* Net income of 1 mln reais breaks string of losses
* Focus on deliveries boosts revenue, margins, cash flow
* Shares jump 10 pct as CEO says turnaround is on track
By Brad Haynes
RIO DE JANEIRO, Aug 10 Brazilian homebuilder
Gafisa posted an unexpected second-quarter profit on
Friday as its focus on delivering older units boosted revenue
and helped reduce debt levels.
Gafisa shares climbed 10 percent in Sao Paulo trading on
signs the builder had turned the corner on a string of losses by
slashing new projects and recovering from cancelled sales.
"The company is focused on generating cash flow and reducing
debt as we enter a new phase of profitability," Chief Executive
Alceu Duilio Calciolari told analysts. "It will take time to
fully recover, but we believe we are on the right track."
Gafisa reported net income of 1 million reais ($497,500),
according to a securities filing, compared with a net loss of
31.8 million reais a year earlier. Four of five analysts in a
Reuters poll expected a net loss in the quarter.
The homebuilder delivered 38 percent more finished units in
the quarter than a year earlier, as it concentrated efforts on
executing delayed projects. New housing starts dropped 60
percent from a year earlier as Gafisa overhauled its low-income
Tenda unit and cut back geographic expansion in other units.
Rising deliveries, land sales and the securitization of
future revenue allowed Gafisa to generate positive cash flow in
the quarter of 231 million reais.
Gafisa's positive cash flow and subsiding debt levels
offered investors further evidence it was reinforcing its
financial position after a troubled construction cycle. Analysts
expect disappointing results from rival Brazilian homebuilders
in the coming week as falling sales and cost overruns erode
profits after years of poorly controlled growth.
Shares of Gafisa rose 10 percent to 3.42 reais in afternoon
trading to a nearly three-month high but still recovering from a
17 percent loss so far this year.
"Even with the improving results, we think the company still
has a long road ahead of it to consolidate the recovery of its
financial position," wrote analysts from Planner Corretora in a
note to clients.
FINISHING OLD BUSINESS
Revenue rose 6 percent from a year earlier to 1.04 billion
reais, boosted by more deliveries and land sales worth 97
Units from 2009 and earlier accounted for 40 percent of
Gafisa's revenue, down from nearly 60 percent in the prior
quarter, as the builder moved on from delayed projects, which
have eroded Gafisa's profitability with runaway costs.
"Already we're seeing better profit margins as we finish
with those older projects, and we expect to see margins continue
to improve gradually going forward," Chief Financial Officer
Andre Bergstein said on the call with analysts.
Of nearly 5,000 Tenda units whose sales contracts were
scrapped due to customers' credit troubles, the company resold
62 percent in the first half. Management said Tenda was also
handing off more contracts to banks, reducing the risk of more
CEO Calciolari said the company was also making progress in
arbitration regarding the price at which it will buy out
partners in its most profitable unit, the higher-income
Alphaville. After about a month in arbitration, Calciolari said
he expected the case to be resolved in six to nine months.
Gafisa's earnings before interest, taxes, depreciation and
amortization, a gauge of operating profit known as EBITDA, rose
92 percent from a year earlier to 149 million reais in the
second quarter, beating a forecast of 98 million reais.