Brazil's Brookfield in bigger-than-forecast Q3 loss, costs jump

SAO PAULO Wed Nov 13, 2013 8:47pm EST

SAO PAULO Nov 13 (Reuters) - Brazilian homebuilder Brookfield Incorporações SA posted a quarterly loss that far exceeded analyst estimates, hit by a surge in costs as well as sales cancellations.

The result will further cement Brookfield's laggard position in the industry as it struggles to return to profitability following an overly aggressive expansion plan that led to hefty cost overruns and project delays.

The company booked a net loss of 53.2 million reais ($22.8 million) in the third quarter, its fourth straight quarter of losses, compared with a 17.2 million reais profit a year earlier.

Three analysts polled by Reuters had forecast a 16.8 million reais loss in the period, on average, while one analyst had forecast a 4 million reais profit.

Cost problems continued to dog the company, with costs related to real estate development and sales at 680.3 million reais in the quarter, up 27 percent from a year ago.

"The company's rapid growth in recent years has added complexity and challenges to our operations," Chief Executive Officer Nicholas Reade said in the filing.

"Management remains confident in Brookfield's medium to long term prospects and foresees positive financial results in 2014."

Sales cancellations, which have dragged down profitability for many of Brazil's builders in recent quarters, soared some 160 percent from a year ago to 234.8 million reais.

The company began tightening its credit standards in 2010 to tamp down cancellations, but many Brazilian homebuyers are now stepping back after seeing their personal finances deteriorate following a credit-fuelled consumption boom.

On a more positive note, Brookfield posted a gross profit margin, or the portion of revenue left over after construction costs, of 14.9 percent, an improvement from 2.1 percent in the second quarter but still down from 18.6 percent a year ago.

Cash burn fell to 1.4 million reais, down from 72 million reais in the second quarter, while net debt to shareholder equity edged up 2.3 percentage points to 118.3 percent.

"Cash generated by the delivery of units should result in a reduction in leverage in 2014," the filing said.

Brookfield posted earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, of 60.4 million reais, short of an average estimate of 91 million reais in the Reuters survey.

A couple walks along the rough surf during sunset at Oahu's North Shore, December 26, 2013. REUTERS/Kevin Lamarque

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