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Desarrolladora Homex (HXM)

Q2 2008 Earnings Call

July 22, 2008 10:00 am ET

 

Executive

 

Carlos J. Moctezuma - Investor Relations Officer

Gerardo de Nicolas - Chief Executive Officer

Alan Castellanos - Vice President of Finance and Planning and Chief Financial Officer

 

Analyst

 

Gordon Lee-UBS

Vanessa Quiroga - Credit Suisse

Esteban Polidura - Merrill Lynch

Dennis [Horician] - Santander

Cecilia Del Castillo- Citigroup

Jaime Nicholson - Credit Suisse

Gonzalo Fernandez - Santander Investments

Claudia Medina - [Venture] Capital Mexico

Kelly [Trenton] - FLW

Sergio Molina - Bull [Tech] Capital Market

Carlos [Furlong] - Merrill Lynch

Jorge Kuri - Morgan Stanley

Ivan Barona – GBM

Daniel J. McGoey -Deutsche Bank

Adrian Huerta - JP Morgan Securities, Inc.

Francisco Chavez - BBVA Bancomer

Presentation

Operator

 

Welcome to the Desarrolladora Homes Second Quarter 2008 financial result conference call. (Operator Instructions) At this time I would like to turn the conference over to Carlos Moctezuma.

Carlos J. Moctezuma

Good morning and welcome to the second quarter 2008 earnings conference call. Before we start, I would like to remind you that certain statements made during the course of this conference call about future events and financial results, constitute forward-looking statements that are made pursuant to the Safe Harbor Provision of the Private Security Litigation Reform Act of 1995. Forward-looking statements are subject to risks and uncertainties, a discussion of factors that may affect future results are contained in our filings with the Security and Exchange Commission. We do not intend to correct or update any forward-looking statements provided as a result of the information’s further event within ten years in our expectation.

With us in the call today are Gerardo de Nicolas, our Chief Executive Officer and Alan Castellanos, Chief Financial Officer. I would like to now to turn the call over to Gerardo.

Gerardo de Nicolas

Thank you Carlos and good morning everyone and thank you for joining us this morning. This quarter we at Homex have continued to deliver a strong top line growth of 19.5% with a 16.5 % net margin. This continued performance leave us comfort (unintelligible 02:36) that our goals for the intermediate term are achievable. This quarter, our volume of home sold increased 9.3%. The affordable entry level grew 8.8% and the middle income volume sales increased to 14.3%. Infonavit continued as a primary source of financing for our clients. In the second quarter of 2008, 80% of our customers secured their mortgages from Infonavit but the remaining clients used five commercial banks and FOVVISSSTE.

This quarter, we continued our focus on improving our efficiency on our technology, expanding the use of aluminum molds to nine additional branches. In an effort to improve the quality of life for our customers and their buying experience and based on an internal studies of what our clients change the most when they are moving to a Homex home. We have recently have launched a customizations options for all our products.

The Company is the first of its kind in Mexico to offer clients custom options, adding a personal touch to the interiors and exteriors of their home. To these options, home owners will be able to chose from a range of up to 6400 combinations for every home and to increase the value of their homes with the added advantage that they can exercise all their mortgage capacity and the cost of customizing their home will be included in the monthly mortgage payments, without compromising their cash flow. It also allows customers a single contact for support, warranty, and back up which is always provided by the company.

The customization option is available today in 14 affordable entry level branches and in 13 middle income branches. We expect to have customization ready to implement in all our branches by year end. Nine percent of the homes sold in the last week were customized by our client. As we mentioned on the last quarter’s call, Homex have launched our new tourist division, Las Villas de Mexico to cater to the second home market from United Sates, Canadian, European home buyer.

In May, during an event in Cancun we successfully presented the first phase of our project to the main brokers from United States and Canada. They told us they were pleased to know that for the first time in Mexico, a home dealer was offering what the retirees and second home markets look for. Reasonable prices, workable sizes, on-site services, and additional programs which are [Capa] Care and Open Door with full fee toll ownership. Homex started construction of Las Villas de Mexico in Cancun and Cabos during this quarter and we expect to initiate construction in Vallarta during the third quarter.

We are confident that this new divisions successfully will deliver the first home by the end of the first quarter of 2009 as planned. The Mexican housing market remains strong and demand for quality homes continues to grow. Geographic diversification has proven to be a chief trend and a differentiator of Homex. We are actively pursuing opportunities to grow within Mexico.

We have operations in 34 cities in 21 states as of June 30, 2008. During this quarter, we launched operations in Saltillo, the capital city of the state of Coahuila. We continue to consolidate our operations in existing cities and launched three new entry level developments and four new middle income projects while also building more homes in existing community.

We will continue with our expansion strategy and we will open operations in Villahermosa later this quarter, with an affordable entry level development that will bring a competitive offer to the families in the State of Tabasco. During the quarter, we took measures to grow our liquidity and start planning efficiency. On June 30, 2008, we entered into a new great facility denominated in Mexican Pesos in an amount equivalent to $200 million with Banco Inbursa, one of the leading banks in Mexico.

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