SOURCE: Gafisa S.A.

Gafisa S.A.

March 29, 2011 11:44 ET

Gafisa Reports Results for 2010 Full Year and Fourth Quarter

SAO PAULO, BRAZIL--(Marketwire - Mar 29, 2011) -

  • Launches reached a record R$1.5 billion in the quarter and R$4.5 billion for the full year, 54% and 95% higher, respectively, than 2009

  • Pre-sales achieved levels of R$1.2 billion in the 4Q10 and R$4.0 billion in 2010, 18% and 23% higher, respectively, than 2009

  • Net Income reached R$137 million in 4Q10 and R$416 million in 2010, 189% and 309% higher, respectively, than 2009, with a 4Q10 net margin of 14.8%

Gafisa S.A. (BOVESPA: GFSA3) (NYSE: GFA), Brazil's leading diversified national homebuilder, today reported financial results for the fourth quarter and full year ended December 31, 2010. The financial statements were prepared and presented in accordance with IFRS and in Brazilian Reais (R$). Further details of the Company's fourth quarter and 2010 results may be found on the Gafisa website:

Commenting on results, Wilson Amaral, CEO of Gafisa, said, "We are pleased to report strong full year and quarterly results led by record launches and pre-sales in the last quarter of the year enabling us to achieve full year launches of R$ 4.5 billion, close to the higher end of our guidance. Similarly, the operating performance resulted in a full year adjusted EBITDA margin of 20.1%, 60 bps higher than the mid-range of our guidance, with a full year net margin of 11.2%."

However, we are not yet satisfied with our operating margins and expect that we will see some pressure on EBITDA during the first half of 2011 due to lower expected revenues, as accounted for under the POC method, and in line with lower launch activity during 2009, as well as the delivery of the last of both higher cost legacy Tenda projects and lower margin Gafisa projects from our geographic expansionary period and from Rio de Janeiro. During the second half, we expect margins to recover resulting in what we believe will be a full year 2011 Adjusted EBITDA in a range of 18% - 22%, impacted by lower first half results.

Amaral added, "Gafisa has been able to keep pace with the extraordinary growth of the Brazilian economy and seize the unprecedented opportunities that exist in the homebuilding sector. With our highly respected brands that serve all sectors of the home-buying population, we are well positioned to continue to keep pace with the demand for new homes. While our cash burn rate has been impacted by the need to finance some of Tenda's legacy units, we still maintained a cash and cash equivalent amount of R$ 1.2 billion at the end of 2010. As we move into a positive cash flow position at the second half of 2011, we expect to be able to improve our capital structure and reduce net debt/equity by the end of the year to a very comfortable level below 60%, setting the stage for continued robust expansion into the future."

Full Year Results

During 2010, Gafisa significantly increased its new launch activity in all of the market segments it serves, particularly during the second half of the year. Consolidated launches totaled R$ 4.5 billion, an increase of 95.2% as compared to 2009, with Tenda contributing R$1.6 billion to the total.

Net operating revenue for the full year 2010, recognized by the Percentage of Completion ("PoC") method, rose 23% to R$3,721 million from R$3,022 million in 2009, reflecting an increased level of activity and execution. Pre-sales for the year were strong, growing by 23% to R$4.0 billion.

In 2010, Adjusted EBITDA reached R$ 747.5 million, and improvement of 41% over the R$ 530.0 recorded in the prior year. Gafisa delivered a 20.1% EBITDA margin, well within the 2010 guidance range previously provided and 60 bps over the mid-range. This was also a substantial, 255bps increase over the 17.5% EBITDA margin recorded in 2009.

Net Income was R$416 million (12.8% Adj. net margin) in 2010, an increase of 309% as compared to the previous year. EPS R$ 0.97 for full year 2010, an increase of 217% compared with and an EPS of R$ 0.30 during 2009 (5.2% Adj. net margin). These comparisons reflect the impact of a law enacted in Brazil to bring local accounting standards closer to IFRS on both 2009 and 2010 results, as well as a 1:2 stock split that occurred in 2010.

Gafisa's has a truly national land bank of approximately R$ 18.1 billion that is composed of 177 different projects in 22 states, equivalent to more than 93 thousand units. In line with our strategy, 38.5% of our land bank was acquired through swaps, which require no cash obligations. The Company has been consolidating its position in the country's most important regions, and recorded a gross increase of R$3.05 billion in land bank in 4Q10. Its presence in these traditional markets of Rio de Janeiro and São Paulo is complemented by a strong pipeline of sites and opportunities in new markets throughout Brazil.

Fourth Quarter Results

The Company increased launch activity in 4Q10 as a result of the improved economic environment and outlook. Project launches for the fourth quarter were R$ 1.5 billion, an increase of 54% compared to the 4Q09. The Gafisa segment was responsible for 53% of launches, Tenda accounted for 34% and AlphaVille for the remaining 13%. Pre-sales were R$ 1.2 billion, an increase of 18% as compared to the same period last year.

Net operating revenue for the quarter, recognized by the Percentage of Completion ("PoC") method, rose 4% to R$ 928.6 million from R$ 897.5 million in the fourth quarter of 2009.

4Q09 Adjusted EBITDA reached R$ 197.8 million with a consolidated adjusted 21.3%, a 17.8% increase compared to Adjusted EBITDA of R$ 167.8 million (18.7% margin) reached in 4Q09.

Net income in 4Q10 was R$ 137.4 million compared to R$47.6 in 4Q09 (already considering the IFRS impact over 2009 net income). However, net income on an adjusted basis (before deduction of expenses related to minority shareholders and stock options), reached R$ 148.5 million, with an adjusted net margin of 16%, representing growth of 154% when compared to R$ 58.3 million in 4Q09, mostly due to income tax reversal and higher capitalized interest.

Key Recent Developments

Today, the Company announced that Chief Executive Officer Wilson Amaral advised the Board of Directors that he currently plans to retire from the Company towards the end of 2011 to pursue other opportunities. Mr. Amaral has served Gafisa for more than five years, taking it from a privately held company to one of the few fully public corporations in Brazil, and the only NYSE-listed Brazilian real estate company. Mr. Amaral will remain on the Board of Directors of Gafisa and is expected to play a more active role there in the future. He will work together with the Board to identify his successor and insure a smooth transition.

Gafisa's successful fundraising during 2010, via a primary share offering on March 23rd, and a debt offering on October 5th, underscored the Company's strong relationship with financial markets, leading market position and favorable growth prospects. These transactions permitted Gafisa to fortify its balance sheet ahead of 2011 in which operating cash flows are expected to increase. Proceeds of the equity and debt offerings, which totaled approximately R$1.06 billion and R$300 million respectively, are being used for working capital, new developments, land acquisition, strategic joint ventures and acquisitions.

Tenda almost quadrupled the number of units it contracted with Caixa Economica Federal (Caixa), reaching over 22,000 units in 2010 as compared to 6,000 in 2009. The Company understands that it is among the top performing companies in the sector in this regard under the program. Tenda also almost doubled the number of mortgages transferred under the program ("repasse") from 5,000 in 2009 to approximately 10,000 in 2010, another result that points to greater efficiency within Tenda and a streamlined working relationship with Caixa.

Gafisa continues to pioneer innovative concepts in the homebuilding sector and a leading example of this is residential community living offered through its AlphaVille unit, which launched 15 new projects in 2010, extending its footprint to northern and northeastern Brazil. Now present in 22 cities and 64 states, AlphaVille accounted for 16.5% of Gafisa's launches and 14.9% of pre-sales in 2010. The unit is expected to make a greater contribution to the Company's overall business in future periods as suburban living becomes more common in Brazil.

Gafisa's management is committed to facilitating public access to the Company's shares and, as a measure toward achieving that goal, implemented a 2-for-1 stock split on February 23rd. In October, Gafisa also hired a market maker, ITAUVEST DTVM S.A., to further increase the liquidity of common shares issued by the Company on Bovespa, another measure which should facilitate public ownership of Gafisa stock.

For 2011, we are providing additional leverage metric under guidance given the expected positive evolution in cash flow between the first and second half of 2011. We expect launches of between R$ 5.0 - R$ 5.6 billion, an EBITDA margin of between 18% - 22%, and Net Debt/Equity target below 60% by year end.


Our guidance for launches in 2011, of between R$ 5.0 billion and R$ 5.6 billion, reflects the expectation of an increased volume of business. With regard to profitability, we expect an adjusted EBTIDA margin for the full year of between 18% and 22%, with a first half figure of between 13% and 17%, compared to 20% to 24% for the second half of the year. This difference between the margins is due to: i) lower revenue resulting from fewer launches in 2009, compared to 2008 (2009: R$2.3 billion; 2008 R$4.2 billion), with lower recognition of revenue in respect of work in progress and ensuing impact on the diluting of fixed costs; ii) delivery of lower margin products by Tenda, due to a lack of standardization among the older products, and by Gafisa, due to cost reallocation associated with geographical expansion and projects in Rio de Janeiro; and iii) possible discounts on units that are ready but unsold, relating to launches in 2008 and earlier years. Exceptionally, this year, Gafisa is also providing guidance for its Net Debt/Net Equity ratio. We expect that the company's leverage will reach a peak of around 70% during the 1H11, followed by a positive cash flow in the 2H11 that will bring the Net Debt/Net Equity ratio down below 60% at the end of the year. For more complete information on our 2011 guidance, please refer to page 18 of the full-length earnings release found on the Gafisa website:

Conference Call

The management of Gafisa will host a conference call in English on Tuesday, March 29, 2010, at 11:00 a.m. US EST/:12:00 p.m. Brasilia time. To access the call, dial +1 (888) 700-0802 from the United States and +1 (786) 924-6977 from other countries and enter the code Gafisa. A replay of the conference call will be available until April 4, 2010. To access the replay, dial +1 (888) 700-0802 from the United States and +1 (786) 924-6977 from other countries. Code is: GAFISA. A live webcast of the conference call will be available on the internet at

About Gafisa

Gafisa is a leading diversified national homebuilder serving all demographic segments of the Brazilian market. Established over 56 years ago, we have completed and sold more than 1,000 developments and built more than 12 million square meters of housing only under Gafisa's brand, more than any other residential development company in Brazil. Recognized as one of the foremost professionally managed homebuilders, "Gafisa" is also one of the most respected and best-known brands in the real estate market, recognized among potential homebuyers, brokers, lenders, landowners, competitors, and investors for its quality, consistency, and professionalism. Our pre-eminent brands include Tenda, serving the affordable/entry level housing segment, and Gafisa and AlphaVille, which offer a variety of residential options to the mid to higher-income segments. Gafisa S.A. is traded on the Novo Mercado of the BM&FBOVESPA (BOVESPA: GFSA3) and on the New York Stock Exchange (NYSE: GFA).

Only financial data derived from the Company's accounting system were subject to review by the Company's auditors. Operating and financial information not directly linked to the accounting system (i.e., launches, pre-sales, average sales price, land bank, PSV and others) or non-BR GAAP measures were not reviewed by the auditors. Additionally, financial statements and operating information consolidate the numbers for Gafisa and its subsidiaries, and refer to Gafisa's stake (or participation) in its developments. To view a more detailed review of third quarter results filed with the Brazilian Comissão de Valores Mobiliários ("CVM"), please visit Gafisa's website

This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to growth prospects of Gafisa. These are merely projections and, as such, are based exclusively on the expectations of management concerning the future of the business and its continued access to capital to fund the Company's business plan. Such forward-looking statements depend, substantially, on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors; therefore, they are subject to change without prior notice.

Contact Information

  • Luiz Mauricio Garcia
    Investor Relations
    Phone: +55 11 3025-9297/9242/9305
    Fax: +55 11 3025-9348

    Media Relations (Brazil)
    Patricia Queiroz
    Maquina da Noticia Comunicacao Integrada
    Phone: +55 11 3147-7409
    Fax: +55 11 3147-7900