Helbor Empreendimentos SA

BOVESPA:HBOR3

Earnings Call Transcript

[Unknown Executive]

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to Helbor's First Quarter 2021 to show the results of the first quarter of 2021. This webcast is being recorded and simultaneously translated. [Operator Instructions]

Before proceeding, we'd like to inform that forward-looking statements during this webcast related to the company's perceptions, projections and operational and financial goals are based on the beliefs and assumptions of Helbor's management and on information currently available to the company. So there are no guarantee of the company's performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions and other operating factors can also affect the future results of the company and differ materially from those expressed in such forward-looking statements.

Now I will turn the conference to Henry Borenstein, our President.

[Henry Borenstein, executive]

Good afternoon to all watching this Helbor's earning results. Together with our Sales Director, Marcelo Bonanata; our Financial Director, Roberval Toffoli; and our IR, Franco Gerodetti, we are here to share the company's results in the first quarter of 2021.

The company started 2021 with expressive results and positive expectations even in the face of uncertain scenario due to COVID-19. The cycle of positive results generated by the company gets stronger as we launch new developments and advance with new projects that have robust margins. Cash generation is intensified with the deliveries scheduled for the current year, and sales of ready unit is decreasing its inventory every quarter.

Despite the closing of sales of stands imposed by the emergency phase in the state of São Paulo, Helbor keeps its launch plans for 2021. If the market conditions are favorable, we will speed up the launch of projects in the second quarter of 2021.

As we did recently, we adopted different strategies to reduce the inventory level of ready units that will be developed during the year. Our strategy includes transforming hotel units into residence -- residence with services and selling the assets in block to investment funds.

Helbor thanks the trust of investor over these years and reassures its commitment to maintaining its business model, the generation of value to shareholders and keep the company among the highlights of the sector focused on responsible and transparent management.

[Unknown Executive]

Thank you, Henry. Now we will go to the highlights for 2021. Our total gross sales reached the volume of BRL 321 million. And we will give you what happened to the previous quarter. Our speed of sales was very relevant, reaching the 12% mark. Concerning our sales, 82% accounts for the ready inventory and in construction, of which 40% accounts for ready units. In the first quarter of '21, we did our first launch with a VGV volume of BRL 125 million, 6% (sic) [ 60% ] Helbor part, with 63% of sold units. Repasses also had a significative volume with BRL 261 million in the first quarter, 37% above the first quarter of '20. Our net operational revenue is BRL 240 million in the first quarter, a 13% increase compared to the fourth quarter of '20. Our gross margin reached 23 -- 24% in the first quarter with a 2.3 p.p. drop compared to the fourth quarter due to the increase in sales. Our net profit was BRL 27.3 million, 4.2% above the last quarter of last year and 404% higher than the first quarter of '20. And lastly, the cash generation was BRL 41.6 million.

In the next slide, we will see our operational highlights, starting now with our land bank. The land bank, the company sees it as of high quality, not only due to its location, but mainly due to the good cost. A land bank formed up to 2029 with a value -- with a very reasonable value, VGV value, allowing the company to continue in the next periods, expecting a higher gross margin.

In this slide, we -- it's a snapshot of the city of São Paulo, showing more specifically the location of the BRL 3.7 billion of this land bank, Helbor part, in the city of São Paulo. In the center of this map, we have the Jardins neighborhood. You see clearly how well located our lands are. And what we see in this dark blue, which are the subway lines and transportation line, so we have a very good position in terms of product, and we expected to translate in robust margin from now on.

In the next slide, we see our sales performance, and I will give the floor to Marcelo Bonanata.

[Marcelo Lima Bonanata, executive]

Thank you. Good afternoon. The first highlight is the first launch in 2021, Helbor Patteo Klabin, launched in February 27 this year in -- it was 1 week before the state government of São Paulo to set the -- again, the restrictive measures, closing the commerce, the retail and our sales stand. But we had more than 50%. And today, we have 65% of sales in this development, an icon in the city of São Paulo, with a total VGV of almost BRL 124 million and Helbor part, 60%.

In the next slide, we have the contracted sales for 2021 for the first quarter, a total of BRL 322 million. These are very expressive numbers. If we compare to the first quarter of '20, we can see a slight drop, but it is justifiable. Our sales of assets in São Bernardo do Campo account for BRL 50 million, and we know it is sales. But the first quarter of 2021, we had very important sales. And in 2020, we had the lockdown at the end of March. And this year was in March 4. So almost the entire March with our sales stand closed. So no matter how good is our digital media, the sales stand, the decorated unit and the land makes a difference. And we can see this when, in the second half of April, we see the recovery in our sales.

In the next slide, we see the Helbor part sales with BRL 205 million. I'd like to highlight the inventory sales. 83% that was sold in the first quarter was Helbor part inventory. 40% of ready units showing the focus of the company to reduce the ready units inventory.

And in the next slide, we show the sales over SoS, Sales over Supply. We are in line with the market and being in a increasing slope in terms of sales and consequently in our SoS, Sales over Supply.

Now we show the composition of our inventory. In the first of the first quarter, we had a total inventory of BRL 2.2 million, and Helbor part, BRL 1.4 million. So just reminding, this is the result of the work of the company to reduce the inventory.

The next slide can show it in detail. This is specifically for ready units inventory. We had in 2019 (sic) [ 2018 ], BRL 2 billion. In 2020 (sic) [ 2019 ], we went from BRL 1.3 billion. We sold almost BRL 500 million in ready units. And if you see in 2020, we had BRL 1,075,000,000 in ready units. Today, we have with BRL 773 million because we delivered BRL 183 million in the first quarter. So this shows the work of the company in relation to settle its inventory to reduce it gradually. And this is important because in addition to reducing the ready inventory, we were able to gain price. We have very good margins. Even with our legacy, we were able to recover the prices. So the company is selling the inventory, but is gaining price and getting ready to new launches and the new margins.

Now we see the distribution of our inventory by region and standard. We have a high concentration in the mid-high level and increasing the high and very high standard. Our inventory is concentrated in the Southeast region and mainly the city of São Paulo where we can have a very high-quality standard, and this is very important that we are realizing every quarter.

The commercial inventory of the company, we include in this commercial the hotels that we are now transforming for residence with services. So during the year, we'll be able to sell a great part of the commercial inventory. This is the case of Curitiba, Alphaville and Santos, which is most of the commercial inventory. And in Curitiba, we started to sell this commercial units that migrate from hotel to residence units. And in the very short term, we expect to see a decrease in this commercial inventory.

I close my participation, and I give the floor to Roberval Toffoli.

[Roberval Toffoli, executive]

Good afternoon. Now you'll see the financial results. We closed the results of 2021 with numbers that reinforce the sustainable recovery of the company. Slide 15 shows the net revenue of the company that in the first quarter of 2021 was of BRL 240 million with a drop of 7% in relation to the first quarter '20 and an increase of 13% in relation to the 4Q '20.

Slide 16 shows the gross result improving gradually with BRL 57 million in the -- of 1Q '21 with a gross margin of 24%. This margin represents a trend of improvement in the results of the company showing the evolution in its new cycle where the new projects that are being launched have more robust margins, while old projects with -- are being reduced during the efforts of the company to 0 them. The adjusted gross margin in the first quarter was 29.9%. We still have a margin -- a backlog margin and showing the improving of the company and the margins of the new projects.

In Slide 17, we have the evolution of the net profit that was of BRL 27 million in the first quarter '21, 405% increase over the same period of last year. And comparing to the previous quarter, the growth was of 5.2%.

In Slide 18, we show the total debt of the company. In the first quarter of '21, the total debt reached BRL 1.380 billion against BRL 1.410 billion in the fourth quarter of '20. This is a 4% reduction of the total debt of the company.

In Slide 19, we show the cash generation, cash burn that reached BRL 42 million in the first quarter of '21. This is a result mainly from the high volume of repass in the quarter that was of BRL 261 million.

We are at your disposal to answer any questions.

[Unknown Executive]

Thank you, Roberto, Marcelo and Henry. Now we will open the Q&A session.

[Unknown Executive]

[Operator Instructions] Our first question comes from Bruno Mendonca from Bradesco.

[Bruno Mendonca, analyst]

It's about our financial result. Can you give more details about the BRL 22 million revenue with the [ lineation ] of participation? And what can we expect in this line?

[Unknown Executive]

Well, this is a number that many people asked for. This line contemplates the sales of participations in our project. In this period, most of them came from results of participations, sales and projects that we have with partnership with HBR. These sales were foreseen in our investment agreement in 2020.

This type of divestiture is positive to Helbor because it's a part of the development relating to active facades, nonresidential units, commercial units that brings us a benefit to focus in the residential units. And in this case, HBR, since it is a company that operates in this area, they will run it independent from Helbor.

[Bruno Mendonca, analyst]

Are we going to continue this type of transaction?

[Unknown Executive]

Yes, maybe one or another, but it will make sense when we detect a new opportunity, not only with HBR or any other partner company that we keep the residential part, which is the DNA of Helbor. And we divide the cost of land and cost of incorporation. And at the end of the day, this will bring a higher and safer profitability to Helbor.

[Unknown Executive]

Just to add, sometimes we have a sales of participation in with our own partners. In the beginning, we have 100%. But when we do the tender of the development in -- we like that the constructing partner to be a partner of the incorporation. So many times, we do this. So thank you. And to make it clear, the result is the difference of the sales to the cost of acquisition.

[Operator]

The next question is from Gustavo Cambauva, BTG Pactual.

[Gustavo Cambauva, analyst]

Can you elaborate more on the perspective of launches for the second semester? What are the projects that may advance? And what are the status? And can you tell us the average gross margin?

[Unknown Executive]

Cambauva, well, we have a good expectations. We have good expectations for this quarter. We were closed almost the entire month of April, but we are now working for new launches. We will have the launch of Caminhos da Lapa, a new phase, which is a great success in Lapa, a new neighborhood that we are transforming the city.

Last year, we sold more than 500 units. We had another launch in -- by the end of the year that was successful. And now we are preparing the fourth phase with good expectations, wonderful sales, both the second phase of Patteo Klabin. The first phase was in February with apartments of 144 square meters. This is a neighborhood with a great infrastructure, convenience, shopping mall and subway.

Another project worth to highlight is a project in Freguesia do Ó, apartments of 75, 85 square meters. We see a very low offer in this region. So those who go to Marginal Tietê, close to [indiscernible], we'll see the most fantastic sales both of the [ statings ] of São Paulo.

And we have 2 HIS projects that we are working on. In this program of HIS, one in Pinheiros and other in Brooklin, consolidated neighborhood very close to subway. So these are developments with variables in terms of size, product and location. But we have good expectations. And there is one niche, which is the Freguesia do Ó that we will do next week, and one more development in Mogi neighborhood that is also transforming the city of Mogi das Cruzes.

[Unknown Executive]

I'd like to comment on the launches. This land bank of Caminhos da Lapa was of great quality in the city of São Paulo. And we had an agreement there. It's very important for the company. And in the next years, we'll have a very good launch volume.

Another thing that I'd like to specify that is very relevant. The company is not focused only in compact apartments. This semester, we have HIS launches, 3 and 4 bedrooms. And in the first quarter, we launched a studio. So this is important. Helbor doesn't have concentration in small products. And this is due to the quality landmark that we have. We are very well positioned, and there is low concentration neither for neighborhood nor product and margin expectation.

Well, for those who follow Helbor, we are in a new phase delivering our legacy, and we will deliver even more. Those who know Helbor, we went IPO in 2007. We always delivered gross margin above 30%. We are showing this improvement in the margins and in all our launches. The margins are the same. So this is a game of very patience -- of great patience. We had some bad moments in the past, but what is nice are the new launches. And every quarter, we improve.

[Unknown Executive]

Well, the next question is from Elvis Credendio from BTG Pactual.

[Elvis Credendio, analyst]

What is the pace of approval of projects at the city hall? And what is the status of our guidance for projects?

[Unknown Executive]

I will start. Well, projects of this quarter: Caminhos da Lapa, approved and registered; Patteo Klabin, approved and incorporated; Pinheiros, HIS, approved to get the registration; Mogi das Cruzes, Ipoema, approved and incorporated; [indiscernible], another development in Mogi, approved and incorporated; [indiscernible], already approved at [indiscernible]; and to get the registry in [indiscernible], HIS, in the next few days, we will get its approval.

So for the quarter, 80% of the developments are already approved, incorporated or to be incorporated. And as for the rest of the year, most of the developments are well advanced in terms of approval. So we are very safe with this.

What is important is we are keeping the guidance. And due to the COVID, there is a latency in the city hall in several bodies. But it's important to highlight that the company has a very large land bank. And all the land bank is already filed. Even the land bank that we are buying, we are working already in the project. We have a pipeline for approval. So everything is okay.

[Unknown Executive]

Our next question is from Luís Monteiro. He is asking for -- about the DGA. The DGA in the first quarter was about BRL 23 million compared to BRL 20 million in the last quarter of '20.

[Unknown Executive]

So Luís, thank you for the question. This -- the first thing is that this is a small increase, but it's important to say there is an ad hoc increase. This is not going to perpetuate. This was due to adjustments in our payroll, some expenses with contract termination due to -- and other expenses due to this higher volume of launches that we are preparing and some other provision that was entered in the first quarter. But it's important to say that the expectations for our DGA is the same as the last 3 years, a very controlled DGA and also of the size that we have to have, which will be a challenge to next year.

We were always focused in the reduction of the [ SGA ], and just reminding that we are starting the works that we launched in the last years that will improve this. So the company is heavily focused on this. And this is the result of decisions that we had, and we reviewed all the processes in the company. We automated several departments in the company. So this is a reflex. But in the longer term, you'll see some savings and improvement in this process.

[Unknown Executive]

Well, we didn't have any other question. So I'd like to thank. And with this, we conclude our webcast to -- with the results of the first quarter of '21. The company and the IR area is at your disposal, and I will give the floor to Henry for our final considerations.

[Henry Borenstein, executive]

I'd like to thank everybody who participate in our webcast. We are here at your disposal to clarify any questions. And I'd like to highlight that this is an important year for the company with new launches. And the real estate market is still growing in spite of the COVID. And the company delivered good results and good sales performance. And we believe this year will be very positive to Helbor. Thank you.

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