D.R. Horton posts $1.3 bln loss; cuts dividend

By Ilaina Jonas

NEW YORK (Reuters) - D.R. Horton Inc (DHI.N), the largest U.S. home builder, halved its dividend and posted a quarterly loss of $1.3 billion on Tuesday as it wrote down the value of its land and unsold homes after cutting prices and sweetening incentives to boost sales.

But shares of D.R. Horton and other home builders finished significantly higher following cautiously optimistic statements from D.R. Horton and U.S. home financing provider Fannie Mae.

D.R. Horton stock ended the day up 5.5 percent, while Centex Corp CTX.N closed 4.8 percent higher, and Beazer Homes USA Inc (BZH.N) rose 4.6 percent.

D.R. Horton's aggressive selling came at the expense of profitability as the company reported an operating loss, and also led to charges as the lower prices translated to lower values of land and inventory still on its books in many markets.

Home sales fell by a third, and orders declined by nearly 25 percent as the slump in the housing market took a toll.

The loss amounted to $4.14 per share for the fiscal second quarter ended March 31, compared with a year-earlier profit of $51.7 million, or 16 cents per share.

Home-building revenue fell 40 percent to $1.62 billion. The company closed on the sale of 6,719 homes in the quarter, down 31.4 percent from a year earlier. The average selling price fell 7.7 percent to $237,803.

Gross margins fell to 9.4 percent from 17.7 percent a year earlier, with 5.7 percentage points evaporating from more liberal use of incentives, the company said.

Net orders fell 24.6 percent to 7,528, while order value tumbled 36 percent to $1.7 billion, the Fort Worth, Texas-based company said.

During the quarter, Horton took an income tax expense of $714.3 million for the value of deferred tax assets it may not be able to use in full to offset taxes on future earnings.

D.R. Horton ended the quarter with an inventory of 15,100 homes in some phase of construction, down 13 percent from the end of December. Of those homes, 7,100 were not under contract for sale. The company ended the quarter with 3,200 finished homes unsold, down from 5,300 in December.

The U.S. housing sector is experiencing its worst slump in decades, with foreclosures rising and home prices falling.

Chief Executive Donald Tomnitz said he expects homes dumped on the market because of mortgage foreclosures to compete with new home sales in the second half of the calendar year and next year.

"We're not seeing a lot of pricing stability right now," Tomnitz said in a conference call with analysts.

However, Tomnitz expects the company to return to an operating profit in the fiscal third and fourth quarters.

With many of its older homes now sold, Tomnitz said he expects the drastic incentives and price cuts to ease and margins return to the low to mid teens.

"It's getting closer to the end battle," he said.

'WORSE CYCLE SINCE DEPRESSION'

Fannie Mae's CEO Daniel Mudd said the housing market is now in "the belly" of one of the worst cycles since the Great Depression, suggesting a bottom may be in sight.

Fannie Mae (FNM.N), the largest U.S provider of home financing, posted a massive quarterly loss on Tuesday, its third straight. It also slashed its dividend and set plans to raise $6 billion of fresh funds.

To navigate the downturn, U.S. builders have shifted their focus to survival, selling off excess land and inventory accumulated during the boom years of 2002 to 2006.

"All the home builders, including Horton, are just in hunker-down mode where they're trying to generate cash, to survive through this downturn, and I think Horton will," Weiss Research analyst Mike Larson said.

To conserve cash, D.R. Horton cut its quarterly cash dividend to 7.5 cents a share from 15 cents. The lower dividend is payable on May 29 to stockholders of record on May 19.

The builder generated $450 million in cash flow from operations during the quarter. In the fiscal first half, it narrowly exceeded its cash flow goal of $1 billion for the year. It ended the quarter with a home-building cash balance of $519 million.

Shares of D.R. Horton closed up 88 cents at $16.85, while Fannie Mae jumped 8.9 percent to $30.81, both on the New York Stock Exchange.

(Reporting by Ilaina Jonas; Editing by Tim Dobbyn/Jeffrey Benkoe)