Rossi Residencial SA

BOVESPA:RSID3

Earnings Call Transcript 2021-Q1

[Operator]

Good afternoon, ladies and gentlemen, and thank you for holding. Welcome to the Rossi conference call to discuss the results for the first quarter 2021. This conference call is being broadcast simultaneously through Internet at www.rossiresidencial.com.br/ir. At that site, you can find the respective presentation for download. [Operator Instructions]

Before proceeding, we would like to clarify that forward-looking statements made during this conference call referring to the company's outlook, operational and financial forecasts are based on the beliefs and assumptions of the company management as well as on information currently available. These forward-looking statements are no guarantee of performance as they involve risks, uncertainties and assumptions. They relate to future events, and therefore, depend on circumstances, which may or may not occur. Investors should understand that general economic conditions, industry conditions and other operational factors could affect the future results of Rossi and lead to results that differ materially from those expressed in these statements.

I would now like to give the floor to Mr. Joao Paulo Cuppoloni, the CEO of Rossi. You may proceed, sir.

[João Paulo Rossi Cuppoloni, executive]

Thank you very much. Good afternoon to all of you. Welcome to one more results conference call. We have here the Directors to disclose the results for the first quarter 2021. We began 2021 with the outlook that the challenges that refer to the coronavirus pandemic of last year would be behind us during this period. The company continued to work in a responsible and focused way on its financial restructuring to mitigate all of the risks, enhance its operations, increase the liquidity of its assets, leverage capital and resume the cycle of launches. After a period of initial adjustment with negative impacts on our sales, the company presented an improvement in its main performance indicators. And in this first quarter, we have returned to the pre-pandemic levels.

With the great efforts of the commercial structure, the gross sales attained BRL 40.3 million. For Rossi share this first quarter, an increase of 30% vis-à-vis the first quarter 2020 despite the reduction of 24% in our inventory. This performance contributed so that we would advance 28% this quarter in '21, a level that has not been obtained in the past 5 years. Additionally, we continue to maintain great efficiency in the resale of the canceled units, attaining 80% this year.

We also had significant strides in the sale of nonstrategic assets. Besides contributing to simplifying the company's structure, they allow Rossi to comply with the payment schedule among its main creditors. This quarter, we sold 4 lots with the goal of amortizing the company's corporate debt that we have with Bank of Brazil as part of an agreement that was formalized and disclosed in a material fact disclosed in December of 2020. We had an expressive reduction in leveraging and indebtedness in the company, and we had a new reduction of net debt in the first quarter of 2021 with a cash generation of BRL 22.3 million.

Finally, I would like to highlight the continuous effort seeking to reduce its SG&A. When compared to the first quarter 2020, the reduction is of 25% by reducing our head count or through the renegotiation of contracts and a review of in-house processes. We're still expecting an increase in the speed of sales of the Brazilian population and enhancement in the pandemic expected for the first semester of this year. The company has been structuring itself to be in a better situation than it was in 2020 as we resolve our legacy relating to developments built until 2017. The company transfers its focus to new real estate development and for a resumption of this cycle.

After this brief introduction, we will now go on to the presentation of results. I hope all of you have the presentation at hand. We begin on Slide #2, speaking about our operating indicators. Slide #2 refers to the sales of the company. At the top of the slide, you can see that gross sales reached BRL 41 million for this first quarter, BRL 40 million for the Rossi stake, an increase of 31% vis-à-vis the first quarter of 2020 and 53% when compared to the fourth quarter of 2020.

As I mentioned in my address, this increase in the sales of the quarter is a reflection of the efforts deployed by the commercial part of the company that has attempted to mitigate the impacts caused by the coronavirus pandemic. As a result of this, we can see that speed of sales obtained 28% in the quarter with a relevant increase when compared to previous quarters.

At the bottom of the slide to the left, we highlight the share of units delivered. That represent 100% as all of the company works ended in 2020. At the bottom right of the slide, we show you the geographic distribution with the highlight to sales in São Paulo and other nonstrategic regions, representing 74% of total sales for the quarter.

We now go on to Slide #3. At the top, the evolution of cancellation in the last 15 months. In the first quarter of '21, the cancellations were BRL 42 million (sic) [ BRL 43 million ] on 100% base and BRL 42 million for the Rossi share, an increase of 89%. The cancellations are directly associated to the company so that we can monetize our accounts receivable. From the total number of units canceled this quarter, 89% were already resold by March, contributing to the high number of sales that we have and also to our operational cash. At the bottom of the slide, you see the distribution, the stage of works, which, in this case, is 100%, and the location of the units for this quarter.

In the next slide, we show you the inventory profile for the company, totaling a potential sales value of BRL 26 million for Rossi part. In this quarter, there was a reduction of BRL 18 million in our inventory. This refers to the price restatement done in the budget for 2021. In the graph at the top right, we show you the year of launch for our inventory. And in the graphs at the bottom of the slide, we can see that finished units nowadays represent 100% of our inventory, and we show you the geographic distribution of the potential sales value.

We now go on to Slide #5, presenting the company's land bank and the potential sales value. Presently, the land bank for lots and for development represents 81% of the total. The land that will be demobilized represents an additional 19%. At the bottom right, we can see that 100% of our land bank with a potential launch in the short and medium term is found in the state of São Paulo and Campinas, the hinterlands of São Paulo.

I would now like to give the floor to Fernando Miziara, our CFO, for his remarks on the company's financial performance for the quarter.

[Fernando de Mattos Cunha, executive]

Thank you very much, and a good afternoon to all of you. We continue the presentation on Slide #6, showing you the evolution of our debt based on IFRS and the SFH debt. Throughout the introduction, we sold 4 lands this quarter, once again, with the aim of amortizing the company's corporate debt that we have with Bank of Brazil. With this, we have had an expressive reduction in the leverage that we saw in the fourth quarter '20, with a new reduction of our corporate debt totaling BRL 487 million for this quarter. And at the left top of the graph, you can see this. We had an expressive reduction of 52% when compared to the same quarter in 2020. We also had an evolution in the SFH debt that amounts to BRL 367 million for this quarter and the cash balance that has had a continuous reduction. Finally, at the bottom right, you see the evolution of our net debt in the company. In March, it amounted to BRL 808 million, with an expressive reduction of BRL 53 million compared to the close of the first quarter in 2020.

We will now go on to Slide #7. At the top left, we show you the background of our works in the last quarters. In this quarter, we have not had any conclusions. And of course, we haven't had any more units being built. At the top right, you see the evolution of the cost to be incurred. At the end of this quarter, it obtained 0. At the beginning of 2020, we had BRL 2 million, the Rossi share. At the bottom of this slide, you see the transfer speed that attained 17% in the quarter and the cash inflow that comes from receivables. As you can see at the bottom right, that reached BRL 36 million, BRL 35 million, which are the Rossi share. There was a slight drop compared to 2020 as the stock are being -- is being demobilized.

We now go on to the next slide where we show you the evolution of our financial highlights. At the left, at the top, our net revenue totaling BRL 28 million for this quarter. And this, of course, results for the greater gross sales carried out in 2021 and the increase of the IGPM, the general market price index, which is used as the index here. At the bottom left, we show you the reduction in our administrative expenses. That continue dropping after the renegotiation of contracts and the constant review of our in-house processes.

Now this and the search allowed us to have a reduction of 25% in our G&A in the first quarter of '21 vis-à-vis the same period in 2020. When it comes to our commercial activities, we carried out a provision for losses with credit and indebtedness compared to what we had last year, according to the IGPM, which is the main index that we use for our units. As a result of these indicators, you can see that the net loss was of BRL 33 million, significantly lower than the BRL 73 million that we had recorded in the first quarter '20.

To end the presentation, we would now like to offer the floor for your questions and answers.

Ladies and gentlemen, the management of Rossi is available for your questions or doubts.

[Operator]

[Operator Instructions] As we have no questions, we would like to return the floor to the company for their closing remarks.

[João Paulo Rossi Cuppoloni, executive]

Thank you for all of those who have followed up on our results at the conference call. On behalf of the company and our associates, I would like to thank them for another quarter. Thank you very much for your presence and have a good afternoon.

[Operator]

The Rossi conference call ends here. We would like to thank all of you for your participation. Have a good afternoon.

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