PDG Realty SA Empreendimentos e Participacoes

BOVESPA:PDGR3

Earnings Call Transcript

[Operator]

Good morning, everyone. We very welcome to the teleconference of PDG, referring to the results of the fourth quarter and 12 months of 2020. We have here with us Mr. Augusto Reis, Executive Officer, Vice President and Director of Investors. We are recording today's interview [Operator Instructions].

We'd like to inform that questions might be sent directly to the [email protected]. The audio and slides of this teleconference are being simultaneously transmitted by Internet on the website, www.ri.pdg.com.br, and we also have the webcast.

We also would like to make you aware of any declarations that might be done. And all the perspectives of the businesses of PDG, projections and operational information, we have all the information that involve risks, uncertainties, assumptions, and they all depend on their circumstances that might or might not occur. Investors should understand that all the economical conditions of the industry and other operational factors might affect the performance of the future of PDG and also [Audio Gap] so now I would like to give the floor to Mr. Augusto Reis, who is going to start the presentation. Now Mr. Augusto, please.

[Augusto dos Reis Neto, executive]

Hello. Good morning, everyone. I hope you are feeling good as we are going through a very difficult moment at the country. And then we're going to approach all the results considering the fourth quarter and 12 months of 2020.

Okay. So we are starting on the Slide #2, in which you can see the executive summary with all the main points of 2020. And we also had very important results, operational results. So before starting, I just would like to comment about the work that we have conducted, and we are still doing. Since the beginning of the pandemic, middle of March, we have adopted different measures for protection, recommended by all the public bodies and besides that, we also have had preventive measures. We have all the management team and also if you need any assistants, we have a team dedicated to provide support, necessary support for this issue. And we have also been promoting -- we have been promoting good examples in order to avoid this kind of situation. And we are making available a healthcare department, and we have also focused on the maintenance.

We have adopted different measurements, like lectures with professionals of the health care area. We have a program on, which is called PDG at Home, in which we have this program every 2 weeks. It's a live with physical exercise professional who supports the whole company. And also now March, we have initiated a new program and it's about a competition between workers. And by the end of the year, those who gain more points will be rewarded. And we are now focusing on the health care of our professionals.

All competitions are promoted simultaneously. And besides that, we have also adopted to -- we have adopted the hub office. So then we were able to see that that hasn't impacted in the efficiency and the continuity of our operations. We have had internal service that this system is being very effective. And we have officially adopted it, and it's going to remain even after the pandemic.

And that is to contribute to the quality of life of our teams that have been reflecting to the improvement. Our concern once we adopted it, it was about the communication issues. So once we opted to the home office, we adopted communication routines every 15 days. We have communication too available in the company. And myself and my team, we have a communication of any issues. And then we open questions and answers for the whole team. So then we are able to engage and motivate the team.

And I'm sure that even considering that we are distant, we are well-aligned. And I believe that we have been acquiring good results with it. And we can also see the good results considering last year in which PDG has acquired survey -- the impact of coronavirus survey, and the results were very good considering other countries and other companies in the same area. We had a responsibility with the whole team. And we are on the right pathway towards that.

And I'm also going to comment about other initiatives and also the routines of the company. On this Slide #4, we have the effective summary in which I'm going to detail about our net sales summed at BRL 12 million on the fourth quarter of 2020, which presented a very significant improvement. And in 2020, our net sales summed at BRL 64 million, 45% towards the year of 2019. And the -- we also have 6%. Another important information is that all the amortization of bankrupt stats summed at BRL 294 million until last year. And we also had a gross profit of BRL 52 million in the fourth quarter of 2020 and BRL 71 million in 2020. We were able to reach 45% in the net loss of the company or BRL 454.6 million in 2020.

And our Palm Beach located in Manaus, we have 80% of sales, considering 270 units. This is very important for the recovery of the company, and it's well-aligned with our plan. Besides that, considering the unfinished works in March, we also have a new enterprise in Rio de Janeiro, Meridiano. With that, all the customers with the buying company, they had their contracts renegotiated according to their functions and their needs.

On the next slide, our judicial recovery plan, we have 2 very important events for 2020. And as I've said, September -- last September -- on September, we delivered a proposal considering this plan. And we were having a more -- a better economical, and we also had preestablished solutions for the creditors. And it's also considering the classes. Considering a significant increase of labor credits, we were able to identify a need to restructure this by avoiding financial imbalance.

On November, we had a committee and assembly, and we had an approval of 100% of the creditors. And with that, we were able to structure it to BRL 34 million. On January 2001 (sic) [ 2021 ], they chose the option B. And the total was BRL 4.7 million. Deliver creditors, Class 1, who chose the option A and B and D, well, and continuing our plan. This plan every 3 years considering the judicial homologation of the creditors of Classes 3 and 4 will be able to opt to convert their respective credits into actions of emissions of the PDG. In this sense, we have a conversion of credits in October 2020. By the end of January 2021, we consolidated a list of creditors on the Classes 1, 3 and 4, who will convert their credits in actions of PDG now in 2021.

And we also had an approvement of BRL 301.9 million. So now those who have interest can also ask for more information on this. On the Slide 7, considering the judicial recovery, we see this -- the debt that were restructured, debentures. We see here an increase of this debt, the alteration. And that was a debenture, okay? It was not on the plan. And well, this debt registered a net value of BRL 145 million, 17% on the fourth quarter of 2020. And then this debt increased, and we were able to have payments and BRL 47 million. Since the beginning of this plan, the company had reached BRL 294 million and other amortization.

As for the operational and financial results on the Slide 9, we have here BRL 25 million, 56% below and all the gross sales BRL 141 million, 41% below 2019. And this is linked to the policy of sales of the company. So we have a focus -- a huge focus on this. And the sales reached BRL 9 million, represent 36% of the gross sales of the quarter. And we were able to reach BRL 28.2 million, 20%. And that reflects our strategy.

During the fourth quarter, we had BRL 13 million, 83% below the fourth quarter of 2019. So we were prioritizing all the free units in order to reinforce all the resales because we have 100% sales focused on products that are concluded. We have all performance sales. They are not referring to the new sales. I think that what is important here is that we don't have any attention point towards -- we haven't felt any impact about it due to the pandemic so that we were able to work normally.

The net sales amounted to BRL 12 million, 25%; BRL 64 million, 45% above 2019, even that the gross was fewer than we had this result. As I've commented in the last teleconferences April and May were the months that were very difficult due to the pandemic. But by the end of the year, we were able to see that the results were very close. Even considering the pandemic, the sales efforts were very prospective, were very good for the company in order to go -- to move through the year and have this scenario.

On the Slide #10. We have all the administrative, commercial, general expenses. And comparing 2019 and 2020, G&A increased to 2%. So there is a larger volume of expenses according to the financial and legal consultancies. All the commercial expenses decreased to 50% and 58% in the comparison of 2019 and 2020. This reduction was due to the reversion of the provision for the expenses with the finished units. And the general expenses and administrative, we had 34% in the comparison between the fourth quarter of 2019 and fourth quarter of 2020 and a reduction of 26%. We also had all the adjustments, and we had also efforts, and we dedicated to the restructuration of the company, even though we haven't had any campaign -- any specific campaign. We were also able to hire new professionals, new employees, and we had the restructuration of the company.

We now have more collaborators, but it's very important, even considering the pandemic. As for the stocks, we had here 4% of what was registered in the third quarter of 2020. As the fourth quarter of 2019, we had a 3% of the stock value. Here, the -- all the states of São Paulo and Rio, they concentrated 60% of the stock of the company, and 39% is concentrated in projects above 60%. As for -- we now have BRL 458 million, 74% located in São Paulo and Rio, 68% is concentrated in projects with sales above 60% and 56% concentrated in residential products, which is our profile.

On the Slide #12, we have here debt that was reduced in BRL 392 million, 12%, and that was due to the migration of another debt to -- as I've said. And we had 6%.

On the Slide 13, even considering BRL 8 million, the net debt had BRL 384 million, 12%, and then this debt decreased to 6%.

In order to conclude on the Slide #14, I'm going to highlight the key variations considering PDG has registered gross profit of BRL 53 million in the fourth quarter of 2020 with a gross margin of 82%. And also we had a reduction of the cost and a financial impact, and this result was due to an adjustment of the obligations and all the creditors that were enabled in the judicial recovery. We also had a drop in all the operational lines, and we had a reduce of 54%.

Now I'm going to highlight a very positive result, BRL 70.2 million in the fourth quarter of 2020. Considering all the information, it's very evident that we had a very promising -- we were able to go forth, even considering the pandemic, and that provided us a comfort for this planning and to go through the next year.

In order to conclude, I would like to comment about another product that started in the beginning of the pandemic, which is Digital Journey program. So we have -- we want to support, for instance, the sales journey. We want the sales journey to be more digital. And also to update all the internal processes. And also considering the market trends, we are using new tools that we have implemented due to the pandemic. So then we will have improvement of our processes and simplification for our internal processes, and it's going to -- we are going to gain more agility for the company.

In the year of 2020, even considering all the uncertainties, we were able to reinforce the team in a more strategic way. We had 3 key changes. We had -- we restructured the management team. And this change made us to start the year of 2021 better than we were before. And also considering this unfolding, we were able to have all the aligned team for the company. And we also had other initiatives, and we focused on healthcare. We also had lectures, inclusion, information about health. And we also have good initiatives for healthy habits. Because that is good for the engagement of the team.

Another important change was the reinforcement of our legal department, [indiscernible] our Director, she has a very good experience on the market, and she is aligned with our values and our objectives. We also reinforced our commercial and marketing by hiring a new director. And this new professional has a large experience, and also, it's going to be very good for our digital journey.

And I also would like to comment that we are going to have a new operation, and the idea is to use [indiscernible] because we have more than 300 enterprises, and we are offering all the -- and on September, we now have a new law of data protection, and we are implementing it safely. And that is not -- that is to protect the data for customers and the company itself.

And we are very cautious considering the pandemic and the COVID-19 and also the impact that it might bring to the country. So we are preparing in order to face more difficult scenarios, but we are very optimistic considering the vaccines and the recovery of our economy. We are going to have a focus, and we are going to have this digital journey and also other services. So we have -- we are improving our processes. We are having an engagement of teams and also having a focus on the health of our collaborators. I think that's it.

I would like to conclude our presentation, considering the fourth quarter of 2020. And I would like to open for questions and answers. Thank you, everyone.

[Operator]

[Operator Instructions] Our first question is from webcast, [indiscernible]. Most of companies -- what are you thinking about the launching for this year?

[Augusto dos Reis Neto, executive]

Thank you for your question. Well, as you might remember our last calls, we also talked about that of what we're foreseeing for the next year. And we opted to postpone the new launchings. But for now, we are working with a new schedule, and we are trying to work with it, even considering the restrictions of the pandemic. But if there is any change of the scenario, we will be able to provide you information. So, so far, we have the initial schedule. Thank you for your question.

[Operator]

Our next question from webcast, [indiscernible].

The company seems to be recovering. And that is improvingly balanced. What is the expectation for 2021, considering the new conversions of -- and that's of PDG?

[Augusto dos Reis Neto, executive]

Thank you for your question. Well, I think that it's very difficult to foresee that. And everything is going to depend on the movement that is happening of the capital and monetary. And also the recovery of the company. We had a judicial recovery. And since we are always having -- taking into account to retake, well, that might be a trend, but it's very difficult to foresee that because it all depends on a macroeconomic scenario, but we believe that it might be a new trend. It's a movement, as you've said. It improves the balance of the company, and so it's a very important movement. And we need to take this information into account.

[Operator]

Our next question on webcast, Daniel Gasparete.

Congratulations for the improvement of the results. What are the expectations for the sales considering the pandemic scenario? Are you expecting any improvement? And do you expect anything considering the D&A, even considering the commercial expense?

[Augusto dos Reis Neto, executive]

Hello, Daniel, thank you. As for the launchings, the sales, our expectation so far is to perform considering what was foreseeing in the initial schedule. And last year, the end of the last year, we had another expectation, because of the pandemic -- we had a positive expectation. And constantly, the country's economy would be able to recover. However, the reality is different now, and it's very concerning. But we expect that our goal -- well, we are still believing that we are going to be able to achieve our goal.

Considering 2020, our foreseen goal, pre-pandemic and post-dynamic, they were different even considering all the uncertainties and the vaccine, effective treatments to according to the COVID. But now this year, we believe that we are going to have a sprint. We expect -- we are very optimistic for the sales, but well, we are preparing, but we do not believe that we are going to have anything surprising.

But in fact, as I've said in the presentation, our distract impact is very low because, well, they are considering all the other products and they are all concomitant. So the distract is very low. So this timing is very short. And consequently, we don't have a huge expectation towards it. And D&A, we don't have any expectation for it, but the opposite. Obviously, it's a retake process of the company, and we expect that in the future, we are going to have that considering the volume of the company. But for today, we don't have anything about this. Thank you for your question.

[Operator]

Another question. Congratulations for the administration with all the teams considering the pandemic. My question is, considering the financial expenses, should they be considered for 2021?

[Augusto dos Reis Neto, executive]

Thank you for your question. Yes, I think that every time that we are able to have a negotiation, a very important negotiation [indiscernible] is it brings benefits for our financial expenses. So this is going to be the effort of our company, of our teams, and it's going to improve all the processes in the long term. And we believe that we will be able to make this number to have this reduction to be recurrent.

[Operator]

Another question from Joselito. Congratulations for the numbers of 2020. My question is, are you working for new launchings? Do you have any B2B launchings?

[Augusto dos Reis Neto, executive]

Thank you for your question. Well, actually, our first concern is to start launching because, of course, we have launchings, but I'm not going to provide you any guidance on it because the focus of the company is to start new launchings. And as I've said, we had launchings for 2020, but we postponed for 2021 due to the pandemic, BRL 60 million. But so far, this is a bit active. We are going step by step. And yes, we have provisions, but we are not going to do any of the provisions now, but we have an enterprise here in São Paulo.

[Operator]

Our next question from webcast. The new launchings of the company should be done with the partners or if the PDG is going to do by itself?

[Augusto dos Reis Neto, executive]

Hello, thank you for your question. For first launching, we were evaluating 2 possibilities. I think that if it's a partner, we are having a discussion, and we are trying to have a positive and strategic alignment. It's not an obligation, but it's a possibility. So we are also evaluating the possibility to launch the enterprise by ourselves, but we are also considering the partners. Our team is reduced. But we have financial issue, but we are trying to have a balance on this. But yes, not necessarily can be partners, but we can be -- we can do.

[Operator]

Our next question is from webcast. Thank you for your presentation. When is the company going to move out of these additional recoveries?

[Augusto dos Reis Neto, executive]

It's a very curing question. And well, it's the same answer. We don't have a schedule. Well, it's about 2 years, considering the homologation. Well, this is a decision considering the chart. But there is a series of facts. We had recently our assembly for labor that changes the scenario. But I can say that the company is having 100% of its plan. We've been through difficult times. But now it depends on -- well, it's difficult to say, and sincerely, we don't know a perspective, but we will keep doing our obligations, and the company should be prepared for that.

[Operator]

Marcello Noto. Is there any obligation -- critical obligation that the PDG should take into account?

[Augusto dos Reis Neto, executive]

Marcello, no. Well, actually, a very important step was our assembly for the recovery plan. We also have actions for the creditors who opted to receive their credits. So we have all the payment processes. So aside of these facts that are a huge impact for the company, the others are obligations, our daily obligations to have new launchings, assets, and they generate value. This is our plan. This is about our plan. The company should operate and have value. So in a macro way, there is no other [indiscernible].

[Operator]

We are now concluding the questions and answers. Now Augusto Reis for any final considerations.

[Augusto dos Reis Neto, executive]

Once again, I would like to thank you for your participation. I think that it's very important to have questions and answers. It's always good to provide quality and information in our presentation. I would like to say that the year of 2020 was a management exchange year and also considering the recovery plan and the pandemic. Even with the pandemic, our team was able to go through it, and I'm very proud of to be part of this team.

And we are here, we are able to go through all of that and the capacity, engagement with the team. Once we have all of that, everything gets easier. So we don't know much about the pandemic, but the motivation and engagement of the team is very important for the recovery. And so we are still very strong. And I hope in the short term, we will be able to go back to our normal routines, even if part is for home office, but we would like to be together.

Thank you very much, and see you on the next call.

[Operator]

The teleconference of the fourth quarter and 12 months of the PDG is now closed. Thank you, and have a good day.

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