May Corporate Presentation

Transcription

1 May 2012 Corporate Presentation

2 Safe-Harbor Statement We make forward-looking statements that are subject to risks and uncertainties. These statements are based on the beliefs and assumptions of our management, and on information currently available to us. Forward-looking statements include statements regarding our intent, belief or current expectations or that of our directors or executive officers. Forward-looking statements also include information concerning our possible or assumed future results of operations, as well as statements preceded by, followed by, or that include the words ''believes,'' ''may,'' ''will,'' ''continues,'' ''expects,' ''anticipates,'' ''intends,'' ''plans,'' ''estimates'' or similar expressions. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Our future results and shareholder values may differ materially from those expressed in or suggested by these forward-looking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. 2

3 Agenda Expansionary Phase & Growth Hurdles Growth Hurdles and Achievements New Strategy Operational and Financial Review Current Liquidity Appendix 3

4 Agenda Expansionary Phase Growth Hurdles and Achievements New Strategy Operational and Financial Review Current Liquidity Appendix 4

5 Geographic & Income Segment Expansion The acquisitions of Tenda and AlphaVille broadened Gafisa s footprint beyond the mid to high-income segments in SP and RJ to encompass every income segment 2010: New Follow-On: R$ 1 billion; Increase in AlphaVille stake from 60% to 80% 4, : YE Implementation of a Strategic Plan 2006: Company IPO (R$494 mm of primary proceeds; Acquisition of 60% of AlphaVille 2007: ADR issuance First follow-on: R$488 mm of primary proceeds 1, : Acquisition of a 60% stake of Tenda 2,578 3, : Acquistion of the remaining 40% of Tenda; R$600 mm in FI-FGTS debentures (May/09) R$600 mm in FI-FGTS debentures (Dec/09) 3, : GP Investimentos acquires control of Gafisa : Equity International Acquires 36% of Gafisa Contracted Sales (R$ MM)

6 Agenda Expansionary Phase Growth Hurdles and Achievements New Strategy Operational and Financial Review Current Liquidity Appendix 6

7 Growth Hurdles & Achievements Geographic expansion and the Tenda acquisition increased complexity of business Corrective measures have redirected Gafisa s growth trajectory and financial performance AlphaVille has exceeded initial expectations Growth Hurdles Replication of SP and RJ returns in other regions challenging Local market characteristics make management complex Capacity of suppliers to adequately absorb velocity of growth Deviation from budgeted costs and impact on speed of revenue recognition Regional diversification and Tenda legacy created cost overruns Tenda challenges related to sales dissolutions and credit quality More stringent vetting means many customers no longer qualify for bank mortgages High capital employed, especially in accounts receivable related to Tenda s legacy portfolio Achievements Gafisa operations in São Paulo and Rio de Janeiro High ROE High quality operating indicators Long-standing reputation Successful expansion of the AlphaVille model High ROE Growing product mix contribution Significant brand awareness Progress with the Tenda business Record units delivered in 2011 Reinforced relationship with CEF Introduced aluminum mold technology Increased sales platform 7

8 Agenda Expansionary Phase Growth Hurdles and Achievements New Strategy Operational and Financial Review Current Liquidity Appendix 8

9 Strategic Overhaul Restructured organization and new strategic plan position Gafisa for improved financial and operating performance Focus Gafisa launches on core São Paulo and Rio de Janeiro markets Strong brand recognition and regional awareness ensure prominent market position is maintained Capital allocation: SP and RJ where competitive advantages exist Improve working capital cycle at Tenda Launch only contracted developments where mortgages can be immediately transferred to financial institutions Lower volume of launches and remedied construction process Conservative capital allocation Maintain the momentum at AlphaVille Sustain growth rate and expand contribution in the product mix Capital allocation: To maximize growth 4Q11 corrective adjustments impacted 2011 results but cash flow not affected 70% related to Tenda, represents 8% of total cost budget base Gafisa & Tenda geographic presence restricted to markets possessing strong supply chains and established relationships Recognized cost overruns due to increased volume of units delivered 2011 Dissolution of contracts among Tenda clients unqualified for bank financing New management team, including CFO, ensures strong leadership to drive future growth Existing and future liquidity to execute business plan 9

10 New organizational structure to execute plan & facilitate growth P&L Owners by Brand 10

11 Agenda Expansionary Phase Growth Hurdles and Achievements New Strategy Operational and Financial Review Current Liquidity Appendix 11

12 Recent Developments Gafisa is implementing its new turnaround strategy Gafisa: Delivery of units in non-priority markets and launches should be completed this year Tenda: Units contracted by financial institutions has accelerated since June 2011 During 1Q12, Tenda transferred 2,793 units to financial institutions; 23% of mid-range of 10 14k guidance. In March, Tenda achieved positive operating cash flow; Units are being sold only to customers whose mortgages can be immediately transferred AlphaVille: Greater participation in the total product mix with 54% of the total launches Focus on cash generation and deleveraging of the balance sheet. Cash position of R$947 million in March Cash burn of R$76 million in the quarter. 12

13 LAUNCHES PRE-SALES Launches and Sales Performance Launches 2011 Launches 2010 Pre-Sales 2011 Pre-Sales % 10% 28% 61% 36% 48% 25% 65% 36% 49% Gafisa Alphaville Tenda 16% Gafisa Alphaville Tenda Gafisa Alphaville Tenda 15% Gafisa Alphaville Tenda Contribution by brand (1Q12) Gafisa (A) AlphaVille (B) Total (A) + (B) Tenda (C) Total (A) + (B) + (C) Deliveries (PSV R$mn) Deliveries (% contribution) 51% 9% ns 40% 100% Deliveries (units) Launches (R$mn) Launches (% contribution) 46% 54% ns ns 100% Launches (units) Pre-sales (R$mn) Pre-Sales (% contribution) 78% 45% ns -22% 100% Deliveries volume reached 6,165 units in 1Q12 (R$1.1 bn in PSV) reaching double the volume posted in 1Q11 The Gafisa and AlphaVille launches totaled R$463.7 million and pre-sales totaled R$498.7 million, ex-tenda AlphaVille represented 54% of total launches and 45% of total pre-sales of the consolidated results Tenda continues its clean-up process of its portfolio with R$90 million of negative pre-sales 13

14 Consolidated Financial Data Consolidated margins still impacted negatively by Tenda s performance Contribution by brand (1Q12) Gafisa AlphaVille Gafisa + AlphaVille Tenda Total 1T12 Net Revenues (R$mm) Revenues (% contribution) 53% 13% 66% 34% 100% Gross Profit (R$mn) Gross Margin (%) 23,2% 48,4% 28,3% 9,0% 21,7% Gross Profit (% contribution) 56,1% 29,8% n/a 14,2% 100,0% EBITDA EBITDA Margin 16,8% 32,5% 20,0% -5,3% 11,3% EBITDA (% contribution) 78% 38% n/a -16% 100% Consolidated key financial figures 1Q12 1Q11 YoY% Net revenues % Gross profit % Gross margin 21,7% 15,8% 590bps Adjusted EBITDA % Adjusted EBITDA (ex-tenda) % Adjusted EBITDA Margin 11,3% 3,9% 740bps Adjusted EBITDA Margin (ex-tenda) 20,0% 14% 600bps Net Loss % 14

15 Growing Volume of Deliveries Gafisa delivered 118 projects / phases and22,679 units during 2011, representing R$3.7 billion in PSV Gafisa: 34 projects/phases. 5,593 units, R$1.9 billion AlphaVille: 12 projects/phases, 2,624 units, R$530 million Tenda: 74 projects/phases, 14,462 units, R$1.3 million Chart 1. Delivered units (2007 1Q12) PSV R$1.1bn 1Q 2Q 3Q 4Q Full year PSV R$3.7bn PSV R$1.7bn Gafisa delivered 34 projects / phases and 6,165 units during 1Q12, representing R$1.1 billion in PSV Gafisa: 13 projects/phases. 2,715 units AlphaVille: 3 projects/phases, 994 units Tenda: 18 projects/phases, 2,456 units 15

16 Sufficient Land Bank to Execute Strategy & Non-Strategic LB to Improve Cash Flows Combination of AlphaVille s sizable land bank with Gafisa s strategic reserves PSV R$ million (%Gafisa) %Swap Total %Swap Units %Swap Financial Potential units (%Gafisa) Potential units (100%) Gafisa São Paulo ,8% 31,7% 1,0% Rio de Janeiro ,8% 46,8% 0,0% Total ,2% 35,5% 0,8% AlphaVille São Paulo ,5% 0,0% 98,5% Rio de Janeiro ,0% 0,0% 100,0% Other ,4% 0,0% 98,4% Total ,7% 0,0% 98,7% Tenda São Paulo ,0% 30,1% 0,9% Rio de Janeiro ,0% 21,0% 0,0% Nordeste ,0% 0,0% 0,0% Minas Gerais ,7% 21,9% 24,8% Total ,4% 24,2% 6,2% Total São Paulo ,4% 9,5% 69,0% Rio de Janeiro ,2% 10,0% 76,2% Other ,3% 0,7% 94,6% Total % 6% 81% Gafisa Segment Land bank AlphaVille Segment Land bank Tenda Segment Land bank 21% 79% SP RJ 74% 16% 10% SP RJ Other 9% 17% 25% 49% SP RJ Northeast MG 16 Note 1: Potential Sales Value. 2: 3Q11 acquisitions breakdown: 65% swap and 35% in cash

17 Agenda Expansionary Phase Growth Hurdles and Achievements New Strategy Operational and Financial Review Current Liquidity Appendix 17

18 2012 Positive Operating Cash Flow Deleveraging Strategy Gafisa has a well structured debt schedule and profile 32% Short Term Project finance now represents 48% of total debt Competitive low rates: 114,8% CDI Well structured debt schedule R$1.376 R$1.445 R$998 R$318 R$132 5% 48% 59% 52% 95% 100% 52% 41% 48% Mar/13 Mar/14 Mar/15 Mar/16 After Mar/16 Corporate Debt (R$ mn) Project Finance (R$ mn) Note: It does not include investor obligations Debt Composition (R$ mm) and Rates FGTS Debentures - WC Working Capital SFH Investor Obligations Total TR + (8.22% %) CDI + (0.72% %) CDI + ( %) 817 TR + (8.30% %) 364 CDI + (0.235% +1 %) / (IPGM %) 11.82% 48% 52% 2012 expected operating cash flow of R$500-R$700 million Sufficient liquidity to execute our development plans ~R$1bn cash + R$500 mn available for securitization + R$352 mn of finished units in inventory Leverage increased to 122% from 118% Equity Net Debt 4Q ,0% Equity reduction (22) 77 Cash Burn 1Q ,0% 18

19 Backlog of Revenues to be Recognized Margins of Gafisa and AlphaVille contribute positively to the backlog of results. Results to be recognized (REF) (R$ million) Gafisa Tenda AlphaVille Consolidated Gafisa + AlphaVille Revenues to be recognized Costs to be recognized Results to be recognized Backlog margin 35,2% 25,4% 52,5% 35,7% 39,2% Note: Revenues to be recognized are net of PIS/Cofins (3.65%); excludes the AVP method introduced by Law nº 11,638 Recievables + Inventory vs. Construction Obligations (R$ million) Receivables Inventory at Construction Total market value obligations Gafisa AlphaVille Tenda Consolidado

20 Outlook For 2012, launches are expected between R$2.7 and R$3.3 billion Gafisa should represent 50%,Tenda 10% and AlphaVille 40% of launches The Gafisa Group launched R$460 million in 1Q12 The Gafisa Group plans to deliver between 22,000 and 26,000 units in 2012 of which: 30% will be delivered by Gafisa, 50% by Tenda and the remaining 20% by AlphaVille In 1Q12, the Company delivered 6,165 units and transferred 2,793 Tenda units to financial institutions The Company expects to generate between R$500 million R$700 million in operating cash flow for the full year of Guidance 2012 Achievement 1Q12 % Consolidated Launches¹ R$2.7-R$3.3 bi R$450 MM 15% Operacional Cash Flow R$500-R$700 MM neutral 0% ¹ (50% Gafisa, 10% Tenda, 40% AlphaVille) Other Relevant Operational Indicators Achievement 1Q12 % Units delivered % Customers Transferred Tenda¹ % ¹ Customers transfered to finantial institutional 20

21 Agenda Expansionary Phase Growth Hurdles and Achievements New Strategy Operational and Financial Review Current Liquidity Appendix 21

22 Agenda Appendix A: Additional Company Information 22

23 AlphaVille successful business model Differentiated Business for Residential Land Communities Concept AlphaVille Competitive advantages AlphaVille Residential land communities with lots over 360m² Ticket over R$100 thousand High quality infra-structure Terras Alpha Residential land communities with lots from 250m² to 360m² Average ticket of R$75 thousand Optimized infrastructure leveraged by AlphaVille brand Low capital employment Partnership contracts via land swap Construction only after pre-sales Accelerated receiving flow 20% upfront; 70% during the construction High sales velocity 70% of units sold at launching date; over 90% sold before the completion of the project Steady growth track record CAGR % ROCE (%) High profitability Limited competition due to high barriers to entry the segment Wide experience in complex project approval process Solid brand awareness Better access to new land bank (Land owners trust in AlphaVille as their partners) Allow selling with prices 20-40% superior than closest competitor 23

24 24 Operation under the fundamentals takes care of Tenda issues, but implementation requires reducing operations Launches Sales Construction Current Tenda Launches with every step concluded Credit analysis based on CEF criteria 100% of projects self constructed; Mix of technologies: masonry x aluminum molds Tenda Fundamentals Launches only when the project is contracted with CEF Sales recognition only in repasse (mortgage transfers) 100% aluminum molds Minimum scale and recurrence (mín. 500 per type/year) Rationale It is a necessary condition to do the Repasse after the sale CEF is used to do non programed demands (ex.: projects modification). Major focus in contracting with CEF. Not generating accounts receivables and cancellations Reduction in unidentified customers Tenda does not master the process of structural masonry Cost, control and project cycle of the aluminum molds are far superior, since they are used in scale. Operational Cost 4 months delay on the launch 1 month delay on sales recognition Necessity of building in specific land bank 24

25 Operation under the fundamentals takes care of Tenda 25 issues, but implementation requires reducing operations Non-cash nature charges will lower earnings in the period due to the total net adjustments of R$889 million in the 4Q11 (17% 2010 and 83% 2011); 50% based on budget review, remaining due to change in strategy; Revenue reversal totaled R$1.2 billion (18% Gafisa and 82% Tenda) We expect to rebook ~ R$723 million (60%) of revenue reversal, with resale of returned units We expect to rebook ~ R$412 million (34%) in accordance with PoC of the related projects (79% launched< 2008) And only remaining 6% are unrecoverable. (R$000) 75% of adjustment to development cost budget is derived from 3rd party construction partnerships and from launches in regions no longer part of the new narrowed geographic focus; Cost overruns represent 8% of the Company s original targeted cost base of R$ 7.4bn; Sales criteria at Tenda changed to diminish future dissolutions, adequate provisions taken to complete current process. Note: Impairment is a result of strategy to focus in reduced markets and resulted in an adjustment equivalent to 18% of the recorded cost 25

26 The concept of the cost overrun 26 Real Estate accounting bases revenue recognition in PoC ( Percentage of Construction ) Total construction cost is estimated before project is launched and revenues are recognized according to the % already incurred of total construction cost Any total construction cost revision during the project impact the velocity that revenues could have been recognized in results Company needs to rewind part of revenues recognition due to a most incipient PoC than previously assumed (Rewind causes no cash impact. Only cash impact is the project cost overrun) Generic example 1. Original Budget (A) 1 Total Construction Cost: 400 (B) 1 Cost already incurred: 250 (C) 1 = (B) 1 / (A) 1 PoC: 63% 2. Revised Budget (A) 2 Total Construction Cost: (B) 2 Cost already incurred: 250 (C) 2 = (B) 2 / (A) 2 PoC: 56% 56% 450 (D) 1 PSV sold: 800 (E) 1 = (D) 1 * (C) 1 Revenues recognized: 500 (F) 1 = (A) 1 / (D) 1 Project margin: 50% (D) 2 PSV sold: 800 (E) 2 = (D) 2 * (C) 2 Revenues recognized: 500 (F) 2 = (A) 2 / (D) 2 Project margin: 44% 444 Cost overrun: Cost increase cash impact (A) 1 (A) 2 = 50 Revenue rewind: Cost increase impact on earnings (E) 1 (E) 2 = (56) 26

27 Conciliation of cost adjustments A detailed budget review identified adjustments that relate to the 2010 FY, but which were not detected by internal controls that year Cost adjustments primarily relate to operational issues stemming from relationships with franchisees, partners and contractors, revisions to vendor contracts and modifications to projects Management apportioned costs to the 2010 financial year according to whether: Construction launched in 2010 was more than 50% complete by 2011; Construction was brought in house in 2010 following budget overruns related to the use of contractors, partners and franchisees; Additional costs incurred were for projects delivered in the first quarter of 2011 related to projects launched in 2010; Projects whose costs were higher than budgeted had their foundations laid in 2010 Additional reclassifications were made to better compare the 2011 and 2010 financial statements (ie. reclassificaiton of deferred tax accounting from accrual to cash basis, advances for future capital increase, brokerage deductions from revenue, presentation of balance and net deferred tax per segment and short and long term receivables. Consolidated Preliminary Unaudited 2011 Results and Audited 2010 Results (April 2 nd, 2012) 12/31/ /31/2010 Net Income Equity Net Income Equity Adjustments - Relocation of Construction Cost Adjustment 2011 to Supplementary Provision for Bad Debt Taxes Audited 2011 Results and Restated 2010 Results (April 9, 2012)

28 Launches, Contracted Sales and Revenues Launches (R$mn) Pre-Sales (R$mn) Net Revenues (R$mn) 4, , ,005 1,005 2, ,698 1, ,913 2, ,265 1, , , , ,329 1,345 3,248 1, , , ,004 1, , , Gafisa Alphaville Tenda

29 EBITDA, Net Income and Results to be Recognized Adjusted EBITDA (R$ mn) and Margin (%) Net Income (R$ mn) and Margin (%) Results to be Recognized (Backlog) (R$ mn) and Margin (%) 13,4% 15,0% 14,9% 17,5% 17,0% % 8.1% 9.6% 9,9% 12.8% 10% 37.5% 34.6% 35.1% 35.2% 38.9% 34,5% 5% % 1,015 1, % % -15% EBITDA (R$ mm) Margin (%) -60 Net Income (R$ mm) Margin (%) Before IFRS -20% REF (R$ mm) Margin (%) 29

30 Liquidity Cash position of R$947 million Net debt to equity reached 46% (excluding project finance) Project finance represents 48% do total debt Over R$500 million of receivables from delivered units available for securitization Cash burn reduced 62% to R$76 million in 1Q12 Type of obligation (R$000) 1Q12 4Q11 QoQ% 1Q11 YoY% Debentures - FGTS (project finance) % % Debentures - Working Capital % % Project financing (SFH) % % Working capital % % Total consolidated debt % % Consolidated cash and availabilities % % Investor Obligations % % Net debt and investor obligations % % Equity + Minority Shareholders % % (Net debt + Obligations) / (Equity + Noncontrolling interests) (Net debt + Ob.) / (Eq + Min.) - Exc. Proj. Fin (SFH + FGTS) 122% 118% 360bps 73% 4559bps 46% 49% -284bps 20% 2628bps 30

31 Debt maturity (R$million) Average Cost (p.a.) Total Debentures - FGTS (proj. finance) Debentures - Working Capital TR + (8.22% %) CDI + (0.72% %) Until Mar/13 Until Mar/14 Until Mar/15 Until Mar/16 After Mar/ Project Financing (SFH) Working Capital TR + (8.30% %) CDI + (1.30% %) Total consolidated debt Investors Obligations Total consolidated debt 11.82% CDI + (0.235% %) / IGPM +7.25% % Total 100% 32% 34% 23% 7% 3% 31

32 Modification of Certain Debt Covenants 32 Following the modification of certain debt covenants, per the agreement with debt holders, Gafisa avoided triggering covenants and remained in compliance with all debt covenants. Covenant Ratios Debenture covenants - 7 th emission (Total receivables + Finished units) / (Total debt - Cash - project debt) >2 or <0 12,8x (Total debt - Project Finance debt - Cash) / (Equity + Min.) 75% 34,8% (Total receivables + Revenues to be recognized + Inventory of finished units / Total debt - SFH + Obligations related to construction + costs to be incurred) > 1,5 1,75 1Q12 Debenture covenants - 5 th emission (R$125 million) 1Q12 (Total debt Project Finance debt - Cash) / Equity 75% 34,8% (Total receivables + Finished units) / (Total debt) 2.2x 2,4x Note: Covenant status on March 31,

33 Agenda Appendix B: Macroeconomic Overview 33

34 Housing Finance System (SFH) Funding Sources Funding Sources Allocation of Resources Distribution of Resources Borrowers CEF Investments in Infrastructure Companies Registered Workers 8% of their Income FGTS (MCMV) TR + 3% Companies SFH Private Individuals Savings Accounts TR+6.17% 30% Compulsory Housing Credit TR % Central Bank Compulsory Deposits 20%(TR+6.2%).10%(Selic) Market Companies Private Individuals Companies Resources for Lending Private Individuals Note 1: TR is the Taxa Referencial de Juros, currently used to calculate the yield of several investments and loan transactions in the Housing Finance System. The base rate for the TR is the monthly average of the pre-adjusted CDBs. Note 2: FGTS is the Guarantee Fund for Time of Service, managed by the State with the objective to aid workers when they lose their jobs and also used for investments in housing, utililities and infrastructure. Note 3: Please see slide 31 and 32. Note 4: Please see slide 30.

35 R$ Billion R$ Billion Housing Finance System (SFH) Funding Sources Growth in Brazilian Savings (R$bn) LTM Monthly Disbursements by the SBPE % 19% 19% 18% 18% 19% 19% 17% 40% 41% 17% 16% 16% 15% 36% 37% 36% 37% 39% 39% 40% 41% 40% 39% 39% 39% 14% 37% 13% 13% 13% 13% 32% 34% 12% 34% 11% 10% 10% 10% % 41% 36% 37% 36% 37% 39% 39% 40% 41% 40% 39% 39% 39% 37% 32% 34% 34% (%) Var YOY (%) Var YOY Brazilian savings are growing steadily, ensuring available credit for the coming years Scenario Funding Growth Savings Increase Available Credit (R$ bi) Year 1 60% 20% % 10% % 17% % 0% Housing Credit Sources guaranteed while new sources are under development Source: Central Bank, IBGE and ABECIP.

36 Growing Credit Availability In recent years, the credit supply for real estate financing has increased substantially with lower interest rates and longer tenors More Credit at Lower Interest Rates Highlights % 12% 12% 12% 12% 13% 12% 12% 11% 12% 11% 11% 11% 11% 11% 11% 11% 11% 10% 11% 10% 9% 10% 9% 9% 9% 9% 9% 9% 9% 9% 9% 9% A favorable growth trend for credit availability began in 2005, when the annual Selic was close to 20% In 2008 the Central Bank increased the Selic from 11.25% to 13.75% without any impact on home financing According to the Central Bank, the market is expecting a Selic of 11.00% by the end of 2011 and 9.50% by the end of 2012 Credit to individuals (R$mn) Selic rates Current Selic is at 10.50% Mandatory Real Estate Credit SFH (R$ bn) Housing Financing vs. GDP 1 100% H11 Source: Central Bank, IBGE and ABECIP. 67% 67% 15% 10% 4% Denmark USA UK Chile Mexico Brazil Brazil: high growth potential for home financing

37 Robust housing growth Inflationary pressures arising from constructions costs have been main source for budget overruns in the sector INCC and IPCA (In %) 14,0 12,0 10,0 8,0 6,0 4,0 2,0 Highlights An increase in the sales revenues in the sector has been mostly due to an increase in prices rather than in volume Scarcity in the skilled labor market have pushed labor costs upwards, this trend should continue to persist in the current cycle Homebuilders have increased estimated costs as a cushion to control for budget mispricing (usually 500 bps above the INCC) 0,0 INCC (labor and materials) and IPCA (In %) Unemployment rate (In %) 16,0 14,0 12,0 10, IPCA INCC Record low unemployment rates continues to stimulate demand for lower- and middle-income markets 8,0 6,0 4,0 10,0% 9,3% 7,9% 8,1% 6,7% 6,0% 2,0 0, ,0 IPCA Labor Materials and Services Source: Central Bank, IBGE and ABECIP Unemployment

38 Macroeconomic overview of housing sector An increase in real income continues to keep consumer confidence strong IPCA and Consumer Confidence Index Index number (base=100) (LHS), % (RHS) Consumer Confidence Index IPCA Real average and minimum wage growth (In %) 7,5 7 6,5 6 5,5 5 4,5 4 3,5 3 2,5 Highlights Consumers are still interested in purchasing high-valued assets Demand in the short and medium term should remain strong, as real income generally grows faster than inflation Despite rising inflationary pressures, consumer confidence has not slowed down Real Income and IPCA R$ (LHS), % (RHS) Real minimum wage Average real wage Real Income IPCA 9,0 8,0 7,0 6,0 5,0 4,0 3,0 2,0 Source: Central Bank, IBGE and ABECIP.

39 Macroeconomic overview of housing sector Population getting wealthier and older Age's Distribution in the Population (LHS) and Total Population (RHS) LHS in %, RHS in millions 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% 66% 7% 27% 59% 7% 34% 46% 8% 46% 38% 10% 52% 27% 24% 22% 14% 19% 26% 59% 57% 52% E 2030E 2040E Youth (0-15) Elderly (65-) Active Population Total Population Share of Each Income Class in the Population Highlights An aging population means more potential consumers of homes in the future A large housing deficit stands out as an opportunity for the lowincome players in the market Families continue to migrate to higher classes and become wealthier, Class E is practically excluded from the market Housing deficit (In millions of units) 30,17 27,6 24,49 22,78 20,7 18,46 18,23 16,32 15, ,36 44,4 46,08 48,23 50,25 52,32 53,03 54,65 55,8 56, ,12 11,59 12,4 13,3 14,15 15,2 15,08 16,77 17,26 16,35 16,41 17,03 15,68 14,9 14,02 13,66 12,26 11,58 15, e 2014e Class D Classes A and B Class C Class E Housing deficit Source: Central Bank, IBGE and ABECIP.

40 Government Programs MCMV I Government subsidized financing programs were created to reduce the significant housing deficit in the lower income segments Highlights Simulation of Potential Impact on Market Size Financing for one million houses with up to R$23,000 in subsidies to families with income of up to 10x the monthly minimum wage (R$4,650) Average Unit Price: R$80k Before Minha Casa, Minha Vida Program Subsidy 0 16,000 R$34 billion in subsidies (Federal Government, FGTS, Mortgage 80,000 64,000 BNDES) Cost (TR+) 7% 5% Financing of homes with a price range of R$80,000 to R$130,000 Interest Rates ranging from TR+5% TR+8% Homebuilders can finance 100% of the property value No down payment and no installments during the construction period (for families with income up to 3x the minimum wage) Monthly installments Minimum monthly income Equivalent of minimum wages Market Size (millions of homes) 665 2, , Additional market of approx. 10 million houses Source: Market Reports.

41 Government Programs MCMV II Government renewed MCMV program, giving more visibility to the Real Estate sector: Highlights Changes from MCMV I to MCMV II: MCMV I MCMV II Financing for two million houses up to 2014 Total Subsidies (R$ Billions) R$72 billion in subsidies Income limit from MCMV Up to R$4,650 Up to R$5,000 Continued growth for the next 4 years already committed Income limit by FGTS Up to R$4,900 Up to R$5,400 General details to come up to the beginning of 2011 Monthly installments 2 years 4 years It demonstrates the government commitment to provide financing for entry level homebuyers Deadline Dec 2010 Dec 2014 Net Income Bracket 0 3MW 1 3 6MW 6 10MW Up to R$1,395 (400,000 units) R$1,395 - R$2,790 (400,000 units) R$2,790 R$4,650 (200,000 units) Up to R$1,600 (1,200,00 units) R$1,600 R$3,100 (600,000 units) R$3,100 R$5,000 (200,000 units) Units to be constructed 1,000,000 2,000,000 Source: CS, UBS, CEF, Market reports Note 1: MW stands for minimum wage,

42 CEF Real Estate Financing Caixa Econômica Federal has reached historical records of real estate financing Real Estate Financing Amount Funded (R$ bn) 83,1 26,9 49,7 49, ,6 12,9 25,2 10,0 56,2 16,1 6,9 10,3 30,0 34,0 37,0 6,9 6,8 18,3 3,9 5,5 3,0 4,9 9, H11 Savings Account Housing Financing Units ( 000) FGTS CEF vs. Market Financing of New Units (R$ bn) H11 CEF Free Market New Loans (R$ bn) H11 Savings Account FGTS Savings Accounts FGTS Source: Caixa Econômica Federal.