Gafisa Reports Results for Second Quarter 2010

SAO PAULO, Aug. 4 /PRNewswire-FirstCall/ -- Gafisa S.A. (NYSE: GFA; Bovespa: GFSA3), Brazil's leading diversified national homebuilder, today reported financial results for the second quarter ended June 30, 2010.  The financial statements were prepared and presented in accordance with Brazilian GAAP and in Brazilian Reais (R$). Further details of the Company's first quarter results may be found on the Gafisa website: www.gafisa.com.br/ir

Commenting on results, Wilson Amaral, CEO of Gafisa, said "I am very pleased with our second quarter operating results which demonstrate our ability to not only capitalize on the recognition of our strong brands in the market, but also leverage our operating scale throughout the organization. The growth trajectory of sales continued, achieving R$ 890 million during the quarter, with especially strong demand for the middle to high income products of Gafisa and Alphaville.  As planned, we picked up our launches of new developments to R$ 1,008 million for the quarter and we expect to continue increasing this pace throughout the remainder of the year. Our adjusted EBITDA for the quarter was R$ 184 million with a margin of 19.8%, a marked improvement over last year's 15.8% during the same period, as increased operating leverage, realized synergies, and our ability to increase prices in the mid to high end segments resulted in better SG&A ratios, as well as improved gross, adjusted EBITDA, and backlog margins."

Amaral added, "All sectors of the market continue to benefit from growth of the Brazilian economy, which resulted in the expansion of real wages, record low unemployment rates of 7% for the month of June and strong consumer confidence. We are especially well positioned to gain share with our portfolio of brands that serve all segment of the population. Tenda continues to be well positioned to benefit from the Minha Casa Minha Vida ("MCMV") program with one of the lowest average price points of the industry.  Access to housing credit is expanding, also reflecting efficiency improvements at the Caixa Economica Federal, which through June 26 processed over 226 thousand contracts under MCMV, valued at R$ 17.6 billion as compared to a total of 275.5 thousand contracts valued at R$ 14.1 billion for full year 2009. Tenda is poised to be one of the leading providers of housing to this segment while our other brands continue to be extremely popular among the mid to high segment of the Brazilian population."

Second Quarter Results

In the 2Q10, launches were R$ 1,008 million, an increase of 61% compared to the 2Q09.  In total, 34 projects/phases located in 27 cities were launched. The Gafisa segment was responsible for 49% of launches, Alphaville accounted for 22% and Tenda for the remaining 29%.  Forty-five percent of Gafisa launches represented a price per unit below R$ 500 thousand, while nearly 75% of Tenda's launches had prices per unit below R$ 130 thousand. Pre-sales were R$ 889.8 million, an increase of 6.5% as compared to the equivalent period last year.

On the strength of solid sales in the 2Q10, both of newly launched projects and units from inventory, and an accelerated pace of construction, the Company was able to recognize substantial net operating revenues for 2Q10, which rose by 31% to R$ 927.4 million from R$ 705.8 million in the 2Q09, with Tenda contributing 32% of consolidated revenues.

Our Adjusted EBITDA for the 2Q10 totaled R$ 184 million, 65.3% higher than the R$ 111.3 million for 2Q09, with a consolidated adjusted margin of 19.8%, compared to 15.8% in the 2Q09. This gain is part of an expected gradual recovery due to the fact that the Company's results recognition increasingly reflects the execution of recent projects at the same time that older, oftentimes lower margin projects are being delivered.

Net income in 2Q10 was R$ 97.3 million compared to R$ 57.8 million in the 2Q09. However, if we consider the adjusted net income (before deduction of expenses related to minority shareholders and stock options), this figure reached R$ 114.1 million, with an adjusted net margin of 12.3%, representing growth of R$ 33 million when compared to the R$ 81.1 million in the 2Q09.

The Company's land bank of approximately R$ 15.8 billion is composed of 198 different projects in 21 states, equivalent to more than 90 thousand units. The size of our land bank continued to benefit from the disbursement of a portion of the proceeds raised in the follow-on offering concluded in 1Q10. However, in keeping with our strategy, 39% of our land bank was acquired through swaps and thus required no cash obligations.  Approximately 48% of the potential units in the consolidated land bank correspond to the Gafisa brand while more than one quarter of the land bank is allocated to Tenda and Alphaville respectively, reflecting our strategy of serving all segments of the homebuyer market.

Key Recent Developments

Gafisa's improved operating margin during the quarter reflects the benefits of the Company's national reach, broad range of quality product offerings in various market segments, strong execution capacity, as well as robust market fundamentals. Strong demand permitted higher pricing, mainly in the mid and upper middle segments, in markets such as São Paulo while improved G&A and direct selling expenses as a percentage of net revenues (from 6.9% to 4.7%, and from 8.1% to 7.2%, respectively) also contributed to higher EBITDA margin of 19.8%, offsetting higher labor and materials costs throughout the sector.

In addition to posting strong sales, the Alphaville unit extended the footprint of its well-recognized brand during the quarter, launching six new projects with potential sales value of more than R$225 million in diverse regions throughout the country.  These included developments in Riberao Preto (182 units), Vitoria (168 units), Mossoro (93 units), and two in Brasilia (238 units). One of the highlight s for the Company was the launch of the first phase of Alphaville Brasilia, the largest project in the company's history with a total project area of approximately 22 million m2, where 95% of units sold within one week.  

Gafisa, known as an innovator within the sector, finished the quarter employing aluminum molds in seven projects under construction, and expects to use this modern construction approach in a total of 15 projects by the end of 2010. These molds were first used by Tenda and shorten the construction cycle up to 1/3 of the standard time are now being used by Tenda in developments throughout Brazil. Tenda's projects include Portal do Sol, an affordable development of 416 units in Rio de Janeiro with an estimated construction cycle of just 6 months.  We are also testing a similar innovative technology under the Gafisa brand that could reduce construction time by 6 months.

During the quarter, Gafisa enhanced operating efficiency of Tenda through a number of measures which included increasing the level of standardization of building processes in the affordable segment, and completing the implementation of SAP enterprise software, which began running in July. These measures have already begun to raise the overall efficiency of Tenda by mitigating rising materials costs through purchasing leverage, lowering construction time, and permitting greater integration with Gafisa's operations and best practices.

Gafisa's ongoing efforts to streamline financial credit procedures and strengthen Tenda's relationship with Caixa Economica Federal, the mortgage lender which plays a central role in administration of the federal housing program, Minha Casa, Minha Vida, are showing results. We were able to contract 6,239 units in the 2Q10 (9,027 in the 1H10), an increase of 124% when compared to the 1Q10. We have also transferred 2,515 mortgages to Caixa during the 2Q10 (4,413 in the 1H10), with more than 1,000 in June alone, reflecting monthly improvement.

Tenda continues to be well positioned to meet growing demand for MCMV program by offering one of the lowest average price-per-unit among publicly traded Brazilian homebuilders. In the 1H10 the average launch price per unit was R$ 109 thousand while the average sales price was R$100 thousand, respectively 16% and 23% below the MCMV price limit.  Approximately 75% of Tenda's launches and sales had an average price per unit below R$ 130 thousand.

Outlook

Gafisa continues to expect launches in the range of R$ 4 billion to R$ 5 billion through 2010, with an expected full year 2010 EBITDA margin to reach between 18.5%- 20.5%.  Through the first half of 2010, Gafisa reached 38% of the mid range of the launches guidance, in line with historical seasonality. Regarding EBITDA Margin, Gafisa delivered 19.8% in the 2Q10 and 19.2% in the 1H10, well within the previously stated guidance range.

Conference Call

The management of Gafisa will host a conference call in English on Wednesday, August 4, 2010, at 11:00 a.m. US EST/:12:00 p.m. Brasilia time.  To access the call, dial +1 (800) 860-2442 from the United States and +1 (412) 858-4600 from other countries and enter the code Gafisa.  A replay of the conference call will be available until August 11, 2010.  To access the replay, dial +1 (877) 344-7529 from the United States and +1 (412) 317-0088 from other countries and enter the code #442512#1.  A live webcast of the conference call will be available on the internet at www.gafisa.com.br/ir.

About Gafisa

Gafisa is a leading diversified national homebuilder serving all demographic segments of the Brazilian market. Established over 55 years ago, we have completed and sold more than 990 developments and built more than 11 million square meters of housing, more than any other residential development company in Brazil. Recognized as one of the foremost professionally managed homebuilders, "Gafisa" is also one of the most respected and best-known brands in the real estate market, recognized among potential homebuyers, brokers, lenders, landowners, competitors, and investors for its quality, consistency, and professionalism. Our pre-eminent brands include Tenda, serving the affordable/entry-level housing segment, and Gafisa and Alphaville, which offer a variety of residential options to the mid- to higher-income segments. Gafisa S.A. is traded on the Novo Mercado of the BM&FBOVESPA (BOVESPA:GFSA3) and on the New York Stock Exchange (NYSE:GFA).

Only financial data derived from the Company's accounting system were subject to review by the Company's auditors.  Operating and financial information not directly linked to the accounting system (i.e., launches, pre-sales, average sales price, land bank, PSV and others) or non-BR GAAP measures were not reviewed by the auditors.  Additionally, financial statements and operating information consolidate the numbers for Gafisa and its subsidiaries, and refer to Gafisa's stake (or participation) in its developments.  To view a more detailed review of third quarter results filed with the Brazilian Comissao de Valores Mobiliarios ("CVM"), please visit Gafisa's website www.gafisa.com.br/ir.

This release contains forward-looking statements relating to the prospects of the business, estimates for operating and financial results, and those related to growth prospects of Gafisa. These are merely projections and, as such, are based exclusively on the expectations of management concerning the future of the business and its continued access to capital to fund the Company's business plan. Such forward-looking statements depend, substantially, on changes in market conditions, government regulations, competitive pressures, the performance of the Brazilian economy and the industry, among other factors; therefore, they are subject to change without prior notice.

SOURCE Gafisa S.A.