Rossi Residencial SA

BOVESPA:RSID3

Earnings Call Transcript 2020-Q3

[Operator]

Good morning, ladies and gentlemen. Thank you for waiting. We bid you welcome to Rossi's teleconference for the discussion of the results of 3Q '20. The audio of this teleconference is being transmitted by Internet in www.rossiresidencial.com.br/ri. On that address, you can find the presentation PowerPoint for download.

[Operator Instructions] And in the declarations that might be done during this teleconference relative to the perspectives of business of the company, projections of operational and financial goals come from the management as well as information that are currently available for the company. Future forecasts are not guarantee of performance. They involve risks, uncertainties, premises since they concern future events inherent on circumstances that may or not happen. And you must understand that according to different operational factors that may affect future results of the company, and mainly to results that are materially different from the words that will be spoken about today.

And now I give the floor to Mr. João Paulo, CEO. Please go on.

[João Paulo Rossi Cuppoloni, executive]

Good morning, all. We are here gathered, the Board for one more results broadcast. The first -- the third quarter 2020 is a landmark and the resumption of our sector, even in a very challenging year, marked by the impact, socio-economical impact from social isolation and the other restrictions imposed by the pandemic of new COVID. The company improved in its most important operational indicators that are back to the pre-pandemic status.

The gross sales, for instance, were BRL 39.5 million in the Rossi part contributed for the SoS reached 25% in this quarter, an increase of 9 percentage points if we compare to what was found in the previous quarter. And it's worth mentioning a historical record, if we take into consideration the last 5 years. Part of this improvement in commercial performance is explained that efficacy in reselling the -- sales that was 92% in the previous months. And hence, the company adopted a more proactive stance in relation to cancellations. Since most of the negative impact associated to increase in cancelations mitigated by the resold and by accounts receivable of delinquency. And also the company's focus are in the process of operational restructuring and financial restructuring, depositing its attention and efforts in risk mitigation and cash preservation.

Higher cash from sales and transfers that reached BRL 41 million in Rossi part contributed for the company to present a cash generation of BRL 9.1 million, Rossi part. And also, we intensified the actions aiming at simplifying our restructuring in the reduction of administrative expenses that had a drop of 32% and it accumulated in 2020, vis-à-vis the same period of 2019.

And we closed partnerships in places where we will no longer have new developments. The trend is that this figure keeps falling in the next quarters. And the newest step we took in our restructuration -- in restructuring the corporative debt since in the. Beginning of October, we signed new agreements with Bradesco Bank. And these new additions extend our time frame. And they still foresee that we're going to pay 100% of this debt that represents about 55% of our total corporative debt.

We are aware of the challenges in the present and in the future. But we are at ease with our strategic plan, reinforcing our commitment and trust, opportunity of the company. Since we expect that the sector will improve and we had important results already, we'll go on working diligently in order to profit from this new cycle and also [ resuming ] new projects, new developments.

And now we are going to results of -- for 3Q '20. I'm going to start the commercial part. And then I give the floor to our CFO who's going to be talking about the financial aspects. So I'm going to start by Slide 2 that approaches sales done by the company. In the upper part of the slide, you see the gross sales met BRL 44 million in the second quarter. BRL 40 million is the Rossi part. And this means an increase of 17% if you compare to the third quarter, and 40% if compared to the second quarter 2020. This increase in the sales reflects the resumption of the real estate sector and also a cooling of the negative impact from the pandemic that really impacted the second quarter of 2020. As a consequence of this process, we can see that SoS reached 25% in this quarter with relevant increase as compared to the previous quarters, which is the graph on the right upper corner.

On the lower part of the slide on the left, we emphasize participation of sales of units that were delivered into 2019. In this quarter, 81%. On the right side, the geographic distribution most important area Casein São Paulo that added represented 47% of total sales in this quarter.

Now Slide 3, on the upper part, we present the changes of cancellations in the last quarter and accumulated in the year-to-date. In the second quarter, it was BRL 41 million, and BRL 37 million in Rossi part, 2% more vis-à-vis the previous year. And accumulated 6% in the Rossi part in the first 9 months of 2020 vis-à-vis '19. And the cancellations are associated to the effort of the company to monetize their accounts receivable from delinquency. Of the total conferences in 2020, 92% have been already resold, leading to a high rate of resales in the last quarters and for continuous increase in operational cash.

On the lower part, we see the distribution in relation to the stage of the constructions and where these units were canceled in the third quarter arm.

On Slide #4, we show the inventory, BRL 147 million in the Rossi part of PSV. In this quarter, there was a reduction of BRL 10 million in our inventory related to the net sales and the reappraisal of prices in the units that were canceled and came back to our inventory.

On the upper right part, we see the detail of the inventory according to its launch year. And on the lower part of the slide, we see #1 that already units are 100% of our stock, our inventory into geographic distribution of this PSV of BRL 147 million.

Now Slide #5, we present the land bank of the company and its potential PSV. Currently, our land bank for allotments and incorporation is 80% of the total and lands that will be demobilized are 11%. On the lower right side, we can see that 100% of our land bank with possible launch in the short and middle run are in the state of São Paulo.

Now I give the floor to Fernando Miziara, our CFO, who's going to make considerations in relation to the financial development or performance, rather, of the company in this quarter.

[Fernando de Mattos Cunha, executive]

Thank you, João Paulo. Good morning, everybody. Going on with the presentation on Slide #6. We show the evolution of the debt, corporation debt and SFH and IFRS. It's BRL 1 billion this quarter. As you can see on the upper left side of the slide. And financial -- production financing debt is BRL 343 million, aligned with the values presented in the last quarter.

When we analyze the accumulative period of the last 12 months, there was a reduction of 8% in corporate debt and 21% in SFH debt, impacted mainly by the financial discounts that we are obtained with financial institutions in December last year in the case of corporative debt in June 2020 and in the case of SFH debt. On the same slide, we also show the evolution of cash and net debt that was BRL 1.3 billion at the end of the September vis-à-vis BRL 1.5 billion in the third quarter '19.

Now going to Slide 7, we show on the upper part on the left, the history of deliveries through the last quarters. On this quarter, we finished Rossi reserve [indiscernible] launched in 4Q '17. This was the last job of the company. And with the issuing of this last document, the company concludes the delivery of all the 401 units that were forecasted for 2020.

On the upper right corner, we have the evolution of costs to be incurred that with a total of BRL 1 million vis-à-vis the BRL 9 million that we had to spend at the end of 3Q '19. And also on the same slide, we have the evolution of transfer speed of the company that reached 20% in this quarter. Besides cash inflow from payments that is demonstrated on the right side, and that reached BRL 47 million, BRL 42 million in Rossi part.

Now Slide #8, we show the evolution of the most important result metrics. On the left part, the net revenue, BRL 14 million in this quarter vis-à-vis BRL 9 million on the same period last year. All the accumulated this year, net revenue was BRL 24 million, a drop of 24% as we compare to the same period 2019 because of less net sales on the first 9 months of this year.

And also on this slide, we show on the lower left side a reduction in operational expenses, G&A, that keep dropping after we negotiated agreement, and we review constantly our internal process. This relentless effort resulted in an economy of 32% in our administrative expenses in this year vis-à-vis 2019.

And to close on the lower right side, we see that financial loss in the second quarter was BRL 78 million and accumulated BRL 181 million, an improvement of almost 50% as compared to the first 9 months of 2019. And quite impacted by the beneficial effects of the payments of asset H and discard with -- in some financial institutions.

Now the operator will open for Q&A.

[Operator]

[Operator Instructions]

Since there are no questions, we give the floor back to the company for their final considerations.

[João Paulo Rossi Cuppoloni, executive]

Thank you all who participated. We are hence closing this quarterly conference, and we thank you all for being here. Good morning for everybody or good day for everybody.

[Operator]

The teleconference is -- has closed. We thank you for your participation, and have a nice day.

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