By Asher Levine
SAO PAULO Dec 18 Brazilian homebuilder Gafisa
SA plans to rein in new projects and expenses next
year as it seeks to cut debt and boost profitability, executives
said on Wednesday.
Its Gafisa unit, which builds mid-priced homes, will launch
between 1.5 billion reais ($647 million) and 1.7 billion reais
worth of new projects next year, while its Tenda unit, aimed at
low-income buyers, will begin between 600 million reais and 800
million reais in projects. The estimates are down from about 2.7
billion reais in total this year, executives said at an investor
event on Wednesday.
Gafisa shares rose nearly 5 percent to 3.67 reais in early
Gafisa embarked on a turnaround strategy in October 2011
after a rapid expansion into untried markets led to huge cost
overruns, sales cancellations and big quarterly losses. Since
then, the company has reduced expenditures and temporarily
halted launches in the Tenda unit so it could focus on selling
off unprofitable inventory.
Net debt is likely to reach between 55 percent and 65
percent of equity next year, a sharp drop from 126 percent at
the end of September, Chief Executive Duilio Calciolari said at
It will use proceeds from Gafisa's sale of a 70 percent
stake in its high-end Alphaville unit to repay maturing debt,
pay shareholders a one-time dividend and buy back stock.
"We had determined that our leverage had gotten out of our
hands due to operational questions, (that it was) not a question
of financial discipline," Calciolari said.
He added that expense controls will be strengthened. "Now
financial discipline continues but operational control goes
along with it."
TENDA "A START-UP NOW"
Tenda resumed launches earlier this year with a new business
model under which presales could only be booked if mortgages
were able to be transferred to financial institutions.
"We see Tenda as basically a start-up now," said Rodrigo
Osmo, head of the unit. "It's at a moment where it needs to
prove its business model."
Osmo said most of the old unprofitable projects should be
delivered by mid-2014 and that the company's optimal size should
be over 1 billion reais in annual launches.
Calciolari said the company expects to reach combined return
on capital employed - a gauge of financial efficiency - of
between 14 percent and 16 percent at its Gafisa and Tenda units
over about three years.