Rossi Residencial SA

BOVESPA:RSID3

Earnings Call Transcript 2021-Q4

[Operator]

Good morning, ladies and gentlemen, and thank you for waiting. We bid you welcome to Rossi's earnings conference call for the fourth quarter of 2021. We have here with us, Mr. Joao Paulo Rossi Cuppoloni, CEO; and Fernando Miziara, CFO. We inform that this meeting will be recorded and has simultaneous translation into English. In order to select the audio you wish, click on interpretation. For a better sound, we suggest to click mute original audio.

[Operator Instructions] Before proceeding, we'd like to mention that forward-looking statements relative to the company's business perspectives, projections and operational and financial goals are based on the beliefs and assumptions of Rossi as well as information currently available to the company. Future considerations are not performance guarantees. They involve risks and uncertainties because they relate to future events and therefore, depend on circumstances that may or may not occur.

The economical conditions, industry conditions and other factors may affect the future results of the company and may lead to results that are different materially from those expressed in such future considerations. Now I'd like to give the floor to Mr. Joao Paulo Cuppoloni, CEO. Please, Mr. Cuppoloni, you may proceed.

[João Paulo Rossi Cuppoloni, executive]

Good morning, everybody. We are here on behalf of the Board, one more earnings call for the year of 2021, the final results. This year was still a quite challenging year for us. We continued facing a scenario of uncertainties in low economic predictability after a long period living with the new coronavirus pandemic and its outcomings. The unemployment rate continues high and the basic interest rate keeps its upward trend due to a rise in the main inflation indexes, thus affecting the Brazilian population purchasing power in its access to credit. Even facing such challenges, the company has remained concentrated on its restructuring process, focusing internally on the mitigation of risks and execution of its financial deleverage plan and simplification of its operational structure.

In this context, during the year, new financial job renegotiations were celebrated with our main creditors. In the first half, the company successfully concluded the process of restructuring and settling corporate debt contracts with Banco Bradesco and Banco do Brasil. This was done using cash from the sale of assets that were to guarantee the same debt as well as financial discounts that we got with the banks that affected positively the financial results of the company in BRL 245 million. Therefore, the company's corporate debt fell by 56% in the last 12 months.

In addition to the renegotiations formalized and concluded in '21, the company also negotiated at the beginning of '22 a new transaction to tackle another significant portion of its bank debt. As mentioned in the factor relevant to Material Fact disclosed in February '22, the company signed an investment agreement with investors that acquired BRL 75 million of credits raised from construction financing operations, which will be partially capitalized and settled without disbursing cash.

In the same operation, we also foresee credits from consumers, generating favorable conditions for the company. And if restructured, it will reinforce -- these liabilities will reinforce our balance sheet and will be essential for the success of our new launches in the medium and long terms. Regarding our strategy to reduce costs and simplify our operational structure, our team's efforts continued to yield positive results over '21, maintaining the downward trend of administrative expenses, which fell by 12% against 2020. We also have a positive result throughout the last quarters, closing partnerships and joint ventures of constructions that were done in strategic areas. Therefore, we have good control of this business, and we simplify our administration.

We maintained resale efficiency of the units canceled. This year, it reached 89%, and we saw a performance, a flat transfer performance over the year, with an SoS of 22% in this fourth quarter, in line with the same period of 2020. We still have challenges. However, we will be confident and diligent in our planning and in the results already achieved. We will be prepared to have a better and better situation to go into a new phase of the company, resuming growth and value creation with the development of new projects.

After this introduction, we go to the results presentation. I'm going to start with the operational performance. And then Miziara, the CFO will talk about financial results. So first slide, Slide #2, where I approached sales contracted by the company or done. On the upper part of the slide, you see that gross sales reached BRL 16 million in this fourth quarter, aligned with the third quarter, however with a decrease as compared to the first 2 quarters of this year. It's a macroeconomic scenario that's not so certain, and there was a natural reduction in our inventory and the total of the year BRL 95 million, a reduction of 24% in Rossi against the same period last year. When we weigh this indicator considering the stock, we can see that SoS reached 12% in this quarter, less than the ones for the previous quarters. However, the Y-o-Y was 66%, maintaining in line when compared to the period that was closed in December 2020. In the lower part of the slide, we emphasize on the left side the participation of the sales of units delivered. That was 100%, since all the projects were finished in 2020. On the lower right corner, we see the geographic distribution of the same sales, most important Porto Alegre, in nonstrategic regions that summed were 77% of the total sales of the quarter.

Now Slide #3. On the upper part, we present cancellations throughout the last 15 months. On the 4Q '21, the cancellations were BRL 14 million, similar reduction to the one seen in gross sales as compared to previous quarters. And the cancellations are associated to the effort of the company to improve its accounts receivables. The total cancellations in '21, 89% have been resold, contributing to maintaining a high level of resale of the last quarters to contribute to operational cash.

In the lower part of the slide, we see the distribution in relation to the state of the projects and where they are these canceled projects in this fourth quarter. Next slide, we see the profile of the inventory. It's VGV of BRL 120 million Rossi share besides the natural effect of sales that reduced our inventory in BRL 2 million this quarter. There was a decrease of BRL 5 million in our inventory related to reviewing the prices of the units that were canceled and came back with the new prices. On the right upper part, we see the detail of the inventories according to the year they were launched. And on the lower part, we see, number one, the finished units are 100% of our inventory and 62% of the same PSV is in nonstrategic regions. Slide 5. The land bank of the company and its potential PSV. Currently, our land bank for allotment and construction is 61% of the total. And the plots that can be demobilized to reduce the cost and maintenance of these units are 39%. On the lower right part, we see that 100% of our land bank that has possibility of being launched in short term is in Sao Paulo. And to accelerate the maturation curve of these projects, the company has analyzed the possibility of having partners with investors or other companies, and this may happen also with the alienation of these assets in Rossi, which construct or develop this project.

Now I give the floor to Miziara to present his considerations on the financial performance of the company in this first quarter.

[Fernando de Mattos Cunha, executive]

Good morning, everybody. Thank you, Joao Paulo. Going on with the presentation, Slide #6. We see the changes in the last quarters of corporate indebtment of SFH and IFRS. As commented, Rossi in Banco do Brasil implemented successfully all the terms of debt renegotiation that was approved in December 2020, resulting in the total settlement of this agreement. With that, after having reductions in the leverage of the last years, we had a reduction in our corporate debt in 2021 with a total of BRL 223 million.

In the same slide, we see the changes in the financing to production debt and a cash balance that had a reduction and closed the quarter with BRL 10 million. As a consequence of that, on the right lower corner, we see net debt of the company. In December, it was BRL 593 million, that represents a reduction of 29% as compared to the balance of 4Q '20. It's important to highlight that according to relevant fact of [indiscernible] from February '22, the company took an important step in financial deleveraging since we signed an agreement with BPS Capital, a company that acquired about BRL 75 million in debt from the company. This debt will be partially capitalized and again settled without cash disimbursement.

Now Slide #7. We show on the upper part the changes in this quarter, it was stable. The transfer speed, it was flat as compared to 4Q 2020 as well as signature settlement. There was a reduction when we compare to the former quarters due to the natural reduction of inventory and were still indexed without having new launches, and that reflects on the left lower graph, where we have the cash inflow from customers, our clients that reached BRL 21 million in the Rossi share, also a reduction as compared to the last quarters. On the right lower corner, we can see a reduction of all the costs to be incurred within construction since the company did throughout 2020, it delivered all the launches.

Now Slide #8. First, we show the changes in the most important goals. In the upper left part, we show the net revenue, a total of BRL 10 million in this 4Q, and the Y-o-Y was BRL 59 million as compared to a different number in 2020. This is due to a reduction in net sales in the year and the fact that increase in IGP-M, which is the most important index used to correct accounts receivables of finished units was mitigated by the provision to cancellations since an important parcel of these accounts receivable is in delinquency. Also in this slide, we show in the lower left corner a reduction in G&A that keep dropping after renegotiation agreements and reviewing our internal processes. This effort relentless resulted in 12% savings in G&A expenses of the year as compared to 2020. In relation to commercial expenses, there was a reduction of 14% throughout 2021, what reflects a more careful management considering cash expenses.

In 4Q '21, total commercial expenses had a positive BRL 10 million value due to the reclassification of cancellation provision, which, after this fourth quarter, is in gross margin. Anyway, the same adjustment was done for the results in 2020 to make it more clear. On the right lower corner, we see that net income loss was BRL 162 million and year-to-year was BRL 191 million, was worse considering 2020, that was BRL 15 million due to the financial discounts obtained in debt renegotiation of the company that were much higher in 2020, with a total of BRL 155 million as compared to BRL 246 million in this last year. Now I give the floor to the operator to begin Q&A.

[Operator]

[Operator Instructions] Since there are no questions, so we will give the floor to the company for their final considerations.

[João Paulo Rossi Cuppoloni, executive]

So we now close our earnings conference call. I want to thank everybody for their participation, for the collaborators and especially to the whole team and collaborators for one more year that we are together facing challenges. And I want to leave a message of optimism. Since we have this new operations that we could structure with investors, and as well mentioned by Fernando, they have huge potential and the company is very much interested on them, and they are very important for this year of 2022. Thank you again, and be well.

[Operator]

Rossi's teleconference is thus adjourned. We thank you all for your participation and have a good day.