Brazil's Cyrela posts smaller Q4 profit as expenses rise

SAO PAULO, March 20 Thu Mar 20, 2014 10:17pm EDT

SAO PAULO, March 20 (Reuters) - Cyrela Brazil Realty SA , Brazil's largest homebuilder, saw net income fall in the fourth quarter as it dedicated more money to its sales efforts and rewarded employees.

Cyrela posted 183 million reais ($78.54 million) in fourth-quarter net income on Thursday, down 26.7 percent from a year earlier. The result was in line with an average forecast of 189 million reais in a Reuters poll of eight analysts.

The company is widely viewed as ahead of its peers in terms of revamping its operations after a period of aggressive expansion led to huge cost overruns and big quarterly losses industrywide.

With its turnaround mostly complete, Cyrela stepped up new project launches and sales in the fourth quarter, leading to an increase in selling expenses which rose to 122 million reais from 113 million reais in the third quarter. General and administrative expenses also rose, mostly due to an increase in employee bonuses.

The fourth quarter continued a recent trend of higher profitability, though the improvement was slight. Cyrela posted a gross profit margin of 32.9 percent in the quarter, up from 32.8 percent in the third quarter, and estimated a gross margin of between 31 percent and 35 percent for full-year 2014.

While Cyrela had focused in previous quarters on improving cash generation and reducing debt, fourth quarter results saw those gauges move in the opposite direction, partly due to the acquisition of a land plot for its Terra Encantada project in Rio de Janeiro.

The company posted cash burn of 134 million reais in the quarter, up from a 35 million reais in the previous quarter and 233 million reais cash generation in the year-earlier period.

Cyrela's net debt to shareholder equity ratio rose to 39.6 percent in the quarter from 35 percent in the prior three months, while trailing 12-month return on equity fell to 13.7 percent from 14.9 percent at the end of the third quarter.

Earnings before interest, taxes, depreciation and amortization - a gauge of operating profit known as EBITDA - fell 17.7 percent from a year earlier to 284 million reais, missing the average estimate of 338 million reais in the Reuters survey.

($1 = 2.33 Brazilian reais) (Reporting by Asher Levine; Editing by Stephen Coates)

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