The 1Q12 earnings season for the Brazilian homebuilders was “back-loaded,” with no fewer than six companies reporting results last night. Overall, according to Itau, results were negative for MRV, PDG, Rossi and Tecnisa on the margin side, as these companies struggled with projects launched in the past and deliveries, which hurt margins. Cyrela was the main positive highlight, and Direcional reported numbers in line with estimates.
Below is the summary of results for each company (via Itau BBA):
PDG: Earnings Power Still Under Pressure Due to a Low Gross Margin. PDG reported revenues slightly lower than our estimate, but the main negative highlight was the low gross margin (at 27.3%, excluding financial expenses booked in COGS, not very different from the 26.3% posted in 4Q11). The company also revised downward its expectation of units delivered in 2012 to 34-35 thousand (from 35-38 thousand previously) and achieved only 5%-8% in 1Q12.
Cyrela: EPS Beats Our Estimates, Mainly Led by Higher Top Line. The positive results were based on higher revenue recognition (BRL 1.4 billion, versus our BRL 1.3 billion estimate) and a slightly higher-than-expected gross margin (32.7%, versus our expectation of 31.9%, excluding financial expenses booked in COGS). The company had an almost neutral cash burn rate (measured by change in net debt) in the quarter. Overall, we expect a good market reaction to the reported results.
MRV: Disappointing 1Q12 Results; Better-Than-Expected Cash Burn Offset by Lower Margins. Even though we saw a better-than-expected recovery in CEF regarding the transfer of receivables process and cash burn surprised on the positive side (decelerating QoQ to BRL 111 million), the company posted lower-than-anticipated operating margins, with EBITDA margin at only 19.0% (versus our 25.6% and compared with the company’s guidance for 2012 of 24%-28%).
Rossi: Lower-than-Expected 1Q12 Results; Numbers Again Affected by Land Sales. Once again Rossi released results affected by land sales. Nevertheless, excluding the effect from land sales in the quarter, numbers came in lower than expected from the top to the bottom line, mainly based on: i) lower revenue recognition; ii) higher-than-expected SG&A expenses; and iii) heavier income taxes.
Tecnisa: Weak 1Q12 Numbers; Still Recovering From Budget Revisions in 4Q11. Tecnisa posted a modest top line, mainly on the back of lower-than-expected revenue recognition combined with heavier SG&A and other expenses, which pushed the bottom line to BRL -11 million in the period. On the positive side, cash burn remained under control, at BRL 91 million, fairly in line with the BRL 83 million attained in 4Q11.
Direcional: In-Line 1Q12 Results. Direcional maintained the positive trend seen over the last few quarters, posting numbers pretty much in line with our estimates for the top line and slightly better at the bottom line based on healthier-than-expected operating margins. Additionally, cash burn remained at low levels, and Direcional reiterated its guidance for reduced cash burn in 2012 against last year.
Estimates and Valuation: