Cyrela Brazil Rlty S/Adr

Good morning, ladies and gentlemen. Welcome to Cirela Brazil Realty SA's second quarter 2024 results conference call. Today with us are Mr. Rafael Horn, CEO, and Mr. Miguel Mikkelberg, CFO and IRO. This call is being recorded and simultaneously translated into English. You can listen to the translation by clicking the interpretation button. To those listening to the English translation, you can mute the original audio by clicking mute original audio. Also, you can find the slide deck in English on the company's investor relations website at www.ri.sirela.com.wr. During the company's presentation, all participants will be in a listen-only mode. After the presentation, we will hold a question and answer session. To ask a question, please click the Q&A button and enter your name and organization. When your name is called out, a request will pop up for you to unmute your microphone and ask your question. We would like to inform you that any statements that may be made during the conference call related to Cirella's business perspectives operating in financial targets are projections and forecasts made by the company's management that may or may not occur. Investors should understand that political, macroeconomic, and other operating factors may affect the company's future and lead to results that differ materially from those expressed in such forward-looking statements. To start Sorella's second quarter 2023 earnings call, I'd like to turn it over to Mr. Raphael Horne, our CEO. Mr. Horne, you may proceed. Good morning, everyone. The second quarter was characterized by a deterioration in the macroeconomic outlook on the global scale, which had an impact on Brazil. The persisting inflation in the United States changed agents' expectations around the possibility of an interest rate cut in the United States. That caused a depreciation of the exchange rate and in the future Brazilian interest rate, changing the previous scenario that predicted more interest rate cuts and a final select rate of one digit. Despite this iteration in the macro scenario, we saw resilience in the real estate market. Excluding swaps and based on the CBR percentage, we had pre-sales of 3.3 billion in the first half of the year. That's up 12% year on year. Our launches in the second quarter were below our expectations, but the strong sales performance and the success of the launches to the market makes us very confident for the second half of this year. The management expectations regarding launches for the year remain unchanged. Our financial results reflected how solid our operations have been in recent quarters. Our net revenue was 1.9 billion reals in the quarter and 3.4 billion year-to-date, an increase of 18% compared to the first six months of 2023, and a 0.6 percentage point improvement in a gross margin, amounting to 32.2% for the year. We remained disciplined in relation to the expenses, and including our operational leverage, we were able to generate a net income of $412 million in the quarter, with a net margin of 22.2%. Our year-to-date net income reached 679 million, an increase of 53% compared to 2023. Brazil is always a challenging context, and interest rates remain high, but we expect to continue to work to have good operating and financial results in the coming quarters. Let's now talk about our operating results. Thank you, Rafa, and good morning, everyone. On slide four, we'll address Cirela's launches. In the second quarter of 2023, we launched nine new products with a PSV of 1.5 billion reels, 58% lower year-on-year, and 14% lower quarter-on-quarter. The company's stake in the volume launched was 74%. Excluding swaps, we had 1 billion in launches this quarter. On slide four, we'd like to highlight the Escape Eden launch in Sao Paulo with a PSV of 313 million reels. On slide six, we'll talk about sales performance. Pre-sales were 2.5 billion in the quarter, 5% lower year on year, and 10% higher quarter on quarter. Serial stake in the volume sold was 74%, totaling 1.8 billion, totaling 1.8 billion. Excluding swaps, sales amounted to 1.7 billion reals in the serial stake. On slide seven, we'll talk about our sales speed. The company's SOS in the last 12 months was 52.6%. And looking at the speed by launch period, projects launched in the second quarter 2024 have been 51% sold. Talking about inventory on slide eight, We had inventory at market value totaling 8.7 billion reals, 9% lower quarter on quarter, and the total inventory totaled 6.5 billion in serial stick. We can see those changes on the chart to the left. On slide nine, we talk about the finished units. We sold 17% of the finished units at the beginning of the period. And adding up the inventory of projects delivered along the quarter and pricing of units at market value, finished units show a 7% drop quarter on quarter, totaling a 1.3 billion and 1 billion in Cirella's stake. On slide 10, we'll talk about the delivered units. Solarell delivered 10 projects with a PSV of 1.8 billion. Year to date, we delivered 16 projects with a PSV of 1.8 billion. On slide 12, we'll talk about our financial results. Net revenue was 1.9 billion in the quarter, 14% higher on higher, pardon me, higher quarter on quarter, and 18% higher year on year. Year to date, revenue was 2.4 billion, 18% higher year on year. The gross margin in the second quarter was 32.9% comparing to 32.3% in the second quarter 2023 and 31.4% in the first quarter 2024. Year to date, our gross margin was 32.2% comparing to 31.6% in the first quarter last year. On slide 13, we'll talk about our net income and profitability. Net income was $412 million compared to $279 million in the second quarter of 2023 and $267 million in the first quarter of 2024. Year-to-date, our profit stands at $679 million, 53% higher than in 2022. In the quarter, our return on equity which is net income of the last 12 months over the average shareholder's equity, was 15.5%. On slide 14, we'll talk about the debt. Gross debt at the end of the quarter was 5.2 billion rials, and the cash position was 4.4 billion. Our net debt was 799 million rials. 84% of the total gross debt is long-term. Our net debt over equity ratio was 9.1%. On slide 15, we see the cash generation. We had 61 million cash consumption at the start of the year compared to 22 million in the second quarter 2023, and a cash generation of 130 million in the first quarter this year. Year-to-date cash consumption was 60 or cash generation was 69 million below the cash burn of 13 million in 2023. And now we can start the Q&A session. Thank you. Thank you. We'll now start the question and answer session. To ask a question, you just need to click on the raise hand button. When your name is called out, a request will pop up for you to unmute your microphone and you can ask your question. Fanny Oring from Centendare has the first question.

Miss Fanny?

Good morning. Good morning, Rafael and Miguel. Congratulations on the results. I've got two questions. I was quite surprised with the levels presented by the company that were higher than the company, the debt levels. I know you don't give guidance, but what could we expect in terms of that for the coming quarters? And my second question has to do with cash. We see that the banks are a bit more aggressive when it comes to home equity. So what do you expect from the competitive scenario and the sources for cash?