Brazil homebuilder MRV beats second-quarter earnings estimates

SAO PAULO Thu Aug 14, 2014 8:37pm EDT

SAO PAULO Aug 14 (Reuters) - Brazilian homebuilder MRV Engenharia e Participacoes SA beat profit expectations for the second quarter as demand for low-income housing remained robust while the negative impact from older, less profitable projects diminished.

Belo Horizonte, Brazil-based MRV said on Thursday that adjusted net income rose 14.2 percent to 134 million reais ($59.2 million) in the quarter on an annual basis, beating estimates of a 98.7-million-real profit in a Reuters poll of seven analysts.

MRV, like other Brazilian homebuilders, has struggled with cancellations and cost overruns in recent years after a period of aggressive and poorly managed expansion.

"This quarter was an inflection point," Co-Chief Executive Officer Rafael Menin told Reuters on Thursday.

He explained that projects launched before 2012, which tend to be less profitable due to poor cost controls, now make up a smaller share of total deliveries, boosting margins.

MRV's gross margin rose to 27.8 percent in the quarter from 26.4 percent in the previous three months.

Menin said the company was well-prepared to deal with headwinds caused by a slowdown in Brazil's economy because of its focus on the low-income market, much of which is government-subsidized, and low competition in the markets where it operates.

The company generated 138 million reais in free cash flow in the second quarter, well above the 56 million reais it produced in the previous three months. MRV has said problems in the payment-transfer system from state-run mortgage lender Caixa Economica Federal were to blame for low cash generation in the previous quarter.

Still, net debt rose to the equivalent of 30.8 percent of shareholder equity from 29.5 percent in the previous three months.

Menin said the company was more focused on share buybacks than dividend payments as a way to boost shareholder value.

Earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, fell 1 million reais from a year earlier to an adjusted 161 million reais, in line with analyst estimates. ($1 = 2.265 Brazilian reais) (Reporting by Asher Levine and Juliana Schincariol; Editing by Reese Ewing and Jan Paschal)

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