UPDATE 5-Lennar post big loss on housing woes
(Adds CEO quotes, details; updates stock price)
By Ilaina Jonas
NEW YORK, Sept 25 (Reuters) - Builder Lennar Corp (LEN.N), the No. 2 U.S. home builder, on Tuesday reported its worst-ever quarterly results as the crumbling housing market led to a much wider-than-expected loss, sending its shares to a five-year low.
Lennar, whose sales for the period fell 44 percent, also said it had slashed jobs by about 35 percent and that further cuts would be necessary.
The loss for the third quarter ended on Aug. 31 was $513.9 million, or $3.25 a share, compared with a year-earlier profit of $206.7 million, or $1.30 per share.
Wall Street analysts on average had expected a loss of 55 cents per share, according to Reuters Estimates.
"Our third-quarter results on their face are disappointing. Nevertheless, they're part of a program to reflect the harsh realities of a very difficult market condition," Lennar Chief Executive Stuart Miller said in a conference call with analysts.
The U.S. housing market has been suffering from a steep downturn for nearly two years as high prices and climbing interest rates have deterred prospective buyers. Problems in the credit market, stemming from defaults of mortgages to those with checkered credit histories, have exacerbated conditions as those with good credit ratings have found mortgages more difficult to obtain.
"They're dealing with a lot of excess capacity still," Thomas Leritz, portfolio manager with Argent Capital Management, which does not own home-building shares but follows the stocks.
"In addition to that, you have foreclosures, so there's excess supply coming back into the market from foreclosures as well," he said. "What we're looking for is some sense that there's no additional inventories going into the market."
The market declined more rapidly as the quarter passed, Miller said with mortgage difficulties feeding the cancellation of new orders, which ran 32 percent for the quarter.
"August really seemed to be a melting pot of all things negative, and that defined the end of the quarter," Miller said.
On Tuesday, the National Association of Realtors said the inventory of U.S. existing single-family homes for sale rose in August to their highest level in 18 years.
Also on Tuesday, the Standard & Poor's/Case Shiller national home price index showed the price of an existing single-family home fell 0.4 percent in July from June and 3.9 percent from a year earlier, the steepest drop since July 1991.
Miller predicted that home builders would continue to scale back their businesses and that the recovery -- whenever it arrives -- would be a slow one.
WRITE-DOWNS
Lennar said its loss included a charge of $3.33 per share for write-downs of land values and write-offs for land options it walked away from. Lower land values in the western part of the United States drove a significant amount of the charges, which totaled about $848 million.
To cope with the market downturn, the large publicly traded home builders have been cutting back on production of new homes and land holdings, while shoring up their balance sheets.
Lennar reduced its debt by $200 million year over year, ended the quarter with $128 million in cash on its balance sheet and said it continued to believe it would end its fiscal year in November cash-flow positive.
It also has slashed the number of lots its owns or controls by 40 percent to 207,000 and cut its starts by 62 percent.
Like most other home builders, Miami-based Lennar did not provide an outlook, citing market uncertainty.
The company's shares, which have lost more than half their value so far this year, were down 3.4 percent at $23.37 at mid-afternoon on the New York Stock Exchange after falling to $22.50 earlier in the session.
Lennar helped drag down the sector. The benchmark Dow Jones U.S. Home Construction Index .DJUSHB slipped 2.1 percent.
The company's home-sale revenue fell 44 percent to $2.2 billion, as the number of sold homes, excluding unconsolidated joint ventures, dropped 41 percent and the average sale price slipped 6 percent to $296,000.
During the quarter, Lennar offered buyers $46,000 per home in incentives to move unsold homes, up from $35,900 in the year-earlier period. That helped to compress home-sale gross margins to 14 percent from 19.5 percent in third quarter 2006.
New orders fell 48 percent to 5,804 homes, while loss on land sales totaled $344.7 million.
According to BuilderOnline, Lennar overtook Pulte Homes Inc (PHM.N) as the No. 2 U.S. home builder by number of houses sold last year, behind D.R. Horton Inc (DHI.N) (Reporting by Ilaina Jonas, Benjamin Klayman, Chris Reiter and Deepti Chaudhary in Bangalore)
