Even Construtora e Incorporadora SA

BOVESPA:EVEN3

Earnings Call Transcript 2020-Q3

[Operator]

Good afternoon. Welcome to Even's teleconference regarding the results for the third quarter of 2020. Here with us today are Mr. Leandro Melnick , CEO; and Carlos Wollenweber, CFO and Investor Relations Director.

We would like to inform you that this event is being recorded. [Operator Instructions] This event is also being broadcast simultaneously over the internet via webcast and may be accessed at the website, www.even.com.br/ri. The replay of the event will be available as soon as it ends.

Before we proceed, we would like to clarify that any statements that might 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 beliefs and assumptions held by Even's Board and on the information currently available to the company.

Considerations about the future are not a 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 from those expressed in these considerations. Presentation slides are available for download on the Internet at the following address, www.even.com.br/ri.

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

[José Carlos Filho, executive]

Good afternoon, everyone. It's a pleasure to bring you Even's results for the third quarter, which were excellent and in line with our strategic planning. First, I would like to move on to our highlights for the quarter in Slide 2. We noticed that a speedy recovery in sales volumes starting June, which was motivated by the easing of the lockdown and a decrease in the interest rates for individuals in video financing in Brazil. Net sales amounted to BRL 480 million in the quarter, 59% above the second quarter and 84% above the third quarter of last year. This is shown in the graph on the upper left-hand side of this slide.

It is important to highlight the significant number of finished inventory that were sold during the quarter, which is now reduced to 17%, the lowest level since 2017, which can be seen in the graph at the bottom of the slide. Sales of finished inventory contributed to the increase of operating cash, which amounts to BRL 142 million, 68% above third quarter of last year. And in the first 9 months, we generated BRL 304 million, as it is shown in the graph at the center of the slide. We got to the end of the quarter with a cash position of BRL 1.3 billion and net cash, representing 15% of shareholders. A spectacular capital structure.

In the graph at the bottom left-hand side, we can see this structure. As our sales volume recovered, we resumed our launches, which totaled BRL 622 million in the quarter, 263% above the second quarter and 160% above the third quarter of 2019. We delivered in the quarter a net income of BRL 41 million and BRL 104 million in the 9 months. A growth of 147% and 21% in the same period of last year, respectively.

Net margin in the quarter was 12.9%, as can be seen in the top part of the slide. This quarter was particularly special. We had Melnick's IPO, which was 100% a primary offer and brought BRL 600 million into the company to be used in the expansion of the operation in Rio Grande do Sul.

Moving on to Slide 3. We present our launches. We launched 5 projects, as shown in the chart. Open Marajoara in the low to middle-income segment in São Paulo, Clári Pinheiros with a high-end residencial tower and a tower studio apartments and Modo Saúde in the middle-income segment.

Melnick launched the Residencial Tower of the Carlos Gomes project. In total, we launched BRL 622 million in the quarter and BRL 888 million in the 9 months, that's Even's share. As you can see in the pie chart, 65% of the launches were in the upper and middle-income segments. In the next slide, we can see the pictures of these launches. The Clári Residential Studios is already 50% sold; Modo Saúde, 41% sold, with a gain in price of 2%; Residencial Carlos Gomes is 55% sold, with a 3% gain; and Open Marajoara is 54% sold with a 1% gain in price.

It is worth noting that these variations in prices gain are related to the prices approved in the launch committees for these projects, in which are adjusted by an effective rate of 12% a year plus inflation. Therefore, the gains were in addition to this rate. Moreover, 1 percentage point of gain in price, translates into roughly 6% of gain in the net margin of the projects, which is very significant.

In Slide 5, we show you net sales, which amounted to BRL 480 million in the quarter, which is an average SOS of 20%, as can be seen the graph on the left-hand side of the slide. It's important to notice the improvement in the SOS of inventory, 5 percentage points above third quarter of last year. 69% of sales came from São Paulo, 25% from Melnick and 6% from Rio de Janeiro, as you can see in the pie chart. Cancellations have been decreasing and represented 15% of gross sales in the quarter against 25% in the third quarter of the previous year.

In Slide 6, we show you our inventory. It is important to point out, the 17% reduction in finished inventory, as we mentioned in the highlights, and can be seen in the graph in the upper right-hand side, now represents 35% of total inventory as opposed to almost 45% in the previous quarter. This is our lowest level of finished inventory since 2017. Our inventory of units under construction is selling successfully. It amounts to BRL 1.2 billion, 18% of which will be delivered in 2021, 72% in 2022 and the remainder from 2023 on. This gives us confidence that we'll deliver these projects completely sold as can be seen the graph on the left-hand side of the slide.

We remain focused on reducing finished units, inventory, which will be important for a better use of our capital in our balance.

In the next slide, we show you our land bank. Even's share of the land bank amounts BRL 7.3 billion. At the moment, it is divided into 61 projects, you can see in the top part of the slide. 61% of the land bank is in São Paulo business unit, 35% belong to Melnick.

You can see this in the pie chart at the top of the slide. In this quarter, we purchased BRL 1.3 billion worth of land comprising 3 projects, all of them in São Paulo. We maintain our strategy of acquiring land through financial swaps, which mitigates the risk due to the launch period and optimizes the company's capital. It is worth noting that 71% of our land bank was acquired from 2017 on and, therefore, under Even's current strategic guidelines as can be seen in the pie chart at the bottom of the slide.

Moving on to Slide #8. We delivered in the third quarter, 2 projects, Grand Park Lindoia and Domingos de Almeida, both by Melnick and with a total PSV of BRL 88 million, Even's share. As you can also see in this slide, both projects were delivered with the construction cost savings when compared with the original budget.

Moving on to capital structure in Slide 9, we generated total cash of BRL 693 million in the quarter. This regarding a payment of dividends of BRL 30 million and Melnick's IPO, the operating cash generation was BRL 142 million seen in the chart on the left, 68% more than in the third quarter of last year. This is mainly a consequence of the higher sales of finished inventory. We ended the quarter with a cash position of BRL 1.3 billion and net cash of BRL 389 million, representing 15% of shareholders' equity.

The next slide will show you our economic results. Net revenues amounted to BRL 435 million, 21% above the third quarter of 2019. Gross profit, BRL 117 million, with adjusted gross margin of 30.5%. It's important to point out, the consolidated gross margin is affected by the strategy of purchasing land through swaps, in line with our goal of increasing ROE and reducing risk and volatility in our results, as a counterpart of a margin approximately 500 bps lower, and also due to the negative results from Rio, where we prioritize the speed of sales of finished inventory at the expense of margins.

In the chart on the bottom left-hand side of the slide, we present gross profit by business unit. São Paulo had a gross profit of BRL 94 million, Melnick's was BRL 33 million, and Rio de Janeiro had a gross loss of BRL 9.6 million. Net income in the quarter was BRL 41 million and net margin, 12.9%, a nominal profit, 52% above previous quarter and 147% above the third quarter of 2019.

Moving on to a more strategic part, Slide 11. We are quite pleased with the consistent improvement in São Paulo results, where we are expanding our land bank acquired under Even's new strategic guidelines and with healthy expected margins at around 33%. The older lots, acquired before 2016, which represent only 4% of the land bank is still to be developed and as well as the older inventory, which present worse margins, are increasingly less significant to our results in the business unit.

As for Rio Grande do Sul, we were very pleased with Melnick's IPO, which is without a doubt, a unique company with a history of delivering good profitability. And now that is capitalized and facing little local competition is focused on increasing its profit.

Concerning Rio de Janeiro. The business unit, our strategy is clear, speed up sales of finished inventory, bringing the cash and discontinue the business unit.

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

[Leandro Melnick, executive]

Good afternoon. The figures presented in this quarter were very positive, highlighting the fact that this period was highly affected by the pandemic. The positive effects of the current interest rates that were greater than the negative effect of the restrictions imposed by the pandemic.

So in accumulated form, we generated BRL 104 million of cash, reinforcing our cash position, that's at BRL 1.3 billion. We are the lowest level leveraging in our history. It happened as a consequence of our planning implemented more than 5 years ago. Our strategy was clear, to make the company economically solid through a low -- a light capital structure that protects the company against the cyclic risks of our economy.

What -- the decision of concentrating our operations in our regions where we are more competent and defining the focus in products with high differentiation was right. And this is proving when we analyze our launches in the last 4 years that had great gains in terms of speed of sales and prices in relation to the market and in relation to our feasibility of lead acquisition.

Our good performance of selling inventory, that this quarter reached its lowest level in the last 3 years, results in a consistent tendency of increasing profits and profitability for the company.

And this is a moment in the market is heating up. Our net bank is highly qualified that has been built during the crisis years and the last launches affirm the quality of our land.

And in this quarter, we also had Melnick's IPO, a very successful operation that showed the credibility the company built -- has built in the last years, which increases Even, more our responsibility. Even reinforce its belief in regional operations. We are the only company in Brazil now with real estate development focused in its original region.

And we are the major shareholder in another company, that's market leader, publicly traded, that is also dedicated in each region of competence. It's a strategy that mitigates operating risks and brings more results to the shareholders and increase the chance of better results. For all these reasons, we expect to see our growth continuing in the next quarters. We are now available for questions.

[Operator]

[Operator Instructions]

First question, Mr. Alex Ferraz from Itaú BBA.

[Alex Ferraz, analyst]

Carlos, Leandro, I have 2 questions. The first one, in relation to how you allocate capital. Company has been deleveraging, and that there is this factor of the hotel that's not finished, but it should be something reasonably soon. The idea would be to imagine a distribution of the part of the resources from the hotel for people who invest.

And the second question is connected with land purchasing. You mentioned in the release that you added BRL 1.2 billion of PSV in 3 projects. Are these projects really large or 1 is in phases? It seems a reasonable PSV. If you can comment -- if you can continue with this strategy of acquiring land through swaps, if you would, a stronger competition, this will become more difficult.

[José Carlos Filho, executive]

This is Carlos. I will answer the first question. About our capital structure. In fact, the improvement in cash position in leveraging, it has been improving a lot in the last few years and this is a consequence in the way we change the way we acquire land, using our cash generation to pay debt.

And now we are at a cash position, a capital structure that is very deleveraged. We have BRL 389 million in cash, and this is due to the sales and the sale of . We will increase this participation. Our strategic planning foresaw that. We will be able to answer you -- how the capital will be used a little bit further in the future. We will discuss this further, how this will be distributed or how we'll change our -- the way we see this.

And at this moment, our strategic planning, looking at forward in the next 3 years, then we'll be able to answer you in a more objective way. Regarding how we purchase land. We bought 3 lots, 3 projects, one of them is really -- it was in the in São Paulo, the other in Brooklyn, and the third one, is a larger deal. It corresponds to half of the BRL 1.2 billion of land that we bought. It will be iconic. It should be put together within 24, 36 months. So it will take a little bit more to mature, and then we'll clarify further, give you further information about this project. But these projects are indeed differentiated in relation to other cities,

[ the office ].

Complementing your -- complementing the second answer. We understand and we are analyzing in our launches, some differentiating factor for larger projects within a volume of units that do not put at risk our continuity of sales in the long term. But we are still in the middle and upper income segments, so they do not represent necessarily a significant number of units, and this has been showing an infrastructure that were positive, in terms of pricing and assertiveness of the product. We are right now, at this moment, going into the fourth quarter with the beginning of a launch plateau that has these characteristics.

And it seems very promising, very important. And buying land through swaps, it's part of our strategy that has been very successful. As I mentioned in the beginning of my speech, this is a strategy that has been generating important cash and bringing into the company some hedge, some protection against the fluctuation of the economy. So our strategy doesn't mean it will be 100% through swaps. The swaps in the -- is a point that we have been analyzing in our strategic planning for the next years.

[Operator]

Next question, Ms. Nicole Inui, Bank of America.

[Nicole Inui, analyst]

Congratulations on the results. I have 2 questions, first, about the finished inventory that you mentioned. It -- really the sales of finished inventory accelerated. I'd like to know if you can comment what you see right now in this month of October, if these standards will continue, the sales of inventory or finished units inventory?

And geographically, how do you see this -- how this is São Paulo and Rio de Janeiro? My second question about prices, you showed that the prices are going up, but it is still very timid. Where do you see space room for the prices going up within your product?

So you have the high end, the middle, that you have emerging markets. So it's an issue with the standard of the project or you see this across the board? So if there is room to increase prices even more from now on?

[José Carlos Filho, executive]

Nicole, this is Carlos. I'll answer the first question. And then regarding the finished units inventory. There has been an improvement that was very significant in the speed of sales, it improved more than 30%. The speed of sales, if we compare with previous quarters, basically because of the decrease in the interest rate, our clients have been able to buy financing with 6.5%, which is a reduction in the installment of more than 15%, and this impacts the sale of finished inventory because they buy the unit and buy the finance at the same time.

When we use a higher interest rate, when we sell units off plant, so it's been a good surprise. We still have a higher level of finished inventory, which means that looking forward, the next quarters, we still see finished the inventory selling well, and it will contribute positively with the cash generation of the company and help us with allocating our capital in the balance. I now ask Leandro to answer the second question.

[Leandro Melnick, executive]

Regarding the increasing prices, it has 2 topics. One is macroeconomic and market-related. The prices have been increasing. We have been analyzing this very clearly. And we can see this in the launches as we see since last year and with this year, more intensely with the decrease in interest rates.

It's a circumstantial increase of prices at launches, is also generating, as a consequence, an increase in the speed of sales of inventory and also in the prices of inventory, something we hadn't seen in a long time. So our inventory is showing a product of opportunity. So this dynamic is very positive for the market, and it's consistent. And it's been happening at least for 6 months, an increase in volume and price.

The second point which is related to our strategy, is focused on the purpose of the company, which is, we call fantastic products, internal inside. And we put a lot of technology and within the strategic planning of the company, the ideas to develop more qualified projects with lots of attributes, different from the competition, whether in terms of posture, in terms of branding. And this cost, this structure aggregate -- adds to the value is being rewarded with an increasing gain in price, in relation to the competition and our costs.

We have many examples in the company. Fasano is the best known. But if we analyze Campo Belo, Argo, which is another project I commented, plateau, all these launches have been showing a very qualified product and with a more microanalysis. It's 20% higher than the average of the other projects in the neighborhood, but we have obtained a good speed of sales with an increase in price, and this is very important to translate into results for our company. And it's been more than 4 years that we have been getting good results with this strategy of better quality when developing our products.

[Operator]

Our next question, Mr. [ Alves ], BTG Pactual.

[Unknown Analyst]

I have 2 questions. The first regarding inflation about construction material. If you can see this -- the impact of this increase in prices of construction material. If you have any expectations of how these new costs will stabilize, do you think the segment will face another wave of increasing price or it has reached a peak?

And the next question is regarding gross margins. If you can comment your expectations regarding the company's margins from now on. I know one said -- on one hand, we had an increase in the cost of construction, but on the end -- on the other side, we had the increase of prices of the products. So what's your expectation?

[Leandro Melnick, executive]

Hello, Alves, will begin, and then Carlos will continue. Regarding the construction, the cost of construction is very important. First, as a company, as a segment, we benefit from the learning curve of 10 years of learning. So that cycle, that began in 2007, we learned a lot from the problem with the costs going too high and developed a series of strategies to mitigate the problems we had in the past.

So we are calm because we have been analyzing this attentively. And with the strategies that showed effective in other moments. One has to do with engineering, one with the costs and the other with the selling. The costs Even has been for some time, through a process of reorganization and anticipate hiring. Hiring the great vendors, great suppliers, the great packages, we do at the beginning of the construction.

And this -- the beginning corresponds to 60%. So the cost is already

[ hired ]. So it's a protection by the system the way we buy the supplies. And the new launches are always being updated as an activity in the construction, the very intense, which is Even's case. So has -- it's able to update the data in terms of price, very significant. And the second point, the mitigation process is the selling process. We know this segment for a long time and in the sales department, it used to be the happiness. So things changed very quickly, and this was a conquest where price changed very quickly, and this shown to be wrong.

So the process of increasing prices and then a sudden decrease in prices, and now we have a defense against that. Not more pursuing a high-speed of sales but rather price. We have been organizing our projects in terms of focus on price, and we face the market with a selling prices that are challenging, without any need to go after a high-speed of sales.

When it comes, it's welcome because the price is already protecting this. So because of the maturity of the process, the tools we have developed in the company mitigate this problem. We are attentive but we are mature enough to know how to deal with this situation.

[José Carlos Filho, executive]

Answering the second part of your question, regarding gross margins. Let's divide this into 3 parts. The first, an increase in gross margin as a condition of increasing the square -- in the price of square meter. As Leandro was commenting, we have other costs, the cost of construction and the purchase of land.

So when we look -- the business unit in São Paulo, we see an increase in the expansion of margin in a consistent way because we have a mix, which is older inventory with lower margins and launches with higher margins and the new batch of the company -- the launches.

And this is becoming more relevant in relation to the older inventory and the reduction of the inventory. So the margin in São Paulo is at 32%. The adjusted margin, the idea is that it continues expanding as it has been happening quarter-after-quarter. And the third point is regarding Rio de Janeiro.

Rio de Janeiro, in this quarter, yielded a negative result of BRL 60 million of gross, results of BRL 10 million, a negative, and selling negative results at around [ BRL 6 million ], with the participation of Rio de Janeiro, as we sell the inventory there, we increased the volume of sales of inventory.

And today, the inventory in Rio is concentrated in Jacarepaguá and Botafogo. And in Botafogo, we can see an increase in speed of sales and price. When participation of Rio, the decrease will also gain [ margin ]. The potential of gains when we look, the BRL 41 million of net income that we had, which is BRL 164 million of consolidated profit in the quarter.

If we removed the loss from Rio, it will be an annualized profit of BRL 225 million. It's important we analyze the company. Looking at Rio de Janeiro as the margin is being brought down by Rio, but in terms of cash, it's going to bring in more cash in the next quarters as we reduce inventory.

We have confidence that the expansion of the margin will be consistent, along coming quarters, just due to a change of mix as São Paulo continues improving these margins and Rio de Janeiro is phasing out.

[Operator]

Our next question, Ygor from Santander.

[Ygor Altero, analyst]

2 points. First, I'd like to talk about launches. You have already mentioned the selling of inventory is very strong. And the launches year-over-year, there is still a gap to be closed. I'd like to understand how the approvals of new projects are coming along, if you expect an acceleration of launches in the fourth quarter. If you can give me an idea of how this will be distributed among the business units.

And the second point is about the land market in São Paulo is very competitive. At the same time, I'd like to understand -- to see how it is in Rio Grande do Sul?

[Leandro Melnick, executive]

Ygor, thank you for your question. Regarding launches. In São Paulo, it is true, your analysis. When we compare year-after-year, we see 2 effects. First, a negative effect, the COVID-19, with headquarters without launches, and we imagine we would have a year that would be harmed by this. But the second was the quick recovery we have been seeing than we saw in the third quarter.

The market as a whole reacted very quickly to the crisis. And this made us go back to our initial launching projects. And our projects were highly developed in terms of getting licensing and being approved. So the sales stand at buying material, and we reorganize our schedule, because of the effects of the COVID, not just in terms of the market but also because of the restrictions, the lockdowns that we couldn't implement.

It would stop us from launching. So we are planning a fourth quarter. It's not possible to extend time, it doesn't mean we'll be able to change our planning. But in the midterm, if not this year, next year, they are products that are very consistent, and our strategy of swaps. We talk a lot of -- very frequently that this strategy protects the company against the pressure from launch periods.

In one of the -- is this that the variations in the periods for the launch? It's carryover -- the carryover cost is not as much as when you buy through with cash. So in summary, we are planning a fourth quarter that will be very intense in terms of launch. But the sales area has to be adequated. It has to be appropriate for the level of launches.

And regarding Rio Grande do Sul. In São Paulo land, the lots are -- there's more competition for the lots, but we see, it's possible to continue of buying a good land bank for very reasonable prices without having to count on a future increase of prices when we buy land. Our strategy has been active and very strong for many years. And our strategy is also -- there was buying small lots from a small house, 30 -- sometimes we buy 30 lots to acquire one piece of land for a project.

And our strategy is that to create lots. We create lots that are not in the market because this takes 2 to 3 years. This means that we're buying these houses one-by-one. We still have many, many lots to be developed, in which the development has been began, when the market was not so hot. And this gives us the possibility to continue buying land with good prices. And this is good -- will be good for the company in the next year.

In Rio Grande do Sul, it's very different. The market dynamic is -- there's not so much competition. The opposite happened in Rio Grande do Sul, the companies that used to operate in Rio Grande do Sul left there. They suffered a lot from -- with the crisis. They didn't have the capital. They didn't -- they were not in condition to remain in the market.

So we have a market that's not so hard. It is still heating up with a lower potential with lots of opportunities. So it's very different. And in this context, Melnick has been able to grow its market share. In these last few years, and we continue doing the same thing, pursuing the same dynamic.

[Operator]

Our next question, Tayiz from Citibank.

[Unknown Analyst]

I have 2 questions. The first, the operation of inventory -- of selling of inventory in Rio de Janeiro, and how the margin will be after the sales in this quarter? If this happens, how much can we expect in terms of margin? And if we are dealing with a project that have been always well sold?

[José Carlos Filho, executive]

So Carlos here. Regarding the supply in Rio de Janeiro, it has a model of private placement. We are still studying, and we have been receiving proposals that we are analyzing. The company is highly capitalized. We have a good position of cash and we're going to do an operation that's good for the company, reducing risk. Otherwise, we'll continue with this more aggressive strategy of selling inventory. So this is what we can tell you right now. It's a more restricted offer in terms of periods, it can take a few days more for us to continue in this process of negotiation. It's different from other place where we have a specific schedule for this. And we'll only do an operation that in reality, brings the benefits to the company. The second part of your company, I didn't understand. Could you repeat it?

[Unknown Analyst]

If in the short term, you have projects in the pipeline as it was Clári Pinheiros that you sold 100% at the launch?

[José Carlos Filho, executive]

If I understood your question, the pipeline of launches for Rio de Janeiro, we do not. Not it -- the short term, the short term. You launched Clári Pinheiros. And it was 100% sold at the launch. If you have other projects in the short term that can be sold as quickly as Clari was. Okay. Leandro is answering.

[Leandro Melnick, executive]

We have a development -- in development a few projects with the same structure of studios, and we are searching or the best alternative or some alternatives for each project. Some has the characteristics in which we can have a partnership as this was others. We understand that a better format is selling at the market. So we are looking for both possibilities.

We think it's a -- but we do not have a definition. We do not have a role in terms of how we're going to sell. And this happens product-by-product, so we know the model, we keep this month, but we analyze this product-by-product. We have other projects that have the same structure as Clári in terms of studio apartments. And in case the negotiation will be more private.

[Operator]

Our next question, Marcelo Motta from JPMorgan.

[Marcelo Motta, analyst]

If you can comment in terms of the price of the studios on the Slide 4 of your presentation. The other projects that were launched in the third quarter, they had a gain in price, and there is -- the studio tower in the project didn't have gain on price because it's a studio, I would like you to comment.

And when we look at the product mix, what are you thinking in terms of more studios? You made some hotels in the past. We have the issue of a medical center. So I'd like to understand a little bit more on your product mix for the near future.

[José Carlos Filho, executive]

Motta, it's Carlos here. Let me start by answering. Just to clarify, we did not put the percentage of gain in price because we launched Clári at the last week of the quarter, and the project is doing very well, and the studio tower has been 100% sold. We sold it to one investor, and now we are doing the launch and the sales of units of the Clári residential.

In next quarter, we show you the gain in price we had on this project. Now complementing, in this slide, we have less information in terms of the number. We have seen a percentage of gain in price even higher than the one we show on the slide.

[Leandro Melnick, executive]

Carlos answered, we had a period of consistent sales and imported [indiscernible], the 2 projects when we began this project, to answer your question.

It was a little bit lower, more affordable projects than we used like Marajoara, which has a lower elasticity of prices. And our segmentation is within the city. Since -- so part of São Paulo, that's more resilient to crisis or super offer supplies of products, and we have these desire to launch in that part of the city where the buyer really wish to live in, where he can live.

We are operating in the segment where Even already has expertise, which is open line. It is focused in a series today with a lot of expertise but within São Paulo, São Paulo has a tested capacity to absorb multiple products. But with each product, we have been doing the performing the following analysis. We try to position at the top of the pyramid for that line of product.

So if it is positioned at the highest middle, upper middle or even in the open line for that segmentation, we want to be at the top of the pyramid. We want to be the top of the food chain. So for example, a product that in theory, you can sell for BRL 11,000 per square meter, we have a more qualified product and selling for BRL 1,500 more per square meter than the average of that product, so that's our strategy. It's been working.

We are using Even's competence, which is multisegment within a region where our operation has been consistent and resistant to any problem that may happen and position ourselves at the top of each segmentation. But middle income, upper-middle income and high end, there is a higher elasticity in the price. So it's a high -- there's a high demand for this.

And the elasticity is high enough, and the buyer follows this and in the lower income segments, even if the product is very competent. It's very good. The price elasticity is more limited. So our product mix, we have even fewer products in São Paulo of high-end and the percentage is not so high in terms of sale. I don't know if I were able to answer your question. But that's the idea we have.

[Operator]

[Operator Instructions]

We now close the question-and-answer session. I would like now to give the floor to Mr. Carlos Wollenweber for his final thoughts.

[José Carlos Filho, executive]

I'd like to thank you for your participation. We are very excited about the results. The results we are delivering, the perspective and the future of the company, looking the next quarters. And I thank you for your participation.

[Operator]

Even's teleconference is now closed. Thank you for your participation. Have a good afternoon.

[Statements in English on this transcript were spoken by an interpreter present on the live call.]