Hovnanian CFO sees no strong '08 rebound
NEW YORK (Reuters) - The sagging U.S. housing market probably will not significantly recover in 2008, Hovnanian Enterprises Inc.'s (HOV.N) chief financial officer said at the Reuters Real Estate Summit on Monday.
"'08 is probably not going to be a year of strong recovery," said J. Larry Sorsby, CFO of the sixth-largest U.S. home builder, in New York. "Our hope is that it stays no worse than we are today."
Sorsby told Reuters Television that he would not be surprised if the company's margins in fiscal 2008 were below normal levels of the low 20-percent range.
Part of the outlook is based on Monday's report that existing home sales in May dipped 0.3 percent, but the supply of new homes for sale swelled to a near nine-month supply, according to the National Association of Realtors.
"They're at unhealthy levels," Sorsby said.
U.S. home builders have been closely watching sales of existing homes, Sorsby said.
"Historically, it wasn't something we or other home builders focused much on, but as the market deteriorated we started monitoring resales religiously market by market," Sorsby said.
To weather the downturn, Hovnanian is focusing on reducing its debt-to-capital to 50 percent or lower from its current 55 percent.
"We're going to be cash-flow positive in second half of this year and into '08," he said. "You'll see us chip away at that into
The company plans to post positive cash flow of $100 million to $400 million in fiscal 2008, he said.