Conference Call Transcript
3Q08 Results
Trisul (TRIS3 BZ)
November 13th, 2008
Operator:
Good morning, ladies and gentlemen. At this time, we would like to welcome everyone
to Trisul‟s 3Q08 results conference call. Today with us we have Mr. Jorge Cury Neto,
CEO; Mr. Marco Antônio Cattini Mattar, CFO; and Mrs. Rebeca Ouro-Preto (IRO).
We would like to inform you that this event is recorded and all participants will be in
listen-only mode during the Company‟s presentation. After Trisul‟s remarks, there will
be a question and answer session for analysts and investors. At that time, further
instructions will be given. Should any participant need assistance during this call,
please press *0 to reach the operator.
Today‟s live webcast, both audio and slide show, may be accessed through Trisul‟s
Investor Relations website at www.trisul-sa.com/ir. The following presentation is also
available for download from the webcast platform.
Before proceeding, let me mention that forward-looking statements will be made under
the Safe Harbor of the Securities Litigation Reform Act of 1996. Forward-looking
statements are based on the beliefs and assumptions of Trisul‟s management and on
information currently available to the Company. They involve risks, uncertainties, and
assumptions because they relate to future events, and therefore depend on
circumstances that may or may not occur in the future. Investors should understand
that general economic conditions, industry conditions, and other operating factors could
also affect the future results of Trisul, and could cause results to differ materially from
those expressed in such forward-looking statements.
Now, I will turn the conference over to Mr. Jorge Cury Neto, CEO. You may begin your
conference.
Jorge Cury Neto:
Good morning to all. Welcome to Trisul‟s conference call to discuss its results for the
3Q08. We will start with slide four, which shows the period‟s highlights.
Net operating revenue totaled R$94 million, an increase of 71% over the 3Q07. Net
income reached R$12 million. Year-to-date net income was R$44 million, and margin
was 18%. EBITDA was R$14 million in the quarter, with a margin of 15%. Year-to-date
EBITDA was R$44 million and margin was 18%, which is 22% higher than in the same
period last year.
We launched seven projects this quarter, with 1,800 units, of which 69% were in the
Trisul life segment. These launches correspond to a total PSV of R$368 million. Trisul‟s
share was R$226 million, which means a 852% increase over the same period last
year. Four of the seven projects were launched outside São Paulo city, underlining our
expansion and geographical diversification.
In the 3Q, we sold 1,400 units, 400% more than we sold in the 3Q07, totaling R$277
million. Trisul‟s share of these sales was R$170 million, which is a 235% growth year
on year.
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Conference Call Transcript
3Q08 Results
Trisul (TRIS3 BZ)
November 13th, 2008
Let us move to slide five for the recent events. I would like to emphasize that we
carried out our first debenture issue by the end of July, advancing the current credit
crunch scenario, showing the level of conservativeness of our management in order to
ensure our cash flow for the last few years. With this, Trisul is in a healthy financial
position, with a cash balance of R$310 million. We also have credit lines amounting to
R$5.2 billion to finance our constructions and for our clients.
All of these factors place us in a comfortable and solid position for the long term and
enable us to achieve a sustainable growth despite a limited credit scenario. We take
the opportunity to inform you that on October 16th we concluded our share buyback
program, buying 3 million shares at an average price of R$2.85 per share. Also, On
October 31st, these shares were canceled, without alteration in the Company‟s capital
stock, resulting in a new free float of 35%, consisting of 27 million shares.
Since we strongly believe in the performance of the future results of the Company, we
have launched another buyback program, by which 10% of the new free float can be
acquired in the next 12 months.
Now on slide six, we take the opportunity to inform you that recently two funds have
acquired relevant participation of our Company. Tarpon acquired 5.35% of the total
common shares of Trisul, and Credit Suisse Hedging-Griffo acquired 5.10%. We are
very proud of having this competence and important funds as our shareholders.
We also committed a Sustainability Committee in the Company, in other to reduce the
socio-environmental impact of the activities at the construction sites using sustainable
materials and residue management, as well as other social responsibility initiatives.
Aiming to ensure our competitiveness, we are working towards obtaining the ISO 9001
certification, which is already in its concluding phase, and we expect to obtain the
certification by the end of this year. The certification is important because it guarantees
a unified quality management process in the whole Company.
Now moving to slide seven, I want to reinforce that in a difficult moment such as now, it
is important to reaffirm the Company‟s strategic guidelines. First guideline: we will
continue our focus on projects in the low-income segment, mainly supported by our
Trisul life product. As you will see later, 69% of the units launched in the quarter were
in this segment. Despite the worsening of the global economic crisis, we believe that
the low-income segment will be the least affected due to the following factors: the low
loaning period of the end-buyer continues to be 30 years; the interests for this segment
are fixed at the most of 12% per year. The source of the saving accounts and SFH
remains plentiful over R$200 billion to financing housings. And despite of all, our buyer
who earns an average of eight to 12 minimum wages decides its purchase by necessity
of having his first home.
Second guideline: we will continue to capitalize on the opportunities in other segments.
Third guideline: we will proceed with the strategy of expanding our operations to cities
with more than 200,000 inhabitants, with a limit of 500 km of distance from São Paulo
city. Of the seven launches this quarter, four of them were outside of São Paulo city.
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Conference Call Transcript
3Q08 Results
Trisul (TRIS3 BZ)
November 13th, 2008
Fourth guideline: we will continue to develop and improve our sales team by training
our brokers with specific knowledge of the Trisul life products and also support us with
the sales of our inventories. Our sales team has reached 36% of our contracted sales
this quarter.
We will proceed with caution, preserving our solid financial health and seeking to
maximize value for our shareholders. We will maintain our flexible growth strategy,
stable cash position and continuous monitoring of the market conditions, adjusting our
launches whenever is required.
Now, I would like to pass the word to Marco, our CFO, who will continue the
presentation.
Marco Antônio Mattar:
Good morning, everyone. I will now talk about the operating highlights, starting with
slide nine. In the 3Q08, we launched seven projects with PSV of R$368 million,
corresponding to 1,789 units.
Of the total PSV, R$226 million is Trisul‟s share, a growth of 852% versus the 3Q07.
Year-to-date PSV of Trisul totaled R$652 million, a 526% increase over last year. Of
the total units launched, 69% are in the low-income segment, in line with our strategy of
increasing the focus on this segment. Looking at the table, you can see that the
average price of the seven launches in the quarter was R$205 thousand.
On slide ten we present the VSO of the Company. This indicator measures our
capacity to reduce inventory. Considering the inventory at the end of June plus the
units launched in the 3Q08, we had a total of 5,642 units for sale. Since we sold 1,435
units this quarter, we reduced our inventory by 25.4%.
The graph shows that the total of units launched in the 1Q08, we have sold 55% up to
the end of the 3Q08, notably our Trisul life products, which already accumulates sales
of 74% in the same period. Of the launches of the 2Q08, 46% were already sold, once
again led by Trisul life, which reached 51%, and in the 3Q the sales speed of the
launches was 38%.
On slides 11 and 12, I will talk about the Trisul life launches in the quarter. Of the seven
projects, four were in the low-income segment; two were launched in São Paulo city,
one in the countryside, and one in the coastal city of Santos. Trisul life launches
correspond to 1,231 units, that is 69% of all the units launched, reaching a total PSV of
R$166 million.
Now, to slide 13. We had a launch in the high-income segment in Alphaville, one
medium-income segment launch in Santo André, in metropolitan São Paulo, and one
commercial project in São Paulo, adding to a PSV of R$200 million, with 558 units.
Moving to slide 14, this quarter, total contracted sales were R$277 million, a 150%
growth over the 3Q07. Trisul‟s share of the sales was R$170 million, which is 235%
more than in the same period of last year. Of the 1,435 units sold in the period, 684
units, or 48%, were launched in the same quarter.
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Conference Call Transcript
3Q08 Results
Trisul (TRIS3 BZ)
November 13th, 2008
During the 9M08, we sold 3,535 units, a 294% growth over the last year, totaling
R$752 million, with Trisul‟s share being R$479 million; an increase of 218% over the
9M07.
Of the units sold in the quarter, more than 60% were in the low-income segment,
marked by the strong participation of Trisul life products in the Company‟s total sales.
In monetary terms, Trisul life was responsible for 44% of all contracted sales.
On slide 15, I will talk about our land bank. We have a potential land bank of R$2.6
billion, with presence in 28 cities, as can be seen in the graph below. Of the total land
bank, R$2.2 billion is for the low-income segment, and the remainder is divided
between the high-income and medium-income segments. That is, currently we have
around 85% of our PSV and 90% of the units of our land bank dedicated to the lowincome segment, under our product Trisul life.
In monetary terms, we had an increase of 13 p.p. over the last quarter, when 72% of
the land bank was dedicated to Trisul life launches. We are continuing our strategy of
operating in cities with more than 200,000 inhabitants.
On slide 16, as you can see, our projects in the low-income segment have an average
of 328 units per launch, and built on an average area of about 20,000 m2. Compared to
the land bank last quarter, the number of units per launch fell from an average of 430
units per launch to the current 338.
This decline is due to a more conservative strategy aiming at launching smaller
projects on account of the economic crisis that has been affecting the market. The
objective is to launch projects that are big enough to enable dilution of costs and
optimization of resources, but not too big as to lead to high concentration in a single
address, thus affecting sales speed.
I will now pass the word to Rebeca, our Investor Relations Officer, who will comment
on the financial performance.
Rebeca Ouro-Preto:
Good afternoon, everyone. We will now move on to the financial indicators. I will start
on slide 18. We can see net operating revenue totaled R$94.3 million this quarter, a
71% growth over the 3Q07, once again due to the increase in the number of launches
in recent quarters; the progress of construction works and higher contracted sales,
which rose by 222% year on year. Year-to-date net operating revenue was R$249
million, a 77% growth over the 9M07.
Gross profit totaled R$33.1 million in the 3Q08, 34% higher than in the 3Q07. Gross
margin was 35.1%, and our current margin is hardly compared to the margin of the
previous year, because the mix of products was completely different than the one we
have today. In the last year, the Company has focused on low-income segment, where
margins are lower than the ones carried in previous years.
Net income in the quarter was 22% higher than in the 3Q07, totaling R$12.1 million.
Year-to-date net income is accumulating R$44.4 million, a 69% growth over the same
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Conference Call Transcript
3Q08 Results
Trisul (TRIS3 BZ)
November 13th, 2008
period last year. Net margin in the quarter was 12.8%, and in the year almost 18%.
This decline in the net margin from the same period last year is mainly due to the
decline in gross margin, as explained above.
EBITDA in the quarter was R$14 million and in the year, R$45 million; a 22% increase
over the same period of 2007. EBITDA margin in the quarter was 14.8%, and in the
year, accumulated 18.1%.
Now, I will comment on balance sheet data on slide 19. Here we can see more details
about our debenture issuance, which we have already mentioned earlier. The total
issue amount was R$200 million, with interest of CDI+2.5% per year, maturing in five
years, and payment of principal beginning every 36 months. For both the debenture
issue and for the corporate outlook, Fitch assigned the rating „A(bra)‟. The issuance
was in July, at a very opportune moment before the worsening of the credit crunch that
we had experienced in recent months. After the issuance at the end of September, the
Company ended the quarter with a cash position of R$310.5 million.
Now, on slide 20, we can see our debt profile. Loans and financing, including all
debentures totaled R$307 million, as against cash of R$310.5 million on September
30th. Our debt is divided into financing for construction and working capital loans, while
we have R$261 million for working capital needs, including R$200 million in the
debentures we issued, and R$46 million for financing our construction through the
SFH. The recent debenture of R$200 million is basically for acquisition and payment of
land and for working capital requirements. 83% of our debt is long term and 17% is
short term.
Now, moving on to slide 21, we can see our shareholders‟ equity on September 30 th
was R$488 million and represented the following composition according to the table
shown in this slide. Adding to the total shareholders‟ equity Trisul‟s total debt of R$307
million, the total capitalization at the end of the period corresponded to R$796 million.
Apart from our comfortable cash position, we also have, as mentioned earlier, credit
lines amounting to R$5.2 billion to finance our constructions and for our clients.
Now, moving on to the final slide, slide 22, I will talk about launch guidance. In the last
quarter, we revised our guidance, mainly due to the sudden lack of liquidity of the
market. But over the past few months, we have witnessed increased stress in the
financial market, added to the slowdown of the demand, thus we see the need to once
again adapt ourselves to the new economic scenario, following our flexible growth
strategy.
In the last month, we have already felt a reduction in demand, therefore we are
adjusting our 4Q08 launches to this new reality, postponing part of the 4Q launches
and waiting until the market improves. So, for the 4Q08 we are planning a volume of
launches of R$150 million, closing the year with expected launches of R$800 million.
Now, I will pass the word to our president, who will further comment on the subject.
Thank you.
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Conference Call Transcript
3Q08 Results
Trisul (TRIS3 BZ)
November 13th, 2008
Jorge Cury Neto:
To finalize the presentation, I would like to reinforce that we will only launch projects
that we think will have good demand. The same strategy will be adopted in 2009. We
will monitor demand and adjust launches, thus preserving our cash flow and
establishing, above all, a healthy inventory. We will closely monitor the market‟s
development to confirm the launch volume for 2009, which will be announced in the
1Q09.
However, it must be noted that despite the reduced volume of launches, our results in
2009 will only be slightly affected, since 75% to 80% of 2009 revenues will come from
previous years‟ launches, launched before 2009. On the other hand, any reduction in
guidance will positively impact the Company‟s cash flow.
As everybody knows, our business is capital intensive. According to the assumptions of
our model, for each R$100 million launched the working capital required is about 20%
to 25% of that amount. Therefore, each launch must be evaluated carefully so that we
do not comprise our cash, which is an important resource in the current scenario.
So, to finalize, we are ready for the challenge of the coming years, because we have
cash, team, focus, product and a lot of projects approved. However, we also need
good demand to confirm those launches. The Company‟s objective is to seek a
balance between growth and cash flow, maintaining the financial health of the
Company.
Thank you very much. We will now move to the Q&A session.
Adrian Huerta, JPMorgan:
Good morning, everyone. My question has to do with what kind of adjustments you are
doing to the Company operational wise, in order to adapt the new guidance for this
year and next year? I mean, we saw margins dropping quite sharply in the 3Q, already
from a low level in the 2Q as well. So, what are you doing with your operating base,
and how much are you targeting to your operating expenses for next year? Thank you.
Marco Antonio Cattini Mattar:
About the expenses, we have to consider that we launched in the last 12 months 28
launches, which we will obviously deliver next year. And secondly, we have our
revenues growing in the next year, so our expenses our diluting a little bit when you
see the revenues that we are going to have in 2009.
But you are right. The gross margins are increasing because the market is getting
tough, and the prices are increasing a little bit.
Adrian Huerta:
Thank you.
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Conference Call Transcript
3Q08 Results
Trisul (TRIS3 BZ)
November 13th, 2008
Operator:
Gentlemen, we have no further questions at this time. I would like to turn the
conference back over to Mr. Jorge Cury Neto for any closing remarks.
Jorge Cury Neto:
Thank you all. And we are ready to answer your questions through our IR department.
And I hope to see you again in the next call for the results. Thank you, and see you
next time.
Operator:
Thank you. This thus concludes today‟s conference call. At this time, you may
disconnect your lines.
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