November 7, 2018 / 9:59 PM / 5 days ago

Brazil's MRV posts weaker 3rd quarter results, sees stronger 4th quarter

SAO PAULO, Nov 7 (Reuters) - MRV Engenharia e Participacoes SA, Latin America’s largest low-income homebuilder, reported weaker third-quarter results, despite strong cash flow and record revenue in the period, but is optimistic about the year’s final quarter.

MRV reported net income of 174 million reais ($46.25 million) in the three months through September, down 13.8 percent from a year earlier and roughly in line with a Refinitiv consensus estimate of 176.2 million reais ($46.83 million).

“Home sales were very strong in October, particularly in the last 10 days of the month,” said co-Chief Executive Officer Rafael Menin in an interview with Reuters. “Historically the fourth quarter is good, so we’re optimistic that results will be better than in the third quarter.”

Earnings before interest, taxes, depreciation and amortization (EBITDA) fell 12.7 percent to 238 million reais, missing an average forecast of 253.9 million reais ($67.49 million) compiled by Refinitiv.

Menin said both numbers would have looked better compared to a year earlier if not for a non-recurring effect of approximately 47 million reais related to its commercial properties subsidiary, Log Commercial Properties e Participações SA, in the third quarter of 2017.

“It was an accounting adjustment ... This is the only explanation for the lower net income and EBITDA,” he said.

Last week, MRV announced plans to spin off the unit and list it in the stricter corporate governance segment of Brazilian stock exchange B3.

Menin also struck a positive tone on expectations surrounding Brazil’s President-elect Jair Bolsonaro, who takes office Jan. 1. He said the new government is likely to maintain a housing subsidy program known as Minha Casa Minha Vida despite its current focus on cutting spending.

“There might be changes to the program, but not significant ones. We do not believe in any rupture,” he said, adding that MRV operates in segments with smaller subsidies.

In the third quarter, MRV posted net operating revenue of 1.35 billion reais, up 8.6 percent from a year ago to its highest level for a third quarter. Cash flow more than doubled to 242 million reais on payments from prior sales.

$1 = 3.7623 reais Reporting by Gabriela Mello Editing by Tom Brown

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