EZTEC Empreendimentos e Participacoes SA
BOVESPA:EZTC3

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EZTEC Empreendimentos e Participacoes SA
BOVESPA:EZTC3
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Price: 14.5 BRL 1.4% Market Closed
Market Cap: 3.2B BRL
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Earnings Call Analysis

Q3-2023 Analysis
EZTEC Empreendimentos e Participacoes SA

Realignment Strategies to Empower Investor Value

The company's results are not what we aspired but are adequate for the current phase, with efforts to reduce inventory and repurpose land for residential use. We're converting commercial land to residential and plan to reduce engineering sites from 21 to one-third after upcoming deliveries. New board appointees aim to lower costs, improve company culture, and raise margins. Our ready stock averages above a 40% gross margin, helping to incrementally increase our overall margin. We're poised for selective land buying, focusing on value generation through potential land sales or share repurchases if market conditions are unfavorable. We're navigating a minor negative adjustment due to macroeconomic factors, but expect to leverage a robust cash flow from BRL 5 billion in deliveries over 1.5 years and a promising corporate building in Sao Paulo for shareholder value.

Company's Resilience in Face of Challenges

The company acknowledges the disappointment in the presented results but expresses adequacy considering the company's stage. While they face difficulty with their commercial units' legacy, they have pivoted towards residential units with no commercial plots left undesignated. A significant building is highlighted as a longer-term project necessitating patience, differentiating from other companies who have faced similar struggles but incurred significant losses. The transparency of their results demonstrates preparation for the coming year with a commitment to starting with a clean slate, an adjusted cost structure, and improved sales velocity.

Strategic Focus on Sales Acceleration and Inventory Reduction

Next year's strategy is emphasized on launching units that will sell quickly, reducing stock, and being judicious in selecting launches. This stringent selection process is expected to contribute to increased Project Sales Value (PSV) and profitability by transforming the land bank from commercial to residential units. A unique sales strategy aims to generate a feeling of product scarcity to drive demand, which will be evaluated in the coming months.

Leadership Changes to Drive Future Growth

New hires, as symbolized by Christian, indicate a new phase for the company, focusing on adding expertise to the team and shaping company culture for an increased launch and safety volume. Silvio's hiring, in specific, is intended to revolutionize engineering, with expectations for visible results in construction from savings and management changes starting July the following year. The goal includes a happier workforce with improved salaries and contributions, aligning with modern transformations.

Inventory Sales and Cash Generation Strategy

The company maintains a cautious approach towards discounting inventory due to a nearing delivery cycle, aiming to avoid buyer dissatisfaction. There's an emphasis on promptly selling ready commercial stock while positioning residential units within the market at competitive prices. Cash generation is expected from these deliveries, especially as the buildings have not accumulated significant loans, though offset by some cash holdings. The company is looking at a net debt around 5%, with the context of a healthy equity base of BRL 4,600,000,000, suggesting a stable leverage situation with the strategic management of debt and assets.

Launch Pipeline and Strategy for Upcoming Year

The company's launch pipeline is shaped by strategic considerations such as changes in city plans, large-scale projects, and market competition. In response to alterations in housing programs like My Home, My Life, and the city plan, the company plans creative approaches to navigate the market conditions while prioritizing core business segments before expanding aggressively into lower income housing. Partnerships will play a role in this strategic maneuvering, ensuring focus on the most critical business aspects for sustainability and growth.

The Company's Reaction to Judicial Decisions

The company has a history of consistent actions that align with their principles and beliefs in property resumption processes, a position that has now been endorsed by a Supreme Court decision. This validation does not change their strategies but reinforces their existing practices, thus continuing a business-as-usual approach with judicial support.

Earnings Call Transcript

Earnings Call Transcript
2023-Q3

from 0
P
Pedro Lourenco
executive

Welcome to EZTEC Third Quarter 2023 Earnings Conference Call. I am Pedro Lourenco, Head of the Investor Relations Department. And we have today Mr. Silvio Ernesto Zarzur Advisor CEO; Flavio Ernesto Zarzur, Vice President and Chairman of the Board of Directors; Marcos Zarzur, Member of the Administration Board; Marcelo Zarzur, Vice President of the company; and Emilio Fugazza, Financial and Investor Relations Director. This video is being recorded [Operator Instructions]. You can find the presentation slides on our website in the download tab. The information is available in Brazilian currency in BR GAAP and IFRS applicable to real estate development entities in Brazil. Otherwise it will be indicated.Before beginning we'd like to make sure that any statements during this conference call regarding EZTEC's business prospects, such as projections, operational financial goals constitute benefits and assumptions of the company's management as well as currently available information. Future considerations are not guarantees of performance. They involve risks, uncertainties and assumptions as they refer to future events and therefore depend on circumstances that may or may not occur. Investors should understand that general economic conditions industry conditions and other operating factors may affect EZTEC's future performance and may lead to results that differ materially from those expressed in such considerations.Now I'd like to give the floor to Mr. Emilio Fugazza, who will begin the presentation. Please go on.

E
Emilio Fugazza
executive

Thank you, Pedro. It's a pleasure to be with all of you here in this earnings conference call 3Q23. I begin with my consolidations in Slide 2, we are -- right now, we had the launches of the third job with our partnership of EZCAL joint venture with the consultant PSV of BRL 85 million EZTEC's share, 23% has been finished, has been sold, and we consider a little bit more sales, we will cover the cost of construction of this job. In the third quarter, we reached BRL 387 million in launches where participation of joint ventures with the constructors is significant, something close to 40% in the total launch in the year. And our operational performance, we have our sales performance. In the year, we reached BRL 1.245 billion in gross sales, a quarter of BRL 344 million. And the performance of the company was due to sales of jobs in progression. And I want to recall you that cancellations is 130 during 2023, BRL 75 million from the third quarter on. With the volume of delivery that we had that was very good during this year.Now we go straight to Slide #3, where you can see on the left side, the delivery of our international construction job. [ I'm sorry, but his sound is cutting a little bit. ] Now the last phase has been already -- so this is to my home, my life. And we should have BRL 1.8 million, 84% sold in this fourth quarter, about BRL 1.3 billion in all the jobs here have been authorized. The documents have been issued or will be soon issued. And it's important to mention that it had impact in the city. It's an important construction job. It's an icon for the city of Sao Paulo and also for the company. We have the documents issued and we are delivering the units and we have had very positive feedback from all the clients that are receiving their units, and they're quite satisfied.And now talking about inventory, it's worth mentioning here that we are finishing the third quarter of 2023 with BRL 2.5 billion in the inventory, a decrease as compared to the beginning of 2022. And then we'll talk about our land bank. Our land bank did not very much during this quarter, the third quarter of 2023. However, there was an important change in this land bank, which is the conversion of about -- for projects change to residential projects, important projects. And this is why we reached almost BRL 9 billion and DVBs, PSVs, and we may reach BRL 12 billion. And operationally speaking, launches.We have -- we are selling already a project in Vila Prudente with our brand, one of our brands, and we have 2 towers where we have finished the first phase, a project that has a contract signed with Caixa Economica Federal, and it contemplates BRL 153 million in the PSV of the company with 653 units. And this project will be officially launched in the coming weeks. For our not so far future, we have other launches in the forecasts, among them, Lindenberg, Brooklin that is our fourth job with the joint venture with Lindenberg, Lindenberg builder and the direct and indirect share of the company is 75% with a PSV of about BRL 300 million and excellent site in Brooklin with amazing view, and we have a good acceptance by the clients. And we will start launching construction jobs on a plot. It's quite significant that we have in Mooca. And we have 50% share. We're talking about Mooca Eredita. Mooca Eredita will have about 9 phases where 3 of them will be launched within the coming months. And for you to understand what it is, more than BRL 10 billion is the participation 50%. And we have been quite successful with Eredita. At that time Mooca was launched and has been delivered this year already. We are delivering this unit. It has been authorized, legally speaking, and it's sold almost 100% and with excellent feedback from our clients. From the stance side -- from the stance of financial indicators, net revenue above 80%. Our net revenue reached BRL 252 million in this quarter aligned with what we have reported throughout the other quarters of this year. Most significant is the job constructions. And what we have seen in the units that have been sold -- on the right side, upper part, our gross profit and margin. The margin reached 32%. It's not what we want, but it's an important recovery as compared to 4Q '22 where we went from 25% to 32% and we maintain an important expectation regarding 2 topics that we have in our balance. The first one is regarding the backlog result. The cost of all the units, you can see through the backlog results that this quarter, it's about 38% and only the issue of finance -- of the loans that we have been using for our jobs is a little bit less than 2 percentage points. The margin will be better in the next semesters, around 36%. We have this expectation because we are delivering a very large share of jobs in 2023, leaving behind the ones that were developed during COVID pandemic.And also this talk of ready units are around 70-some-percent of the total we have and this is quite significant. The margin is quite significant, more than 40%. And this margin of this unit, many have been sold. It will help us to increase the mid margin of the company. Equity and earnings BRL 14 million. It's not significant. It should be better in the next semesters with margin of sales of our jobs with the progress of the joint venture construction jobs that enter in the equity and earnings. And also the Cidade that EZTEC launched will be considered equity and earning likewise.Now going to the slide on financial results. In this quarter, -- it did not show any effect here except that during the quarter that we are considered, EBITDA was negative in 4.14%. So this was more than enough to create an offset in what we charge from clients. EBITDA was very small, 0.27 during this period. So the result of the Fiduciaria [indiscernible] portfolio was highly impacted on this quarter. In this portfolio, you can see -- it's a portfolio that finishes this quarter in BRL 376 million. It increased as you considered at the beginning of the year and the deliveries of more than BRL 1.2 billion that we have now in the fourth quarter. If we think about -- we can think about a true increment in this portfolio.And we finished now impacted by all these effects that I mentioned before, around BRL 39 million, which is a net margin of 16%, bringing for the year, something close to BRL 156 million of results for the company.Something important to mention here is the net debt cash. We have a small variation against the availability of gross cash, but important variation as compared to the indebtedness. In this debt, this variation is only of evolution because it's only focused on production. The production we have here, we have a rate that is quite different from the current situation. And it's been used to implement all the jobs that we have opened. So the gross indebtedness should grow a little bit throughout the coming months, but it's also true that our availability will have positive impact in this volume of deliveries that we will have for the coming months.And finally, in terms of capital structure, you can see here on the [indiscernible] plot on the left, the company total about 20% of third-party capital and no doubt that this capital impacts in our sector, it's almost BRL 1.2 billion versus BRL 800 million, meaning the loans that we have. And this was to be paid have been paid during October.And we have the asset distribution. As you can see, the participation of the cash is quite significant in terms of the comparison to last year. And show -- because of the increase in sales that we had, especially in the first half of this year.Before I give the floor to our Directors, I would like to mention that, as usual, quarter-over-quarter, talking about payouts in this quarter is going to be BRL 9,300,000, and we should pay it on November 30. And the [ X data ] is the 17th of November, contemplating everything that has been distributed in the year, BRL 37 million the payout of the year.And would -- now I give the floor to the President of the Board, Administration Board, Flavio, please.

F
Flavio Zarzur
executive

Good morning, everybody. It's a satisfaction to be here with you sharing our results. Here, we are open for the questions that you want to ask. And as Emilio has said, we are readapting our operation, and we trust that it's going to perform as it always had. You know that something that we have in our culture is to follow our objectives, go for them and meet them when the time comes. So we're open for questions if you want to -- if one -- if somebody from the Board or the CEO wants to say anything, you can say something. We're open for questions. I give the floor to our Executive President and Director of Development

S
Silvio Zarzur
executive

It's not the result we would like to present. However, it's adequate for the moment of the company. For this point in time, we are working strongly to reduce our inventory to solve the problem of the cost of jobs that we faced. The company is very large. So we must be patient to reach that. We did everything to recover that. I want to remind you that we had previously a large land bank of commercial units. This is a legacy that proved that is very difficult to keep. So we changed this land bank in residential units, so much so that we don't have any plot that is not as yet allocated for commercial units. So this is an important point. We have one job that's an amazing building. It's going to take a long time to mature. We have to be patient. I want to remind you that other companies when -- cross moments like ours had huge losses. And you have the transparency of our results. So you have -- you see entirely what our reality is. We are preparing for next year to begin the year in a clean slate. We are sure we're going to achieve that. We're going to turn this page. The cost will be adjusted. We will increase our sales speed. So a new word. If you want to ask specific questions. Well, I want to say that we're going to adjust cost, we will accelerate sales. We will be very -- we will buy plots, but not so many. We will look -- we try to turn our plots in the best way possible. So you will see that we're going to take steps that will increase our launching speed. And that will help to recover what we consider that's more important for the company after safety because it's more important for the company is safety and serenity. You'll see that we are working a lot to educate our results.Emilio, please take over.

E
Emilio Fugazza
executive

Pedro, we can open for questions.

P
Pedro Lourenco
executive

[Operator Instructions] The first question comes from [ Pedro Bao ] from Bradesco.

U
Unknown Analyst

First, I want to further elaborate on the inventory. The -- we understand that the company wanted to focus more on selling the stock. And I'd like to understand if there is a level of inventory that you understand is healthier so that the company has the launching level that we saw in the last 2 years. This is the first question. And the second is about the launching pipe. It's interesting that you talked about the coming months. However, I notice the absence of the second tower in Ibirapuera. And if I missed something, could you please clarify, well, how is the timing there for the second tower.

U
Unknown Executive

Good morning. Thank you for your question. It's not exactly the volume of stock that concerns us. We are going to decrease it naturally, but we want to sell what's the strategy for next year. It's to launch jobs that will -- units that will be sold quickly. And we will decrease the stock because we're going to choose really choose the launches. So almost all of them because of market position in one or the other would be an exception, but we only launched those that will be sold very quickly. So that is the drive, the success in launching. We have to sell quickly these products. That is the tone of increasing PSV and also we focus in partnership. That will help us to turn around our land bank and also measure -- or share this huge PSV that we have because of the transformation of the land bank from commercial units to residential units so that we can sell and have a better rate for the company. It's a strategy. We will close -- I'm going to retail. We're going to close the sales now of the product. So if you want to buy Lindenberg Ibirapuera from December 1 on, we will not be able to until, I don't know, April, we have not decided yet. And then we launched again with a commercial strategy for a new launching and sell 40% of these units. And then we will meet a better sales percentage. The strategy of stopping to service what we did in [ Akron ]. We closed sales and that generated this feeling of lack of the product. People wanted to buy of a shortage in the product. People wanted to buy and they couldn't find it. So we're going to do that. I think at the beginning of May. Pedro answering your question. Did we answer?

U
Unknown Analyst

Yes, quite clearly.

P
Pedro Lourenco
executive

Next question from [ Tina Costa ] UBS.

U
Unknown Analyst

I would like to explore this announcement you did about the new Board. What's the biggest challenge? And from then on, should we -- are we going to see that reflected in the company in a positive way.

U
Unknown Executive

It's a sign. I'm going to start by [ Christian ]. Christian is a sign of a new phase of the company. It's something that we are thinking in the long run, somebody who comes to add more professionals to the team. And to apply our culture in the -- in our collaborators so that we can spread our volumes are better, increase our volumes in launching and safety from now on. So Christian comes for that. And Silvio, I'm going to give the floor to Marcelo because Silvio will be in Marcelo's place. So Marcelo can say what he thinks about it.

M
Marcelo Zarzur
executive

Good morning, everybody. I will talk a little bit about Silvio Gava. I participated on his hiring, and I endorsed it. And I think we made the right choice. Tina, your questions, going -- it's going to really change things after the jobs in -- from July next year on, he's really turning engineering around. Until then, there is a dragging of what's behind. But the worst negative results that we have in construction will finish this year. This year, it will be over. From next year on, we're going to have better results in construction. And in about Gava work, we're going to see the result from July on going back to what it used to be. And I would say, Christian, when she was hired, Flavio and I talked to her when did we tell her? That her mission here is to have the collaborators working happy. So this is the idea. They are selling and they have to be happy. She is going to improve the mood in the company. She's going to place or organize better salaries. The company will be in a different vision level. All our collaborators and the contribution for the company will be better. She is a modern person, and I'm sure that she's going to bring important contribution. Gava, here we have only one Silvio and its Silvio and Iamamura, they are not Silvio they are Gava. So we have about 10 Silvios here. So Gava came to change the engineering department. When you have something that's not doing well, and you cannot see exactly where because we were the best in engineering for 30 years, 40 years, and we found a problem. Then -- so we brought a new person who is strong with knowledge to really stun the management. And I'm sure that this decision was taken by Marcelo and Flavio, they hired him. And it was a very good decision, and we will soon see the result. His mission is to bring the cost down and change the way we do the job. Change the behavior of our engineering workers. And I want to add something, what Silvio said was quite clear and correct. The timeframe for Christian's profit, let's say, will be around 8 months, 2 years, 2 and some years, then we're going to be in a ranking of quality and performance and commitment from the workers, that's going to be much higher. But we need some time for that. Tina, did we answer your question?

U
Unknown Analyst

Yes.

P
Pedro Lourenco
executive

Now Mr. Elvis Credendio from BTG Pactual.

E
Elvis Credendio
analyst

Two questions here. First one about sales of the inventory because the company is getting to a delivery cycle, and we have seen other builders that are more aggressive in discount. I would like to understand from you if you're comfortable with the level of inventories that you're going to deliver by the end of the year, maybe you could be more aggressive, not builder -- developers. And the second question, about the cash generation aligned with the delivery issue to understand the expectation of cash generation, the leverage of the company with the cycle of deliveries at the end of the year and for next year to the trend of that. If the company has reached the peak of levering or if it should raise a little bit more.

U
Unknown Executive

Thank you for the questions. Who wants to answer that?

M
Marcelo Zarzur
executive

The ready inventory. We have a mechanics that we use when we're going to deliver building the buyers will sign that contract for loan and for the share. And we cannot go there and be very aggressive in the commercial part because that will make the person be dissatisfied and will give us -- we provide difficulties in people to really abide to that from -- I'm being quite transparent -- from the moment that they signed, and we have this building delivered and consolidated this delivery. We're going to check the marketplace for that, the best price for the market, not ready inventory. We have for residential and commercial buildings, the ready stock, we will not be carrying residential stock. And even the commercial one that we have in 2 or 3 months, we are selling and we are looking to sell as soon as possible. But the residential units will have a marketplace and we will sell. Indebtedness and cash, Emilio, you can talk better, say better words than mine.And also delivering in this quarter are buildings that are quite valuable that are being sold, and they have huge added value. Guarulhos is something that's going to come for the stock, but it's a very good piece of units. They are very good units.

E
Emilio Fugazza
executive

Thank you Marcelo, cash generation. I will separate each one of the topics. Cash; these deliveries will lead to cash generation for the company. And in average, this buildings did not take huge volume of loans. We have some loans, but we have much more cash. We had a discussion in this case of what's the percentage of sales, and we also have to think about trustees in relation to leveraging, I want to remind you that I have the expectation in relation to what's happening, leveraging everything that is under construction, those launched in 2021 or '22 are jobs that take more real estate loans. So there's always an expectation that we increment the gross sales during 2024. It will be around BRL 1 billion, sometimes more, sometimes less. But -- it's the avenue we will cover throughout the year of 2024. What means in average that we will have a small percentage of net debt throughout this time. A percentage is not relevant for the company. Considering the company has BRL 4,000,600,000 in equity. So we're talking about net debt around 5%. And I also want to remind you that included in this expectation we have the payment of the plot of extra BRL 300 million. So we're going to reach this immediate expectation. And within that, we have the payment of that plot that's quite valuable. It's a jewel. It's a piece of jewel. In answering your -- did we answer your question?

E
Elvis Credendio
analyst

Yes.

P
Pedro Lourenco
executive

Now [ Hugo Gracie ] from Citibank.

U
Unknown Analyst

Thank you for your presentation, very clear as always. I'm going to ask a broad question about the launching pipeline that you have for next year. But I'm going to bring some elements to understand how you intend to navigate this coming year in the selection of what launches are worthwhile in what segment of the population revenue share? The -- let's talk about the change in the city plan, does it make sense not to launch something that had been programmed to even if you postpone this launching, this is one thing. Second, some projects are large. And here, I emphasize, but on the Monsanto that you have finished at least one phase, and you were launching it soon. And also Mantiqueira that you are already launching maybe with the competitor nearby. You have a competitor nearby. The third element is my house, my life -- My Home, My Life. You have some record on that, some history in the Cidade but maybe with this new engineering director, you have different considerations on what makes sense for low income or even thinking about what could be the #4 gap or not gap, #4 of line in income. Maybe up to 12,000 because this 3 data, the city plan concentration of high-volume projects in My Home My Life. What's the strategy? What is your -- what are you thinking about that?

U
Unknown Executive

Yes. Okay. It's a long question. Help me out. First, I'll talk about the city plan we had the approval of a new law that brought important impact in the zoning of the plots. So it's 2 different things. One thing is the city plan that will change the zoning of some plots for each that -- and it has changed for each zoning that we had, the master plan, the changes in the master plan. We gained 20% more of PSV. It's worth doing. So in the next months, we will then implement 1, 2, 3; next year, 4 and 5 that will come with an increase in construction potential around 20%. So I'm going to exemplify something for you to understand. Then we're going to have a structured operation for the region. And then instead of 2, we'll be able to make 4. Each phase of the construction will be launched according to what has happened. I will launch 4 and 5. I will not wait for this operation structure to increase. But 6, 7, 8, 9 if the structural changes come, we can have a -- we can think about a scale to maintain the company function. We cannot stop and wait for things to happen. And we have also to benefit from things that happen as possible. So it's an organized way so that we do not lose our pathway. We cannot just stop. Density is an approval that has been protocoled for some time. We should approve it within this year. It's some success that we had. I don't know if you can measure, it's huge, huge we are not competitors from [ MRB ] very different from [ Russia ], I'm not saying that it's better or worse, but it's a different public and we do not have competitors. And so each one will be in one -- one part of the population everybody here has good expectation, and we're going to sell very well in PSV. Now My Home My Life. My Home, My Life I will say that we will try to be creative. To begin with, we will move it around, but we understand that for us to have something really strong, not criticized. We must have -- first, we're going to organize our core business, which is the medium income bracket, selling well high income also we will first organize that. And then we go to My Home, My Life. And in the meantime, we have partnership with [ PPE ], and we have other partnerships that are on the move and can bring great PSVs for us. We're going to look for partnership as we get organized to really phase in a strong way the lower income bracket. And I will not take my attention from what's important for the company and look at something else. That's the strategy.

U
Unknown Executive

Hugo, could we answer you?

U
Unknown Analyst

Yes, perfectly. And if I could use of you about the portfolio -- fiduciary portfolio, it's always relevant, especially in deliveries, and there was a decision from court that validates the resumptions that happened without any need to go to the judiciary. I know that you resumed some units, some other way. What does it mean for you, the new decision from the Supreme Court? Is it more comfortable? Does it change anything? Your predisposition to count on that portfolio? The cost of delinquency? Of course, you are the developers that have the biggest direct portfolio.

U
Unknown Executive

It's been 20 years that we work on the same way. We always acted accordingly. And that corroborate what we have always thought and done. It does not change anything because there are some things that -- how can I say that you believe and that you bet on them. We always bet that it was correct. Now the Supreme Court just confirmed it. So we keep acting the way we have always done. Part of the lack of results, we see that for INCC and IGP was 4% negative in the quarter. And you talked about portfolio and I decided to mention that it was 4% negative. And that also lowered our results. And the interest on it is very close to the banking loan. So maybe we can increase a little bit our portfolio because the fiduciary is again important to improve liquidity in our sales.

U
Unknown Executive

Just to corroborate what Silvio is mentioning, in our fiduciary backlog, we have been tested in this more than 20 years that we work like that, judicially tested in every single way, including by the Supreme. And we always want -- it's not that we only believe. We believe and we have been tested, and we never lost. So that just consolidates what we always had. In complementing here, it was also approved something that brings this second -- the new debt and how to change the potential -- when you have the -- when it's going to affect the primary market, it's going to be better. So this new at large is good.

P
Pedro Lourenco
executive

Your next question from Mr. Antonio Castrucci from Santander.

A
Antonio Castrucci
analyst

I would like to understand whether you could further elaborate on the margin of your different parts, the ready stock, the one that was done during the pandemic and the launches for this year? And what's your expectation for when we were going to see the [indiscernible] margin closer to those 40%.

U
Unknown Executive

I'm going to begin separating the following: Pedro showed on the Slide #8, our acknowledgment of margin per harvesting, so to say. So you will see that we see -- you can see there what we have reported to give you a bit of our expectations in the future separate into parts. First, the first expectation that I have is the REV margin that tells us that the sales that are being done, they demonstrate a gross margin for the company that is better than the sales that were done in previous years for those jobs under construction. So clearly, when you see what was presented, it goes from 38%, it's around 38% that we are reporting. So the sales show that margin is better. Be it because of the group or because of the price. Second, I would like to explore better. The ready stock of EZTEC is always very valuable. The jobs that are ready now, they have a gross margin for the company above 40% in average. So no matter what is seen in the other margin. The sales of this stock will impact the margin that you will see quarter-over-quarter. So you will not you will not see 40%, but you will see that we are being able to move this up because of these 2 factors. And I will complement saying that we had 0.5% ex of lowering the interest -- in interest. So today, people think, I'm going to put my money in the bank, and I wait for the interest to raise. And when somebody does that everybody else does it. So there will come a moment where this market will turn around. As Emilio -- Emilio said important things. We have a problem of demand, we are going to have a commercial gain. Emilio it is something that we do not know, although he says that he thinks that the margin will not be able to see it soon, according to what happens in the macroeconomic scenario, we can improve quicker. The assertiveness in choosing the selection of launches that we are doing also increase our margin. We'll sell quicker, we have less expenses and then you can gain price. So it's a whole equation. I'm not talking about what's happening, but it's within a plan for next year, if things run accordingly, we'll be prepared to improve.

U
Unknown Executive

Could we answer your question, Antonio?

A
Antonio Castrucci
analyst

Yes. Yes. Just one more thing. You talked about increasing prices. Do you have any idea on which regions of Sao Paulo, what neighborhoods? Do you believe that you can get a higher gain?

U
Unknown Executive

I think that's general. If you think about high standards, look at the ones that are being launched and they need buyers. And when you have -- offer higher than the demand, the price goes down. What I understand is and that's true for medium income to not for My Home My Life. In medium and high income, as we have a lower interest rate and the demand for our units increase, they're going to have lower loans. So instead of paying BRL 700,000 in the unit, they're going to buy one of BRL 800,000. That will generate increased demand. And that's for medium and high brackets of income. Did we answer

A
Antonio Castrucci
analyst

Yes.

P
Pedro Lourenco
executive

Now Mr. [ John Bosco, Jasil ].

U
Unknown Analyst

My question, I would like to understand a little bit about your operational mindset. This year, you had 2 launches. If we consider that the most important one was a relaunch because of the macroeconomic issues of the engineering department. I also understand you don't want to overload the ready inventory because of the BRL 5 billion debt you have to deliver in the next 18 months. My question is, you're going to have a cash generation that's strong in this 1.5 years of deliveries. But also you have 21 operational sites now. I think you're going to have 1/3 operational after this delivery cycle. So let's think that this cash generation that you have, the projects you have to launch may put you in a focused cycle that would generate value for the shareholders with the historic -- what are the historical margins -- with the historical margins again.

U
Unknown Executive

I am going to begin answering your question, and then I give the floor for the President for the CEO. First of all, the focus of the company is in the real estate market to get as much value as possible. We faced some difficulties throughout the last 2 or 3 years with the -- and the value we're offering is not what's expected, especially when I look at the controllers, this is a company whose controllers, they live off dividends. We're talking about a company that is aligned with the need of physical and institutional shareholder. When -- in the face of that, we are doing an important adjustment in our house. It's an operational adjustment. And with that, the objective is to generate more value for every shareholder. If we look at our brands and we transform in net margin, first, what we want? Money coming back home. That's the first part. We were very focused on that delivery that will happen until 2024. We have important cash generation -- generator. And I cannot do anything now because the market is not good for that. But we have a diamond there, something that's very special. It's the best corporative building in the city of Sao Paulo, the best technology, the best site for the corporations to be. So no doubt, we're going to generate value for the shareholders from there. And also, as Silvio said, we're going to be very selective in relation to buying land. We already have a contract that gave us BRL 3 billion in the extra. And then considering the expectations we have, the price of land and price of sales bring a huge potential of value generation for the company. And then bringing this money we depend on the market conditions; if we really have a market where sales will be possible without increasing much the stock. You see the company doing what it has always done, more launches with added value for everybody. If it's not like that, of course, they're going to think about some way to increase the profit, maybe share sales, et cetera, but it's not the moment to talk about that. We have to wait for cash generation.

M
Marcelo Zarzur
executive

Yes, perfect. This talk of the land bank we have for commercial -- land that we bought for commercial jobs. Now it's going to be residential jobs. And we have to change that. But if we have money to spare, if many strategies we have that now I cannot detail do not prove to be safe, do not prove to be adequate. Then we're going to pay out. As Emilio said, maybe share repurchase, maybe and maybe something of buying back. We are on the same chair you are. I want to get the money, have some profit and pay it out. We believe a lot. There are many strategies that can help us to really place these investments in an adequate way. And the share of this participation, our subsidiaries have 60% of the company.Did we answer you?

U
Unknown Analyst

I understand that you don't have yet a clear view. But my question is more in the sense of you will have a company, a few sites of -- a few sites in 1.5 year. I would like to understand how are you going to objectively -- what's your plan to leave the company with enough sites to be focused if you're going to have larger jobs, smaller jobs, you have the plan, is that going to depend on macro aspects? Or do you have a defined plan for that?

U
Unknown Executive

We have a land bank that has different types of land plots, different patterns. It defines what we're going to do from now on. He mentioned a few land acquisition, but we have Roberto Mounir and others and Marcelo will talk a bit more. We -- is tech. We had 32 sites. We got back to 11 sites in the period. And then we got back to less and now it's going to reduce. Engineering adapts itself. It works according to demand. And when you decrease the number of sites, then you organize the house. And when you go back, you come back, you come back stronger and more assertive. That happened to us and it will happen. We are prepared for that. I want to remind you that we have had a clear strategy of the partnerships we have. Silvio mentioned [indiscernible] too also though for Lindenberg, who are responsible for the construction. The 3 launches of the year, Lindenberg will build 2 of these jobs. Adaptation does not concern us. And of course, the company will adapt reducing or increasing engineering according to the need.

P
Pedro Lourenco
executive

Since there are no further questions, and we have already used our time. Now Flavio, please.

F
Flavio Zarzur
executive

I thank you for all the questions. If more questions come for Emilio -- Emilio and Pedro will be available. You know that, and let us make clear that we're not concerned structurally speaking. We're going to become stronger. And I have no doubt that John Bosco's last question. We are going to -- about -- in about 12 months, we're going to have a meaningful volume of jobs. And we're going to have [indiscernible] that is equivalent to 6 or 7 or 8 other jobs. This is our nature and our culture to do this type of job construction. So Silvio Marcelo want to say anything?

U
Unknown Executive

Actually, we're going through a crisis and what we do best through our time is to manage crisis. We have gone since 1979 for I don't know how many crisis, many, many. And we are facing this with the calm and effort. We're not accommodated -- being calm is not accepting, is to really face it and take right decisions. We are very well guided and supported. And I'm sure that we will solve it as we have solved throughout the last 44 years. For us, it's nothing new. If you may rest assure, that we are common working strongly. I don't want you to think that we're not doing anything. We are working twice as compared to what we used to work. And I want to thank everybody.

U
Unknown Executive

Just to finish and contribute to my brothers here with the decrease of the jobs; when we come back, we're going to come back 100% assertive. We have been working a lot, and we are sure that the better times will come back and we're going to surf on those waves.

P
Pedro Lourenco
executive

Thank you so much for being here. And you too, thanks for your participation in our earnings conference call. So this conference is closed and you have more material in our website. We thank you all and wish you an excellent weekend.[Statements in English on this transcript were spoken by an interpreter present on the live call.]