Rossi Residencial SA

BOVESPA:RSID3

Earnings Call Transcript 2019-Q1

[Operator]

Good morning, everyone, and thank you for waiting. Welcome to Rossi's First Quarter of 2019 Results Conference Call. This event is being recorded. And it's being broadcast live via webcast and may be the accessed through the company's website at www.rossiresidencial.com.br/ri where the presentation is also available. Participants will only listen to the teleconference during the company's presentation. [Operator Instructions].

Before proceeding, let me mention that forward statements are based on the beliefs and assumptions of Rossi's management and on information currently available to the company. They involve risks and uncertainties because they relate to future events and therefore, depend on circumstances that may or may not occur. Investors and analysts should understand that conditions related to macroeconomic conditions, industry and other factors could also cause results to differ materially from those expressed in such forward-looking statements.

Now I will turn the conference over to Mr. Joao Paulo Cuppoloni, Rossi's CEO. Mr. Cuppoloni, you may begin your presentation.

[João Paulo Rossi Cuppoloni, executive]

Good morning, everyone. It's a pleasure to be here presenting the first quarter results for Rossi with the indicators for this period. In 2019, the company continues working responsibly and focusing on its operational and financial restructuring aiming to reducing intrinsic risks of the operations to improve the liquidity of the assets to leverage its capital structure and also start launching again.

Of all transactions aiming at these objectives in the first quarter, we have gross sales reaching BRL 47.7 million with an increase of 13% when compared to the previous quarter even with the reduction of the stocks. This has contributed for sales to go from 14% to 17% in the first quarter of 2019. And furthermore, we have 82% of concluded units, which will provide cash in the short term for the company. Number two, the continuation of the negotiations so that we can restructure our debts or bank debts generating cash for the company.

Number three, the sales of nonstrategic assets, which have contributed to restructuring the company and has also led to an increase in the amount of daily cash available allowing the company to keep its deadlines. And finally number four, we had a significant reduction of 49% of our administrative expenses and business expenses when compared to Q1 2018 reducing deadlines and generating 97% reduction or by renegotiating contracts.

When added, they contributed to a decrease of our debts of BRL 39 million for Rossi and BRL 1.1 million for [ ACVS ]. And as we solve this problem for, the company was able to gradually transfer its focus to new launchings and real estate development. We are aware that we have challenges, but we believe in our strategic plan and hope that 2019 will mark a new phase for the company, which is just starting.

Now I'm going to share the results with you with some indicators and operational indicators. So we're going to start our presentation for the second unit. On the upper part of the slide, we can see that the gross sales reached BRL 51 million in the first quarter, BRL 46 million for Rossi, with an increase of 13% when compared to Q4 2018.

For the quarter, the SoS was 70% as shown on the upper left side of the slide. It demonstrates an increase compared to last year and made 3% increase when compared to the first quarter in 2018. On the left side, we highlight the participation of sales of our finished construction, which represent 18%. On the right side of the slide, we can see the geographic distribution of the gross sales.

And now moving on to Slide #3 in the upper part, we can see the progression of the cancellations in the last quarter. In the first quarter, we have BRL 46 million and BRL 42 million for Rossi, which represents a 30% decrease when compared to the previous period. And I'd like to highlight that this has all been taken into account. And on the lower part, we can see the cancellation compared to the construction stage and also for the different geographic regions.

In Slide #4, we present the inventory profile of the company totaling BRL 272 million for Rossi. On the left side, we can see that what was observed in the first few months of 2019, we have BRL 1,500 million resulting from the units with partnerships and the other BRL 27 million refer to the update of the stock of the inventory according to the current prices.

On the right side, you can see this inventory according to the year of launch and then on the lower part, we can see a distribution of finished units, which correspond to 18% of our inventory. And we also have the geographic distribution of the inventory.

And moving on to Slide #5, we have the land bank of the company. For launchings until 2020, we have BRL 1.8 billion for Rossi. We show in the lower part of the slide that 28% refer to projects in Minha Casa Minha Vida. These are all located in the Campinas Metropolitan region and this is also where we have other lots in conventional construction. On the right side, we can see that 100% of our land bank with a possibility of launching in the next few years are located in the state of Sao Paulo.

And I now turn over to Fernando Miziara, our CFO, for him to make his presentation and to make his considerations.

[Fernando de Mattos Cunha, executive]

Thank you, Joao Paulo. Good morning, everyone. Moving on with the presentation in Slide 6, we present our debt evolution over the last quarters, especially for corporate and see -- I'm sorry, SFH debt. Because of the renegotiations we had in 2017 and 2018 which guaranteed a period, we can see that the debt has had a continuous decrease with a reduction of BRL 250 million in the same period when compared to last year.

Also in this slide, we show you the evolution of our cash and equivalents. And we can see the differences in -- from compared to the first quarter of 2018. In this quarter, we had a cash generation of BRL 25 million and a BRL 34 million for Rossi -- for the Rossi part.

And now moving on to the next slide. On the upper part, we show the deliveries over the past year reaching BRL 14 million of the amounts we had to spend in the last quarter of 2018. We also show that the cash entries shown -- the cash inflow shown on the right side where we reached BRL 80 million -- BRL 90 million actually and $81 million for Rossi. And we also show you the evolution of the main results metrics. If we compare our performance to the first quarter of last year, we can see that there was a decrease caused by a decrease in the inventory as the company was able to conclude the constructions and capped a conservative approach for new launches.

On the lower left part of the slide, we can see the continued restructuring process, the operational process the company is going through. And since 2014, we have had a decrease of 87% in the number of administrative employees. We also had savings of almost 50% of our administrative expenses and business expenses for the first period this year when compared to the first quarter in 2018.

And I now turn back to the operator so that we can start our Q&A session.

[Operator]

Ladies and gentlemen, the Board of Directors is available for the Q&A session for analysts and investors. [Operator Instruction]

Since there are no other questions, we turn over to the company for the final consideration.

[João Paulo Rossi Cuppoloni, executive]

I once again thank you all for your presence. And I will be looking forward to the next opportunity.

[Operator]

Have a good day. We now conclude our conference call.