Helbor Empreendimentos SA

BOVESPA:HBOR3

Earnings Call Transcript

[Franco Neto, executive]

Good afternoon, ladies and gentlemen, and thank you for waiting. Welcome to Helbor's Fourth Quarter 2021 Earnings Conference Call. This webcast is being recorded and simultaneously translated. If you need translation, we have a tool available with a global icon called Interpretation located at the bottom of the screen. Then you can choose the language you prefer, Portuguese or English. For those listening to the conference in English, there is an option to mute the regional audio. Participants will only watch and listen this webcast during the company's presentation. Later, we will open for the Q&A session. [Operator Instructions]

Before proceeding, we'd like to inform that any statements made during this webcast related to the company's business perspectives, projections and operational and financial goals are based on beliefs and assumptions of Helbor's management and on information currently available to the company. Forward-looking statements are not guarantee of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that can, may or may not occur. General economic conditions, industry conditions and other operational factors can lead to future results that differ materially from those expressed in such forward-looking statements.

Now I will turn the floor to Mr. Henry Borenstein, President. Henry, please, you have the floor.

[Henry Borenstein, executive]

Good afternoon. For those who follow this webcast, with our Sales Director, Marcelo Bonanata; our Financial and Investor Relations Director, Franco Gerodetti, we are here to share with you the results of the company in the first quarter of 2022. I'd like to highlight that 2022, we started with good operational and financial indicators, reinforcing the continuous retake of the positive results generated at the company that has strengthened and is evolving every quarter.

Sales of ready units continue at their scheduled pace. We launched 4 development representing a net VGV of BRL 750 million. Two of them are of very high standard, reinforcing our portfolio in this segment. This year, our efforts continue to -- so ready unit sales continue to contribute the reduction of the leverage level of the company.

We will continue to be attentive to the macroeconomic and market indicators before taking decisions in relation to projects that we plan to launch during this year. Our focus will be to keep the company with higher margins and consequently consistent returns. We believe we are prepared to face one more challenging year.

I'd like also to thank, on behalf of Helbor, for confidence from our investors over the years and reaffirming our commitment to the business model and value generation to the shareholders and the company's being one of the highest levels in this sector with a responsible and transparent management.

Before closing, I'd like to highlight one more event. Só a Helbor Tem, Only Helbor Has, on May 21 and 22, to reduce the inventory of ready units in construction. This event will provide special conditions and exclusive offers. This event will reinforce once again the company's commitment to reduce its leverage and the generation of positive results.

Now Franco Gerodetti and Marcelo Bonanata will share with you the main operational and financial results. Thank you.

[Franco Neto, executive]

So going quickly, we will -- deep in this -- during the presentation, we reached BRL 325 million in total gross sales in this value, 63.7% for the inventory trade. And of them, 46.9% are ready units. So this means we are continuing with a strong focus on ready unit sales.

Total VSO was 9.2% and launches 15.7%. We had BRL 150 million of repasses in relation to the last quarter. And in this quarter, we did not have any delivery.

The net operational revenue was BRL 211 million in the quarter. Our gross margin reached 28% in the first quarter, 4.3 p.p.s above the first quarter of '21, showing the trend we've been talking with you to increase the gross margin of the company. And our net profit was BRL 11 million, keeping the tenets of positive results.

I'll give the floor to Marcelo who will talk about our operational development.

[Marcelo Lima Bonanata, executive]

Thank you, everybody. Good afternoon. Our total land bank is BRL 9-point billion. We have BRL 5.9 billion of the Helbor share with 39 projects.

Concentrated in the Southeast region in the city of São Paulo where we have a high concentration, you can see our diversification. Especially in relation to the regions of this map, we are present in the best neighborhoods of the city: Jardins, Moema, Chácara Santo Antônio. 30 years ago, a survey was released with the best and prime addresses in São Paulo. And of the 5 best ones, we have 3 developments in 3 of these addresses, so showing the quality of our land bank. And most importantly, this is scattered in places with a great mobility, which is a great value, in the city of São Paulo, 6.6 million (sic) [ 6.6 billion ] and Helbor's share, 3.6 billion.

In the next slide, we see the launches in this year. As Henry mentioned, we had 4 launches and 2 in very high standard. We have some high and very high standards like Casa Vila Nova. And these are iconic that we will launch in the first quarter. One is Jardins por Artefacto and the other, Figueira Leopoldo. The last land in Rua Leopoldo Magalhães, very, very high standard. And this accounts for 30. These 2 developments are above the curve of our units.

We also launched another phase of Reserva Caminhos da Lapa with this coordination of a higher meter area. And this 23% correspond to March 30. Today, we have sold more. And Caminhos da Lapa, I always reinforce to say there is a development that is a new neighborhood in the Lapa's neighborhood. We are transforming this area, contributing to the development of the city.

And then Helbor My Way Guanabara in the city of Campinas, development of 1 and 2 bedrooms in March. 17% has been sold, but today, much more. It is really surprising, the speed of sales. It was really above our expectations.

Now talking about hired sales. We closed it with BRL 305 million. In relation to the first quarter of '21, we have an increase of 1%. In the fourth quarter of '21, we have an increase of 26%.

Next slide, please. In Helbor's share for contracted sales, we had an increase of 13% compared to the fourth quarter of '21 and a drop of 8% compared to the first quarter of '21, which is important to say, here is the typology sales. It is well balanced, selling well, our ready unit stock, but gaining more in development in construction and also with a good performance concerning launchings. So this is the division by type.

Our GSO was of 8.8%, almost in line with what happened in the fourth quarter. And now we have our inventory, our total stock of point 3.2 million (sic) [ BRL 3.2 million ] and only 24% dip, a great drop in relation to last year. And of this, we had 507 million of [ BW ]. We are getting to lower levels and then the distribution of our inventory with the launches of 2019, '20 and '21 and the inventory being healthier, so to say, a much more balanced inventory.

In relation to its distribution, it's important to say the concentration that we have in the Southeast, much more diversified, specifically in the city of São Paulo. And it's worth mentioning that we are working on the high and very high level because we see the momentum in the country for this standard, different from the other income ranges. So we have a concentration of 79% of our stock in the city of São Paulo.

Now we will have Franco who will share the financial data.

[Franco Neto, executive]

Well, our net operational revenue, we had a 12% drop in relation to '21 and 34.7% in increase. We always have a longer perspective of 12 months. So quarter-after-quarter, we have a very good value in line with what we were expecting.

This slide, we've been showing this recurrently. And once again, we proved in numbers the increase in gross margin that we announced as we sell our legacy. It changes the mix of revenue, and we see our margin increasing. This is a positive point. This is what we call a new cycle for projects launched as of 2019, bringing a margin of 30% and a legacy of 16.3.

Another point to highlight in this slide, we had margins that we reached the 28%. We kept these margins. This is also a recurrent question that people asked us. So what explains Helbor being able to keep this, we see the sector showing slightly lower margins, but this is because of the outsourcing of our construction. It is a closed price, and this difference is on behalf of the construction company. Our margin, we see the same level in that last quarter, and this will be contributing to our gross margin increase.

This other slide showings DGA. As I always say, the company is very well controlled. Specifically in a year with high inflation, it is important to control the expenses. And we are being successful in this, an increase below 5% in relation to the first quarter of '21. And in this last quarter, slightly bigger, but with expenses that did not happen in the fourth quarter, but in line with what we are expecting for 2022.

And this is the slide we've been showing frequently, our net results. The trend is the same. We have 2 years of positive results. The exception was the quarter during the pandemic, but we are improving our net results.

Indebtedness. Well, it is in -- up to the same level. And since this is a year with very few deliveries and we have advanced some important developments, we expect the indebtedness to be in the same level over this year. And in '23, we'll have -- maybe you will see a drop in this indebtedness.

Our cash burn, we see the results based in inputs of [ SBS ] in development of projects and more relevant for referring to [ CapEx ]. So we considered -- and when I save this [ CapEx ], to continue with our launches, we see this cash burn but within what was scheduled.

So basically, that's it. Thank you. We are now going to open the Q&A session. [Operator Instructions]

[Franco Neto, executive]

Our first question is from [ Carlos Ferreira ]. Well, with the advance of the launches, how do you see the leverage level? The second question, is there an increase in the default because of the financial situation of the country? And third, how can we see the reduction in our legacy?

[Unknown Executive]

Well, first, thank you for the question. Concerning the leverage, well, the company -- this year is a year of very few deliveries, only 2. But next year, we will have a strong cash generation because we will deliver more developments. And with the advance of these new launches, what we are expecting for this year is to take you from the plano empresário to new developments, but we'll have a reduction in the other deadlines. By the end of the year, our leverage will be at the same level or slightly below. Next year, we will -- it will decrease.

And also about default, because of the economic situation of the country, well, [ Carlos ], we haven't seen this in a significant way. Our default levels are very in line with 2021. And very similar to mutual agreements, we have a very low number for mutual recision. We haven't seen any negative signs, but we are always looking at it, the financial and commercial management. But up to now, we are keeping the same level of last year.

And the receivables portfolio is very healthy. And this has to do with the products that were launched and very well located in São Paulo. And who bought during the launching day are also making money because most of them, they were sales success. This also contributed for this healthy portfolio we have. And again, we are focusing on high and very high standard. And we understand that this portfolio is okay for that.

Well, the third question was about the legacy inventory, how we intend to reduce. Well, [ Carlos ], we had a great reduction in our legacy. We are decreasing them. We had 3 projects that were combo hotels, and we had a great difficulty because the hotels were not generating any revenue. It was very difficult to sell them. But by the end of last year, we changed for commercial. And in February, we revert another one. There is also residential, and the last, in the city of Santos that we are still in negotiations to change it, revert it. So these 3 developments that were on hold, which is part of this legacy, we are now having focused work. And we think that by the end of this year, we'll be very close to eliminate this legacy inventory.

[Franco Neto, executive]

Our next question is from Bruno Mendonca from Bradesco. How is the appetite for launches of premium projects in the Faria Lima region? With the high increase in construction costs, was there any relevant change?

[Unknown Executive]

Well, Bruno, the best example that we have is the next launch of Leopoldo. We have -- we are happy to be on one of the most desired addresses of that neighborhood. So this is a real increase, of course, but the valuation of this region was really big.

We have one example that is important. We launched W Residence at the end of '19 that opened with a price in that region, and W today is in a reality that the region increased its price. Figueira, for instance, it's about 45,000 square meter. So this is the value of that works in that region.

And in terms of feasibility, as Franco mentioned, we contracted with close the price. So the increases is not with us. If we can pass on this new price, it's in this high-level region. We see prices in region of Faria Lima above BRL 45,000.

[Franco Neto, executive]

Our next question is from Bruno Tomazetto from BTG Pactual. Can you comment about the sales of the second quarter? Can you also comment about the expectations for the launch of Fazenda Rodeio?

[Unknown Executive]

Well, the second quarter started very aligned with the first quarter that we think it was a good sales quarter. We had the events of Só a Helbor Tem in the city of São Paulo and Só a Helbor Tem in the city of Mogi das Cruzes. We are doing a strong work with the commercial developments with the pace of sales that we were unable to get last year. We are working hard, but we are getting the results.

In 2020, right after the pandemic, we were in a very strong speed, but we didn't drop or reduce this velocity. The answers are coming. People see that this volatility is dangerous, and people like to invest in real estate because it's a safe investment. Well, this is an electoral year. And in these years, people prefer to invest in real estate.

And we have a great expectation for Fazenda Rodeio not only for the buyers but the city of Mogi. This is the hype subject. Everybody is asking when it will be, and it's great expectations, everybody waiting for this. We are working on this very strong to have the final approval in entering with the registration. And we think that very, very soon, we will have the convention to start the prospection of this launch that will be the greatest launch of the state in São Paulo.

And Fazenda Rodeio, we are analyzing another phase. We have a project to get this perimeter for more lots. And if the market answers properly, we shall launch this next year.

[Franco Neto, executive]

One more question from Bruno Mendonca. Where are the greatest challenges to sell the oldest inventories?

[Unknown Executive]

Well, the challenge, as I mentioned in the beginning, we had a concentration of hotels, which was a great, large base of our legacy. And we had to sell this because this was not performing. So over these 3, they have become residential. So we'll be free of the great challenge to make this combo hotel to residential units.

Commercial, that were also a great challenge. If you see the speed of sales, we were able to sell this much faster in the city of Rio de Janeiro. Some of you saying, we decreased the inventory. So I think, Bruno, that the challenge, the greatest difficulty was in the past. Now is the final spring. So if we cannot finish this legacy next year, very few will remain for next year. The legacy inventory accounts for very, very small part in our total [ LGV ]. We are recognizing in the balance sheet the new sales then the legacy.

[Franco Neto, executive]

The next question is from [ Fábio ]. He is an investor. He's asking, how is the situation of partnerships with Helbor, example, Cinemark with Wide, and how these partnerships were affected with the pandemic?

[Unknown Executive]

Well, this should be directed to HBR, Wide development that you mentioned. In this development, Helbor's share is a residential development, but the commercial and entertainment part is under HBR's responsibility. Thank you for your question.

[Franco Neto, executive]

The next question is from [ Jean Bosco ] from [ Basser ]. Can you give a color about the next launches and the development in Mogi das Cruzes?

[Unknown Executive]

Well, about the development, we mentioned how high is the expectations in the region. And for us, as Henry said, we are developing the second part with 700 more lots. We have our sales stand ready there, and we will file the registration until the end of this month. And we expect to start June and measure the temperature June or July or August. This is well-based, and the expectations are very good.

And we have 2 projects there that are close to start the advancement, one in São Bernardo, a project that we started last year, we are just waiting for the approval. And we expect to launch another one in the city of São Paulo at Rua Caconde, a wonderful project, almost 5,000 square meters, 800 meters far from Parque Ibirapuera.

So 15 days ago, we started to the -- started the sales stand. And we also filed the registration at the notary office. And very soon, we will have another success with a good perspective for this product.

Looking quarter-after-quarter, we know about the challenge of this year. So launches will happen if the market is responding. We are very calm here in the company. We want to have good sales, a good margin and do things as they should be done. This is a year that we know the plane is flying, but we have a very dark cloud ahead. So this is for professionals. We cannot keep -- be playing on. So these are developments that we -- that are worked, so to say, okay?

Before going to the next question, here, we mention something important. The orientation is, let's get ready but only start it if we are ready to continue. We talk about this referring to the development in Campinas. Every day, we are working on this. This is very healthy. We had -- last time, we had 2 stay some days. And sometimes you lose it, and you don't have any velocity. So with this, we shorten this holding period, and today, we are selling every day. So today, we went beyond the expected curve, and we only go with developments we know that we will have an answer.

[Franco Neto, executive]

Our next question is from [ André Gevi ]. Thank you, [ Gevi ]. What is your expectation in relation to the gross margin for the next quarters? How the pressure on cost is impacting these margins? And have you been able to adjust prices? And what products absorb this best?

[Unknown Executive]

Well, first, the expectations for gross margin is to go in line with the last quarters. If you look at the historical margins of Helbor pre-crisis, it was 30%, 32%, always in this level, at this level. Depending on the sales mix, if it was a legacy or a new cycle, our margin can increase, but it will stay like this.

The pressure on costs, again, it is important to highlight our way, our business model, which is a lump sum contract. So again, we saw the impact on the balance sheets of the companies in the sector. But because of our business model, we are in a better situation. Our partners are long-term partners. So it's proof that this model is working both for Helbor and for them. They have also equity participation. We have this scheme. So as for prices and price increase, I think yes, we were able to adjust some prices. We mentioned other times that our land bank is very, very good for very good prices. This is also contributing to margins.

The construction costs increased. We felt this, but it is already in the new price. It is a lump sum, but the increase in price for the square meter -- and together with a very good land bank, this gave us security to see that this margin will be maintained and, who knows, maybe will slightly increase.

[Unknown Executive]

[Foreign Language] So for us, I can mention the name, Toledo Ferrari, MTD, [ Epsom ], also [ Compri ], more than 20 years. The risk of construction is on the builder, but they also have a participation in the development because in a moment like this, this works. Sometimes they can gain less in building, but they have the stake in their incorporation that gives a benefit.

And this model is of today, but in the past was different. We want to keep our margin, our gross margin of 30%, 35%. And there are some moments that are better for the builder and others for the incorporation. The great differential is that Helbor knows how to work with outsourced builders and who to hire. These are partners, long-term partners.

[Franco Neto, executive]

We have another question from [ Jean Bosco ] about how the sales of the second quarter are. We answered, the next months [indiscernible] value, reinforcing the question of [ Carlos Ferreira ]. I'd like you to comment about the quality of the receivables of the company since you have due installments of about BRL 120 million.

[Unknown Executive]

Well, [ Marcus ], this is -- this value here, to make it clear, is almost the total, the sum -- suits, legal suits that we have with clients, the value is kept in the portfolio. But most -- in the most cases, the real estate return to Helbor and was resold. But due to legal requirements, we cannot do anything until the suit, the process is closed, okay?

[Franco Neto, executive]

The question is from [ Fábio ], an investor. What is the price perspective for the Pinheiros region in the next years?

[Unknown Executive]

Well, Pinheiros have a great valuation. We divide Pinheiros in 2 sides. Above Henrique Schaumann, Artur de Azevedo, Alves Guimarães is the lower part. So 2 or 3 years ago, it was about 14,000, 15,000. We launched 2 developments in Pinheiros. Wide, that is ready now, we launched at 14,000. I'm not sure. And today, it's about 20,000. And we have the Supreme as well that we launched about BRL 16,000, BRL 17,000 at Joaquim Antunes District, and the value is 22,000. So Pinheiros in this part of Joaquim Antunes where we have Wide, it is about 20,000, 22,000. And the other part of Pinheiros, it's in the range of 17,000, 18,000. This is a reality today.

[Franco Neto, executive]

Well, since we have no more questions, I'd like to remind you that we address all the questions we receive, so please be -- feel free to ask the questions, okay?

I'd like to close saying that in this next weekend, we will have another Só a Helbor Tem event. It will be the centennial event. It's the largest event of real estate in the country. We have this in more than 25 cities in the country, always with the performance above expected. The salespeople waiting for this event, the clients understanding what we offer in this event, so very high expectations in the city of São Paulo this weekend and in the next weekend in the city of Mogi das Cruzes. So then we will have the 101 edition of this event. We invite you at Brigadeiro Faria Lima where we have Café Otávio. We'll be there working on weekends, of course, and waiting for you if you want to visit us.

So ladies and gentlemen, with this, we close our presentation. Henry, any final considerations?

[Henry Borenstein, executive]

Well, thank you all for participating in this webcast. Thank you, all the employees. And once again, another event, one more, Só a Helbor Tem. Thank you very much. Thank you.

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