2Q12 Earnings Release

Transcription

1 Earnings Release Rio de Janeiro, August 14th, Brookfield Incorporações SA ("Brookfield Incorporações" or "Company") (BM&FBovespa: BISA3; US OTC: BRRSY), one of Brazil's largest developers and construction companies, today announced its consolidated results for the second quarter of RECENT EVENTS Conclusion of Budget Review A review of 100% of current projects resulted in a budget adjustment of R$ million, with an after tax impact of R$ million. The adjustment was fully recognized in the quarter, leading to a negative impact of R$ million (non-cash) on the quarter s net profit, and an impact of R$ 4.7 million on future quarters. Revised 2012 Guidance Due to delays in project approvals and the low level of first-half launches, management has reduced guidance for both launches and sales to a range of R$ 3.0 billion to R$ 3.5 billion, from midpoints of R$ 4.5 billion and R$ 4.2 billion respectively. Equity Offering The Board of Directors approved a common equity rights offering totaling R$ million, fully backed by Brookfield's controlling shareholder, to strengthen the Company s capital base, reduce leverage and maintain a competitive level of activity. QUARTER HIGHLIGHTS Strong Cash Position End of second quarter cash balance of R$ 1.0 billion, up 11.5% year-over-year Improved Operational Cash Consumption Second quarter cash consumption decreased 28.0% to R$ million (ex dividends) on a sequential basis Healthy Housing Demand First-half sales-over-supply largely stable at 36.1% year-over-year Unit Deliveries 5,129 units delivered across 41 projects in the first half, with a total PSV of R$ million Reduced Sales Terminations Gross terminations totaled R$109.2 million in the second quarter, down from R$125.0 million in the and R$167.0 million in the 4Q11 Timely Resale of Terminated Units Of sales terminated in the first half, 34.1% of the units were resold within the same period at a premium, demonstrating the marketability of the Company s products 2Q Conference Call August 15th, 2012 Portuguese 9h (New York) 10h (Brasília) 2h (London) 6h (Los Angeles) Phone: +55 (11) Code: Brookfield Replay: +55 (11) Replay Code: # Webcast: available at our website English 11h (New York) 12h(Brasília) 4h (London) 8h (Los Angeles) Phone: +1 (412) Code: Brookfield Replay: +1 (412) Replay Code: Webcast: available at our website IR Contacts: Cristiano Machado CFO and IR Officer Luciano Guagliardi Director Alexandre Freire Manager Paula Alvarez Analyst Phone: +55 (11) ri@br.brookfield.com Nações Unidas Avenue, th floor Tower B São Paulo - SP Brazil

2 Main Indicators Main Indicators 1H12 Launches Launched PSV (R$ million) % % , % Number of Units Launched* 1,108 1, % 2, % 2,610 4, % Average price (R$/sq. m.)* 4, , % 4, % 4, , % Usable area (sq. m.)* 79,462 82, % 170, % 161, , % Contracted Sales Contracted Sales (R$ million) % 1, % 1, , % Sales from launches % % % Sales from inventory % % 1, , % Units sold 2,348 5, % 3, % 7,576 5, % Sales over Supply 20.8% 21.1% -0.2p.p. 27.5% -6.7p.p. 36.1% 36.7% -56.9% PSV terminated % % % Units terminated % % 1, % Financial Performance (R$ million) Net Revenues % % 1, , % Gross Profit/Loss (196.4) n/a n/a % Gross Margin (%) n/a** 25.1% n/a 28.4% n/a -2.0% 29.2% -31.3p.p. Adjusted Gross Margin (%) n/a 32.1% n/a 34.0% n/a 9.9% 34.6% -24.7p.p. Net Income/Loss (383.5) 4.0 n/a 78.2 n/a (379.5) n/a Net Margin (%) n/a 0.6% n/a 8.9% n/a n/a 8.9% n/a Earnings/Loss per share (%) (0.865) n/a 0.17 n/a n/a Number of shares (thousand) 443, , % 460, % 443, , % ROE LTM (%) n/a 8.8% n/a 11.4% n/a Results to be Recognized (R$ million) Revenues to be recognized 3, , % 3, % Results to be recognized 1, , % 1, % Margin to be recognized (%) 33.1% 37.6% -4.5p.p. 39.3% -6.2p.p. Balance Sheet Items (R$ million) Net Debt 2, , % 2, % Cash 1, , % % Shareholder's equity 2, , % 2, % Net Debt / Shareholder's equity 110.6% 85.6% 24.9p.p. 67.7% 42.9p.p. Total Assets 9, , % 8, % *Excluding partial sale of Tambore land bank in **n/a: not applicable 1H12 X 2

3 Index Main Indicators... 2 Index... 3 Recent Events... 4 CEO Message... 5 Operating Performance... 6 LAUNCHES... 6 CONTRACTED SALES... 7 SALES OVER SUPPLY (SoS)... 8 INVENTORY... 8 SALES TERMINATIONS... 9 EXECUTION CAPACITY... 9 MORTGAGE TAKEOUT... 9 LAND BANK Financial Performance REVENUES COST GROSS PROFIT REVENUES TO BE RECOGNIZED SALES, GENERAL AND ADMINISTRATIVE EXPENSES EBITDA FINANCIAL RESULT NET INCOME Balance Sheet RECEIVABLES DEBT AND CASH CONSUMPTION Annexes LAUNCHED PROJECTS DELIVERED PROJECTS INCOME STATEMENT BALANCE SHEET CASH FLOW POC AND SALES HISTORY* DEBT MATURITY SCHEDULE BREAKDOWN Ownership Structure About Brookfield Incorporações S.A About Brookfield Brasil IR Contacts

4 Recent Events Budget Review The Company concluded a budget review of all current projects during the second quarter, having detected an increase in some project costs in the first quarter. Independent of the project stage, all costs to be incurred were reviewed for 100% of projects. Two independent engineering firms that specialize in project management and budgeting, Engineering and Concremat, were retained to review Brookfield s analysis. The results confirmed the Company s budget review, and consequently, ratified the methodology used for the remainder of the portfolio. The review resulted in a budget adjustment of R$ million, which represents approximately 3.2% of the total budget for the portfolio of projects. The total after tax impact of this adjustment is R$ million. This adjustment was fully booked in the second quarter, leading to a negative impact of R$ million (non-cash) on the quarter s net profit and an impact of R$ 4.7 million on future quarters. The adjustments refer to costs to be incurred during the remaining life of the projects, and are not related to past costs or losses. It is important to emphasize that the projects with budget adjustments remain profitable. The average adjusted gross margin of this group of projects decreased to 32.1% from 35.5% prior to the review. The adjustments reflect the integration of three companies with different processes and IT systems to one company with a single operating platform, coupled with the strong growth experienced in the homebuilding industry in recent years. This integration was completed in mid-2011, leading to standardized budgeting and controls across the Company, which largely mitigates the risk of future budget overruns. Equity Offering On August 14, the Board of Directors formally approved a proposal for a capital increase of R$ 400 million, as disclosed in the Material Fact published today, to maintain a competitive level of activity and to reduce leverage. The proceeds will reduce the net debt to equity ratio to 82.7% from 110.6% previously. This capital increase will be made in the form of a common share rights offering. The full underwriting backstop of the capital increase by the Company s controlling shareholder, Brookfield Asset Management, indicates confidence in the Company s ability to improve future profitability. 4

5 CEO Message We maintain a positive view of the Brazilian real estate sector, despite uncertainty in international markets and the potential impact on local economic activity. Housing demand remains robust and we expect the current lower rate of growth within the industry to continue at this rate, which is more sustainable over the long term than the high-growth environment of recent years. We remain committed to our strategy of focusing on our three largest markets, combined with a select number of metropolitan regions, and maintain a diversified product range which is primarily targeted at the middle income market. Our second quarter operational results were impacted by delays in the approval process in some of our main markets. This resulted in reduced launch volumes on a year-over-year basis. Accordingly, sales volumes also contracted. However, sales still exceeded launches, leading to a reduction in inventories. Although we cannot rule out the possibility of further delays, we expect second-half launch volumes to improve substantially, which reflects a strong pipeline. Still, the first-half impact of delays has prompted us to reduce our full-year launch and sales guidance. In the second quarter we concluded a review of all project budgets and the adjustments were primarily due to the integration of three companies to one organization with a single operating platform. This process was exacerbated by rapid growth within the homebuilding sector in recent years, and to a much lesser extent project cost overruns. We are very disappointed with our financial results in the second quarter. However we are taking steps to improve profitability and reduce operating costs by lowering G&A expenses and increasing the level of standardization of our products. We are also cross-pollinating marketing and sales best practices and implementing organizational changes, which should benefit future results. Following the migration to a single operating platform, we are confident in our cost structure and believe that execution risks have been minimized. Additionally, the proposed equity raise, fully underwritten by our controlling shareholder, will strengthen the Company s capital base, maintain a competitive level of activity and create value for shareholders over future quarters. We expect the Company to return to profitability in the second half and to revert to traditional gross margins in Nicholas Reade, CEO 5

6 Operating Performance LAUNCHES Launches totaled R$ million in the second quarter, a 5.8% reduction compared with the and a 52.0% decrease compared with the. The reduction reflects delays in obtaining project approvals within our key markets of São Paulo, Brasilia and Campinas, which should result in a greater concentration of launches in the second half of the year. Demand for first-half launches was strong, with 50.8% sold in the period. The chart below contains data for the last five quarters, including sequential and year-over-year comparisons. The tables below show the breakdown of launches by product and business unit: Launches (R$ million) Unit Price 1H12 Residential % % % % Affordable Up to R$170 thousand % % % % Mid-Low R$ 170 to R$ 350 thousand % % % % Middle R$ 350 to R$ 500 thousand % - 0.0% % % Mid-High R$ 500 to R$ 1 million - 0.0% % % % High Above R$ 1 million - 0.0% - 0.0% - 0.0% % Lots - 0.0% - 0.0% % - 0.0% Office - 0.0% % % % Corporate - 0.0% % - 0.0% % Office Suites - 0.0% % % % Total % % % 1, % Launches per Business Unit (R$ million) 4Q11 3Q11 São Paulo , Rio de Janeiro Mid-West Other Total ,

7 CONTRACTED SALES Contracted sales totaled R$ million in the second quarter, a 7.3% decrease compared with the and a 32.2% decline compared with the. Reduced sales reflected fewer launches, rather than weaker demand. The chart below contains data for the last five quarters, including sequential and year-over-year comparisons % 1,726 1, ,330 1, , % , % , ,196 1,296 3Q11 4Q11 1H12 Residential Corporate Office Suites Inventory sales totaled R$ million in the second quarter and accounted for 83.1% of total sales, up from 68.5% in the. First-half inventory sales totaled R$ 1.3 billion or 80.5% of total sales in the period. The tables below show the breakdown by product and business unit: Contracted Sales Unit Price 1H12 (R$ million) Residential % % 1, % 1, % Affordable Up to R$170 thousand % % % % Mid-Low R$170 to R$350 thousand % % % % Middle R$350 to R$500 thousand % % % % Mid-High R$500 to R$1 million % % % % High Above R$1 million % % % % Lots 2 0.3% 6 0.5% % % Office % % % % Corporate 8 1.1% % % % Office Suites % % % % Total % 1, % 1, % 1, % Sales by Business Unit (R$ million) 4Q11 3Q11 São Paulo Rio de Janeiro Mid-West Total ,330 1,330 1,088 7

8 SALES OVER SUPPLY (SoS) Sales over Supply was 20.8% in the second quarter, compared with 21.1% in the. First-half SoS was largely stable at 36.1%, compared with 36.7% in the. The results include the impact of sales terminations. The chart below provides SoS for the last six quarters, including sequential and year-over-year comparisons. Sales Over Supply (SoS) 36.7% 36.1% 27.5% 31.3% 27.0% Sales over Supply 1H12 Beginning Inventory 3,074 3,270 3,270 3,398 Launches , % 20.8% Supply (without terminations) 3,432 3,650 4,008 4,601 Contracted Sales ,532 1, % Sales over Supply (without terminations) 21.5% 21.8% 38.2% 37.5% Sales terminations Total supply 3,541 3,775 4,242 4,706 Sales over Supply 20.8% 21.1% 36.1% 36.7% 1Q 2Q 3Q 4Q 1H INVENTORY Inventory at market value was R$ 2.8 billion at the end of the second quarter, a 7.3% decrease compared with the. Sales in excess of launches resulted in a reduction in inventory. The balance of inventory at the end of the second quarter was equivalent to 8.1 months of contracted sales (considering LTM sales for each period), which is unchanged from the, as demonstrated in the chart below, but which represents a significant decrease compared to the. Inventory per Segment* (R$ million) Units Price % % 4Q11 % 3Q11 % % Residential 2, % 2, % 2, % 2, % 2, % Affordable Up to R$170 thousand % % % % % Mid-Low R$170 to R$350 thousand 1, % 1, % 1, % 1, % 1, % Middle R$350 to R$500 thousand % % % % % Mid-High R$500 to RS1 million % % % % % High Above R$1 million % % % % % Lots % % % % % Office % % % % % Corporate % % % % % Office Suites % % % % % Total 2, % 3, % 3, % 2, % 3, % Inventory in months of sale** *Not considering parking lanes and lots of R$ 5.3 million ** Considering LTM sales on a monthly basis Completed units (finished projects) accounted for R$ million or 9.7% of total inventory, as demonstrated in the chart below. Inventory per Stage of Development* (R$ million) Residential % Office Suites % Corporate % Total % Launching 1, % % % 1, % Under Construction 1, % % % 1, % Completed % % 0 0.4% % Total 2, % % % 2, % *Not considering parking lanes and lots of R$ 7.5 million 8

9 Inventory per business unit and period of launching (R$ million) São Paulo % Rio de Janeiro % Mid-West , % Total 345 1, , % Other Years Total % SALES TERMINATIONS Sales terminations totaled R$ million across 550 units in the second quarter. As forecasted, sales terminations have been declining on a sequential basis. Of the units terminated in the first half, 34.1% were resold in the same period at a premium, indicating the marketability of the Company s products. The affordable segment, which has more volatile credit characteristics, accounted for 48.8% of terminated units. The table below provides sequential and yearover-year data on terminations. Sales Terminations 1H12 1H12 X PSV (R$ million) % % % Units terminated % % 1, % EXECUTION CAPACITY The Company delivered 25 projects or project phases, equating to a Potential Sales Volume (PSV) of R$ million and 3,061 units in the second quarter. In the first half, 41 projects or project phases were delivered, representing 5,129 units and a PSV of R$ million. The table below provides data on construction sites and delivered units in the last five quarters. Execution Capacity 4Q11 3Q11 Construction Sites Units being developed 36,512 35,227 29,874 22,365 21,074 Projects (or phases) delivered Units delivered 3,061 2,068 2,968 1,653 2,205 PSV delivered (R$ million) Note: Complete table of delivered projects available in the annex session MORTGAGE TAKEOUT The Company transferred 1,101 contracts to financial institutions equaling R$ million in the second quarter. This is a 21.5% decline compared with the. The first-quarter result benefited from higher 4Q11 deliveries. On a firsthalf basis, the Company transferred 2,654 contracts to financial institutions equaling R$ million. This is a 44.9% increase compared with the. Transfers - PSV (R$ million) 1H12 1H12 X Affordable % % % Mid-Low % % % Middle % % % Mid-High % % % High % % % Corporate % % % Office Suites % % % Total % % % 9

10 Transfers (units) 1H12 1H12 X Affordable % % % Mid-Low % % 1,326 1, % Middle % % % Mid-High % % % High % % % Corporate % % % Office Suites % % % Total 1,101 1, % 1, % 2,654 2, % LAND BANK The Company s land bank had a PSV of R$ 18.0 billion at the end of the second quarter. During the quarter, the Company acquired land with a PSV of R$ million. Swap agreements were used to acquire 44.8% of the land, with the remainder acquired through future commitments to be paid in cash installments Land Bank Turnover - PSV (R$ billion) Landbank per Segment Lots 12% Affordable 5% Mid-Low 14% Office Suites 13% High 1% Mid-High 4% PSV Years of launching (based on LTM launches) Middle 52% Landbank per Business Unit Saleable Area (thousand of sq.m.) % PSV (R$ Million) São Paulo 2, % 8, % Rio de Janeiro / South 1, % 3, % Mid-West 1, % 4, % Other % 1, % Total 5, % 17, % % 10

11 Financial Performance REVENUES Net revenues totaled R$ million in the second quarter. The result was largely stable on a sequential basis, but down 24.0% from the due to cost adjustments. The completion of the budget review in the second quarter resulted in a net revenue reversal of R$ million. Excluding this impact, second quarter revenues would have been R$ million. (R$ thousand) Gross revenues 690, , % 906, % 1,385,681 1,659, % Revenues from real estate development and sales 599, , % 856, % 1,224,434 1,548, % Other revenues 90,942 70, % 49, % 161, , % Taxes (21,430) (22,741) -5.8% (25,905) -17.3% (44,171) (47,738) -7.5% Net revenues 669, , % 880, % 1,341,510 1,611, % 1H12 1H12 X COST Costs related to real estate development and sales were R$ million in the second quarter, a 74.3% increase compared with the. On a first-half basis, costs increased 15.7% year-over-year to R$ 1.2 billion. The increase reflects one-time cost adjustments of R$ 85.0 million related to the budget review completed in the quarter, which increased costs in the amount of R$ 43.8 million, and the recognition of R$ 41.2 million of capitalized interest expenses as costs. Excluding these adjustments, the cost of real estate development would have been R$ million in the second quarter. (R$ thousand) Cost of real estate development and sales (791,903) (454,432) 74.3% (607,469) 30.4% (1,246,335) (1,077,421) 15.7% Other costs (73,497) (49,016) 49.9% (22,935) 220.5% (122,513) (63,205) 93.8% 1H12 1H12 X GROSS PROFIT The Company reported a gross loss of R$ million in the second quarter, due to the impact of budget adjustments, which impacted net revenues and costs. Excluding all adjustments, the Company would have reported a gross profit of R$ million. (R$ thousand) Gross loss/profit (196,359) 169,022 n/a 250,238 n/a (27,337) 471, % Gross margin (%) n/a 25.1% n/a 28.4% n/a -2.0% 29.2% -31.3p.p. 1H12 1H12 X REVENUES TO BE RECOGNIZED The backlog of revenues to be recognized under the PoC method totaled R$ 3.8 billion at the end of the second quarter, with a margin of 33.1%. Revenues to be Recognized (R$ million) 4Q11 3Q11 Revenues to be Recognized 3,433 3,500 3,478 3,511 3,311 Advances from Clients Total Revenues to be Recognized 3,793 3,622 3,582 3,592 3,334 Costs to be Recognized (2,536) (2,274) (2,231) (2,234) (2,023) Results to be Recognized 1,257 1,348 1,351 1,358 1,311 Backlog Margin % 37.2% 37.7% 37.8% 39.3% 1 Margin before taxes and interest capitalized 11

12 In order to use the backlog margin as an indicator of the future gross margin, the following adjustments must be made: deduct PIS/Cofins (which typically ranges between 3.13% and 3.65% of revenues), future interest to be capitalized (which historically ranged between 2% and 5% of revenues), adjustment to present value; and add future index adjustments of accounts receivable (INCC or IGP-M). SALES, GENERAL AND ADMINISTRATIVE EXPENSES Sales and marketing expenses totaled R$ 43.9 million in the second quarter, a 13.9% decrease compared with the and a 2.5% decline compared with the. G&A expenses totaled R$ 37.1 million in the second quarter, a 24.9% decrease compared with the, mainly due to lower personnel expenses in the amount of R$ 6.0 million and lower stock option expenses in the amount of R$ 3.9 million. Other expenses totaled R$ 31.9 million in the second quarter, a 107.6% increase compared with the. The increase relates mainly to a reduction of expected revenues from some partnerships in the amount of R$ 16.6 million. Operating Expenses Analysis 1H12 Sales Expenses (R$ million) G&A Expenses (R$ milllion) Sales Expenses /Contracted Sales 6.0% 4.1% 5.1% 4.6% G&A / Contracted Sales 5.0% 4.5% 5.6% 5.1% Sales Expenses /Net Revenues 6.6% 5.1% 5.8% 4.9% G&A / Net Revenues 5.5% 5.6% 6.4% 5.5% EBITDA EBITDA (R$ thousand) Net income (383,482) 3,961 n/a 78,217 n/a (379,521) 144,023 n/a (+) Income and social contribution tax 28,666 15,857 n/a 28,160 n/a 44,522 51,810 n/a (+) Net financial results 40,845 29,216 n/a 37,811 n/a 70,061 87,239 n/a (+) Capitalized interest in operating costs + APV 102,756 42,343 n/a 37,005 n/a 145,099 75,058 n/a (+) Depreciation and Amortization 4,693 4,280 n/a 3,396 n/a 8,972 6,168 n/a EBITDA (206,523) 95,657 n/a 184,589 n/a (110,866) 364,297 n/a EBITDA Margin -37.1% 14.2% n/a 21.0% n/a n/a 22.6% n/a 1H12 1H12 X FINANCIAL RESULT Net Financial results were negative R$ 40.8 million in the second quarter, compared with negative R$ 29.2 million in the. This result relates mainly to a reduction in the amount of interest expenses capitalized as project costs. 12

13 NET INCOME The Company reported a net loss of R$ million in the second quarter, primarily due to the completion of the project budget review, which resulted in the recognition of additional costs and the reversal of revenues. (R$ thousand) Earnings before taxes (354,816) 19,818 n/a 106,377 n/a (334,998) 195,833 n/a Income tax and social contribution Incurred (14,194) (16,573) -14.4% (21,936) -35.3% (30,767) (44,459) -30.8% Deferred (14,472) 716 n/a (6,224) 132.5% (13,757) (7,351) 87.1% Net income/loss (383,482) 3,961 n/a 78,217 n/a (379,521) 144,023 n/a Net margin (%) n/a 0.6% n/a 8.9% n/a n/a 8.9% n/a Number of shares (thousand) 443, , % 460, % 443, , % Earnings/loss per share (0.86) 0.01 n/a 0.17 n/a (0.86) 0.32 n/a 1H12 1H12 X 13

14 Balance Sheet RECEIVABLES The Company had R$ 7.2 billion of receivables at the end of the second quarter, of which 60.8% mature in 2012 and Receivables R$ million Units Under Construction 2, , Q11 2, Q11 2, ,340.6 Completed Units 1, , , , ,163.1 Services Adjusted Present Value (112.9) (99.3) (92.0) (81.3) (74.2) Provision for Losses (44.4) (44.6) (41.5) (38.4) (37.0) Total Receivables in Balance Sheet 3, , , , ,495.1 Revenues to be Recognized 3, , , , ,873.5 Advances from Customers (360.3) (122.2) (103.9) (81.3) (23.0) Total Receivables 7, , , , ,345.6 Schedule of Maturities R$ million , , Q11-3Q , , , , , , , , , , , , , After Total Receivables 7, , , , ,345.6 Revenues to be Recognized (3,652.0) (3,260.2) (3,243.3) (3,156.5) (2,873.5) Advances from Customers Total Receivables in Balance Sheet 3, , , , ,495.1 DEBT AND CASH CONSUMPTION Gross Debt reached R$ 3.9 billion at the end of the. Project finance (SFH) totaled R$ 1.2 billion, a 16.8% increase compared to the. SFH represents 31.2% of total debt and 42.4% of net debt. The Company continues to increase the share of SFH funding which contains more favorable terms than other forms of debt. Specifically, according to financing contracts, providers of SFH funding are required to finance individuals once construction has been completed. At the end of the second quarter, the Company had R$ 4.7 billion worth of contracted SFH loans, of which R$ 3.4 billion are yet to be disbursed. The amount is equivalent to 78.8% of future construction costs for projects already launched. In keeping with the Company s focus on leverage reduction, the proceeds of the capital offering will reduce the net debt to equity ratio to 82.7% from 110.6% previously. Net Debt to Equity R$ million 4Q11 3Q11 Cash and short term investments 1, , , Total Debt 3, , , , ,956.7 Project Finance (SFH) 1, , Corporate Debt 2, , , , ,012.9 Net Debt 2, , , , ,026.9 Net Debt Variation/Cash Consumption From Operations Share repurchase Dividends MB earn-out Shareholder's Equity 2, , , , ,993.3 Net Debt / Equity 110.6% 85.6% 76.0% 70.7% 67.7% Net Debt ex-project finance / Equity 63.7% 50.8% 46.5% 38.7% 36.2% 14

15 The proceeds of the capital raising, combined with the transfer of receivables to financial institutions in the second half, are expected to cover any near-term maturities. Debt Maturity Schedule (R$ million) Debt maturity profile (R$ million) Current Loans 1, ,073.4 Long Term Loans 2, ,657.9 Total Debt 3, , After 2015 Construction Loans (SFH) Corporate Debt 15

16 Annexes LAUNCHED PROJECTS Brookfield Incorporações share Launched Projects Type Segment State City Area (sqm) PSV (R$ mm) Units Avg Price (R$ 000) R$/sqm Caenge - Manuel Ferreira R Affordable SP Cosmópolis 28, ,494 Focus Business Center C Offices GO Goiânia 9, ,148 Naturalle - Sahy H R Affordable RJ Mangaratiba 11, ,403 Said Aiach - BDH Ibirapuera R Mid-high SP São Paulo 6, ,845 Tamboré R Lots SP Barueri 1,432, , Travessa do Viterbo R Mid-high RJ Rio de Janeiro 15, ,533 Yard Comfort Residence - Boa Vista R Middle PR Curitiba 10, ,971 Total 1,514, , Mio Mananciais Phase 01 R Middle RJ Rio de Janeiro 33, ,008 Sahy - Tropicalle R Affordable RJ Mangaratiba 9, ,454 Onda Carioca Recreio R Middle RJ Rio de Janeiro 32, ,658 Point R Mid-Low MW Samambaia-DF 4, ,875 Total 79, ,217 4,507 Total 1H12 1,593, ,486 1,

17 DELIVERED PROJECTS Delivered Projects Type Segment Estate City Saleable Area (sqm) Brookfield Incorporações' stake PSV (R$mm) Units Average Price (R$000) Imprensa IV R Mid-Low DF Águas Claras 7, ,117 Paineiras II R Mid-Low SP Campinas 2, ,926 Jardins do Cerrado - Houses R Affordable GO Goiânia 20, ,702 Sonho e Vida e Encanto - Cajamar Block 6 R Affordable SP Cajamar 16, ,543 Girassois and Vila das Flores - Cajamar Block 8 R Affordable SP Cajamar 15, ,358 Jacarandá and Figueiras - Cajamar Block 9 R Affordable SP Cajamar 13, ,391 Bem Viver - Cajamar Block 4 R Affordable SP Cajamar 8, ,568 Felicitá Tower D R Affordable GO Goiânia 4, ,778 Maison Autentique Tower A R Mid-High GO Goiânia 6, ,398 Maison Classic R Mid-HIgh MT Cuiabá 2, ,348 3,069 Villa Branca Home & Club - Phase 1 R Affordable SP Jacareí 6, ,653 Villa Branca Home & Club - Phase 2 R Affordable SP Jacareí 3, ,872 Villa Branca Home & Club - Phase 3 R Affordable SP Jacareí 3, ,022 Villa Branca Residence & Club- Phase 1 R Affordable SP Jacareí 4, ,720 Villa Branca Residence & Club- Phase 2 R Affordable SP Jacareí 2, ,852 Villa Branca Residence & Club- Phase 3 R Affordable SP Jacareí 2, ,946 Total 121, , ,245 Bella Colônia Phase Buona Vita R Mid-Low SP Jundiaí 3, ,400 Cajamar Block 4B Magia de Viver R Affordable SP Cajamar 8, ,200 Cajamar Block 4C Morar & Viver R Affordable SP Cajamar 8, ,200 Cajamar Block 5A Felicidade R Affordable SP Cajamar 8, ,200 Felicita Goiânia II HC8 Tower C R Mid-Low CO Goiânia 4, ,816 Mirage Alpe's Village Block D20 Tower A R Mid-Low CO Goiânia 5, ,222 Panorama Samambaia Lot 5 and 6 R Mid-Low CO Samambaia 15, ,049 Sinfonia Lot 7 and 9 Tower A R Mid-High CO Águas Claras ,126 Soneto Lot 6 and 8 Tower A R Mid-High CO Águas Claras 5, ,969 Vitalitá Parque Solter Tower A R Mid-Low CO Campo Grande 7, ,816 Catu Aquiraz Tower A1 R Mid-High CO Aquiraz ,000 Catu Aquiraz Tower A19 R Mid-High CO Aquiraz ,000 Catu Aquiraz Tower A2 R Mid-High CO Aquiraz 1, ,000 Catu Aquiraz Tower A20 R Mid-High CO Aquiraz ,000 Catu Aquiraz Tower A21 R Mid-High CO Aquiraz 1, ,000 Catu Aquiraz Tower A22 R Mid-High CO Aquiraz ,000 Catu Aquiraz Tower A23 R Mid-High CO Aquiraz 1, ,000 Catu Aquiraz Tower A24 R Mid-High CO Aquiraz 1, ,000 Catu Aquiraz Tower A25 R Mid-High CO Aquiraz ,000 Jardim do Cerrado Tower Phase 1 R Affordable CO Goiânia 18, ,009 Jardim do Cerrado Tower Phase 2 R Affordable CO Goiânia 18, ,009 Jardim do Cerrado Tower Phase 3 R Affordable CO Goiânia 18, ,009 Jardim do Cerrado Tower Phase 4 R Affordable CO Goiânia 19, ,009 Ventura Lot 1 to 3 Samambaia Tower C R Mid-Low CO Samambaia 8, ,420 Ventura Lot 1 to 3 Samambaia Tower D R Mid-Low CO Samambaia 8, ,420 Total 168, ,061 6,047 59,874 Total 1H12 289, ,129 6,309 62,119 R$/m² 17

18 INCOME STATEMENT Income Statement (R$ thousand) % over revenues % over revenues Gross revenues 690, , % 906, % 1,385,681 1,659, % Revenues from real estate development and sales 599, , % 856, % 1,224,434 1,548, % Other revenues 90,942 70, % 49, % 161, , % Taxes (21,430) (22,741) -5.8% (25,905) -17.3% (44,171) (47,738) -7.5% Net revenues 669, % 672, % -0.5% 880, % -24.0% 1,341, % 1,611, % -16.8% % over revenues 1H12 % over revenues % over revenues 1H12 X Operating costs Cost of real estate development and sales (791,903) % (454,432) -67.6% 74.3% (607,469) -69.0% 30.4% (1,246,335) -92.9% (1,077,421) -66.8% 15.7% Other costs (73,497) -11.0% (49,016) -7.3% 49.9% (22,935) -2.6% 220.5% (122,513) -9.1% (63,205) -3.9% 93.8% Gross loss/profit (196,359) 169,022 n/a 250,238 n/a (27,337) 471, % Gross margin (%) n/a 25.1% n/a 28.4% n/a -2.0% 29.2% -31.3p.p. Operating expenses Selling and marketing expenses (43,897) -6.6% (50,968) -7.6% -13.9% (45,024) -5.1% -2.5% (94,865) -7.1% (78,637) -4.9% 20.6% General and administrative expenses (37,093) -5.5% (49,362) -7.3% -24.9% (49,212) -5.6% -24.6% (86,455) -6.4% (88,452) -5.5% -2.3% Other expenses (31,930) -4.8% (15,378) -2.3% 107.6% (8,418) -1.0% 279.3% (47,308) -3.5% (14,824) -0.9% 219.1% Depreciation and amortization (4,692) (4,280) -0.6% 9.6% (3,396) -0.4% 38.2% (8,972) -0.7% (6,168) -0.4% 45.5% Net financial results (40,845) -6.1% (29,216) -4.3% 39.8% (37,811) -4.3% 8.0% (70,061) -5.2% (87,239) -5.4% -19.7% Earnings before taxes (354,816) 19,818 n/a 106,377 n/a (334,998) -25.0% 195, % n/a Income tax and social contribution Incurred (14,194) -2.1% (16,573) -2.5% -14.4% (21,936) -3.0% -35.3% (30,767) -2.3% (44,459) -2.8% -30.8% Deferred (14,472) -2.2% % n/a (6,224) -0.9% 132.5% (13,757) -1.0% (7,351) -0.5% 87.1% Net income/loss (383,482) 3,961 n/a 78,217 n/a (379,521) 144,023 n/a Net margin (%) n/a 0.6% n/a 8.9% n/a n/a 8.9% n/a Number of shares (thousand) 443, , % 460, % 443, , % Earnings/loss per share (0.86) 0.01 n/a 0.17 n/a (0.86) 0.32 n/a 18

19 BALANCE SHEET Balance Sheet (R$ thousand) Consolidated Assets Jun-12 Mar-12 Jun-12 X Mar-12 Cash and equivalents 548, , % Short term-investments 391, , % Accounts receivable 1,780,535 1,527, % Inventory of properties for sale 1,437,161 1,500, % Current taxes and witholding taxes 43,229 40, % Other 361, , % Current assets 4,562,765 4,351, % Long term-investments 96, , % Trade accounts receivable 2,173,020 2,345, % Inventory of properties for sale 1,752,923 1,722, % Deferred taxes 17,172 71, % Intangible 502, , % Other 455, , % Long-term assets 4,997,566 5,277, % Property, plant and equipment 70,470 69, % Total assets 9,630,801 9,698, % Liabilities Jun-12 Mar-12 Jun-12 X Mar-12 Borrowings and financing 1,231,902 1,073, % Trade accounts payable and other 769, , % Advances from customers 636, , % Current taxes payable 26,618 23, % Provisions 39,296 29, % Proposed dividends - 77,622 n.a. Other 103, , % Current liabilities 2,807,635 2,490, % Borrowings and financing 2,704,477 2,657, % Intercompany loans - - Trade and other payables 160, , % Advances from customers 690, , % Deferred taxes 220, , % Provisions 77,615 80, % Other 346, , % Long-term liabilities 4,200,268 4,184, % Total Liabilities 7,007,903 6,674, % Capital 2,128,256 2,128, % Reserves 757, , % Valuation adjustments to equity 151, , % Proposed additional dividens - 15,524 n.a. Treasury shares (34,156) (29,713) 15.0% Retained earnings (379,521) 3,961 n.a. Shareholders' equity 2,622,898 3,023, % - Total liabilities and shareholders' equity 9,630,801 9,698, % 19

20 CASH FLOW Cash Flow Statement (R$ thousand) Net Income (383,482) 3,961 Adjustments to reconcile the net income for the period with the cash generated by (used in) operational activities: Depreciation and amortization 9,689 12,317 Allowance for credit losses (237) 3,127 Interest and monetary variation 19,279 56,852 Deferred income tax and social contribution 28,666 15,857 Other Provisions 18,795 16,210 (Increase)/decrease in operating assets: Accounts receivable (55,629) (107,236) Properties for development and sale 91,153 (64,810) Other Assets 6,551 (35,857) Increase/(decrease) in operating liabilities: Accounts payable 278,315 (1,095) Other liabilities (84,423) (59,145) Interest paid (57,650) (135,344) Income tax and social contribution (38,419) (36,674) Net Cash Inflow/(Outflow) from Operating Activities (167,392) (331,837) Cash flow from investing activities Fixed asset sale/acquisition (11,711) (6,530) Redemption of short-term investments (239,312) 141,182 Advances to related parties 4,435 5,062 Intangible asset acquisition (559) (1,810) Financial investment (2,493) (9,635) Net Cash Inflow/(Outflow) from Investing Activities (249,640) 128,269 Cash flow from financing activities Loans of third parties and intercompany Inflows 387, ,695 Amortization (224,002) (161,403) Stock buyback payments (4,443) 0 Dividends paid (93,146) 0 Net Cash Inflow/(Outflow) from Financing Activities 66, ,292 Cash and Equivalents Cash and cash equivalents (increase/decrease) (350,832) 317,724 Balance, beginning of period 899, ,891 Balance, End of Period 548, ,615 20

21 POC AND SALES HISTORY* P ro ject B usiness Unit Quarter o f Launching End o f co nstructio n P o C % So ld Saleable Area (sqm) P SV (R$ mm) Units A verage P rice (R$ 000) CENTURY PLAZA - M ALL CO 4Q09 2Q13 93% 100% 10, ,000 8,259 TORRE IV SP 2Q07 3Q12 84% 100% 49, ,500 5,257 BHD IBIRAPUERA (SAID AIACH) SP 3Q14 58% 68% 6, ,408 ONDA CARIOCA RJ 2Q15 33% 45% 32, ,658 CONNECT TOWERS CO 3Q11 1Q15 46% 61% 20, ,093 PANORAM A CO 4Q07 100% 79% 9, ,669 PÁTIO CARIOCA RJ 4Q09 4Q13 60% 93% 42, ,899 ATELIER TRÊS RIOS RJ 3Q10 3Q13 47% 87% 25, ,802 URBAN LIVING E OFFICE SP 4Q10 3Q13 63% 100% 15, ,790 M ICHIGAN SP 4Q11 3Q14 25% 55% 21, ,420 8,271 SOHO - TAMBORÉ 17 - FASE 01 SP 4Q10 4Q13 34% 88% 15, ,511 TRAVESSA DO VITERBO RJ 1Q15 25% 41% 15, ,619 GARDENS LIVING SP 2Q10 2Q13 68% 100% 21, ,764 CAMPINAS FASE 01 SP 4Q11 2Q14 39% 93% 22, ,056 BROOKFIELD PLACE RJ 4Q10 2Q14 50% 95% 29, ,676 BR. TOWERS BL A CO 2Q10 4Q13 51% 99% 20, ,121 CAMPINAS FASE 02 SP 4Q11 2Q14 27% 84% 19, ,994 MIO RESIDENCIAL MANANCIAIS FASE 1 RJ 2Q15 11% 45% 32, ,214 RIV. DEI FIORI BL C CO 4Q09 4Q12 89% 99% 7, ,186 PLACE SANTANA SP 3Q10 1Q13 75% 75% 12, ,312 LONDON BLUE SP 3Q10 1Q14 60% 96% 9, ,672 7,644 VITALITÁ - BLOCO D CO 2Q09 1Q13 76% 96% 7, ,041 PREM IÈRE CO 3Q08 3Q12 92% 100% 15, ,278 RES. VILLA AMALFI F2 SP 4Q07 4Q11 100% 97% 36, ,771 RIV. DEI FIORI BL B CO 4Q09 1Q13 75% 100% 9, ,224 IGUATEMI RIBEIRÃO PRETO FASE 01 SP 4Q11 1Q14 32% 73% 12, ,895 OITICICA SP 1Q11 1Q14 48% 100% 15, ,057 RIV. DEI FIORI BL A CO 4Q09 1Q13 66% 99% 9, ,089 MAISON AUTENTIQUE - BL.B CO 3Q09 3Q12 100% 66% 9, ,193 VILA BELA RJ 2Q10 3Q13 42% 91% 20, ,870 GREEN VALLEY RESIDENCIAL 03 SP 4Q10 1Q14 27% 92% 18, ,127 ALL - COOPER-FÊNIX: FASE 1 CO 4Q10 2Q13 73% 98% 9, ,723 APÊ CO 2Q10 1Q13 86% 99% 6, ,577 VILLA DO RIO RJ 4Q09 3Q13 42% 58% 14, ,190 IOFFICES RJ 4Q10 3Q13 67% 78% 10, ,594 BOSCA RJ 4Q10 4Q13 51% 52% 29, ,148 GARDENS II - RUA MARQUES DE LAGES SP 4Q10 2Q13 53% 100% 11, ,131 GENERAL TINTAS SP 4Q11 1Q15 20% 98% 51, ,851 TERRARA SP 4Q09 4Q12 67% 99% 97, ,045 AGUAS CLARAS RJ 4Q09 4Q12 88% 81% 12, ,676 ALL - COOPER-FÊNIX: FASE 2 CO 4Q10 3Q13 42% 100% 9, ,681 MATERTRADE 45NO - F1 RJ 2Q15 46% 81% 27, ,084 VISTA VALPARAÍSO SP 4Q09 3Q12 94% 99% 16, ,969 MARQUÊS DE SÃO VICENTE SP 3Q11 2Q14 53% 99% 8, ,642 ENCANTO - BLOCO B CO 4Q09 3Q12 85% 97% 9, ,861 VITALITÁ - BLOCO E CO 2Q09 1Q13 64% 93% 7, ,105 BR. TOWERS BL B CO 2Q10 4Q13 54% 85% 11, ,136 4,698 BRAGANÇA PAULISTA SP 4Q11 2Q14 32% 73% 17, ,422 NADIR FIGUEIREDO LOTE 03 RJ 4Q11 4Q14 16% 50% 39, ,872 M ARIA CALLAS SP 3Q10 3Q13 54% 27% 17, ,497 6,855 * Main projects with revenue recognition in the quarter Brookfield Incorporações stake R $ / m² 21

22 DEBT MATURITY SCHEDULE BREAKDOWN Loans and Financing (R$ million) Construction Loans (TR+ 8.3% to 12.0%) 1, , After Bonds (108% of CDI) After Bonds (IPCA + 9,5% to 10,25%) After Bonds (CDI + 1,6 to 2,0%) After Working Capital Loans (CDI + 2,7%) 1, , After Total Debt 3, , , , , After

23 Ownership Structure Shareholders Number of shares % BROOKFIELD BRASIL LTDA. 196,148, % Shareholders Agreement 38,615, % Treasury 5,944, % Management 49, % Alliance Bernstein L. P. 24,238, % Other 180,187, % TOTAL 445,183, % About Brookfield Incorporações S.A. Brookfield Incorporações S.A. (BM&F Bovespa: BISA3) is one of the leading developers in Brazil s real estate industry, with operations that include land acquisition, product development, marketing, sales, construction and customer service. Brookfield Incorporações offers a broad array of products in the residential and office segments, with its primary focus on middle income residential. Brookfield Incorporações is present in the main metropolitan areas in Brazil, namely São Paulo, Rio de Janeiro, Federal District, Goiânia, Curitiba and Campinas, which account for the majority of the Brazilian real estate market.. About Brookfield Brasil Brookfield Brasil owns 44.2% of Brookfield Incorporações S.A. and is an asset manager and a wholly owned subsidiary of Brookfield Asset Management Inc. Brookfield began investing and operating in Brazil in 1899 and currently has almost 8,000 employees. It maintains one of the largest investment platforms in the country with approximately R$ 25 billion of assets under management, managed on its behalf as well as its investment partners, which include some of the world s largest institutional investors. Brookfield Brazil invests in property, renewable power, agriculture and timberland assets in addition to financial and insurance brokerage services. Brookfield Asset Management Inc. is a global alternative asset manager with over US$150 billion in assets under management. It has over a 100-year history of owning and operating assets with a focus on real estate, infrastructure, power and private equity. It has a range of public and private investment products and services, which leverage its expertise and experience and provide them with a distinct competitive advantage in the markets where they operate. IR Contacts Cristiano Gaspar Machado CFO and IR Officer Luciano Guagliardi Director Alexandre Freire Manager Paula Alvarez Analyst ri@br.brookfield.com 23