3q08 presentation
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Investor Relations ContactJulia [email protected]
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Third Quarter 2008 ResultsEarnings Conference Call
Overview of 3Q08 Results - Wilson Amaral, CEO
Financial and Operational Performance
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Highlights of the Quarter
3Q08 launches increased 79% over 3Q07Launches increased to R$762 million in 3Q08 from R$426 million in 3Q07
Pre-sales increased 37% from 3Q07Pre-sales increased to R$504 million in 3Q08 from R$367 million in 3Q07
Net operating revenues rose 19% from 3Q07Net operating revenues increased to R$373 million in 3Q08 from R$313 million in 3Q07
3Q08 EBITDA reached R$64 million (17.2% EBITDA margin) a 40% increase from 3Q07
Net income increased to R$38 million in 3Q08, a 5% increase from R$36 million in 3Q07
Gafisa consolidates presence in low income segment, with Fit showing R$187 million inlaunches and R$124 million in pre-sales in 3Q08
In this quarter, Gafisa completed five projects totaling 820 units. Fit completed its firstdevelopment, Fit Jaçanã in São Paulo.
Note: 2007 adjusted for capitalized interest and land swaps.
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Recent Developments
Leadership in Low Income Segment Enhanced: On October 21, the merger of Fit
Residencial and Construtora Tenda S.A was approved by 98% of Tenda shareholders
present at a general meeting. Gafisa now holds 60% of the total capital and voting
shares.
Strategic Investor Increases Participation: Gafisa announced that Equity International
(“EI”) had acquired an additional 3.3 million Gafisa ADRs representing 6.6 million
shares. The new stake brings EI ownership of Gafisa outstanding shares up to 18.7%
from 13.7%.
Strengthens Accounting Practices: We have started to account for land acquired
through product swaps, which previously did not flow through our financial
statements. This has increased our revenue and cost recognition.
SAP and SOX implementation : The implementation of the SAP management is on
track and will serve as an important tool in managing the company’s operations. In
October 2008 we began the SOX certification testing period.
Moody’s Ba2 international rating and Aa3.br Brazil national scale rating.
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Gafisa now controls Construtora Tenda, a leading low income real estate developer that incorporated Fit Residencial.
98% of Tenda shareholders present at the General Meeting on October 21st
approved the incorporation of 100% of Fit's shares into Tenda.
Gafisa owns 60% of Tenda's shares after the transaction.
Tenda will continue to operate as a publicly traded company, listed on Bovespa.
Tenda has:
The strongest balance sheet and cash position in the segment,
One of the largest land banks,
Strong distribution platform,
Housing for the 4-20 time minimum wage segments.
We expect this transaction to be highly accretive.
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16%34%
64%30%
32%
20%12%
16% 14%
74%
34%
54%
2005 2006 2007 9M08
Gafisa direct financing longer than 36 monthsGafisa direct financing up to delivery of keysMortgage Loans
Increased Mortgage Penetration
Pre Sales financed by Gafisa vs. financed by Banks
Reduction in accounts receivables duration, improves Gafisa’s working capital
Higher returns
Higher asset turnover
Improving terms for clients with lower rates and longer payment periods
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2.2 3.0
18.4
12.0
22.8
3.83.9
5.5
7.0
6.9
3.7
5.4
4.9
9.3
2003 2004 2005 2006 2007 Jun-07 Jun-08
Mortgages using resources from FGTSMortgages using resources from Savings Accounts
25.3
16.3
6.06.9
10.4
115126
135
150
187
205
2003 2004 2005 2006 2007 Sep-08
Savings Accounts SBPE Balance (R$ bn)
Sep 2008 Savings grew 19% from Sep 2007
Sources: ABECIP, Central Bank of Brazil, CEF and FGV.
Mortgage Lending Expanding Rapidly Strong growth in mortgage lending still does not meet pent-up demand
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90%
46%
Housing Credit (R$ bn)
57%
51%
15%
3%
36%
41%
63%
90%
27% 98%
-1%
55%
CAGR (2003-2007): 43%
15.7
28.2
80%
Savings up to SepFGTS up to June
2007 2008
Delivering on Growth Strategy: Diversification and Expansion
3Q Launches (R$ million)
471
953
79%
151 185
243
334
87
188
3Q07 3Q08
New Markets
Rio de Janeiro
São Paulo
426
762
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Gafisa 69%
Bairro Novo 3%
Alphaville 7% Gafisa 66%
Fit 24%
165 189
64
250
68
134
3Q07 3Q08
New Markets
Rio de Janeiro
São Paulo
Delivering on Growth Strategy: Strong Pre-sales
3Q Pre-sales (R$ million)
37%
367
504
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Gafisa 62%
Fit 25%
Gafisa 61%
Bairro Novo 3%
Alphaville 10%
Fit 25%
One of the Most Geographically Diverse Homebuilders
States where we already launched projects.Vision - Gafisa
Campo Belo – São Paulo, SP
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Diversified, High-Quality Land Bank Provides StrongPlatform for Growth
220 different sites, in 21 states, in 66 cities
SegmentPotential
Units 100%
Potential Units% Gafisa
Future Sales% Gafisa
R$ mi
Swap Agreements %
Gafisa 26,422 22,182 7,754 47%
AlphaVille 32,953 16,365 2,914 99%
Fit Residencial 13,887 17,796 1,633 16%
Bairro Novo 24,326 12,163 802 82%
Total 97,588 68,506 13,103 73%
73% acquired by swap agreements.
Low income represents 44% of potential Gafisa units in land bank.
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Own Sales Force
In São Paulo, Rio de Janeiro and Northeast
Selling Machine
Management of Channels & CRM
Management of Outsourced & Local SC
Dedicated Management Teams for Each Market Segment, Product Line
Mid, Mid High and High
Vertical
Metropolitan areas
Financing: Banks
Unique Projects
Unit Prices: > R$200K
60% owned by Gafisa
Mid High and High
Horizontal (lots)
Outside Metropolitan Areas
Financing: Direct
Unique Projects
Unit prices: R$70K –R$500K
50/50 JV with Odebrecht
Low Affordable Entry Level
Horizontal / Vertical
Metropolitan Areas and Outskirts
Financing: CEF and Banks
Standardized Projects
Unit Prices: < R$100K
60% owned by Gafisa
Low Affordable Entry Level
Horizontal / Vertical
Metropolitan Areas and Outskirts
Financing: CEF and Banks
Standardized Projects
Unit Prices: R$50K –R$200K
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Our Differentials
ProfessionalManagement
and Established Organization
World-class Shareholdersand the Highest
Standards of Corporate Governance
Growth Through Product
Diversification
Industry Leadership and Strong Brand Recognition
Geographic Diversification Supported by Strategic
Land Bank
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Financial and Operational Performance – Duilio Calciolari, CFO
Overview of 3Q08 Results
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3Q07 3Q08
3Q08 Operating Highlights
Net Revenues (R$ million) Gross Profit (R$ million)
Adjusted EBITDA (R$ million)
313374
3Q07 3Q08
Net Revenues
19%
40%
Adjusted Net Income (R$ million)
5%
2007 adjusted for Capitalized Interest and land swaps.
Gross Profit Gross Margin
6446
17.2%
14.7%
3Q07 3Q08
Adjusted EBITDA Adjusted EBITDA Margin
3836
10.2%11.6%
3Q07 3Q08
Adjusted Net Income Adjusted Net Margin
91
131
29.0%
35.0%
44%
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Strong Pre-Sales Positively Impact Backlog of Revenues to Be Recognized
R$711 million of results to be recognized (69% growth compared to 3Q07)
3Q08 2Q08 3Q07 3Q08 x 2Q08 3Q08 x 3Q07
Gross sales to be recognized 2,045.1 1,927.5 1,208.6 6% 69%
Sales net of 3.65% sales tax to be recognized 1,970.4 1,857.1 1,164.5 6% 69%
Cost of units sold to be recognized (1,259.9) (1,190.1) (743.5) 6% 69%
Backlog of results to be recognized 710.6 667.1 421.0 7% 69%
Backlog margin - yet to be recognized 34.7% 34.6% 34.8% 14 bps 23 bps
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Land for Product Swaps
9M08 3Q08 2Q08 1Q08 2007
Swap Effect on Gross Revenues 27,175 5,313 9,008 12,855 20,088
Swap Effect on Net Revenues 26,184 5,119 8,679 12,386 19,355
Swap Effect on COGS (18,538) (3,664) (6,318) (8,556) (13,414)
Swap Effect on Gross Profit 7,646 1,455 2,361 3,830 5,939
Net Revenues including land swaps 1,149,879 373,632 444,380 331,868 1,191,529
COGS including land swaps 762,273 242,839 298,392 221,042 810,328
Gross Profit including land swaps 387,606 130,793 145,988 110,826 381,200
This quarter we began to account for land acquired through product swaps in our income statement, targeting best accounting practices
Previously, product swaps did not flow through our income statements, but financial swaps did
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Gafisa’s Strong Financial Position Will Allow it to Execute Growth Strategy and Access Credit Markets
3Q08 2Q08
Total Debt 1,377 1,084
Obligation to Investors 300 300
Cash and Cash Equivalents 790 775
Net Debt & Obligation to Investors (Cash) 887 609
Shareholder’s Equity 1,689 1,637
Total Capitalization 3,066 2,721
Net Debt & Obligation to Investors / Equity 52.5% 37.3%
R$250 million in securitizable receivables in addition to R$790 million cash.R$3.5 billion in construction finance lines of credit provided by all of the major banks:
R$1.6 billion signed contractsR$1.2 billion contracts in processR$682 million additional availability
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Outlook for 2008
Tenda consolidation starting in fourth quarter 2008
Launch guidance for 2008 maintained at R$3.5 billion, equivalent to R$3.3 billion excluding R$200 million of Fit 4th quarter launches
EBITDA margin guidance maintained at 16% to 17% for 2008
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Safe-Harbor Statement
We make forward-looking statements that are subject to risks and uncertainties. Thesestatements are based on the beliefs and assumptions of our management, and oninformation currently available to us. Forward-looking statements include statementsregarding our intent, belief or current expectations or that of our directors or executiveofficers.
Forward-looking statements also include information concerning our possible or assumedfuture results of operations, as well as statements preceded by, followed by, or that includethe words ''believes,'' ''may,'' ''will,'' ''continues,'' ''expects,'‘ ''anticipates,'' ''intends,'' ''plans,''''estimates'' or similar expressions. Forward-looking statements are not guarantees ofperformance. They involve risks, uncertainties and assumptions because they relate to futureevents and therefore depend on circumstances that may or may not occur. Our future resultsand shareholder values may differ materially from those expressed in or suggested by theseforward-looking statements. Many of the factors that will determine these results and valuesare beyond our ability to control or predict.
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