Rossi Residencial SA

BOVESPA:RSID3

Earnings Call Transcript 2023-Q3

[Operator]

Good morning, ladies and gentlemen. Thank you for waiting. Welcome to Rossi's earnings conference call to discuss the results for the third quarter of 2023. We have here with us today, Fernando Miziara, CEO; and Vitor Alvarez, Director of the company.

Please be aware that this meeting will be recorded and has simultaneous interpretation to English. You can select the webcast with the desired audio at ri.rossiresidencial.com.br. [Operator Instructions]

Before proceeding, we would like to clarify that any statements that may be made during this presentation regarding the company's business prospects, projections and operation and financial goals are beliefs and assumptions of Rossi's management as well as information currently available to the company. Further considerations 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, industry conditions and other operating factors may affect the company's future results and may cause them to differ materially from those expressed in such forward-looking statements.

I would now like to give the floor to Mr. Fernando Miziara, Rossi's CEO. Please, Mr. Miziara, you may proceed.

[Fernando de Mattos Cunha, executive]

Good morning. Thank you all for being here. After the first 9 months of 2023 and still experienced a scenario that continues to be quite challenging for Rossi, our team has already managed to achieve some important results for the company and implement much of what was planned at the end of last year when we decided to file a request for Judicial Reorganization at the Judicial District of São Paulo. The process itself continues to progress as planned. And yesterday, we took a very important step with the resumption of the general creditors' meeting in the approval of our Judicial Reorganization plan by most of our creditors.

The plan will now be ratified by the 1st Court of Bankruptcy and Judicial Reorganization of São Paulo. And until this happens, the company remains focused on its internal restructuring process. We continue to maintain cash discipline and seek to increase our operational efficiency, whether through improving our sales and transfer processes or through the optimization of our structure, and this has yielded good results.

The company's growth sales surpassed BRL 10 million mark for the second quarter in a row and showed an increase of 26% on Rossi's share as compared to the same period last year. This performance reflects the success achieved by the company in reducing the number of units subject to judicial mortgage, releasing part of our inventory, which until the judicial recovery request was blocked and unavailable for sale. Furthermore, we also maintained a high resale rate of canceled units, which reached 91% this quarter. And we saw an increase in the speed of transfers due to the signing of financing contracts and clients' payments made in the third Q '23, which maintained cash inflows at a similar level to the last quarter and well above from what we saw in the first quarter of '23.

Regarding our cost reduction strategy, the efforts made by the entire team continued to yield positive results throughout '23, maintaining the trend of reducing administrative and commercial expenses, which compared to '22 fell by 38% and 55%, respectively. All of this enabled the company to fulfill all its obligations assumed with its current suppliers and achieved a small increase in its cash balance, which reached BRL 17.4 million in September.

Challenges will continue to exist. However, diligent and optimistic about the success of our judicial recovery plan as well as the results were achieved by our team, we will continue preparing to, in the near future, begin the transition to a new phase of the company of value creation and new developments.

Now going to our presentation. We're going to Slide #2 that contemplates the sales done by the company. In the upper part of the slide, we see that gross sales reached BRL 10 million, 29% above what we had in 3Q '22. As I have commented after the judicial request, the company got back its units. And so we were able to sell part of this inventory that had been blocked, what explains the improvement in performance in the last quarters. And then we maintained the sales as well as at the same level of the second quarter.

When we analyze the year-to-date, we see that sales reached BRL 27 million in Rossi's share, 25% drop as compared to the same period in '22. This drop in sales presented in the last 15 months is directly related to depreciation of stocks as the company has finished the launches until 2017 or the jobs launched until then.

On the lower part of the slide, we can see what was delivered 100% since all the jobs have been delivered. We also demonstrate the geographic distribution of the sales, with emphasis in nonstrategic regions, 64% of the total sales, and most of them are in Rio.

Now let's go to Slide 3 and the upper part, we present the recessions in the last 15 months. In the third quarter, it's up to BRL 10 million, significantly less than what was seen in 3Q '22. Then many districts have been formalized as preparation for our judicial recovery. So it's in a typical event. If we compare the volume of the third quarter with those registered in the previous ones, it has a similar level in year-to-date of '23, it's BRL 30 million different from what we've seen in the same period last year. And this difference also reflects what's happening after the judicial recovery. The cancellations are associated to the effort of the company to monetize what it has, the accounts receivable. 91% were resold, contributing to cash generation in the short run.

In the lower part of the slide, we see the distribution regarding the state of the jobs and where these units are.

The next slide, we present the profile of the stock of the company. It's a PSV of BRL 120 million. Besides the natural events of sales, there was a decrease of BRL 3.6 million in our stock related to price reassessment in these units that were canceled, and they were put back in the company's stock and where resold by its market value.

On the upper right side, we detail the stock according to the year of launching. And in the lower part of the slide, we see that the ready units represent 100% of our inventory, and most of it or 54% of the same PSV is in nonstrategic regions.

Now I give the floor to Victor, who is our Director, for his considerations relation to the financial performance of the company in this quarter.

[Vitor Alvarez, executive]

Thank you, Fernando. Good morning, everybody. Going on with the presentation. Slide #5, we show the debt evolution and FTRS and FSH (sic) [ IFRS and SFH ] after the company has taken successfully the process of restructuring some of its loans that were contracted at Bradesco and Banco do Brasil and contracts of FSH (sic) [ SFH ] with Bradesco and Itaú. The variations presented here, the quarter-over-quarter refer to interest in this period and also amortization through repassing its guarantees.

In this third quarter, the debt has a total of BRL 370 million and FSH (sic) [ SFH ] BRL 315 million, presenting a small increase when compared to the first quarter, in the second quarter of '23, as I commented, because of the taxes in that period. With the judicial recovery request, most indebtedness will be paid in those terms that was approved yesterday.

In the lower part of the slide, we show the cash and equivalents in the last 15 months, BRL 17 million in September, positive variation of 73% in relation to what we saw in June the same year. And this increase in the cash and equivalents is related to net sales in this last quarter. It impacted the transfers volume.

Now Slide #6, we show in the upper part the progress of the transfers of the company. In this quarter, it reached 29%, 4% more when compared to the second quarter of 2023. When we analyze in absolute terms, the volume of new contracts and payments, we can see that it was BRL 7 million in this quarter, it improved and when compared to last 3 trimesters.

Now to the lower part of the slide, we see that cash inflow reached BRL 11 million this quarter, 31% reduction as compared to the third quarter of '22. This is due to the reduction in debt balance of potential transfer agreements, and it's directly related to a natural reduction in inventories and gross sales. Anyway, compared -- when compared, cash inflows remained almost the same when compared to the first Q '23, increased by 47%. As I have commented, this is an effect of the gross sales carried out in the last 2 quarters. We hope that unblocking the units that have been blocked that is -- has been happening for the beginning of this year, commercial performance will go on improving, and we can have more transfers.

It's worth saying that once we have delivered all the works that we had in progress, you can see on the lower left part of the same slide, the results.

Slide #7, we show the progress of the most important metrics for results. We show the net revenue, BRL 7 million in the third quarter '23. And Year-to-date, it was negative BRL 6 million in '23. And in the same period of '22 was plus BRL 4 million. We had quite a few cancellations that was necessary to complement and therefore distract because our accounts receivable was aging.

On that slide, we show on the left lower part, G&A after reviewing the contracts in our internal processes. This process results in a saving of 38% in G&A and 55% in commercial expenses. When we compare the values from 2023 to the ones from 2022. And at last, on the lower right side, we see that net income loss was of BRL 140 million and improving considering a negative result of BRL 232 million in 2022.

Now I give the floor to the operator for Q&A.

[Operator]

[Operator Instructions] We now give the floor to the company for their final considerations.

[Fernando de Mattos Cunha, executive]

Once again, I thank the whole team of the company that has put an amazing effort for the plan to be approved yesterday. It was very important in the history of the company. And we'll keep the market informed about our processes. And thank you all, shall you have a good day.

[Operator]

Thank you. This teleconference is closed. We thank everybody's participation, and have a nice day.