Gafisa SA (GFA)

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Gafisa S.A. (GFA)

Q4 2012 Earnings Call

March 12, 2013 10:00 am ET

Executives

Alceu Duilio Calciolari - Chief Executive Officer, Member of Executive Board, Coordinator of Finance executive Committee and Coordinator of Investment Executive Committee

Andre Bergstein - Chief Financial Officer, Investor Relations Officer, Member of Finance Execuive Committee and Member of Investment Executive Committee

Sérgio Goldman

Analysts

Marcelo Garaldi Motta - JP Morgan Chase & Co, Research Division

Luiz Mauricio Garcia - Bradesco S.A. Corretora de Títulos e Valores Mobiliários, Research Division

Eduardo Silveira - Espirito Santo Investment Bank, Research Division

Rene Brandt - Fator Corretora, Research Division

Presentation

Operator

Good morning, and welcome to Gafisa's Fourth Quarter and Full Year Earnings Presentation. At our conference call today, we'll have Duilio Calciolari, CEO of Gafisa; Andre Bergstein, CFO and IR Officer. And we would like to inform you that this presentation is being recorded. [Operator Instructions]

Before we start, I would like to inform you that this conference call refers to Gafisa's financial results of the fourth quarter 2012 and information currently available. The management's statements involve risks, uncertainties and can refer to future events. Any changes in macroeconomic or legislative policies or operating changes in macroeconomic or legislative policies may affect Gafisa's performance. You may proceed, sir.

Alceu Duilio Calciolari

Good morning. Thank you for being with us today. In 2012, we carried out the testaments -- we carried out the targets defined in the deficit turnaround: cash generation; deleverage; the delivery of units; Tenda's operating adjustments; and Gafisa's focus on the strategic markets in São Paulo and Rio; besides continued growth of Alphaville, which were our main targets for the year. And I am delighted to report that we delivered on these targets. Our brands, now headed each by its own exclusive officer with its own operating structure, are focused on increasing the profitability of our activity segment.

We have reduced, in Gafisa, our geographic coverage to focus on São Paulo and Rio, our more profitable markets and are finishing up the lower-margin markets. We are maximizing the gains potential of the group, increasing Alphaville contribution for the products mix. And we are trying to regain the control of financial cycles and the construction -- and Tenda, after having frozen the launches since the middle of 2011. The successful execution of structural changes and operating changes means that we are at a turnaround moment in our company.

In 2013, we started off in a more comfortable liquidity and capital structure position on a 2012 strong cash generation position. In 2013, we'll try to maximize Gafisa's potential, increasing investments in the business through land acquisitions through the Gafisa brand and increased number of launches in the next years. This includes the regaining of Tenda's launches and profitable business and continuous expansion of Alphaville.

This more productive focus on reinvestment will lead to lower cash generation and stability in leverage throughout 2013. This is an important step to capture the group's potential in this new structure. Finally developed and executed the restructuring plan of Gafisa in 2012, we are confident that we have achieved established targets for 2013 and successfully carried out the next phase of our growth strategy.

On Slide 3, we would like to discuss the highlights of the fourth quarter in the year 2012. As I have just said, one of our main targets for the year was the generation of operating cash. In 2012, the operating cash flow achieved BRL 1 billion, well above the revised guidance, which was BRL 600 million to BRL 800 million. This result was possible thanks to the record unit delivery throughout the year, 20% above the delivery of 2011, totaling 27,107 units, exceeding the top of the guidance for 26,000 units. Tenda's contribution in the total of deliveries was relevant, a total of 16,889 units. We also generated cash through transferring the remainder of our client -- with the balance of our client's debts to financial institutions.

Launches during the year were BRL 3 billion, in line with the maximum of the guidance of BRL 2.4 billion to BRL 3 billion. In the fourth quarter, where the volume of launches is typically stronger, we achieved about BRL 1.5 billion, with sales of BRL 905 million in the fourth quarter. As planned, the participation of Alphaville increased to 46% in 2012 compared to 28% in 2011. All the projects were launched according to the profitability parameters as published by the company and showed the turning [ph] moment high sales level, with speed of sales in the fourth quarter totaled 20% or 25% x Tenda.

Although we have achieved the operating metrics established for our plan in 2012, the financial results in Gafisa and Tenda were still substantially impacted by the projects -- the margins developed in the nonstrategic markets and by Gafisa's high leverage and by Tenda's legacy management. Now Alphaville, which had an excellent financial performance managed to partially offset the poor results in Gafisa and Tenda.

And the focus on the positive generation of cash was the most important thing this year. The record on units delivery benefited the cash generation, as we can see on the left-hand side of this slide. This chart shows the consistent improvement in our cash position throughout the last 2 years, with a turnaround of the second quarter of this year when the generation of cash became positive. This positive generation has been constant for these last 3 quarters, achieving in the fourth quarter a generation of BRL 381 million, a total of BRL 685 million in the year.

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