3Q15 and 9M15
Earnings Results
São Paulo, November 4th, 2015: PDG Realty S.A. (PDGR3) announces today its results for the third quarter and nine months of 2015. Founded in 2003, PDG develops projects for different segments and publics, operating in the development, construction and sale of residential and commercial units, as well as land development.
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www.pdg.com.br/ir ir@pdg.com.br
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Conference Call
Date:
Thursday, November 5th, 2015
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English
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Replay:
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3Q15 Highlights and Recent EventsSuccessful Na Ponta do Lápis campaign, with sales of R$319 million. A total of 1,087 units were sold from 2,954 visits, a conversion ratio of 37%. (page 6)
3Q15 and 9M15 Earnings Results 1
Message from Management 3
Operating and Financial Indicators 5
Operating Performance - Launches and Cancellations 6
Operating Performance - Sales 6
Operating Performance - Cancellations and Resale 8
Operating Performance - Sales Speed (VSO) 10
Operating Performance - Inventory 11
Operating Performance - Landbank 12
Operating Performance - De-risking Panel 13
Operating Performance - Title Individualizations 14
Operating Performance - Historical Data 15
Operating Performance - Mortgage Transfers 15
Financial Performance16
Balance Sheet and Income Statement21
Given the change in the country's economic scenario, the new Management began implementing an action plan based on seven main initiatives: (1) restructuring of the debt (2) acceleration of asset sales; (3) increased efforts to sell inventory units and the speeding up of mortgage transfers; (4) the continuation of cost reductions; (5) more emphasis on execution in order to conclude and individualize titles of projects in advanced stages; (6) the reduction of liabilities; (7) preservation of the Company's cash.
One of the plan's first measures was to begin an ample restructuring of the Company's debt, whose maturities were incompatible with the pace of asset monetization and inefficient in regard to the collateral structure. In order to help with this task, the Company hired Rothschild as its financial advisor.
Another important action plan initiative was the acceleration of asset sales based on the continuous evaluation of non-core assets (shareholding interests, projects, land plots), together with the pursuit of strategic partners for ongoing projects. As part of this strategy, PDG sold its 25% interest in the Jardim das Perdizes project, in São Paulo, for R$160 million in October, the proceeds of which were used to deleverage the Company.
Seeking to further improve the performance of inventory sales, in August we conducted the nationwide Na Ponta do Lápis campaign, which proved highly successful, generating sales of R$319 million from 1,087 units. Another important factor that helped the Company's sales performance was the continuing high resale pace of cancelled units within the same quarter, which remained at around 40%.
We are also taking various steps to continue reducing costs, whose results were reflected in the substantial downturn in general and administrative expenses this quarter. One such example was the subletting of space in PDG's central office, which reduced rental and condominium expenses by more than 24%. We will continue to impose rigid cost control and reduction mechanisms, while adapting PDG's structure to the size of its operation.
The Company had 48 ongoing projects at the close of the third quarter and the cost of works to be incurred totaled R$838 million, less than R$1 billion for the first time, further reducing the execution risk and substantially improving asset quality. Advanced works are the subject of redoubled attention so that their conclusion and title individualization occur as quickly as possible, allowing for the timely transfer of the units and the consequent inflow of cash.
For yet another quarter, PDG recorded positive operational cash generation, reducing its extended leverage by R$400 million. Nevertheless, the Company believes it is necessary to speed up cash inflow and is directing its efforts towards this goal.
There were no launches this quarter, with all attention geared towards the monetization of assets and the reduction of costs and liabilities. The Company has no plans for launches in the short and mid-term.
We believe the quality of the Company's assets, almost entirely delivered and with no execution risk, together with the action plan prepared by the new Management, will allow PDG to successfully overcome all the challenges imposed by the current economic scenario.
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