Even Construtora e Incorporadora SA

BOVESPA:EVEN3

Earnings Call Transcript 2020-Q1

[Operator]

Good afternoon, welcome to Even Construtora e Incorporadora Conference Call regarding the results of the first quarter of 2020. Today with us is Mr. Leandro Melnick, CEO; and Carlos Wollenweber, CFO and Investor Relations Director. We would like to inform you that this event is being recorded and that our participants will only be listening to the teleconference during the company's presentation. Immediately after that, we'll begin the Q&A session for analysts and investors only, and further instructions will be provided. [Operator Instructions] This event is also being broadcast simultaneously over the internet via webcast and may be accesses through the website, www.even.com.br/ri, and a recording of the event will be available as soon as we've announced.

Before we proceed, we would like to clarify that any statement that will be made during this teleconference regarding business perspectives of the company as well as its operating and financial projections and goals are based on the recent assumptions held by its board and management and any information currently available to the company. Considerations about the future are not guarantee of performance and involve risks, uncertainties and assumptions since they refer to future events that depend on circumstances that may or may not happen. Investors should understand that general economic conditions, industry conditions and other operating factors may affect future outcomes for the company and may lead to results that materially differ those expressed in these considerations. The presentation slides are available on the Internet for download by the following address, www.even.com.br/ri.

I would like now to give the floor to Mr. Carlos Wollenweber, CFO. Mr. Wollenweber, you may proceed.

[José Carlos Filho, executive]

Thank you. Thank you, all, for attending this conference call to present our results for the first quarter of 2020. Before we move on to discuss our operating and financial results, I would like to briefly explain how Even has prepared to face the crisis caused by the COVID-19 on Slide 2. We ended the first quarter of 2020 with a cash position generally robust, above BRL 1 billion, and the lowest level financial leverage in the last 5 years, with only 23% of net debt to equity ratio. In this quarter we had a cash generation -- a positive cash generation of BRL 32 million. As we paused [indiscernible] in the federal government -- by the federal government, the single construction industry has been deferred with things like [indiscernible]. The company had adopted stringent measures to prevent contagion on our work sites in order to guarantee the continuity of the construction work with [indiscernible]. And our business unit in [indiscernible] issued in the city of [indiscernible]. Our construction work in the city was sterilized for 5 weeks. However, since most of the services provided by third parties, the financial impact was marginal, mostly due to the idle [indiscernible] responsible for managing the construction sites. We are confident that we will deliver all the construction work on schedule, as defined by the contracts signed with our clients. We have reinforced our collection teams and we're being successful in preventing an increasing in the cancelations. Almost 100% of our administrative teams are working from home with an impressive level of productivity. In the launch of the first quarter, we have a great SOS of [indiscernible]. On the second quarter of March, we had a negative impact in sales, especially in power generated business units. So the result of this decrease in sales would be more evident in the second quarter. Nevertheless, we created an online sales campaign with a dedicated team of brokers working on this channel and with all the paperwork digitally signed. We have also instated a crisis committee in order to closely monitor the most sensitive aspects of our operation and ensure the lowest possible economic impact caused by the COVID-19 crisis.

Moving now to our operating results in the next slide. We have decided to hold off launch of new projects until we have a clearer view of the extension of this pandemic. As a result, in the first quarter 2020, we launched only BRL 95 million Even share, but with an excellent speed of sales of 44%. There were 2 launches, 1 -- 2 in Rio Grande do Sul and 1 launched in Sao Paulo.

Net sales in the quarter is on the next slide, totaled BRL 256 million with the consolidated SOS ratio of 12%. It is worth mentioning the nominal reduction in cancellation of 20% in relation to first quarter of 2019. However, given the lower gross sales due to fewer launches, the cancellation to gross sales ratio was reduced to 22%. Of our net sales, 68% of them happening in São Paulo's business unit, 24% in Rio Grande do Sul and 8% in Rio de Janeiro.

In the next slide, we see our inventory. In the quarter, we saw Even cancellations of BRL 71 million in our delivery of projects with units in inventory, which represented BRL 122 million. We closed the quarter with BRL 884 million of finished inventory, 46% of total, as can be seen in the graph on the upper right-hand side. Although it is a higher percentage than we consider appropriate, selling this inventory will continue to contribute positively to our cash generation. Adding the PSV of the unsold units still under construction, we closed the first quarter with a potential sales value of inventory worth BRL 1.9 billion, which represents approximately 14 months worth of sales.

Moving on to our land bank in the next slide. We purchased 2 plots of land in São Paulo in the first quarter, representing a PSV of BRL 481 million. It's important to highlight that we are disciplined in our strategy of buying plots through financial strikes. And therefore, we'll continue to search for good opportunities for land acquisition, even in a challenging economic scenario. We have a solid land bank worth BRL 6.8 billion, from which more than 80% were acquired through swaps. In a crisis, and as we are going -- swaps are very important movement in our business because we do not have costs -- carryover costs, allowing us to make the best decisions as when to launch this project. In our land bank, more than 60% consist of plots purchased after 2017.

In the next slide, we show our deliveries. We delivered 2 projects in the first quarter, totaling BRL 352 million, regarding 630 units. It's important to mention the exceptional quality of our products, usually surpassing our clients' expectations.

In our next slide, our cash generation in the quarter was positive by BRL 31 million, reducing even further our net debt-to-equity ratio to 22.5%. We closed the quarter with a very robust balance of over BRL 1 billion in cash. Despite the disturbances, we remain focused on improving our efficiency indicators. We are implementing cost reduction administrative initiative because of our decrease in revenues due to lower volume of sales. In this quarter, our G&A was in line with the fourth quarter of last year. However, due to a lower income than last quarter, it represented 8.5% of our net revenue.

In the next slide, we show you a net revenue of BRL 407 million in this quarter. Our gross profit was BRL 121 million and the adjusted gross margin was 31%. The unit -- São Paulo Business unit contributed with BRL 77 million, branded issue with BRL 36 million, and here generated with BRL 4 million. It's important to mention, we are improving our profit and gross margin in a consistent way along with previous quarters.

Considering the backlog margins, if it's an indication of a margin that will be appropriated to our results, it's important to highlight that São Paulo and Rio Grande do Sul produced REF margins that are very healthy of 37% and 33%, respectively. As a direct result, we delivered in the first quarter, a net profit -- net income of BRL 36 million and ROE annualized of 9%.

I would like now to go into strategy for each one of its business units. In São Paulo, starting in 2016, we implemented a new management model for [indiscernible] and changed our strategy regarding the purchase of plots of land. We have already launched BRL 2.4 billion of PSV, in line with this new management model. A total of 15 projects, which have yielded fantastic results, and a gross margin of 35% compared to 14% of margin for the projects developed and land plots acquired prior in the old management model. Except for 2 plots in São Paulo, we'll change the type of product and develop in partnership, this -- 90% of the projects already have the new business model, showing excellent margins and profitability. As for business units in Rio de Janeiro, we have already delivered 100% of construction work and are focused on selling finished inventory. Margins for this inventory are low and contaminates the consolidated results, but these sales will bring an important cash generation for Even.

Concerning the business unit in Rio Grande do Sul, our brand is extremely strong in the region, and we have consolidated more than 35% of market share in the middle and high-end segments. Even taking into consideration the crisis in our industry, the business unit has been delivering solid, stable margins, averaging 30% of margin along the years. Therefore, we are confident we are very solid and well prepared to face the crisis caused by the coronavirus. And as the economic environment improves, we are sure we have the correct strategy and the right team to reach a level of excellence in our results.

I would like now to give the floor to Leandro Melnick, Even's CEO.

[Leandro Melnick, executive]

In this moment of crisis, we were disciplined and fulfilled our strategic plan. We are coming across as a company that is prepared for this moments of crisis. This is the real way of putting into practice our long-term view. The strategy we have on with a light capital, always searching for the highest profitability, it has led us at the end of the first quarter of 2020 at this position. A great solidity -- financial solidity with a robust cash, low indebtedness, which gives us tranquility for -- in this moment of crisis.

Reading this from a real estate perspective, we need to remember that we have implemented from 2016 on, Even's strategic planning some important definitions. We decided to structure a company that is lower -- that is smaller and more profitable, only work with launches in which we're going to have good results and so as not to make mistakes and reduce our risk. Today, we have 30 projects under construction. Approximately 3,000 -- billion that we have in terms of PSV. This represents 78% of its PSV sold. We still have an average period to deliver these projects of 15 months. This great performance, we also include projects launched during the crisis. According to the same strategy, our land bank today is centralized in São Paulo and Porto Alegre and highly qualified.

Looking to remove the risk on the land bank, 71% in the residential segment, in the middle- and high-end segments, 20% in the emerging markets, 3% in the commercial segment, which are a few stores and some points of sales that are part of our project and 5% of lots development. 84% of our land bank is through swaps. So we have, at this moment -- in this moment of crisis, a position of safety. And for next year, a positive reading since we have land that is very well-located in consolidated regions. And because we have acquired through swaps, it allows us to wait for the right moment to launch without a high carryover cost.

We work in the real estate market in São Paulo and Porto Alegre, 2 markets that will not stop existing that will be less competitive and with an interest rates we have never seen before. It's a scenario in which, I think, it will have a much more positive impact in our segment -- in our industry when someone is expecting. We can proceed now to questions.

[Operator]

[Operator Instructions] The first question is from Alex Ferraz from Itaú BBA.

[Alex Ferraz, analyst]

I have 2 questions. The first question regarding gross margin. It has seen an improvement. Currently looking at the breakdown you have shown by regions. Region energy improved quite a lot. Was it just because of a decrease in cancellations or something more specific? Can you explain better with improvement in growth?

The second question would be more like an update from you regarding the situation in April. If you have anything regarding May, especially this performance in Rio Grande do Sul that we have been following, which is a region that seems to be more under control. They have a plan to reopen the economy. I would like to have your update on that in São Paulo and Rio de Janeiro.

[José Carlos Filho, executive]

Hello, Alex. It's Carlos here. I'm going to answer the first part of your question. In Rio de Janeiro, our focus there is to sell inventory, as we have an expectation of a low margin if we were looking to sell this inventory. But it's an important contribution to our cash. In this quarter, in January, we saw the beginning of a new project in Botafogo. Because we had cost savings in the work in the project, in the savings in these projects, we made the margin -- in this quarter, made this margin a little higher. We delivered an 18% gross margin in the REF margin, the backlog margin, which is a scenario for the year of 7%, which was a margin. This business unit a little higher because of this new project that we have launched.

[Leandro Melnick, executive]

I will answer the second question, which is interesting. I would just like to say our margin, our gross margin, has seen a technical decrease because we do swaps, which reduces this margin quite a lot. It decreases the gross margin. That is taken out. Regarding the performance in this month's or during the pandemic, we are positively impressed in Rio Grande do Sul as well in [indiscernible]. We migrated our system to a digital sales system very quickly. We did this migration very quickly. Maybe we were even the first company to put together a system like Rio Grande do Sul and managed to capture the attention of the brokers. We saw BRL 150 million we have already sold, if you put together March in April, in the Porto Alegre and São Paulo. So the performance is much way above our expectations when we saw the total halt of the market. And this is the kind of market where the sales process is very rational. The clients usually think over before buying. In this weeks of social distancing, the performance was a little below the performance as if we didn't have the pandemic, but still very satisfactory in our analysis considering the current moment. And what Carlos said in the beginning, our surprise when we see the structure, the competency structure, the back office -- the sales back office that performed in a way that was very reasonable, very good in its work, working from home with the tools we provided.

[Operator]

Next question, Victor Tapia from Bradesco.

[Victor Tapia, analyst]

First question, a follow-up to Alex's question. São Paulo and Rio Grande do Sul. It's difficult to have -- to see how the launches are going because there's 2 regions. Given the scenario we're going through today, which one you think -- which one do you believe will be the first one you'll try and increase the launches.

And the second question, in relation to land bank, we have a land bank of almost BRL 7 billion. In relation, the opportunities, do you see -- as we begin our second quarter, do you see an increase in opportunities in terms of acquiring land or are you already feeling this crisis? Are they more willing to deal because of the crisis and everything?

[Leandro Melnick, executive]

Thank you for your question. We understand the launches. Obviously, it will be decided according to the market going back to operation. In relation to your question, we do not have now data pressure for launching, both from the point of view of the cash because we have -- this is a detail. But it makes all the difference, especially when we have this situation like the one we're going through. But first, that puts pressure on launches. And we have a capital structure that allows us too late without punishing the company in a severe way in our industry. So this gives us a strategic advantage. And we have done this -- know exactly, knowing that Brazil is a country where crisis happens and we have to be prepared for them. So this -- there is a chance that in the second half, we'll have some opening for new launches, our projects and our strategic planning. And I refer to very safe projects, very secure projects. These are not extremely large projects. We are more in the central regions of the city. So they are basically residential of high-end and middle-high end net income. Even in a moment of crisis, they have good performance. And I dare to say that we launched a lot of projects in the crisis of 2016, 2017, which was a really bad crisis, a crisis that generated a huge impact in unemployment rates and very tense political moments in our country. And in that moment, we launched 30 projects, and they were well sold. They sold very well.

So what we're not going to do, which is not reasonable, launch during a very cloudy moment or a moment of insecurity, not only financially, but as we can see nowadays regarding the social consistency. So when we go through this moment of the epicenter of this crisis, when we are absolutely sure how this -- the next week will be, we do have projects that are appropriate to this moment in our recent history. We can -- again, we launched several projects in difficult moments that have good performance. So what we understand, we need to wait the epicenter of this crisis of global insecurity. And when we still are impressed with a more stable prices when we already have some way to understand what's happening, we'll go back to launching. We believe it will be in the next -- the second half of the year, São Paulo and Porto Alegre. We don't know which city will go back to business before. It will be those launches in the half year will be more concentrated in the fourth quarter, but they can be concentrated in the third quarter of the year -- the beginning of next half year.

And again, we state we can be very impacted because we do know our land bank that is very well positioned for this month.

In relation to land acquisition, some opportunities have come up. It hasn't changed drastically the logic we follow to buy land, that -- we have seen an increase in good opportunities because we came from a market that, besides being very warmed up -- beginning to warm up, especially in the São Paulo region, it's started moving a lot of companies to buy land bank in an accelerated rate, putting themselves for the future. And these companies entered into a purchasing halt in its majority.

So we come from a market that was very aggressive in regard of buying land. It's halted. And now, we are going to follow our -- the premises, we believe, are the premises or the assumptions that we follow frequently, which is our planning, which is forming land bank, was very resilient.

[Operator]

Next question, Nicole from Bank of America.

[Nicole Inui, analyst]

I have one question about your finished inventory. Of course, liquidity is important. I imagine that, nowadays, it's more difficult than before -- it's more difficult to sell than before. I would like to understand a little bit better. You have changed the strategy, if you're going to have something to speed up to help the sales of your finished inventory.

[Leandro Melnick, executive]

Thank you, Nicole, for the question. Our strategy is stated by region. So we have to look into each region. Each one has a different strategy. In Rio de Janeiro, we have basically finished inventory. All the construction work is already delivered. We are not launching. We are not -- we do not have new launches. We have some projects in partnership. That mean a customer need a project, and they are doing the operations and all our focus is on selling finished inventory. We did not change anything. We were -- until the crisis, we had a very interesting positive performance because we were -- being able to sell the inventory with a good speed and with a gain in prices. We had higher expectations of this launch, but we were also gaining in terms of finished inventory.

In this moment of pandemic, we have been able to maintain a good pace of sales, especially in São Paulo and Rio de Janeiro. In São Paulo, we had an exceptional performance in January and February regarding finished inventory, and we were ending the quarter with the residential finished inventory in São Paulo. And the Porto Alegre region also had a very good performance with the finished inventory, but it still has some inventory for the region that's important of commercial units that we were able to devise a new strategy in terms of ranking and selling enough in a format that we have denominated reversible ranking, vis-à-vis the client ranks the room and then moves to buying. So it's been a very successful strategy. So we were able to develop this method to give liquidity to our finished inventory of commercial units. If memory serves me, we have more than 100 units that have been rented in this format.

So to sum up, we have finished unit -- a very big finished inventory. Each region has its own design in its own because they have their own peculiarities. And we have a performance that, in some quarters, that the finished inventory would be reduced in a few quarters. But now in this moment of crisis, we need to understand how the market will come back after this paralysis, after the market halted.

[José Carlos Filho, executive]

Nicole, it's Carlos here. I'd like to complement what Leandro said, just to give you a few numbers. We have a volume of BRL 884 million of finished inventory. But last year, we managed to sell BRL 650 million, which means the company has a good team and a good sales force that's very robust to be able to reach these levels of sales.

This quarter, in spite of our selling a little bit less of finished inventory, we're able to sell BRL 135 million in Rio de Janeiro, just to give you a few numbers. We have finished inventories, a little over BRL 250 million -- BRL 252 million. Last year, we sold BRL 125 million in the region. If we didn't have the pandemic the -- and its effect, this would be a region where the inventory would last at most 2 years until we sold it all. Again, it's an inventory that you're right, is an inventory that's a little more difficult to sell. We expect that as the economic scenario improves, we go back to selling with a speed that was similar to the one we had before. But it will be an important cash generation for the company and will help us with the strategy that Leandro has mentioned in his answer, which is to make the company lighter and lighter.

We have a high volume of inventory. As we sell this inventory, we will have the opportunity to rethink our strategy regarding how to pay dividends or how to reinvest this capital in a way to make the company lighter and increase our profitability in relation to what we are delivering today.

[Operator]

Next question, Andre Mazini, Citibank.

[André Mazini, analyst]

First question, it's about the land bank. How do you see -- when we come back to launching, what kind of units do you believe will be more demanded when we come back after this coronavirus crisis? Maybe it will have changed people's preferences. Do you think people will want bigger units to facilitate the social distancing or not? 25% in mixed use, 7% in middle income. In mixed use, this is land bank that can -- I would like to understand regarding the mixed use projects.

And the second question regarding the ranking in the commercial units. Do you think it makes any sense to offer some kind of ranking. And also to the residential units, it seems that our customers -- I don't know, I'm just thinking if it would make sense to offer the same model of rentals for residential units.

[Leandro Melnick, executive]

Hello, Andre, Thanks for your question. Let's go in parts. Regarding new launches, we have, nowadays, a land bank that allows us to put together -- compare the products, we understand are the best suited to the market. And this, again, it's because of the swaps because we can hold our land bank for a longer period in relation to other components. But we understand that the first component of residential, the middle and high-end segments, is the more -- historically the most resilient kind of project. It's the profile of our society that suffers a little less than the other brackets of our society. If you see the history, middle and high-end behaves better during deep crises, they are more resilient.

We have a new fact, however, which is now very clear. And personally, particularly, I think, which is the impact of the interest rate in the economy. In 2008, we had the boom of the real estate market when we had a new format regarding the purchase of properties by the customers in a longer period, but with high interest rates. As we have a period alone of 20 years, 30 years, the impact of the interest rate will be very relevant, which is it's a remedy that hasn't been felt yet. The interest rate is not impacting. Of course, it won't impact in the short term. We are in the center of a crisis, a very complex political, social, health crisis, there is a point that will impact someone who buys a 120-square meter apartment, maybe we'll be able to buy 150 square meter apartment. And people will notice that they will be able to buy apartment. So this question of interest rates can change what would be increases. What would be the usual in our real estate market, would be the high-end market?

How are we preparing? We are speeding up the dealings regarding these projects. We have projects in both segments, what I call the emerging segment, which is -- it's above Minha Casa Minha Vida project, we call it an emerging market. We are studying, we are working on these 2 fronts to put in the market, what we understand what will be more liquid. If the crisis has an effect again, middle and high-end markets usually have a higher resilience, especially because the client is different.

With 2 projects in São Paulo, some projects with the client, the client sees an opportunity because it is not repeatable. There won't be another project similar to this one next door. So these are clients who know that they will be able to -- so we look for projects similar to these ones. Unique. And if the interest rate causes the expected effect, we'll also introduced launches regarding the emerging segment. So it really is what you said. We have a lot of studios because of our urban plan. So we have some projects that cannot be only residential. So we use them as mixed. So they are majorly placed as residential projects, although they've been classified as mixed use.

Regarding rental, really, it's an interesting surprise, not only because that we are selling the portfolio because having a well-placed portfolio is a great asset, so not way of solving the finished inventory, which is not so usual, which is the rental. And then after that selling, it's an alternative to the buyer. And here is the surprise. Letting the commercial here, the person maybe doesn't have the courage in the moment we were going through of acquiring such a long-term debt. So they invest in rental, he doesn't feel like he's wasting that money because we give them some periods of x months in which he can reuse this capital that he used for rent of the apartment and convert it into a downpayment to buy the room. So some people wanted to buy commercial unit, but they were afraid of getting into a long-term role. But on the other hand, not wanting to waste their money on a rental in which they wouldn't be able to take advantage of this capital later on.

Yes. And in the residential segment, it can be an alternative. We were already thinking this way. Your positing is valid, but we are waiting for the economy to settle down so we can continue thinking new ways or formats of selling our -- marketing our units.

[André Mazini, analyst]

And a quick follow-up. What metrics to convert for these people who are renting and then they have an option to buy? And how is this performed?

[Leandro Melnick, executive]

We are at the beginning of this process. We haven't gone over this first one, in which we have provisioned the contract of the clients have rented at least, and they had an option to buy. But the expectation is positive. I think we'll have a significant conversion. I don't want to give you a number, a figure. We don't have it. But by the contract we have with clients, the perception we have, we feel that they want to invest in these new rooms. So they have to put flooring and other finishings. So they create a bond because they invested in this. It's also a property that valuates. And who -- those who don't opt for buying, for these people who have a portfolio, there will be a portfolio of a good behavior as a renter, so maybe we'll build a portfolio of leased properties. Our finished inventory will be under assumed, which will have many commercial units and to keep the speed of sales. At a high level, we are having -- we have a more relevant, more interesting performance in this format. It does not generate speed of sales at this moment. But after this period, and in which the portfolio will mature, it will generate an interesting speed of sales.

[Operator]

Next question, Marcelo Motta, JPMorgan.

[Marcelo Motta, analyst]

The first question, if you could explain the other operating expenses line, when we see the release, we see the provisions for contingencies, minus 10, minus 13, and then they end up with a positive number in other operating revenues. I would like to understand a little bit more the decline? And if you can comment the buyback program. If you have done anything regarding this program at the end of the quarter.

[José Carlos Filho, executive]

Marc, it's Carlos here. First, I want to clarify we had in the other expense line for loans, for interest. This reinforcement in the provision, we increased the provisions for the litigations. And since in the quarter, we had a low level of negotiations of settlements. We also have a lower positive number. So provisions is a number. The decreases from our result, it comes from negotiations and also the increase in provisions.

In relation to the line of others, 8 -- the amount of BRL 8 million, they are basically the consolidation of 2 partners, where we consolidate the balance in the quarter. In this page, it's a negative. It subtracts from the result. The number that's positive was a cancellation of a provision -- was a decrease in the provision for cancellations because we had a negotiation with HP regarding the hotel Ibis, in which we had a hold down because of -- we hold it -- or had it off because of the pandemic we're going through. So this transaction will happen probably in the third or fourth quarter. In the number of units that we're selling, we canceled 47 units in the hotel, which is BRL 375,000 per unit. So we reduced BRL 18 million. That goes through the other expense line, but subtracts from our net income.

If you look at the gross profit before the loss that this company gave because we had to subtract this provision. So the net impact of this removal of this provision is almost practically 0. If you remove this provision that has been successful, the amounts that have transited through these other expenses and revenues was negative. It was around BRL 13 million above the recurring expense. And because of this consolidation of these partners of BRL 8 million, we target about BRL 11 million. If these things haven't happened, the results for the company would be higher than it was. So it was a negative recurring result for the company.

Our net profit is -- our net income would have been to the tune of BRL 45 million.

Excuse me, you also asked about the buyback programs. We do not -- we cannot say exactly how much we want, but we are still buying back. In a few moments, we are not because of earnings release and all these things, but we are still running this buyback program. And we will probably conclude this project. It's a 6-month program. It's small. 2% of the total. We have already bought 3%. So when we end 100% of the buyback, we buy 5% of the company. We have 5% of the shares in treasury. So maybe we use part of this for long term incentives, but it's a program that we are running with.

[Operator]

Our next question, Bruno Mendonca, Santander.

[Bruno Mendonca, analyst]

Can you tell me a little bit about how the supplier dynamic is going on, how we can map if you have seen some bottleneck regarding logistics. That's been significant. Some material that, by any chance, you're having difficulty of receiving? And also the pricing for these materials, for these raw materials, what is more important, the low demand that allows you to bargain or shortage of some material that can inflate the costs? What do you see in terms of dynamic after these 2 months?

[Leandro Melnick, executive]

Hello, Bruno. Thank you for your question. That's -- if you -- I'm going to separate our supply chain in a few words. Our main concern since the beginning of this process were the middle and small contractors, because they are the fragile parts of our productive chain, maybe the most fragile because these are small companies, where the highest cost are people and the non-productivity generates absolute frustration in revenues for these small companies. They are paid by productivity, by production. And because they serve many developers, their cash can be disorganized because of this crisis. And today, it's well taken cared of. Construction work is ongoing. In Porto Alegre, we had a halt, but it's -- but we have already resumed operations. And we develop a program to support this small company in the workers of these small contractors. And this in our chain is maintained in this -- during the pandemic. The way that the construction is structured in Brazil, differently from other countries. In fact, we are -- we have a saying on the construction work with some industrialized programs. But with a lot of labor force organizing small contracts, the suppliers of material. We also have the weight of the dollar, a negative weight on the valuation of the dollar. But the current balance is not so relevant because no one had this behavior of going after opportunities with taking advantage of the drama we are going through. So we have some right signs that we're going to get some savings in the process. It's not consolidated yet. That is the balance is more favorable to savings than to a new hike in prices.

What I can bring to you is an interesting way of saying this is we could see a hike in prices, that happened in 2006, '07, '08, we had an increase in prices. But today, companies are more mature, but we started seeing an increase in prices, and we were already including this in our -- this price increase in our launch. A percentage of our work, our projects becoming more expensive. But apparently, this is not going to happen anymore. The perception is that this pricing will be stable or maybe even with a low decrease in price as the idle capacity of middle and higher size, big size in compound. Of course, there is some pressure for those imported materials that are in dollars. But on average, it's balanced.

[Operator]

[Operator Instructions] We end at this moment the Q&A session. I would like to give the floor back to Leandro for his final considerations.

[Leandro Melnick, executive]

Well as we reported, we are satisfied with the results of the first quarter. I think it was a good result. And we are, frankly, in relation to this moment of crisis, because of our cash and the way our land bank is structured, we hope Brazil and the economy and the global economy are able to face success for the coming weeks, maybe the coming months and that we can, together, go back to having an active society and functional, economical. And I thank you all. Thank you for your questions. So we now wrap up our earnings release call.

[Operator]

Even's teleconference conference call is wrapped up. Thank you all for your participation. Good afternoon.