Fourth Quarter Earnings Conference Call. Fourth Quarter 2006 Launches

Transcription

1 Fourth Quarter 2006 Earnings Conference Call Fourth Quarter 2006 Launches Riviera Nice Manaus AM Collori São Paulo SP Vivance Rio de Janeiro RJ Investor Relations Contact: Gustavo Felizzola 4Q06 Earnings Conference Call São Paulo January 30th, PM (Brasilia Time), 11AM (USET) Phone: +1(973) Code: Webcast: 1

2 Business Update Wilson Amaral Chief Executive Officer 2

3 2006 Highlights Record Project Launches of R$1.0 billion for Full Year 2006 Correspondly High PreSales of R$995 Million during 2006 The backlog margin for 4Q06 was stable at 42.6%, 3.8p.p. higher when compared to the 4Q05 In 2006, Backlog of Revenues reached R$297 million Gafisa s debut in the Maceio market, under the partnership with Cipesa More recently, we closed the Acquisition of AlphaVille Urbanismo S.A. Land reserves reached R$3.0 billion, an increase of 61% compared to Gafisa land reserve is equivalent to three years of operations at the current level of launches For 2006 mortgage granted by commercial banks and CEF increased 96% and 54%, respectively Creation of the following management committees: (i) Audit, (ii) Compensation, (iii) Corporate Governance; and (iv) Finance 3

4 4Q06: Gafisa Reports 4% Growth in Launches and 86% in PreSales Launches by Region (R$ mm) PreSales by Region (R$ mm) New Markets Rio de Janeiro Sao Paulo % New Markets Rio de Janeiro São Paulo % Q05 4Q06 4Q05 4Q06 Launches Mix Breakdown 4Q06 PreSales Mix Breakdown 4Q06 3% 9% 16% HIG MHI MID 72% 30% HIG 17% MHI MID 49% 45% 27% AEL LOT COM 3% 1% 15% AEL LOT COM 34% Segmentation (Prices in R$/sq.m) HIG High Income: > 3,600 MHI Middle High: 2,800 < > 3,600 MID Middle Income: 2,000 < > 2,800 AEL Affordable entry level: 1,800 < > 2,000 COM Commercial LOT Urbanized lots 4

5 2006: Record R$1.0 billion in launches and R$995 million in Presales Launches by Region (R$ mm) PreSales by Region (R$ mm) New Markets Rio de Janeiro São Paulo New Markets Rio de Janeiro São Paulo % % % % Launches Mix Breakdown FY 2006 PreSales Mix Breakdown FY %2% 7% 19% HIG MHI MID 72% 3% 3% 14% 15% HIG MHI MID 65% 42% AEL AEL 30% LOT COM 36% 29% LOT COM Segmentation (Prices in R$/sq.m) Segmentation (Prices in R$/sq.m) HIG High Income: > 3,600 MHI Middle High: 2,800 < > 3,600 MID Middle Income: 2,000 < > 2,800 AEL Affordable entry level: 1,800 < > 2,000 COM Commercial LOT Urbanized lots 5

6 National Expansion: Laying the Groundwork to Achieve Longterm Goals Gafisa currently operates in 13 states and 21 markets Gafisa s National Foothold Recent Developments A. Salvador (Bahia) 3rd largest City of Brazil First projects launched under partnership with OAS Located at AlphaVille Salvador F E B. Vitoria (Espirito Santo) One of the highest GDP per Capita of Brazil Oil Industry expected to drive strong demand Opportunities for Secondhome Projects A G C. Niteroi (Rio de Janeiro) Very attractive and underexplored market Second most important city of Rio de Janeiro State Part of diversification strategy in Rio de Janeiro Gafisa D C B D. Curitiba (Parana) 7th largest City of Brazil Lowest unemployment rate of the country Construction Begins along with Launches E. Belem (Para) Second project launched under partnership with Premium F. Manaus (Amazonas) Third project launched under partnership with RN G. Maceió (Alagoas) First projects launched under partnership with Cipesa 6

7 The 100% growth in Mortgage Granted in 2006 is still shy if Compared to the Potential of The Market Mortgage Granted (R$ million) CAGR 0306 (%): 53% 24,0 Timeline Recent Developments in the Mortgage Market 2003 Central Bank increases bank requirement to invest in the sector 2004 Resolution Improves Foreclosure regulation 6,7 4,5 2,2 +34% 36% 33% 9,0 6,0 3,0 +54% 9,1 4,8 14,0 9, Mortgage by Commercial Banks¹ 52% 60% 13,9 +73% 54% CEF Mortgage Loans Sources: ABECIP, Central Bank ¹ Total mortgage lending using savings deposits funding (channeledlending requirement). ² Of the R$14 billion estimated for 2006, R$9,4 billion were entailed to FGTS. ³ Estimated number for From January to November period of 2006 lending volume totaled R$8,4bn. 96% Individuals get tax exempted on MBS Investments ABN Amro, Santander and HSBC reduce Mortgage Rates to 8%p.y from 12%p.a. Itaú, Bradesco, Unibanco follow suit Santander launches 10yr fixed mortgage rate (21%p.a.) 2006 Bradesco, Santander and Itaú offer up to 20yr fixed rate at 14%p.a. CEF reenters to middle income market (10.9%p.a.) HSBC offers 10yr fixed mortgage at 12.7%p.a. Gafisa, HSBC and Santander offer preapproved mortgages BCB allows paycheck discount for mortgage lending to public employees Banks allowed to offer fixed rate mortgage with funds from SFH (limited to 14.2% p.a.) 2007 CEF board members agreed that in 2007 ~50% of the mortgage loans entitled to the FGTS resources might be channeled to the new projects Banco do Brasil expects to enter in the housing finance market this year CEF reduced the bureaucracy in filling for construction financing. It intends to lend R$3,5bn for this purpose. The government intend to create a fund using FGTS resources to subsidize 2/3 of the monthly installments to homebuyer contracts. The annual household income 7 required will be limited to 5 minimum wages.

8 Decreasing Interest Rates and Development of the Mortgage Market is already impacting PreSales Financing provided by Gafisa versus Mortgage provided by Banks (%) % % % 65% 90% 85% Mortgage Loans Gafisa Mortgage Loans Gafisa Mortgage Loans Gafisa 8

9 Closing of the Acquisition of AlphaVille On January 8th 2007, Gafisa concluded the acquisition of AlphaVille Urbanismo S.A. AlphaVille Urbanismo is the largest and only nationwide community development company in Brazil, with no major competitors to date. Segment characterized by: high entry barrier; higher margins and lower cash exposure than that of residential buildings Gafisa acquired 60% of AlphaVille for R$198.4 million, of which R$20 million in cash and R$178.4 million paid in 6,358,616 share Gafisa will acquire the remaining 40% over the next five years in cash or shares, at Gafisa s sole discretion. Gafisa s PostAcquisition Shareholder Structure Shareholders Vehicles Controlled by Equity International Vehicles Controlled by GP Investimentos AlphaVille Shareholders Treasury Stock Market Float Total Position as of 12/31/2006 # Shares (%) 28,234, % 22,468, % 8,141, % 52,667, % 111,511, % Position as of 01/08/2007 (Post Acquisition) # Shares 28,234,042 22,468,727 6,358,616 3,124,972 52,667, ,853,538 (%) 25.0% 19.9% 5.63% 2.8% 46.7% 100% 9

10 Land Bank: High growth with relatively low risk Combination of AlphaVille s sizable Land Bank with Gafisa s strategic reserves Gafisa Usable Area (sq.m) Potential Units Future Sales (R$000) % acquired by swap Sao Paulo 305,034 2, % Rio de Janeiro 345,906 3, % New Markets 817,290 6,144 1,240 77% Gafisa Total 1,468,230 12,902 3,047 79% AlphaVille Southeast 20,570,203 13,703 1,781 84% Northeast 4, , % South 3,853,600 3, % MidWest 1,635,676 1, % North 392, % AlphaVille Total 30,593,768 20,779 2,683 77% Gafisa + AlphaVille 32,061,998 33,681 5,730 77% ¹ As of 09/30/06 10

11 Underpinning our actions is a commitment to staying ahead with Governance Transparency, clear policies, disclosure and best practices in corporate governance Audit Committee (required NYSE Rule 303A.03) (i) Reviews the integrity of the financial statements and the financial reporting process of the Company Compensation Committee (required NYSE Rule 303A.05) (i) Evaluate the CEO's performance in light of goals and objectives, (ii) Determine and recommend to company's shareholders the CEO's compensation level Nominating and Corporate Governance Committee (required under NYSE Rule 303A.04) (i) To develop and recommend to the board a set of corporate governance guidelines applicable to the corporation Finance Committee (i) approves our corporative finance policies, follows up and examines their effectiveness and implementation (ii) examines our investment and financing plans and opportunities (iii) examines the impact of the investment and financing plans in the Company s cash flow and capital structure 11

12 Financial and Operational Performance Duílio Calciolari Chief Financial Officer 12

13 4Q06: Operating Highlights Net Revenues (R$ mm) Gross Profit (R$ mm) 28,3% 128,9 84.8% 238,3 36,0 27,9% 87.1% 87.1% 67,4 4Q05 Net Revenues 4Q06 4Q05 Gross Profit 4Q06 Gross Margin EBITDA¹ (R$ mm) Net Income¹ (R$ mm) 30,5 12,8% 2,2% 2, % 5,6 4,3% 149.6% 149.6% 5,8% 13,9 4Q05 EBITDA 4Q06 EBITDA Margin 4Q05 Net Income 4Q06 Net Margin 13 ¹ Under new accounting policy for selling expenses.

14 2006: Operating Highlights Net Revenues (R$ mm) Gross Profit (R$ mm) 416,9 457,0 9.6% 30,4% 29,9% 45.3% 663,8 42.7% 11.5% 124,5 138,8 198,1 29,8% Gross Profit Gross Margin EBITDA¹ (R$ mm) Net Income¹ (R$ mm) 14,6% 14,1% 11,3% 66,0 65,0 13,2% 96,6 64.2% 4,2% 5,6% 145.2% 20,0 27,0 75, Adj. EBITDA EBITDA Margin ¹ Under new accounting policy for selling expenses Net Income Net Margin 14

15 Revenues Reflect Previous Years PreSales 2006 Presales x Recognized Revenues for 2006 (R$000) Developments PreSales % of PreSales Revenues % of Revenues Launched in ,292 56% 78% 109,930 17% Launched in ,290 22% 167,644 26% Launched in ,029 15% 197,434 30% 58% Launched in ,973 4% 134,705 21% Launched in ,490 3% 45,244 7% Other (1,003) 0,2% Total 995, % 663, % 15

16 Productivity Indicators: G&A and Selling Expenses G&A / Launches (R$ mm) 4Q06 G&A / Launches (R$ mm) ,5% 2.8pp 6,3% 4,7% 0.7pp 5,3% 4Q05 G&A / Launches 4Q G&A / Launches Selling Expenses / Pre Sales (R$ mm) 4Q06 Selling Expenses / Pre Sales (R$ mm) ,0% 5.8pp 9,3% 4.1pp 4,2% 5,2% 4Q05 4Q06 Selling Expenses / PreSales Selling Expenses / PreSales 16

17 Changes in Accounting for Selling Expenses Matching BRGAAP Practices with USGAAP Differences between Previous and New Practices BR GAAP (old policy) BR GAAP (new policy) USGAAP Institutional Advertising Expensed as Incurred Expensed as Incurred Expensed as Incurred Sales Stand / Showroom / Model Apartment Deferred and recognized as the development progresses Deferred and recognized as the development progresses Deferred and recognized as the development progresses Project Specific Advertising Deferred and recognized as the development progresses Expensed as Incurred Expensed as Incurred Sales Commissions Expensed as Incurred Expensed as Incurred Expensed as Incurred 17

18 Reconciliation for Changes in Accounting for Selling Expenses Matching BRGAAP Practices with USGAAP Income Statement (R$000) 4Q06 Proforma Results under Previous Policy Effect of New Accounting Practice 4Q06 Results under New Policy Net Revenues 238, ,287 Gross Profits 67,356 67,356 Gross Margin 28.3% 0.0p.p. 28.3% Selling Expenses (11,244) (4,841) (16,085) EBITDA 35,362 (4,841) 30,521 EBITDA Margin 14.8% (2.0p.p) 12.8% Net Income 17,992 (3,195) 13,932 Net Margin 7.6% (1.3p.p) 5.8% EPS(R$) Income Statement (R$000) 2006 Proforma Results under Previous Policy Effect of New Accounting Practice 2006 Results under New Policy Net Revenues 663, ,847 Gross Profits 198, ,051 Gross Margin 29.8% 0.0p.p. 29.8% Selling Expenses (39,785) (11,886) (51,671) EBITDA 108,526 (11,886) 96,640 EBITDA Margin 16.3% (1.8p.p) 14.6% Net Income 83,078 (7,845) 75,233 Net Margin 12.5% (1.2p.p) 11.3% EPS(R$)

19 Backlog: Change in Practice increases Visibility of Gafisa s Financials Currently, Gafisa has approximately R$297 million of results to be recognized Revenues and Results be Recognized (R$ mm) Backlog Margin (%) 4Q05 (a) 3Q06 (b) 4Q06 (c) (c)/(a) % (c)/(b) % 43,2% 42,6% Backlog of Revenues 436,1 679,8 795,3 82% 17% 38,8% Costs of Units Sold to be Recognized (266,9) (386,1) (456,3) 81% 25% Backlog of Results (previous method) 169,2 293,7 339,1 84% 6% Backlog Margin (previous method) 38.8% 43.2% 42.6% Backlog of Results (new method) 297,4 Backlog Margin (new method) 37.4% 4T05 3T06 4T06 19 with margins of 42.6%

20 Reconciliation of Backlog Changes in Accounting of the Backlog Income Statement Backlog of Results (old policy) Backlog of Results (new policy) Construction Cost Recognized Recognized Recognized Land Cost (cash and swap payments) Recognized Recognized Recognized Development costs Recognized Not recognized Recognized Land paid under revenue swap Recognized Not recognized Recognized 20

21 Financial Position coupled with focus on working capital management (R$ million) 4Q06 3Q06 4Q05 Short Term Debt Long Term Debt Total Debt Cash and Cash Equivalents Net Debt (Net Cash) Shareholder s Equity Total Capitalization , (79) 810 1, Net Debt/ Equity 10% 4% 68% 21

22 Gafisa x Consensus Estimates Guidance First Call Consensus Estimates 2006 FY Results New Projects Launched (R$000) ,005 PreSales Net Revenues Gross Profits Gross Margin 30.7% 29.8% EBITDA EBITDA Margin 1617% 15.4% 16.5% Net Income Net Margin 12.3% 8.5% EPS(R$) Net Debt (47) 29 Source: Thomson First Call (1) Previous Accounting Practice (2) Including IPO Expenses 22

23 SafeHarbor Statement We make forwardlooking 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. Forwardlooking statements include statements regarding our intent, belief or current expectations or that of our directors or executive officers. Forwardlooking 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. Forwardlooking 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 forwardlooking statements. Many of the factors that will determine these results and values are beyond our ability to control or predict. 23