 147% a year. Lucio, which is our partner in Sao Paulo with the duet products, right? They are very important here in this result, among others, and among other SPOs that we do not consolidate in our balance sheet. To the right, we have been talking to you during all these quarters about strategy to reduce minority interest stake in projects. This was very important for us.
At the moment, in the past, to have the minority interest, when we were going tackling new areas. But today, we are have new areas, and we don't want to go into new areas. We have an important brand here and also stakeholders with regards to Riva and Direcional in the areas we're in, and we don't need to -- this means that our operations can grow without the intensive stake of minority interest. So the results remain -- a large part of the results still goes to the Direcional shareholders.
And after all of this, having said all of this, translating all of the previous slides, we have reached the 4Q 15.4% net margin in the year, almost 14% net margin. Net profit, 76% higher. So in spite of the numbers, that Paulo showed, that was similar to the growth of a startup in -- around 30% launch, 30% sales. This is a startup that generates important results. It is incumbent generating important net profit.
So this joins this growth with the results with an increasing results, very solid results, and we are very proud to present this to you. To the right here, we also present to you in a longer retrospective ROE, how it has been going, reaching 20% and the net margin quarter after quarter. And our perspective is that this number will continue with this growth trend.
Lastly, but as important as our capital structure. We ended 2023 with the best credit situation in the history of the company, BRL 1.327 billion, in cash, enough to pay up all the indebtedness of the company. And still, we have BRL 72 million. This means that in '22, we had 3% and now we have less than 3.4%. For obvious reasons, this is not the most efficient structure, capital structure. We hope to have around 20% here. We did a follow-on.
In fact, without debt, the trend here with the growth of the operation, we go back to between 15% and 20% here of [ our PE ] And this ratified, confirmed by our quality, right? We are one of the few companies in Brazil that are AAA, now rated by S&P as AAA.
Thank you very much, now we go to questions and answers.
Thank you very much, Paim. [Operator Instructions]
The first question, [ Maria Angela, Itau ].
I have two questions. I would like to talk about, for '24, the revenue, you showed a mismatch between net revenue and launches then over till now. And the number here is slightly below what we believed. So how do you expect the revenue should reach the expectation for '24?
Also, I would like to ask about this speed of sales, that is that was considered the main priority for the year. I would like to understand the value that you, in fact, imagine and how do you believe that this is going to be reported to investors?
Maria Angela. With regards to revenue, and then I will talk about DSO, we don't begin work during the rainy period. Construction works, right? We have excessive costs in the part of the movement of land containments, right? So it doesn't really make sense for us to begin works in the rainy period. So it is natural that the fourth and first quarter do not have the beginning of construction works.
So revenue recognition has suffered, and impact here works are delivered in this period, but they don't begin. Most of our works beginning now. Works that were launched September last year. So the perspective of an increase in revenue recognition occurs from the second quarter on, when we begin construction works.
But when I say that January and February is a year, where we concentrated our sales efforts in those units that had been launched and were available for sales. The average POC of sales in January and then February tends to be higher then the average POC happened in the third and fourth Q. So when we think of the first Q, well, works do not begin, but the average POC is over is where we have a concentration of those products that begin works.
This greatest volume can compensate for this effect that we don't have all the revenue this period, but there must be a positive impact this higher volume of sales. The POC that comes from the beginning of their construction works, the first, the second, and third quarter is, well, we have a great increment of square meters built, so we should have a growth of revenue. And then we see how sales perform in this period. So one thing can be added to the other. So when we talk about revenue, this is what I have to contribute.
With regards to net sales speed in our vision here, we should be going after of net sales close to 20%. It is difficult to say if this is going to be reached or not. But we have made efforts in this sense. When we make an analysis of the volume of inventory, of we have. And the increment -- we have an increment of net sales percent, up 3%, would have an important impact on cash generation for us in this year.
So we have searched for this. We have aimed for this. We're going to have this growth in net sales, during the year because we've been trying to do this correctly, which is to invest in our sales team, qualifying them, having the best professionals here, strongly investing on online sales, sales apps. So this is an aspect of which results materialize gradually.
And at this moment, we have not seen the need, no need whatsoever for any kind of adjustment in the price of the product because it would be the wrong way to do this to increment VSO net sales. But efforts, investments in online sales and all the rest, I'm very optimistic. I'm very enthusiastic with the results we've seen from last year now to year-to-date. And I believe that the work we've done will demonstrate results. It is difficult exactly to say that how much of the net sales speed is going to be. But I would say 20%, clear?
And also because of this adjustment in price is not being done. Can we understand the backlog margin of 40% is what you're beginning to do with more recent launches in new projects.
Well, it's important to highlight, we had 2 Pode Entrar contracts here. Since the unit is 100% sold, right? There is no default in the pro soluto. We don't have provisions for this kind of loss. So we have a G&A, which is much lower to operationalize. The Pode Entrar product, right? There is no transfer here. So here, the gross margin is inferior to a project that is traditional. So what I want to stress here is that this reduction of 0.2 percentage points in our backlog margin, occurred in a context where BRL 200 million was signed of the Pode Entrar and gross margin expected are inferior to this. So this is a sign that our backlog margin would have grown in the fourth Q, if it went for the Pode Entrar program.
And now we have Bruno Mendonca, Bradesco.
Ricardo, I was going to ask you about the backlog margin in Pode Entrar, if it was within this accounting, right, in this calculation, you said yes. So this is a very specific issue. So it is defined that the accounting recognition of this Pode Entrar will be in the reported gross margin, not a separate line. So the lower gross margin of Pode Entrar might impact your reported margin? This is my first question.
Bruno. Maybe Paulo or Paim can add to this, in case they have a point to add to this. We have, yes, Pode Entrar will enter with a sold product. It would impact the gross margin. But like we did this first quarter, this quarter, the idea -- it's the margin -- gross margin ex Pode Entrar, right? This is a business that has a time limitation or deadline. It is not something that's going to be recurrent. So it's important to show the market what gross margin ex Pode Entrar would be right. So that the analysis of our long-term analysis can be assertive. Yes. It goes through the gross margins, but we will always report this adjusted gross margin to you.
My second question here. Can you give us a little color on the distortions between the different geographies, areas you're operating in, right? If there continues a relevant difference in the areas, where we have great leaderships, and other more competitive areas like Sao Paulo. And how have you imagined its evolution? What kind of adjustment do you see in this geographic mix? And what kind of impact can we expect from the results coming from this adjustment in the mix?
Bruno, yes, areas where we have more mature operations and greater market share, we've had benefits in 2 fronts. One, we have been able to deliver a higher gross margin because we better negotiate with our suppliers. We negotiate the price of the service rendered when we have more scale in that area.
And when we have a greater share, we can better price our product. So I think these 2 points allows us to deliver a higher gross margin. And also, we have the sales expenses. Since we have a great array of products being offered, we end up converting to and having a conversion of greater sales in those areas, we have less possibilities of products to offer to that potential buyer.
So we have a lower sales expenses where we have a greater conversion of a client in a sale. So when you have more products being offered, the probability of one of them fitting into what that is demanded by the customer is much greater.
I think we have been able to -- once we have greater maturity, we have been able to have a gain in gross margin and a reduction of sales expenses. And part of what we've been able to do in '23 in those areas where we had lower relevance, we end up gaining relevance and gaining the benefits in this gain in energy. And in our statements, this will reduce a reduction of sales expenses. Gross margin is not so easy to see, but this has occurred for these 2 reasons. An interesting point, this sometimes is not clear here. But when we analyze the results, last year, no matter how much more, we had a sales volume, a quarterly sales amount growing every quarter.
Ever since the beginning of the year, we had sales goes from area to area. And oftentimes, we had discrepancies between goal and volumes sold. So there was the standard deviation between what was established and what was done in the different areas was much greater, no matter how much the consolidated became very close to what we had in terms of internal goals for the year.
When we consider January -- February '24, the standard deviation has really reduced in areas where we sold well below the goal are very close to the goal now. And those areas where we had sales that were well over the goal. We have a goal that is closer to what we were able to deliver the year. So we raised the bar all the time.
So I'm very excited with what I've seen. All the areas I have worked in, we have worked in this year, has presented a huge performance improvement, and dispersion with regards to the goal established, which is very small. So I would say -- I wouldn't say that there is an area we're doing very well, and the other way, we have to improve the performance. No, this gives us the comfort.
We know that our operations profitability over the capital that we're allocating in each one of these projects in each one of these areas. So we have been able to see the results of the work we developed here. And I'm very, very excited with what I've seen. And there is no new area at this moment that we have tried to analyze for the expansion of our operations.
The focus is to consolidate more recent operations here. And the more recent one is 4-year old, right? All the other areas, we have delivered projects. But the shares, Riva can give us -- bring us very important synergies and a return of the capital that we have allocated in each of the areas, growing once these operations mature.
Next question, Rafeal Safra.
I have two quick questions here. The first, I would like to touch upon the funding for the year. The financing continues very high over 30%. And I would like to better see if you find -- if you believe that there is risk there of funding, finishing and this could change the mix of the next launches, right? So it's not to have this core risk finishing in the fourth Q?
And then Pode Entrar, now that things are more stabilized. I would like to understand if the margin in the program is what you imagined in the beginning. And if new units not contracted, are you still interested in continuing in the Pode Entrar program? Or do you -- what do you think here?
Okay. Rafeal. Minha Casa , Minha Vida. we're in the beginning of March. So it's still very early to have any kind of conclusion here with regards to this. I think that we have a very qualified team in the [ Citi's ] and Caixa EconĂ´mica Federal. And we have complete conditions to do necessary adjustments in case budget consumption is over or can impact the operations of the program at the end of the year.
But for the moment, this is not something that has concerned us. Obviously, because of this first and second month of the year, the strong right adjustments will have to be done, but with no kind of impact on our new product, which is a market where we concentrate ourselves. And I think it's very early to have any kind of concern here with regards to here.
Pode Entrar, yes, the margins, although effective contracting took some time ever since this the invitation to bid was announced, we've been able to control here. We have been able to deal with Pode Entrar with the margins that we foreseen with a return that justifies operations within the program with regards to new projects to be contracted. We have one more project.
That was approved during that first initial part of the project, and this might be contracted in the next months. And in case there is a contracting here, we would develop it normally. Still, we have a new invitation to bid and it's not good to talk about the attractiveness of a new phase of the program. So the first phase would -- was a phase where projects were contracted, part of it last year. And the other ones falling under this invitation to be. We will wait to see when this will happen, and it's falling under the program.
Okay. Perfect. Very clear, one last point, the contribution margin of these units. Do you think they're similar to a normal development projects?
Well, Pode Entrar is a project that demands less capital than conventional operations because we exceeded 100% of the value during the time of the works. And we don't have to sale. It's 100% sold in the beginning. So it demands less projects, right, with lower margins. And here, we can deliver returns that will justify our operations in the program.
I would say that the margin is lower than the traditional development program, which is natural because of the competition we had in this first phase of the program. But these are margins that allow us to deliver returns that justify had the projects in the program. And this is why we presented some projects, of which 3 were selected to be executive within the Pode Entrar.
Elvis, BTG.
Two questions here from our side. First, approval of H1, I want to know, how do you see this implementation of H1 can influence the mix of products for you from here on. For example, product profitability becomes more attractive. So how do you see this? Have you made any calculations here? And also, how much of this -- how much could you launch in this segment from here on?
Second question understanding this 3 percentage points gap that mentioned. I want to understand if the first months of the year, if you will have closed this gap and also maybe this could impact the cash flow? So I don't know if you could share something with us here, if you reach this goal of 20% net sales, how this could improve the cash flow?
Well, I'm going to talk a little bit, and then Paim and Paulo can add to this H1. No doubt whatsoever, it's attractiveness. The operation in products where buyers have an income of less than [ 2,640 ] to mid 2,640. This -- we've had a lot of competitiveness in terms of cost of the execution of our products. We have a lot of lands that gets into this kind of product. So certainly makes sense to have products of this type.
With regards to what H1 can present in our mix, at a first moment, it should be around 10%, 15% of what we launch. In spite of the fact that operations of Minha Casa , Minha Vida in cities where there are several states that adhere to the program, giving purchasing capacity to lower-income families with less than 2 -- with minimum wage. And this helped us increment this percentage.
We have a practical case in Pernambuco, where some products, we went directing to this profile of customer. But with the state program, we acquired some landlords destined to this income range and H1 to allow for this project.
So I think, we might have an increment in case Minha Casa, Minha Vida is disseminated across the country, allowing us to help operate in this segment with a pro soluto that is lower because of the gain in purchasing capacity and also reducing the need for -- guarantee of pro soluto in our part. So this brings about -- just it will allow us to increase this volume depending on how much we perceive that states, municipalities except Minha Casa, Minha Vida.
Well, with the second question, it is difficult to see the immediate capital and cash generation. We began the year with BRL 5 billion of products available for sales. So I would prefer you to this calculation here and the impact here. It is difficult to say whether it's going to be more advanced work or less advanced works, but the impact can be relevant.
Just a caveat, we can have this as an ideal net sales speed in this first moment because of the efforts done. However, this net sales speed increment will happen in time. And all the efforts that we've done in our sales, specifically in the online automation of our processes, simplification, availability of information tested to the sales team will impact the increase in net sales speed, but this is going to happen in time. It's difficult to say when it's going to happen. It's a goal. The impact is very relevant, 3% per quarter over BRL 5 billion. But I think it's too early to tell you -- give you a time as to when we will reach this net sales speed level. Thank you.
Next question. Victor Tapia.
I would still like to do a follow-up with regards to the sales point, [indiscernible] because I think that this is very important. For Direcional. Just to see what I understood, you said that '23 was a year, where we had a lot of dispersion and with regard to the goals. And in this beginning of '24, the ones that had a lower dispersion, you were able to close this gap. And the ones that were over, you increased the bar. So naturally, and gradually, we should have this net sales speed catching up during the year. It shouldn't be from one quarter to the other. But exactly what is it, that you were doing that is different?
You mentioned training of the sales team. So in fact, what are you doing here that, in fact, is going to enhance this sales speed. Is there a change in compensation to intermediate, the broker, the real -- not the global amount, but the one that is there selling. Or if he is going to have a greater incentive or the person that sells so many units will receive an award. What -- give us more details here. What is being done here?
These are a series of actions being done? Well, I don't think it makes sense to share this at this moment because there is a lot of strategic aspects here. There are alterations in the payment of our team but any payment increment will only occur if there is an increase in gross margin of that project.
So it's not within the actions we're taking, increase of sales expenses without an increment that's over the sales expenses in the gross margin. So we've tried to have a series of things here, right? Because in my point of view, sales shouldn't be compensated with the revenue. But yes, the gross margin. But unfortunately, there is a way, it's a more usual way of work in the market. And we've always tried with our incentives to have some kind of correspondence in an increase of margin for the company. I think there are many, many things, good things that are happening. I think it makes sense for us to go -- for you to go to our stance to understand what's being done.
But what's relevant is that we are going after gains in net sales without increasing sales expenses without increasing discounts. And in case there is an increase in sales expenses, there should be an increase in gross margin, which more than compensates this. You will not notice this in our balance sheet, but certainly, you will certainly see the impact that we went after.
Thank you. Now we have Ygor from XP.
I would like to understand about the program improvements. The representativeness that you see of the future FGTS its potential impact to the results of this measure. And with regards to an increase of the income not for now for March, but how do you -- if this -- if you can tell us in the next meeting, right, if you see room for this, and what is the size that you see here?
Ygor, the future FGTS, it is important once it is approved, and I believe it will be soon. It is important to understand exactly how it's going to be implemented by financial agent. And in case, it is in the format that we have seen or heard, I think the impact of the product sold below BRL 200,000, BRL 220,000 is very expressive.
So I think it's very important to have clarity as to how this is going to be implemented. So it's good to hear cash with regards to the implementation of this future FGTS debt once it's approved. And but if it's something, for example, where you had the conditioning of the income of the customer or the installment, 20% of the customer and the FGTS representing 8%. Can you imagine the impact for the customers' purchasing capacity.
So with several of our projects, the impact in my vision might be really, really, really significant. And the conditioning percentage is very high in products sold below BRL 20,000. This profile of customer that has a lower income.
However, I think it's interesting to see, to transferred -- to convey before doing this, here from CAIXA to see, if there's going to be an eventual larger problem here to minimize to the level of default here. But if it is an increment limited to 30% of his commitment, of his income with the installment from 20% to 28%, right? I think the impact is just huge.
And I'm very -- I'm animated here. The increment of the income ranges of the program. There is a strong perspective where there might -- for there to be an adjustment here because since this last income ranges were defined. It's been taken some time. It's taken some time now. So I think it's difficult now to create expectations because it's not in our hands.
We just react to eventual adjustment. And it's important for us to know the adjustment before we have any kind of measurement of its impact and the profile of customers that buy our products. There is an expectation that this will happen. But we're significantly wait for the moment and see the degree of increment here in this income ranges so that we can see what was going to happen, specifically with regards to the profile of our customers. But I do believe it is going to be an adjustment here.
Next question Hugo from Citi.
Congratulations for your results. I would like to ask about the Sao Paulo market. I remember that in the beginning of '23, you were kind of fearful here with regard to the competition. But during the year, you were positively surprised specifically via Riva breaking record sales records. And I would like to know, looking at now and the future, where you have an average reconvergence, if Sao Paulo continues performing specifically vis-a-vis the new rules right? That have brought a series of incentives for HLA, S&P within the access and out of the access for the income ranges you work in level -- to income levels you're work in, right? The Sao Paulo games space here compared to the regions you're in? And if yes, right, is it great? Is it only Riva or could we think of other front too?
Hugo, I think Sao Paulo has been doing very well, in terms of demand and speed of sales of products that we have branded available for sale. Our operations in Sao Paulo had gains month after month after last year, it has performed very well. In the beginning of this year, we launched the product in Sao Paulo recently, which is just exceptional performance.
So from the point of view of demand, although this is a market we have more structured companies, with strong conditions throughout the product, we still noticed a strong demand in Sao Paulo because the point of attention is not demand, but availability of labor, how this -- the cost of labor is going to behave, equipment.
So it has much more to do with execution than demand. But now, yes, it is a market, when we analyze the market share we have in Sao Paulo, no matter how much in terms of sales volume, it's between first and second in the market, we've the greatest amount of sales last year. Sao Paulo is very close to Belo Horizonte right? March is well in front of Belo Horizonte in the previous months, they were the same.
So here, allows us to have a relevant market share in Belo Horizonte, and a small market share in Sao Paulo. So in our growth process to grow in Sao Paulo is easier than to grow in Belo Horizonte because our share is small. And I think the growth perspective, in Sao Paulo exist and before we think of going to any other market, it makes more sense to try to grow the markets we're in. And Sao Paulo is a priority, caveat, although we -- given that we work in 8 metropolitan regions of Brazilian capitals and cities, surrounding cities, and plus another 3 cities around the city of Sao Paulo, we have the option of allocation capital in different markets.
So the analysis is when to grow in the growth pace in Sao Paulo is given because of demand because it's healthy. Execution, which is a point we are closely monitoring, right? Labor, some equipment. This is a point of attention and but also the need for capital in order to run a feasible project in Sao Paulo versus the capital need to do the same project in other markets and the return we're delivering of this capital that we're opting in allocating in Sao Paulo.
So when we do this analysis, this is when we define the speed we're going to choose to grow in Sao Paulo. Depending on engineering and the need for capital in order to do business in Sao Paulo versus capital need to do business in other markets because here, it's things are limited.
So we have been very selective with the acquisition of areas in Sao Paulo, very disciplined in the amount of capital allocated in the projects that we have decided to continue with in Sao Paulo because it might make sense to develop projects in other markets in a moment, while Sao Paulo can eventually demand capital that is greater than a level that we believe is reasonable because of the competition we have in Sao Paulo. It is natural.
There is -- if mix we have room for growth, this makes sense. but we are not in a hurry because sometimes we might want to allocate capital in a more efficient way in other markets. But Sao Paulo is always a priority for us.
Very clear. If I can just ask one more question with regards to cost pressure. And in labor, right, we heard cooling they also mentioned this concern, right?
Wage pressure, availability of qualified labor. I would like to hear from you as to how much this is an issue, right? And if, in fact, for example, this is circumscribed here in Sao Paulo. Looking at domestic sphere, right? Is this not a concern in this cycle?
Well, I would say, let's say, there is greater difficulties to have certain professionals in Sao Paulo. When you look on the street, all the volume of works being done simultaneously, right, being constructed, we have an important number of projects falling under the Pode Entrar program, which have begun and are beginning simultaneously demanding the same professionals at the same time. So this reality is more concentrated in Sao Paulo.
There are no labor challenges like we have in Sao Paulo, but I would say that this is not such a challenging scenario as already has been in 2009, 2010, 2011, when the sector performed really well. And the fact that we altered a construction process to a much more industrialized process, this result in representativeness of labor as a total proportion of the cost of the works, which is much lower. So eventual increment of cost and availability of labor in Sao Paulo is positive because most possibly, we will have an increment that is lower than more crafty, more crafty right processes.
This is something we are monitoring. We have performed very well in Sao Paulo. We always try to anticipate eventual scarcity scenarios greater than we have today. So we've monitored this with much attention. It's, and yes, it is something we have tried to anticipate the hiring of professionals to deal with area that has more demand for professionals. And automation of our, and the industrialization of our construction process, we have to improve the productivity of our man, of our employee. And we've been able to do this since 2009. Which is very different than the 3 we used before, where man produce much more. And naturally, this was a mitigator for a scenario where we had a certain scarcity, less availability of certain professionals in the city of Sao Paulo.
Next question. Antonio, Santander.
I want to better understand if you can explain what has caused this growth between gap between sale transfer of '23. And how this is for '24 because ever greater percentage. I would like to understand this.
Paulo, will you answer this or Paim?
In the end of the year, when we compare transfer per sales for sales, I think you're talking about PSV here. There was nothing very different here. We continue doing operations normally. The contract -- contracting companies continues the same. So I believe there might be some growth in our direct tables where we've financed the customer, but nothing very relevant.
And I believe -- and in the first or second quarter, we will increase the number of transfers of plant transfers and close this gap that happened during the fourth Q. I also, at the end of the year, December is a month that things are more complex. The transfer process is more bureaucratic. Historically, you always have this gap in the fourth Q. In the first and second Q, there's always a closing of this gap, not only here in Direcional now, but even in the market, even Minha Casa, Minha Vida, numbers in January, they were very strong. December was less than January. So I think it's a marketing issue, and we see nothing out of the curve.
Now Jonathan from GT.
My question has to do with minority interest, the reduction and going from 3% to 4%. I would like to understand how much more this can reduce, the potential of revision here for Direcional. Thank you.
Shall I answer this? Ricardo you can add to this. As Paim said in the presentation, Jonathan, the minority interest was nominally reduced during the year. From here on, most of the game with regards to this line is based on dilution. I would not project the nominal reduction. When we look at the launches, we are going to have around 10% stake of minority interest in our results. which is very close to what it would be nominally between this year and the previous year. So the benefit here is dilution. Revenue grows as operational results show is a trend. And this dilutes the minority interest line in the next quarter.
If you have anything else to say here Ricardo or Paim?
We have no other questions. So I would like to give the floor back to Ricardo for his last -- for his final comments and the wrap-up of our presentation.
Once again, I would like to thank you all for your participation. A huge amount of questions focused on very relevant teams for our operations. We are beginning the year in a very optimistic way. Perspectives are very positive. The program has done very well, performed well. Conditions are favorable.
From the cost point of view, costs are under control. We talked about the Sao Paulo market. With regards to labor, they might have a reality that is different than Brazil. But even so, this brings us a strong comfort, resilience in terms of our norms because we are in no market that represents more than 20% of our business.
Our strategy mitigates eventual realities that might be specific with regards to a metropolitan region in itself for our market. We are very optimistic in this beginning of the year, focused on operations concentrated on the delivery with the same size of profitability that we have been able to see in the last quarters. This is the challenge we've had much more than increasing launches is to do this catch-up in revenue, right?
With this level of profitability we've delivered, margins we have been able to operate with, we're very optimistic. We believe this is possible. Our product is standardized. It's the same all over the country. So we can control of the work sites and its performance and we've seen a performance that has made us very comfortable in this moment of our operations. So I really do believe this is a year, where we always have challenges and improvement opportunities, but we will try to do better than what we did than what we did in the last year.
Thank you very much once again. We are, as always, at your disposal for any eventual questions and clarifications. The IR team are always at your disposal for -- questions, you can -- all you have to do is contact them. Have a very good afternoon.