Gafisa SA (GFA)

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Gafisa S.A. (GFA)

Q1 2013 Earnings Call

May 13, 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, Coordinator of Ethics Executive Committee, Member of Finance Execuive Committee and Member of Investment Executive Committee

Fernando Cesar Calamita - Operational Executive Officer, Member of Ethics Executive Committee and Member of Finance Executive Committee

Analysts

Vivian Salomon-Karam - Itaú Corretora de Valores S.A., Research Division

Gustavo Cambauva - Banco BTG Pactual S.A., Research Division

Rafael C. Pinho - Morgan Stanley, Research Division

Eduardo Silveira - Espirito Santo Investment Bank, Research Division

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

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

René Brandt

Presentation

Operator

Good morning, and welcome to Gafisa's First Quarter 2013 Results Presentation. On the call today, we have Duilio Calciolari, Gafisa CEO; Andre Bergstein, the company's CFO and IRO; Fernando Cesar Calamita, Planning and Control Officer; and Luciana Doria, the Head of IR.

We would like to inform you that the presentation is being recorded. [Operator Instructions] Before we begin, I would like to inform you that this teleconference will relate to Gafisa's financial results of the first quarter 2013, as well as information currently available. Statements made by management involve risks, uncertainties and may relate to future events. Any changes in macroeconomic policies or legislation and other operational results could affect Gafisa's performance. Please proceed, Mr. Calciolari.

Alceu Duilio Calciolari

Thank you very much for being with us today. As we have already said last quarter, 2012 was a year focused on generation of operating cash and deleverage. In 2013, we will seek a greater balance between cash generation, investment and profitability. As [ph] we are allocating capital to acquire land both for [indiscernible] and Tenda, serves to make our Land Bank -- to adjust our Land Bank. In terms of segments, we are glad to inform that we have relaunched the brand under a new business model, 2 projects were introduced, one in São Paulo and one in [indiscernible] accounting for 1/3 of the total launches of the group. The Tenda brand has a huge potential and its relaunch is part of expansion strategy needed at long term. At this moment, we are being conservative in the resumption of operations precisely to ensure a controlled operation and guaranteed sustainable growth.

Talking a little bit about the performance of the quarter. We have a stable market typically with a lower activity level when compared to other periods of the year. As we have already said, the high volume of deliveries in the second half of 2012 led to a significant amount of sales terminations in this quarter, which we should resell during the year.

Regarding our cash burn in the quarter, the same is related particularly to our decision of adjusting our Land Bank to our future launch projection. Besides that, we have substantially reduced discounts built into our sales when compared to the currency applied in 2012. I would also like to say that having achieved the [indiscernible] established for 2012, we are confident that in 2013, we will take another step which is necessary to create the conditions which are attractive to our shareholders.

Slide 3. I would like to quickly discuss the results of the first quarter. Launches were BRL 308 million, accounting for 10% of the midpoint of our guidance. This is in line with the proportion of launches which has directly occurred in the first quarter. Contracted sales reflect the significant sales terminations which we had because of the high volume of delivery in the second half of 2012, as we have already disclosed. And this impacted the velocity of sales, 6% of the first quarter.

We delivered 1,300 units in the first 3 months of the year. We expect this to grow during the year, in line with our guidance. Our financial results continue to be affected by projects with lower margins, but the impact on the group's results have already decreased. We expect to conclude the delivery of the projects for the Gafisa segment launched in the noncore markets this year, and also mostly the remaining projects for Tenda. This should open the way to better margins and financial earnings in 2014.

Another relevant prospect [ph], which I will talk about later, is the resumption of Tenda launches after 18 months of tidying up house, and at the same time, the development of an efficient operating model from -- efficient from all aspects.

Slide 4, we will see that, that's from the second quarter of 2012, our cash generation became positive, improving our liquidity, debt profile and capital structure, which has made us able to seek, in 2013, proper balance between cash generation, investment and profitability.

Cash burn in the first quarter was BRL 89 million, relating to the new investments in land, totaling BRL 53 million [ph], vis-a-vis acquisitions of the last 6 months, and also a more restrictive fiscal policy.

Slide 5. In this quarter, we launched BRL 307 million to resume launches of Tenda, accounting for 1/3 [ph] of the total. Gross sales totaled BRL 700 million, 42% in Gafisa, 23% in AlphaVille and 35% in Tenda. We had sales terminations of BRL 481 million, 40% of Gafisa, 48% in Tenda, 12% in AlphaVille, particularly because of a high volume of deliveries in the second half of 2012.

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