Rossi Residencial SA

BOVESPA:RSID3

Earnings Call Transcript 2023-Q2

[Operator]

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to the Rossi's conference call to discuss the second quarter 2023 results.

Present with us today are Fernando Miziara, CEO; and Vitor Alvarez, Director of the company.

Please note that this event will be recorded, and it has simultaneous translation into English. You can select the webcast with the desired audio at the address, ri.rossiresidencial.com.br.

[Operator Instructions] Before proceeding, we'd like to clarify that any statements that may be done during this presentation regarding the outlook for the company made during this presentation regarding the company's business outlook, projections and operational and financial targets are beliefs and assumptions of Rossi's management as well as Rossi's management information currently available to the company.

Future statements are not guarantees of performance. They involve risks, uncertainties and assumptions as they refer to future events, and therefore, depend on circumstances that may or may not occur. General economic conditions may affect the company's future results and may lead to results that differ materially from those results that future statements.

Now I'd like to hand over to Mr. Fernando, Rossi's CEO. You may proceed.

[Fernando de Mattos Cunha, executive]

Good morning, and thanks for being here. We are close to the last half of 2023, and we are very confident that the process, the bankruptcy process, will guarantee a definite solution to allow the restructuring of the company's debt and restrengthening of our short- and medium-term cash flow.

The general creditors' meeting has been scheduled for the second half of August, and we are hopeful that we will be able to approve the Judicial Reorganization Plan we have prepared and filed with the majority of our creditors.

In the meantime, however, the company remains focused on its internal restructuring process aiming to enhance its operational performance, whether through implementing improvements in our sales and transfer processes or through streamlining our own structure.

This effort has yielded positive results, especially as we also began to observe significant signs of recovery in the Brazilian real estate market with an increase in demand for properties nationwide.

The company's gross sales reached BRL 11 million, Rossi's share, corresponding to an 82% increase over the previous quarter of the year. This performance contributed to an 8% SoS rate, a performance we had not achieved since June '22. This achievement also reflects the company's success in writing off judicial mortgages, releasing part of our inventory, which before filing for Judicial Reorganization, was blocked and unavailable for sale.

The company has also maintained a high resale efficiency index reaching 98%. Furthermore, we observed a significant increase of 58% in cash flow -- inflow due to a higher volume of transfers and settlements in second Q '23 compared to first Q '23.

Additionally, regarding operational expenses, our plan to simplify the company's structure continues to yield together positive results, maintaining the trend of reducing our administrative expenses, which fell by 43% in the first half of '23 from first half '22; and commercial expenses, which also fell by 65% in first half of '23 in comparison to first half of '22.

These efforts have enabled the company to fulfill all of its obligations to current suppliers and even achieve a slight increase in its cash balance, which reached BRL 10 million in June.

It's clear to us that in the short and medium term, we will still be dealing with limitations and challenges. And we believe that the company is within a very favorable position to favor longer-term challenges aiming at the development of new projects and creating value for its shareholders.

Let's now proceed to Slide #2, which will address our sales. On the upper part of the slide, gross sales have reached BRL 11 million in the second quarter, 33% below of what we had agreed for the second quarter 2022, but above the performance that we have reached the last half. Year-to-go, we had achieved 100% of our vision at Rossi's, a drop of 43% in comparison to the first semester '22. Such a sales decrease in the past 15 months is directly related to the depreciation of our inventory once the company concludes those in the inventory until '17 with a conservative position to the new releases.

Despite, the company has been successfully in reducing the number of units that are under judicial-ization, which has allowed the commercialization of part of our inventory, which before was blocked, which explains such an improvement since last year. With such an unblock, our sales have increased and reached 8% this quarter, a significant growth in relation to the past 2 quarters.

Below the slide, on the left, we see unit sales participation, which represents 100% as all the construction have been delivered.

Below to the right, we see geographic distributions, and we have to highlight the nonstrategic sales, which represented 13% -- 73% of total sales and mainly they are related to those properties in the state of Rio de Janeiro.

Slide 3, above, we see the evolution of the [ regions ] in the past 15 months. We had BRL 8 million statement with the reduction in relation to the second quarter -- in relation to the first quarter of this year. In addition, 2023 year-to-go was 23% in relation to the first semester '22.

[indiscernible], they are related to the company's efforts to monetize those deliverables -- or receivables, better saying. 98% of them were resold, collaborated to generate cash inflow in a shorter term.

Below the slide, we see the distribution in relation to the constructions and the locations of those units. In the first slide, we showed the profile of the company, BRL 124 million for Rossi. In addition to the natural flow of net sales, we see BRL 4.3 million reduction in our inventory related to price reassessment of the units. And they went back -- they returned into the company's stock and they were sold by their current market price.

Upper right, we see the inventory number. And below the slide, the red unit, they represent 100% of our inventory. And the main share, 56% of the [ same VGV ]is still situated in the nonstrategic regions.

Now let's hand over to our director, so he can address his financial considerations for the company.

[Vitor Alvarez, executive]

Thank you, Fernando, and good morning to all of you. Let's keep going with the presentation.

Slide #5. We see operating and financial indicators and the indebtedness of FCH (sic) [ SFH ] in IFRS and nonconsolidated companies. After we had some of those contracts with Bradesco and Banco do Brasil and some contracts with IFRS with Bradesco and Banco do Brasil, we have those accurate interests and amortization after the guarantee assets.

In the second quarter, the indebtedness of the company accrued BRL 310 million, while that debt was BRL 312 million. We see a small increment if we compare that to the statement of the first increment after the judicial performance. A part of that will be paid, thanks to the Judicial Plan, which soon will be appreciated by our creditors by the end of the month.

The following chart will show the evolution of the cash inflow in the past 15 months, BRL 10 million in July, a similar step -- similar to what we showed last month after the Judicial Recovery.

Slide #6. Above, we see the contract sales and speed of sales reaching 25%. We see 2 percentage points drop in relation to the first semester of 2023. In absolute numbers, the volume of signatures of new contracts, we can see that this volume was BRL 4 million in the quarter, aligned to the performance of the last semester.

Below in the same slide, we see that the cash inflow reached BRL 12 million this quarter with a reduction of 52% in relation to the same half of 2022 due to the main debt, which is related to the scores and our receivables. However, once we compare to the past semester, that has increased 56% due to the increase of gross sales.

We hope that with the new units that are taking place since the beginning of the year, the commercial performance keeps improving. And with them, we can see better results for the company.

Let me highlight that once the company has delivered all the last business, there are no further costs.

Now Slide #7, where we see the evolution of the main metrics on results. Upper left, we see the net revenue, which has amounted to BRL 14 million in the second half. Here, we see a negative net in relation to the BRL 8 million negative that we had registered in the same period as we had a high number of people that left the company, taking into account the writing offs and subscriptions.

In the left, we see a reduction of our SG&A after the renegotiations of contracts and constant revision of our internal process, which led to a reduction of administrative expenditures and a saving of 65% of commercial sales once we compare our numbers in '22 and '23.

And finally, in the bottom right, we see the [ net income was BRL 92 million ], which shows an improvement in relation to the negative result of BRL 201 million that we had achieved in the last year.

Now I would like to hand over to the operator to start the Q&A session.

[Operator]

[Operator Instructions] If there are no questions, we are going to hand over the floor to the company for their final remarks.

[Fernando de Mattos Cunha, executive]

Once again, we'd like to thank you all for following our quarterly earnings release and would like mainly to thank our collaborators, and we are hoping that our credit general assembly will be very successful.

Thank you so much for your time and participation.

[Operator]

Thank you. And Rossi's earnings release call is concluded now. Have a wonderful day. Goodbye.

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