Rossi Residencial SA

BOVESPA:RSID3

Earnings Call Transcript 2023-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 2023. Here with us today are Fernando Miziara, CEO; and Vitor Alvarez, Company Officer. This call is being recorded and has simultaneous interpretation into English. You may select the webcast with the desired audio at ri.rossiresidencial.com.br.

[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 lead to results that differ materially from those expressed in such forward-looking statements.

Now I would like to turn the floor over to Mr. Fernando Miziara, CEO of Rossi. Mr. Miziara, you may continue.

[Fernando de Mattos Cunha, executive]

Good morning. Thank you, everyone. We start the year 2023 with the expectation that the most challenging times of the company had ended. We are confident that the judicial recovery, or Chapter 11 program that has been filed with the courts in São Paulo will be accepted. We continue to work on a focused way with the restructuring -- financial restructuring of the company to increase the liquidity of our assets and get rid of the risks. After an initial adjustment period, in which we noticed the deterioration of the main sales and transfer index, there has been a considerable improvement in the sales performance of the company. And in the first quarter of this year, it has gone back to levels found in the first quarter of 2019.

For example, 261% in gross sales when compared to the fourth quarter of '22, even considering the initial inventory levels. This performance contributed to the sales over supply of this first quarter to be 5%, a rate that already reflects the success of the company in lowering legal constraints that used to be -- and then the company's account used to be blocked.

Also, it better explains the gross sales performance. The fact that the company reached a resale rate of 100% after its successful effort to sell units sold. This transfer rate reached 27% and also increased when compared to the fourth quarter of previous year, which capped the level of cash income in cash at a good level, allowing the company to meet all the obligations with its suppliers and even so increased its cash balance slightly. This is also a result of the company's efforts to reduce its costs and simplification of its operating structure that continue to have positive results. We had a reduction in administrative expenses that when compared to the first quarter of 2022 have reached -- have decreased 43% and operating expenses or sales expenses, 77% reduction.

With everything that has been made, as soon as the Chapter 11 program is approved, the company will be in a position that's rather favorable to face long-term plans in order to develop new projects. We will now start the presentation of the results on Slide #2 that talks about the sales of the company. On the upper part of the slide, we see that gross sales have reached BRL 6 million in this quarter, 55% as compared to the first quarter of '22, but way over the performance seen in the last quarter of last year.

Despite the impact caused by the natural depreciation of our inventory and due to market issues related to the performance of 2022, the number of units has -- that have restrictions in court have decreased. And that allowed us to sell units that were blocked previously. And the sales over supply has increased and reached 5% in this quarter, a significant improvement when compared to the sales over supply in the fourth quarter of '22.

We see on the left, the finished -- the number of sales that a 100% on construction state because 100% of the construction has been delivered. On the lower right, we see the geographic distribution of such sales with a highlight for nonstrategic regions, which accounted for 66% of the total sales of the quarter, mostly related to properties located in Rio de Janeiro.

Now on Slide 3, on the top of the slide, we see the cancellations development. In the first quarter of '23, they amounted to BRL 12 million. But these figures are higher than the cancellations in the last quarter. This is associated to actions taken by the company on a proactive basis that aim to accelerate the accounts receivable of defaulting customers.

It's worth highlighting that from the total number of units canceled between January and March, a 100% of them were sold, increasing cash generation in the short term. In the lower part of the slide, we see the distribution as compared to the construction stage and the location of units canceled. In the next slide, we see the inventory profile of the company that has a total PSV of BRL 131.3 million.

There was a decrease in BRL 1.5 million in our inventory, which is related to the adjustment of prices of these units, which were canceled and went back to the inventory of the company. On the top right chart, we see a detailed -- a breakdown of inventory according to a year of launch. On the lower part of the slide, we see that the units that are finished account for 100% of our inventory, and most of them, 57% of the same PSV is located in nonstrategic regions for the future of the company. Now I turn the floor over to Vitor, our officer, for him to talk about the financial performance of the company in this quarter.

[Vitor Alvarez, executive]

Thank you, Fernando. Good morning, everyone. Now continuing with the presentation. On Slide #5, we see the development of SFH and IFRS. As we commented in other releases in previous quarters and then a material fact in '22, we did the restructuring and settling of some corporate debt with Bradesco and Banco do Brasil. We are also able to restructure and settle some construction credit or loans with Itaú Bank. This was made from the cash used in the sale of assets that were the guarantee for the collateral for such loans.

Since the end of '22, the evaluation presented in the net debt of the company has to do with the interest accumulated in the period and amortizations made to the sale and transfer of collaterals -- that is BRL 304 million, while the SFH debt was BRL 310 million with a small increase when compared to December.

With the filing for Chapter 11, now most of that will be submitted to the voting at the creditors meeting. The cash and cash equivalent of balance was BRL 8 million in first quarter '23, similar to the last quarter of '22. Now moving to the next slide, #6. We show at the top the transfer speed of the company that reached 27% in this quarter, an improvement when compared to the performance seen in the fourth quarter of '22.

But it's still below the rates found in the last quarters of last -- or the quarters of last year. This improves when we see new funding agreements and settlements, BRL 1 million higher than last quarter, but BRL 6 million less than in the third quarter of '22, and BRL 4 million in this quarter. And when we see the cash inflow from receiving from customers, that was BRL 8 million but lower than the figures from -- since January and September 2022, as we can see in the lower chart, the lower left chart.

We expect that with the finishing of this blocking of units in court that are being released since the beginning of the year, our sales performance will go back to previous levels, and therefore, we can have a more significant improvement in transfers of funds received from customers. It's worth highlighting that our costs and expenses also are dropping because the company delivered the last constructions in '22 and has no longer units under construction.

On Slide 7, we see the main highlights of our financial metrics. Net revenue was BRL 27 million negative when compared to BRL 8 million in the first quarter of '22, we had a high number of contracts canceled, and we had to improve the allowance for cancellations. On this slide, we see on the lower chart on the left, the reduction of SG&A that has a downward trend after the review of the agreements and constant review of our internal processes.

This accounted for savings of 47% on administrative expenses and 77% on commercial expenses when compared to figures of first quarter of '22 and '23. We see that the gross income was -- our net income was BRL 49 million, a loss of BRL 49 million, with an improvement when compared to the first quarter of '22, which accounted for BRL 141 million loss.

Now let's move on to the Q&A session.

[Operator]

[Operator Instructions]

Since there are no questions, we return the floor to the company's for their final remarks.

[Fernando de Mattos Cunha, executive]

Once again, we thank you all for attending. We will finish this call of the first quarter of '23 now. Thank you very much.

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