Rossi Residencial SA

BOVESPA:RSID3

Earnings Call Transcript 2024-Q3

[Operator]

Good morning, ladies and gentlemen, and thank you for waiting. Welcome to Rossi's conference call to discuss the [Audio Gap] and Persio Careli, Company Director. This meeting will be recorded and has simultaneous translation into 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 conference call relating to the company's business prospects, projections and operational and financial goals constitute beliefs and assumptions of Rossi's Board of Directors as well as information currently available for the company. Forward-looking 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, industry conditions and other operating factors may affect the future results of the company and may lead to results that differ materially from those expressed in such forward-looking statements.

I would now like to turn the call over to Mrs. Maria Pia De Orleans e Bragança, Rossi's CEO. Please, Mrs. Maria Pia, you can proceed.

[Maria Pia de Orleans e Bragança, executive]

Good morning, everyone. We began the third quarter 2024 with an important step toward the continuity of the company. In July, we made the first payments to the creditors of our judicial recovery plan, demonstrating that our efforts to generate cash flow are beginning to bear fruit. With a growing sense of optimism, we are confident that this process will enable the company's recovery, the maintenance of its operational stability and the resumption of activity expansion. Regarding our operational results in the third quarter 2024, the company reported a 3 percentage point increase in the sales over supply compared to the same period in 2023. This result shows that even with the depreciation of our inventory due to a lack of new launches, our sales team continues to make consistent efforts to improve our sales processes.

Additionally, it is worth highlighting the success in releasing [indiscernible], which has freed up part of our inventory that had been blocked and unavailable for sale prior to the filing for judicial recovery. Another noteworthy point concerns contract terminations, which decreased by 14% in the year-to-date comparison for 2024 versus the same period in 2023. This positive result is accompanied by a high resale rate of terminated units, reaching 95%. It is important to highlight that these terminations directly reflect our efforts to monetize delinquent accounts receivable.

Regarding operating expenses, our plan to simplify the company's structure continues to yield positive results, sustaining a downward trend in administrative expenses, which decreased by 11% year-to-date in 2024 when compared to the same period in 2023. Another highly significant milestone was recently achieved as reported in the material fact published on November 7. On this occasion, we signed the individual settlement agreement with the Office of the Attorney General of the National Treasury aimed at renegotiating all the company's federal tax liabilities and in addition, enabling the immediate regularization of its tax standing. We are aware that in the short and medium term, we will still face the limitations and challenges imposed by the judiciary recovery process. Nonetheless, given the important operational results already achieved, we remain confident that the company is positioned itself favorably, aiming to develop new projects and generate value for its shareholders.

I now turn the floor over to Fábio Gallo, our Vice President, so he can present and share his insights on the company's sales performance this quarter.

[Fábio Garcia, executive]

Thank you, Maria Pia. Good morning, everyone. We will begin the presentation with Slide 2, which basically covers the sales made by the company. The top of the slide, on the left, we see a chart showing that our gross sales reached BRL 8.8 million in the Rossi segment for this third quarter with a total of BRL 23 million for the first 9 months of 2024. And this is 15% below the figures in the same period of 2023. This decline in sales reflects our reduced inventory and is directly related to the company's conservative approach regarding its new launches. There, we can also see at the top on the right of the slide that sales over supply for the third quarter 2024 rose to 8.4% showing an increase of 3.1 percentage points when compared to the second quarter of 2024. At the bottom of the slide, on the left, we highlight the contribution of sales from completed units, which accounted for 100% as all of the company's projects have already been delivered.

Now on the right side, at the bottom, we show the geographical distribution of the sales with nonstrategic regions standing out, representing 34% of the total sales for the quarter and a large portion of the sales involved properties located in the state of Rio de Janeiro.

Moving on to Slide #3. top on the left side, we can see the trend in contract terminations over the past 15 months. In the third quarter of 2024, terminations reached BRL 10.8 million in the Rossi segment, a volume 14% higher than in the third quarter of 2023. Terminations are directly associated with the company's efforts to monetize its delinquent accounts receivable. The company achieved -- and we can see that on the top on the right, the company achieved a resale rate of 95% in the third quarter of 2024, maintaining its successful efforts in selling terminated units and contributing to the increase in short-term cash generation.

In the graph at the bottom of the slide, we can see the distribution by stage of construction and the location of the sites terminated in this quarter. In the next slide, we present the profile of the company's inventory, which, as we can see on the top -- on the left side, totals a potential sales value of BRL 93 million in the Rossi segment. In the graph at the top right, we provide a breakdown of the inventory by year of launch. At the bottom of the slide, we can see the graph showing completed units currently representing 100% of our inventory with the majority, meaning 54% of the total potential sales is still located in nonstrategic regions.

I now turn the floor over to Persio, our CFO, who will present and provide his insights on the company's financial performance for this quarter.

[Persio Luiz de Carvalho, executive]

Thank you, Fábio. Good morning, everyone. Continuing the presentation on Slide 5, which show the evolution of corporate and SFH debt over the last few quarters. In the second quarter, the company's corporate debt totaled BRL 254 million, while the SFH debt balance was BRL 126 million. showing a 20% decrease compared to the same period in 2023. At the bottom of the same slide, we show the evolution of the cash balance over the last 15 months, which reached BRL 24 million in September. This reduction compared to the previous quarter is due to the disbursement made by the company in the third quarter for the payment to creditors under the judicial recovery plan.

Now moving on to the next slide, Slide 6. At the top, we show the evolution of the company's transfer speed, which in this quarter reached 15%, an increase of 4.2 percentage points compared to the second quarter of 2024. When we analyze in absolute terms, the volume of new contracts signed and the volume of settlements -- we can see that the transfer amounted to BRL 2 million in the quarter, maintaining the same level as the previous quarter. Now moving to the bottom of the same slide, we can see that the cash inflow reached BRL 9 million in this quarter, also maintaining the same level as the previous quarter. It is worth noting that since the company has completed the delivery of all the last launch developments, there are no costs to be incurred in our projects.

Now moving on to Slide 7, which show the evolution of the main performance metrics. In the top left corner, we show the net revenue, which totaled BRL 69 million in the third quarter of 2024, positively impacting the company's gross profit for the period. Also on this slide, we show our SG&A in the bottom left corner, it is important to highlight that we continue to review our internal processes and renegotiate our contracts, which directly reflect in the reduction of administrative expenses. In this quarter, administrative expenses decreased by 11.3 percentage points when comparing the first 9 months of 2024 with the same period in 2023.

Finally, in the bottom right corner, we see that the company reported an aggregate result of BRL 65 million for the quarter compared to a net loss of BRL 48 million in the same period of 2023.

I will now hand over to the operator to begin the Q&A session.

[Operator]

[Operator Instructions]

If there are no further questions, we return the floor to the company for the final remarks.

[Maria Pia de Orleans e Bragança, executive]

I would like to thank you all for joining our session, and I wish you all a great day.

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