SOURCE: Gafisa S.A.

Gafisa S.A.

May 09, 2011 23:54 ET

Gafisa Reports Results for First Quarter 2011

SAO PAULO, BRAZIL--(Marketwire - May 9, 2011) - Gafisa S.A. (BOVESPA: GFSA3) (NYSE: GFA)

  • Backlog margin to be recognized improved to 39.0% on strength of newer higher margin development execution
  • Pre-sales reached R$822 million, reflecting strong sales velocity of 58% over the R$ 513 million launched in the quarter
  • Cash position of over 0.9 billion, comfortably within debt covenants
  • Gafisa CFO Alceu Duílio Calciolari, named interim CEO

Gafisa S.A. (BOVESPA: GFSA3) (NYSE: GFA), Brazil's leading diversified national homebuilder, today reported financial results for the first quarter ended March 31, 2011. The financial statements were prepared and presented in accordance with IFRS and in Brazilian Reais (R$). Further details of the Company's first quarter 2011 results may be found on the Gafisa website:

Commenting on the results, Wilson Amaral, CEO of Gafisa, said, "Our first quarter performance was in-line with our expectations and was reflective of impacts from the past. While demand for housing remains strong as demonstrated by the solid sales velocity of launches we achieved at the end of the quarter, and there is confidence in the Brazilian economy, our margins were impacted by lower margin Gafisa product and legacy Tenda developments that we are clearing out of inventory and will be delivering mainly throughout the first half and beginning of the second half of the year."

"While we project our second quarter to be impacted by some of the same factors that we experienced in the first, looking ahead we expect to see improvement in our financial performance throughout the second half of the year. Demand should remain strong and as a national homebuilder with scale, we are well-positioned to benefit from the positive side of the macroeconomic environment and tremendous growth cycle that Brazil is currently experiencing."

Amaral continued, "I am pleased to report that the Board has decided to elect Duilio Calciolari, who has been with Gafisa for 11 years and worked as my partner for the last five, as the interim CEO. He has been a professional colleague of mine for over 20 years, and I can think of no one better than Duilio to maintain continuity at Gafisa while I focus on our search for a CEO and dedicate more of my time to Board related matters.

"I also want to highlight that our shareholders recently elected three new independent board members so that today, eight of our nine directors are independent. We have always been at the forefront of our industry and will continue to take steps to ensure that we remain there."

First Quarter Results

  • Consolidated launches totaled R$ 513 million for the quarter, a 27% decrease over 1Q10. AlphaVille launches reached R$ 182 million in the quarter, 87% higher than 1Q10, reflecting strong performance from this segment.
  • Pre-sales reached R$ 822 million in the quarter, a 4% decrease as compared to 1Q10 mainly due to lower launches, partially offset by strong sales velocity of 58% over 1Q11 launches.
  • Net operating revenues, recognized by the Percentage of Completion ("PoC") method, reached R$800.4 million, a 12% decrease from 1Q10, mainly due to fewer 2009 launches with lower recognition of revenue in respect of work in progress.
  • Adjusted Gross Profit (w/o capitalized interest) reached R$ 221.9 million, 19% lower than the same period of 2010, with a 27.7% Adjusted Gross Margin.
  • Adjusted EBITDA reached R$ 106.5 million with a 13.3% margin, a 36.8% decrease when compared to the R$ 168.5 million reached in the 1Q10, which can be attributed to the delivery of lower margin products by Tenda and Gafisa and lower SG&A dilution.
  • Net Income was R$ 13.7 million for the 1Q11 (3% Adj. Net Margin), a decrease of 79%, when compared to 1Q10.
  • As expected, Net Debt/Equity reached 72% at the end of the quarter. We continue to expect an increase by the end of 2Q11 before it decreases, given positive cash flow generation in the 2H11 that should result in a Net Debt/Equity ratio below 60% by 2011 year end.
  • The Backlog of Revenues to be recognized under the PoC method reached R$ 4.06 billion, a 38% increase over the 1Q10. The Margin to be recognized improved 390 bps to 39.0%.

Key Recent Developments

On May 9th, the Board of Gafisa appointed the Company's CFO, Alceu Duílio Calciolari to the position of interim CEO effective today. Mr. Calciolari will retain his position as CFO and IRO of the Company. With almost 11 years at Gafisa as CFO, Mr. Calciolari has had responsibility for various areas of the Company including, Human Resources, Information Technology and, Finance and Controllership. Over the last five years he has worked closely with the Company's CEO to develop the strategic direction of Gafisa, while executing three successful capital markets transactions, a number of joint ventures and the acquisitions of AlphaVille and Tenda. Mr. Calciolari will retain this role until a CEO has been named.

On April 29, 2011, at Gafisa's annual general shareholder's meeting, the election of three new independent shareholders was approved, bringing the total number of board members to nine, eight of whom are independent. In addition, the currently elected directors were ratified for an additional term. Henri Phillippe Reichstul, Guilherme Affonso Ferreira and Maria Leticia de Freitas Costa join the board, each bringing a depth of experience in corporate leadership positions, public and private company board directorships and financial and strategic advisory expertise.

As a fully independent publicly listed company without the presence of a controlling shareholder and a Board of Directors with a majority of independent members, the Nomination and Corporate Governance committee, proposed a series of corporate governance reforms to be adopted by the Company's shareholders that ensure adherence to best practices and protect the on-going interests of all shareholders. Due to the lack of a minimum legal quorum required for an extraordinary general shareholders' meeting, the package of reforms, as presented, was not approved on April 29, 2011. At the request of shareholders, and in order to facilitate a process of deliberation, the voting process related to the amendments and additions proposed to the By-laws was modified in its format. The detailed proposal may be found on Gafisa's IR website.

On April 27, 2011 the Congress approved the second phase of the Minha Casa, Minha Vida program with the goal of constructing 2 million new homes through 2014. It also limits beneficiaries of the program to earners of no more than 10 times the minimum salary of 2009. Tenda remains well-positioned to leverage this on-going program with among the lowest price points in the industry and housing aimed at between 3x - 10x salary earners.

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 continues to launch high demand developments. Two projects (Pernambuco and Campo Grande) were launched in March with sales in excess of 56% for each in just the final month of the quarter.

The strong demand for our product is not only a result of our reputation for delivering high value products, but our investment in building ongoing relationships through advanced CRM tools to thoroughly understand what our clients want and how their tastes change. Customer satisfaction is one of the most important measures of our success and we have expanded the area that is dedicated to CRM focusing on different customer relationship platforms such as social networks, online communications -- through our Viver Bem ("Live Well") portal and through off-line communications. An investment of R$ 6 million in new software and R$ 4 million in infrastructure and human capital have been made over the last year to reinforce this crucial area of our business.


In 1Q11 Gafisa achieved 10% of the full year launches guidance of between R$ 5.0 billion and R$ 5.6 billion. The slower launches in the first quarter can be partly attributed to delays in licensing approvals, mainly under Tenda segment. These delayed projects held back in Q1 are expected to be launched in Q2, keeping expected share of full year launch guidance, typically in the range of 30%-40%, to be followed by what is a traditionally stronger second half of the year.

With regard to profitability, the 13.3% EBITDA margin came in according to our expectations for the first half guidance range of between 13% and 17%, mainly due to the reasons anticipated in the 4Q10 related to: i) lower recognition of revenue impacting 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 overruns associated with geographical expansion and projects in Rio de Janeiro; and iii) discounts on finished units.

We continue to expect lower cash burn in the 2Q11, followed by a positive operating cash flow in the 2H11 that should bring the Net Debt/Equity ratio down below 60% at the end of the year. For more complete information on our 2011 guidance, please refer to page 16 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, May 10, 2011, at 9:00 a.m. US EDT/10:00 a.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 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

  • Contact:

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

    Media Relations (Brazil)
    Debora Mari
    Maquina da Notícia Comunicação Integrada
    Phone: +55 11 3147-7412
    Fax: +55 11 3147-7900