V. ARA s Results 3Q 2018 vs 3Q 2017, 9M 2018 vs. 9M 2017

Transcription

1 November, 2018

2 Disclaimer This presentation contains certain statements about future plans and expectations which constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of Such forward looking statements are generally stated in terms of the Company s plans, expectations and intentions. These statements are based on the Company s current expectations and the current economic environment. Forward looking statements are inherently subject to significant economic, competitive and other uncertainties and contingencies, many of which are beyond the control of management. The Company cautions that these statements are not guarantees of future performance. There are or will be important factors that could cause actual results to differ materially from those expressed or implied in the forward looking statements.

3 Contents Contents I. Solid Industry Fundamentals II. III. IV. ARA S Strenghts Our Strategy Dividends V. ARA s Results 3Q 2018 vs 3Q 2017, 9M 2018 vs. 9M 2017

4 I. Mexican Housing Sector Driver of Mexican economy based on its contribution to GDP and jobs generation. Fundamental factor in social development

5 Age Solid Industry Fundamentals 65 and + 60 to to to to to to to to to to to 14 5 to 9 0 to Population (millions of inhabitants) million million Middle Class Population (millions) +33% By 2050, the number of inhabitants between 20 and 64 years of age will be more evenly distributed. People between 20 and 64 years Which means Number of homes million million million million +36% +31% A total of 450,000 homes will be needed each year for new households in the next two decades. One feature that makes ARA s business model different is its diversification for serving different segments. According to INEGI, between 2000 and 2010 the middleand upper-class population grew from 38.5 to 46 million. % of the Population % % Upper Class Middle Class Lower Class E OECD World Bank INEGI

6 Mortgage lending plan 2018 Number of loans 110,000 55,195 Banks FOVISSSTE Investment (billion pesos) $150, ,982 INFONAVIT $35,150 $141,543 Total 537,177 Total $326,

7 Consorcio ARA More than 41 years of experience 353,000 homes sold throughout its history, inhabited by 1,412,000 Mexicans. Focus on developing high-quality houses and Integrated Communities

8 Geographic and product diversification Strategic land bank II. ARA S Strengths ARA s strengths Financial solidity Vertical integration Flexible construction process A highly experienced management team Robust corporate governance

9 Geographic and product diversification Operating in: 17 States 20 Cities 35 Municipalities 48 Developments - 6 -

10 Geographic and product diversification AFFORDABLE ENTRY LEVEL Price Range: P$320,000 to P$550,000 USD$16,120 to USD$27,710 MIDDLE INCOME Price Range: P$550,001 to P$1,200,000 USD$27,711 to USD$60,500 RESIDENTIAL Price Range: From P$1,200,0001 From USD$60,

11 Vertical Construction We have had several vertical housing developments. IntegrARA vertical projects in Mexico City and State of Mexico. Dream Lagoons ARA projects include vertical construction. We have been aligned to the public policy of vertical construction and redensification schemes. More than 50% of ARA s work in progress is vertical construction

12 Geographic and product diversification Shopping 6 Malls - 9 -

13 Shopping Malls Centro San Miguel Centro San Buenaventura Plaza Carey Plaza Centella Paseo Ventura Operadora de Unicentros Municipality or City Cuautitlán Izcalli Ecatepec Ixtapaluca Veracruz Cuautitlán Ecatepec Cuautitlán, Acolman y Coacalco State State of Mexico State of Mexico State of Mexico Veracruz State of Mexico State of Mexico State of Mexico Type Anchors Sub-anchors Mega Comercial Mexicana C&A, Coppel Regional Center Fashion Mall Power Mall Liverpool, Sears Sanborn's, Suburbia, C&A, Walmart, SAM S Office Max, Martí, Sport City, FAMSA Bodega Aurrera Coppel Soriana Hiper N/A Mega Comercial Mexicana Martí, Parisina, McDonald's, D'Europe Cinemex Best Buy, Coppel, Ice Station Coppel, Bodega Aurrera Express Cinema (# of Screens) Cinépolis (10) Cinépolis (14) N/A N/A Henry Cinemas (10) Cinepolis (10) Cinepolis (12) NA Net Leasable Area (GLA) All the complex (m 2 ) Net Leasable Area (GLA) ARA Ownership/Partner (m 2 ) Community Center Centro las Américas Community Center Community Center Community Center Entertaiment Center Strip Center 38,561 75,929 43,742 11,474 20,917 25,996 25,783 7,686 38,561 47,265 14,272 11,474 20,917 14,882 25,783 7,686 Year of construction % ARA 100% 50% 100% 100% 100% 50% 100% NA NOI 9M18 $165.3 millions of pesos GLA 180,840 m 2 Occupancy rate: 95.2%

14 18 States Strategic land bank State Units % $4.75 billion pesos in book value (at acquisition cost) million m 2, enough to build 131,147 master-plan homes. State of Mexico 43, Quintana Roo 34, Jalisco 7, Baja California 6, Nuevo León 5, Hidalgo 5, Guanajuato 4, Guerrero 4, Veracruz 4, Nayarit 3, Puebla 3, Sonora 1, Morelos 1, Subtotal 126, Others (5 states) 5, Total 131, Includes 2.3 million m 2 set aside for non-housing development, such as the retail properties, tourist resorts and industrial zones

15 Land bank 131,147 master plan units % by Revenues (A) Affordable Entry Level 94, % 18.8% Middle Income 24,628 Affordable Entry Level 48% 25% Middle Income 9.3% Residential 12,282 27% Residential (A) Percentage obtained by multiplying units per LTM average price

16 Financial solidity Prudent use of debt. Act cautiously, grow profitably. Highest S&P and Moody s credit ratings in the Mexican housing industry for 12 years in a row. In 2017 ARA received an A+ rating from HR Ratings. Focus on generation of free cash flow to the firm

17 Positive trend in our results Millions of pesos Revenues 9,000 7,000 6, , ,000 6, , % Net Income +96.4% 8, , , , ,500 Cash and Cash Equivalents +255% 2, ,000 Net Debt 1, ,000 1,500 1, , , ,500 1,000 1, , %

18 Vertical integration Final Post-Sale Service Start Environment and market research Planning and acquiring land bank Delivery of home Titling Value Chain Design of homes and developments Applications, permits, etc. Construction Sales Procurement /Supply: COMACI

19 Vertical integration 15 plants to produce our own ready-mix million m 3 of ready-mix produced during the past twenty-one years, enough to build a 60-inch wide, 4-inchthick sidewalk that would reach around the world one and a half times

20 Flexible construction process Monolithic System for the on-site construction of floors and walls

21 Investment Highlights A highly experienced management team Germán Ahumada Russek CEO more than 41 years with ARA Miguel Lozano Pardinas CO-CEO more than 10 years with ARA 32 years of industry experience Alicia Enriquez Pimentel CFO more than 16 years with ARA The homebuilder that s still standing

22 III. Our Strategy Maintain a diversified portfolio of products with an increased weight in Middle Income and Residential-level homes, accounting for between 55% and 60% of total revenues. 100% 2.5% 2.2% 2.8% 4.7% 2.5% Other Real Estate Projects 80% 20.3% 18.3% 18.7% 27.4% 35.1% Residential 60% 34.8% 43.5% 41.0% 28.3% 28.7% Middle Income 40% 20% 42.4% 36.0% 37.5% 39.6% 33.7% Affordable Entry Level 0%

23 Our Strategy Middle Income and Residential-level homes: A product differentiated from the rest. Paraíso Country Club Dream Lagoons Cancún Dream Lagoons Foresta

24 Our Strategy Paraíso Country Club Club House

25 Our Strategy Dream Lagoons Foresta Dream Lagoons Foresta Dream Lagoons Veracruz Dream Lagoons Cancún

26 IV. Dividends ARA has had a policy on paying dividends subject to two conditions: 1) a sufficient balance in the net tax income account, and 2) positive Free Cash Flow generation. Assuming these two circumstances were present, dividend payments would normally amount to between 15% and 25% of our net profits. * Year of payment TOTAL Dividend amount (1) , ,606.3 Dividend per share (2) (3) Yield 1.42% 9.06% 0.86% 1.30% 0.91% 1.16% 1.57% 1.27% 1.31% 1.80% (1) Millions pesos. (2) Pesos. (3) Total shares: 1,312,847,

27 V. Statement of Comprehensive Income Third Quarter Change January-September Change 2018 / Q18 / 3Q / M18 / 9M17 3Q18 % 3Q17 9M17 % $ % 9M18 % Restated Restated % $ % Revenues 2, , (87.0) (3.9) 6, , Costs 1, , (44.4) (2.7) 4, , Gross profit (42.6) (6.9) 1, , (17.0) (1.0) General expenses (13.9) (4.3) (4.2) (0.5) Other (expense) income - net (0.1) (3.6) (103.5) (7.1) (7.1) (511,022) Income from operations (32.3) (11.0) (19.9) (2.7) Financial income - net: Interest expense (3.1) (4.4) (2.6) (1.4) Capitalized interest expense (56.2) -2.6 (56.2) (0.1) (151.8) -2.5 (156.5) (3.0) Interest income (50.0) -2.3 (32.8) -1.5 (17.2) 52.4 (119.7) -2.0 (75.2) -1.2 (44.5) 59.2 Exchange loss (gain) (0.6) (1,104.2) (7.1) (54.0) Loss on derivatives (1.0) (32.1) (32.6) -1.5 (20.0) -0.9 (12.6) 63.0 (75.5) -1.2 (25.0) -0.4 (50.5) Equity method in join ventures (3.5) (15.1) (1.2) (2.0) Income before Income taxes (23.3) (6.9) Taxes: ISR deferred (159.1) (66.1) ISR current (229.2) (101.2) (71.5) (106.2) Net Income (96.1) (29.5) (57.2) (8.6) Other comprehensive income Comprehensive income (96.1) (29.5) (57.2) (8.6) Depreciation (0.3) (2.1) NCFR recognized in costs EBITDA (18.3) (5.4)

28 Units Revenues Product Mix 3Q18 Results 3Q18 3Q17 Chge. 3Q 18/17 Units % Av. Av. Mill. $ Rev% Units % Price Price Mill. $ Rev% Mill. $ % Affordable Entry Level 2, , , Middle Income Residential , , Total as Hom e Builder 3, , , , Other Real Estate Projects Total 3, , , , % 100% Other Real Est Proj 2.5% 2.4% Residential 8.2% 14.4% Residential 23.0% Middle Income 80% 19.4% 80% 35.8% 26.4% 60% 60% Middle Income 26.6% 40% 20% Affordable Entry Level 72.4% 59.2% 40% 20% Affordable Entry Level 47.9% 28.0% 33.8% 0% 3Q18 3Q17 0% 3Q18 3Q

29 Units Revenues Product Mix 9M18 Results 80% Units % 19.5% Av. Price 26.8% Mill. $ Rev% Units % Total 8, , , , % 100% 2.9% 2.7% Residential Other Real Est Proj 8.5% 13.8% 80% Av. Price Mill. $ Rev% Mill. $ % Affordable Entry Level 6, , , , Middle Income 1, , , , Residential , , , , , Total as Hom e Builder 8, , , , Other Real Estate Projects Middle Income Jan-Sep'18 Jan-Sep'17 Chge. 9M 18/17 Residential 24.3% 34.1% 60% 60% Middle Income 26.3% 29.0% 40% 20% Affordable Entry Level 72.0% 59.4% 40% 20% Affordable Entry Level 46.5% 34.2% 0% 9M18 9M17 0% 9M18 9M

30 Balance Sheet ASSETS As of Sep'18 As of Dec'17 Restated Change Amount % CURRENT ASSETS: Cash and cash equivalents 2, , Accounts receivable (2.3) Land for development 1, , (2.7) Work in process (mainly) 9, , Total Inventories 11, , Other current assets (9.6) 15, , NON-CURRENT ASSETS: Golf Club memberships available for sale Investment properties Land for development 2, , Property, machinery and equipment Net (9.1) Investments in joint venture Deferred tax asset (3.8) Derivative financial instrument (89.2) Other non-current assets , , TOTAL ASSETS 19, , CURRENT LIABILITIES: Bank Loans (30.8) Financial Leasing (38.5) Suppliers Other current liabilities (13.8) 2, , (4.9) NON-CURRENT LIABILITIES: Unsecured Securities Certificate and Bank Loans 2, , Financial Leasing (24.3) Deferred income tax 2, , Other Long Term Liabilities (28.8) 4, , TOTAL LIABILITIES 6, , As of September 30, 2018: Accounts receivable turnover was a month. Cost bearing liabilities/ Shareholder s equity: 0.20 times. Cost bearing liabilities/ EBITDA (12M): 2.09 times. Cost bearing liabilities/ total assets: 0.13 times. Net debt / EBIDTA (12M): times. Net debt / Shareholder s equity : times. STOCKHOLDERS' EQUITY 12, , LIABILITIES AND STOCKHOLDERS' EQUITY 19, ,

31 Jan-Sep'18 Statements of cash flow Jan-Sep'17 Restated Operating activities: Income before taxes Items related to investing activities: Depreciation Equity in earnings of equity method investees Other Items related to financing activities: Interest expense (Increase) decrease in: Trade accounts receivable - Net Inventories Other assets Increase (decrease) in: Suppliers Other liabilities Income taxes paid Net cash provided by operating activities Investing activities: Investments in equity method investees Purchasing of property, machinery and equipment Disposal of other permanent investments Dividends received from equity method investees Investment property Cash excess to apply to financing activities Proceeds from debt ,098.3 Payment for debt ,155.0 Payments of capital lease obligations Dividends Interest paid Repurchase of own stock - net Decrease in common stock Financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year 2, ,786.6 Cash and cash equivalents at end of the period 2, ,

32 Contact Alicia Enriquez Finance and Investor Relations Phone: (+5255) x 4096 Address: CONSORCIO ARA Arcos Bosques Marco II. Paseo de Tamarindos 90, Torre I. 25th floor, Bosques de las Lomas, Zip Code México City, México