Rossi Residencial SA

BOVESPA:RSID3

Earnings Call Transcript 2022-Q1

[Operator]

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to the conference call of Rossi to discuss the results of the first quarter of 2022. Here with us, we have Joao Paulo Rossi Cuppoloni, CEO; and Fernando Miziara, CFO. This call is being recorded and has simultaneous interpretation into English. [Operator Instructions]

Before proceeding, let me mention that forward-looking statements, projections and operating and financial goals are based on the beliefs and assumptions of Rossi's management and on information currently available to the company. Forward-looking statements are not a guarantee of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. General economic conditions, industry conditions and other operating factors could also affect the future results of the company and cause them to differ materially from those expressed in such forward-looking statements.

Now I would now like to turn the floor to Mr. Joao Paulo Rossi Cuppoloni, CEO. Mr. Cuppoloni, you may continue.

[João Paulo Rossi Cuppoloni, executive]

Good morning, everyone. Thank you for your presence. So let's start another conference call for the earnings of the first quarter 2022. This year, 2022, we started a restructuring of a financial and operational areas of Rossi. During this year, we will maintain our cash discipline, implementing the latest negotiations for the leverage of -- financial leverage of the company. We'll continue to work to attain operating efficiency either by improving sales processes, transfers or by reducing costs and expenses and simplification of our administrative structure.

In this context, we may say that the main event of this first quarter of 2022 has been the negotiation of a new reduction of the financial -- the bank with debts -- that with banks of the company. As mentioned in the material fact disclosed on February 22, the company signed an investment agreement with BPS Capital that acquired the credit originated from construction financing from SFH that were partially capitalized without cash disbursement.

Therefore, our net debt has decreased by BRL 10 million in this first quarter. And the second stage of this operation that will be implemented in the next quarters. It is -- we also reduced the reduction of credits -- that will credits in court that will also allow to reduce the liabilities of the companies.

As for our financial results, in the first quarter of 2022, the company presented a drop of 17 percentage points in sales compared to the same period of 2021. Since our inventories continue to decrease, since we have no new launches, and we continue to experience an uncertainty scenario with high environmental and trends in changes in the basic interest rate, which affects the purchasing power of a Brazilian population, their access to credit.

When compared to the performance of the last quarter, the reduction on the speed of financing transfers of 1 percentage point. our DSO of sales, sales oversupply, I'm sorry. However, we maintained and saw an increment in performance with a speed of financing transfer attaining [Indiscernible] given an agreement that was signed with Caixa Econômica Federal to resume financing in development in Porto Alegre. That was paralyzed that has stopped since it's delivered and it was delivered in 2020.

We are making efforts every year to reduce cost and optimize administrative expenses. SG&A of the company was reduced by 11% when compared to the first quarter of 2021. We will continue confident with our planning and focused on their next challenges to continue to restructure ourselves in a better way so that we can have a next cycle to generate value for the company.

Let's now start the presentation of results. I'll start with the operating indicators. And then Fernando will talk about the financial aspects. On Slide 2, talks about sales. The lower part of this -- the screen, we see that gross sales attained BRL 14 million, 15% lower than in First Q 2021, but with a positive trend regarding the last quarter of last year. When we weigh this indicator, we can observe that the sales -- speed of sales of a supply was in line, almost the same result of the last quarter. The lower part of the slide on the sales of finished units, which is 100% since all construction works at the company were finished in 2020.

On the right, we show the geographic distribution with a highlight for Porto Alegre, which accounted for 44% of sales in the quarter, given the financial agreement that we signed to resume the sales of the development of Porto Alegre that had been -- whose sales have been stopped since the delivery.

On the next slide, we see cancellations. Cancellations amounted to BRL 14 million in the first Q of '22, which was similar to the variation of gross sales when compared to the previous quarter. This is fully aligned with the company's efforts to reduce cancellations. Of the total amount canceled during the first quarter, 93% of them have been restored, which contributes to the resale index in the last quarters to continue to generate operating cash. In the lower part of the slide, we see the construction stage, which is 100% finished and the location of the canceled units in the first quarter.

On the next slide, #4, we see the profile of the company inventory with a total PSV of BRL 117 million for Rossi. In addition to the effect of net sales, which were virtually 0, there was also a reduction of BRL 4 million in inventory, which is related to price revaluation.

In the upper chart, we see the inventory that broken down by year of launch. At the lower part of the slide, we see that finished units account for 100% of our inventory, and most of them, 66% are still located in regions that are not strategic. Now I turn the floor over to Fernando Miziara, CFO of the company, and he will talk about the financial performance of the company. Fernando, if you please? I believe we're having some technical issues with Fernando. Fernando, can you hear us? Can you hear me now?

[Fernando de Mattos Cunha, executive]

Yes, we can.

[João Paulo Rossi Cuppoloni, executive]

Please go ahead.

[Fernando de Mattos Cunha, executive]

Okay. Thank you, Joao Paulo. Good morning, everyone. So continuing with the presentation on Slide #5, we see the evolution of debt in the last quarters and corporate debt and SFH debt according to IFRS. As recommended by Joao Paulo -- as commented by Joao Paulo, the company took an important step in the financial deleverage since we signed an investors agreement with BPS Capital, a company which acquired 75% of debts -- SFH debts of the company. These debts are partially capitalized and settled again with no cash disbursement by the company.

With that, after continuous reductions in our corporate debt, it was -- we had a chance to decrease the SFH debt which totaled BRL 318 million in this quarter. In the same slide, we show the development of corporate debt, which includes the noncapitalized part of the debt acquired by BPS, which totals BRL 271 million in the quarter, and the cash and cash equivalents balance, which closed the quarter at BRL 5 million with a reduction.

As a consequence of these movements on the right lower part of the slide, we see the net debt of the company that amounted to BRL 583 million in March. This accounts for a reduction of almost 30% when compared to the balance of the first quarter of '21.

Moving on to the next slide, #6. At the upper part, we see the transfer speed of the company, which increased to 32% this quarter as well as the development of transfer signatures plus settlements, which had an increase when compared to the last quarter. Since transfers of [Indiscernible] Porto Alegre were resumed, as mentioned by Joao Paulo. This is still not reflected at the lower part of the slide, in which we show the cash inflow coming from customers of BRL 21 million in this quarter because new transfers usually takes 60 days to enter the company's cash.

At the right lower corner of the slide, we see the reduction of our costs to be incurred with construction works since the company delivered all the units that were finished and launched in previous years in the first Q of '20. On Slide #7, we see the main earnings metrics. On the upper left, net revenue, which was negative BRL 8 million against BRL 16 million in the first quarter of '21. This reduction results mainly from the reduction in net sales calculated in this quarter and the fact that the increase in the IGP-M, which is the main index that we use to adjust account -- trade receivables of finished units by -- according to inflation, was recorded in the provision for cancellations because a large portion of trade receivables are overdue and delinquent.

We have a reduction of our SG&A, which continues with a downward trend after review of agreements and constant review of our internal processes. This effort resulted in savings of 11% when compared to the same period of last year.

We also see that the net income amounted to BRL 141 million loss, which was a loss, which is worse than the loss of BRL 33 million accounted for in the first Q of '21. Now we can move on to the Q&A session.

[Operator]

[Operator Instructions] Since there are no questions, we turn the floor over to the company's management for their final marks.

[João Paulo Rossi Cuppoloni, executive]

I would like to thank you all for attending this call on behalf of the entire management and all the associates. We hope to see you in our next conference call.