Rossi Residencial SA

BOVESPA:RSID3

Earnings Call Transcript 2022-Q2

[Operator]

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Rossi's conference call to discuss the results of the second quarter of 2022. The following are present with us today. Joao Paulo Rossi Cuppoloni, CEO; and Fernando Miziara, CFO of the company.

Please be advised that this event will be recorded and has simultaneous translation into English. [Operator Instructions]

Before proceeding, let me mention that forward-looking 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. Future considerations are not guarantees of performance. They involve risks and uncertainties and assumptions since they refer to future events and therefore, depend on circumstances that may not take place. The general economic conditions, industry conditions and other operational factors can affect the company's future results and may lead to results that are significantly different from those expressed in such future considerations.

I now turn over to Mr. Joao Paulo Cuppoloni, CEO of Rossi. Please, you may proceed.

[João Paulo Rossi Cuppoloni, executive]

Good morning. You're all welcome to another results teleconference, and we're now going to present the information on the third quarter of 2022. This scenario is very challenging and is directly impacted by the current scenario of uncertainties and lack of economic visibility. The rates continue very high and the basic interest rates tend to increase because of the increases observed in the main inflation indices. And this has a direct impact on family incomes resulting in a decrease of the ability to buy and the financial capacity of families to buy new households. The company remains focused on its restructuring process and has maintained a cash discipline, implementing the last negotiations for -- the negotiation of its bank debt and has worked towards operational efficiency, be it by means of the improvement of our sales processes or by the simplification of our structure, the same partnership in nonstrategic read and a constant renewal of processes always aiming at reducing costs and expenses.

In this context, we can say that the sales performance remains stable. The amount of gross sales is aligned to the like 6 quarters even with the depreciation of our inventory because we have had no new launches. We maintain high resale efficiency of the canceled units. And in the last months, it has reached 66%. In addition, we have seen an increment in the resale opportunities reaching 30% in the third quarter of 2022, reflecting agreements established by the constructions in the southern region of the country. And this has increased our cash, which increased 22% for Rossi [indiscernible].

Regarding administrative expenses of the company, they have had a decrease of 11% and emulated for 2022 when compared to 2021. We have made continued efforts and reviewed our internal proceeds, and therefore, the trend is for this figure to coming down in the next quarters.

As we restructure ourselves and the company reinforces its balance by means of leverage, we are going to focus on trying to reestablish our liabilities, which has been -- has had a very significant impact. Finding solution and reducing liabilities has received more highlights [indiscernible] which will be key for the future so that we can guarantee new launches in the mid and long term.

We are now going to start with our results presentation. I start the presentation on Slide #2. It is on the sales performed by the company. And therefore, on the upper part of the slide, we can see that the gross sales reached BRL 16 million in the second quarter, 27% lower than in the second quarter last year. When we compare it to the first quarter this year, we have seen a slight increase in this indicator, and the decrease observed in the same quarter of 2021 results from the natural depreciation of our inventory since the company delivered its less enterprise in 2020.

When we take this index into account, we can see that we had 14% of SOS with a small increase when compared to the ones presented in the last 4 quarters. On the upper part of the slide, on the left side, we can see the sales of units that were delivered and represented 100%. And I have already mentioned that the constructions have all been delivered. On the lower right corner, you can see the geographic distribution of the same sales with the highlights to Porto Alegre and also nonstrategic regions, which added -- represented 44% of the overall sales in the quarter.

And now in Slide #3. On the upper part, we can see the evolution of cancellations in the last 15 months. In the second quarter of 2022, we had BRL 17 million with a reduction -- further reduction when compared to 2021. And this is what we had observed in the gross sales. The cancellations are directly related to the company's efforts to monetize its ability to receive default payments. So 96% of canceled units have already been resold, confirming the high resales rate in the last quarters to continue generating operating cash.

On the lower part of the slide, we can see the distribution according to the stage of the constructions and their location.

In the next slide, we can see the profile of the inventory. We had BRL 111 million for the Rossi part. In addition to the net sales this quarter, we had a decrease of BRL 6 million in our inventory, which is related to the reevaluation of the price of cancellations that were resell. On the right side, we can see the detailed inventory according to the year of launch. And in the lower part graphs, we can see that the units that are red represent 100% of our stock and 66% of this same B2B is located in nonstrategic regions.

I now turn over to Miziara, CFO, so that he can talk about the financial performance of the company in this last quarter.

[Fernando de Mattos Cunha, executive]

Thank you very much, Joao Paulo, and good morning, everyone. Moving on with the presentation in Slide #5, we can see the debt evolution of corporate debt and SFH. Over 2020, 2021 and the first quarter of 2022, the company has been very successful in restructuring and paying some of its corporate debt that were hired with Bradesco and Banco do Brasil. And also SFH with Bradesco and Itau. These payments were made by using cash that was originated in the [ nomination ] of the assets that were per the guarantee given to the banks and also by international discounts obtained in the negotiations.

With that and after reductions of our debt, balance has remained stable. And here, what we can see with regards to accrued interest rates and payments made by the resales, which guarantee or SFH. In the second quarter, the debt of the company totaled BRL 284 million, whereas the balance of SFH was BRL 314 million. In the lower part of the slide, we can see the evolution of the cash in the last 15 months, which closed the quarter with BRL 4 million of the net debt of the company.

In the next slide, on the upper part, we can see the transfer speed, which was close to 30% this quarter. And this is shown on the lower part -- left side of this slide, where we had the cash inflow, which was BRL 25 million this quarter with an increase when compared to previous quarters as a result of the higher volume of signatures that were observed throughout 2022. This is the result of transfers in the South that were mentioned by Joao Paulo.

Finally, on the right lower corner of the slide, we can see the reduction of all of the incurring costs with constructions and in corporate [indiscernible] was the company in 2020, delivered all of its launched enterprises.

And now in Slide 7, we can see the main result metrics. On the upper left side, you can see the net revenue totaling BRL 100 million negative. This reduction results mainly from negative sales this quarter and also because of the main [ GP ] which is what we use to calculate was mitigated by a complement, was a relevant part of receivables is overdue and in default.

Also in this slide, on the lower left corner, you can see a reduction of our G&A, which has a trend towards decrease after a constant review of our internal processes. These continued efforts result in savings of 11% when compared to the accrued for 2022 and 2021. Finally, on the lower right corner, we can see that the loss accrued to this year is BRL 200 million worsening when compared to the results in 2021 when we obtained financial discounts at Banco do Brasil, which granted the company, the results obtained below.

And we are now available for Q&A.

[Operator]

[Operator Instructions] Since there are no further questions, we turn back to Mr. Joao Paulo for his final considerations.

[João Paulo Rossi Cuppoloni, executive]

So we're going to close another results call for the second quarter of 2022. And I'd like to thank you all for being present at this conference. Our employees, shareholders and Board of Directors, I hope to see you next quarter, and thank you very much.

[Operator]

Rossi's teleconference is now over. We thank you all for your participation, and wish you all a good day.

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