company presentation nov06 eng - globalri5 cyrela price performance and trading volume 9m06 average...
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Company PresentationNovember 2006
2
Disclaimer
This material that follows is a presentation of general background information about Cyrela Brazil Realty as of the date of the presentation. It is information in summary form and does not purport to be complete. It is not intended to be relied upon as advice to potential investors. This presentation is strictly confidential and may not be disclosed to any other person. No representation or warranty, express or implied, is made concerning, and no reliance should be placed on, the accuracy, fairness, or completeness of the information presented herein.
This presentation contains statements that are forward-looking within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Such forward-looking statements are only predictions and are not guarantees of future performance. Investors are cautioned that any such forward-looking statements are and will be, as the case may be, subject to many risks, uncertainties and factors relating to the operations and business environments of Cyrela Brazil Realty and its subsidiaries that may cause the actual results of the companies to be materially different from any future results expressed or implied in such forward-looking statements.
Although Cyrela Brazil Realty believes that the expectations and assumptions reflected in the forward-looking statements are reasonable based on information currently available to Cyrela Brazil Realty management, Cyrela Brazil Realty cannot guarantee future results or events. Cyrela Brazil Realty expressly disclaims a duty to update any of the forward-looking statement.
Securities may not be offered or sold in the United States unless they are registered or exempt from registration under the Securities Act of 1933. Any offering of securities to be made in the United States will be made by means of an offering circular that may be obtained from the underwriters.
This presentation does not constitute an offer, or invitation, or solicitation of an offer, to subscribe for or purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever.
3
Agenda
1. Company Highlights
2. Recent Events
Appendix
4. Financial Information
4
Shareholder Structure
After the equity offering, the free float increased to 55%After the equity offering, the free float increased to 55%
(1) Include exercise of 15% "greenshoe“
Post-Equity Offering(1)Post-Equity Offering(1)Before Equity OfferingBefore Equity Offering
152,532,439 shares152,532,439 shares 177,232,439 shares177,232,439 shares
Controlling Shareholders
51%
Management3%
Free Float46%
Management3%
Free Float55%
Controlling Shareholders
42%
5
Cyrela Price Performance and Trading Volume
9M06 Average Daily Trading Volume (ADTV): R$ 16 million
Price per Share - CYRE3
-
5
10
15
20
25
30
35
40
45
50
jan/05
mar/05
jun/05
ago/0
5ou
t/05
nov/0
5jan
/06fev
/06mar/
06mai/
06jun
/06ag
o/06
set/0
6no
v/06
(Clo
sing
Pric
e - R
$)
-
20.000.000
40.000.000
60.000.000
80.000.000
100.000.000
120.000.000
140.000.000
(Trading Volume - R
$)
Volume (R$) Price (R$)
IPOSep/05
Follow -OnJul/06
6
Main Activities of Cyrela Brazil Realty
Gross Revenues - 2005R$725 million
Residential DevelopmentResidential Development
Focus on the development of residential buildings for high and mid-high income classes in São Paulo and Rio de Janeiro19 launches in 2005 totaling R$ 1.052 billion in potential sales, of which 58.0% were pre-sold in the period (R$ 1.930 bi in 9M06)Pre-sales contracts of R$ 983 million in 2005 (R$ 1.346 bi in 9M06)Land bank with 5.9 million m2 to be launched
Rental PortfolioRental Portfolio
CBR currently leases prime office properties and owns participations in 3 shopping centers in São Paulo
ServicesServicesCBR provides administrative services to commercial buildings andshopping centers, real estate brokerage and construction fees charged over partners
93%(*)
5%
2%(*) Excluding office sales = 90%
7
Smart and Efficient Financial Management
Exchange agreements (80%) when acquiring land to reduce cash disbursements
Construction financed by customers
15% received before start of construction
56% received before delivery of the unit
More than 70% of units sold before start of construction
Use of SFH (1) funds (TR + 12% p.a.)
Customer financing of receivables at INCC (2)
Customer financing of remaining receivables at IGP-M + 12% p.a.(3)
Insignificant losses from default
Land
Construction
Post -delivery
(1) Brazilian mortgage financing system, reference rate index (TR) was 2.9% p.a. in 2005(2) Residential Construction Cost index(3) General market price index
8
Consolidated Leadership in the Largest Brazilian Markets
Cyrela has the leading brand in the main Brazilian real estate marketsCyrela has the leading brand in the main Brazilian real estate markets
São Paulo Rio de Janeiro
20052005
20042004
1st1st 2nd2nd 3rd3rd
1st1st 10th10th --
4th4th
--
10 largest players = 74%10 largest players = 74%
1st1st 2nd2nd 3rd3rd
1st1st 4th4th 6th6th
4th4th
--
20032003 1st1st 2nd2nd -- --
Source: Embraesp, % of developments launched Source: Ademi, % of VGV launched(1) Cyrela RJZ Empreendimentos Imobiliários Ltda.
2nd2nd 3rd3rd 1st1st --
10 largest players = 33%10 largest players = 33%
(1)
10%
4% 3% 3%
20%13%
12% 12%
9
Launches
Potential Sales (R$ million)Potential Sales (R$ million)
1,052
826
2004 2005
721
331
660
166
Usable Area (m² 000)Usable Area (m² 000)
386
286
2004 2005
294
92
234
52
CAGR.: 27.4%
CAGR.: 34.9%
SP RJ
10
Launches – 9M06
# of Units (*)Usable AreaPotential Sales
(R$000)
São Paulo 975,964
% Cyrela
(*) exchange excluded
Rio de Janeiro
2006 Total
% Sold
538,971 58.33,5061,929,947 65.3
Minas Gerais
283
1,929
1,004
9M05 9M06
(R$ million)976
701
721
+ 92.1% SP
RJMG
Rio Gde do SulOther Cities
326,564 70.72,238
124,025 48.4747701,478
67.1
73.6
36,358 50.0110134,528 30.9
12,424 42.517031,226 57.1
39,600 17.224186,751 43.6
RSOther Cities
3187
135
11
51%
Launches – 9M06 – By Segment
Luxury
Total
Rio de Janeiro
583,297
São Paulo
Minas Gerais
Other Cities
% Total
100%
Potential Sales(R$ 000) Mid-High Middle
976,268 370,383
By SegmentLuxuryMid-HighMiddle
Rio Gde do Sul
51%
36%
7%
4%
2%
-
583,297
-
-
723,558
118,182
134,528
-
252,406
-
-
86,751
- - 31,226
30%19%
12
Excellent Track Record of Growth
51%
5%
MarketSP + RJ
CBR
CAGR 2002-2005 (in R$ MM)
CAGR 2002-2005 (in R$ MM)
Source: Embraesp and Ademi
Consistent track record of growth in Pre-sales ContractsConsistent track record of growth in Pre-sales Contracts
Pre-Sales Contracts - in R$ million(1998 – 2005)
Pre-Sales Contracts - in R$ million(1998 – 2005)
807
365285290
195211153
1998 1999 2000 2001 2002 2003 2004
983
2005
1998 - 2005 CAGR = 30%
13
Pre-Sales Contracts
LaunchesInventory
9M059M05 9M069M06
44% 56%30%
182
1,345
674
9M05 9M06
(R$ million)
912
339
492
+ 99.7%
SP RJ MG RS Other Cities
1736
41
Pre-Sales increased 99.7% Y-o-Y
70%
14
Pre-Sales to be Recognized
R$ mm (as of) 2004
366.5
825.8
(19.8)
295.9
(363.0)
678.7
(513.6)
46.5%
Sales to be recognized at the beginning of the period
Sales recorded in the period
Revenues recognized in the period
Sales to be recognized at the end of the period
Cost of units sold to be recognized
Selling expenses
Profit to be recognized (deferred results)
Percentage of gross profit
2005
678.7
1,012.5
(21.0)
477.8
(521.1)
1,020.0
(671.2)
48.9%
3Q06
1,379.4
264.7
(32.7)
600.1
(794.4)
1,427.2
(216.9)
44.3%
15
Recent Events
16
Major Accomplishments Since IPO
Significant Growth in Land Bank
Growth Through JVs / Acquisitions
Growth Through Geographical Diversification
Entering Middle Low Income Segment
Expansion of Management Team
17
Significant Growth in Land Bank
Land bank in prime areas in São Paulo, Rio de Janeiro and other 8 cities:
5.9 million m2 in buildable area
4.3 million m2 added since IPO
Potential Sales of R$ 16 billion
Distribution of Land Bank AreaDistribution of Land Bank AreaAcquisition FormAcquisition Form
Enough land bank to secure next 5 years of launches in averageEnough land bank to secure next 5 years of launches in average
Cash16%
Exchange84%
Sept. 05 Sept 06
5.9
1.6
Growth: 272,5%(million of m2 in usable area)
Land BankLand Bank
Total
Belo Horizonte
São Paulo
Vitória
Salvador
Rio de Janeiro
Porto Alegre
Other Cities
% Total38.2%
1.2%
0.5%
0.4%
56.1%
0.9%
2.8%
100%
18
Landbank – 9M06 – by Segment
Luxury
Total
Joint Ventures
111,391
CBR 60,566
50,825
Mid-High Middle
1,590,866
1,523,324
67,542
3,507,491
2,928,676
578,815
740,087
218,559
521,528
Economic
1.9% Total 26.7 59.0 12.4
Total Potential Sales: R$ 16 billion
Usable Area (m²)Exchange
%
88%
53%
19
Growth Through JVs / Acquisitions
4 joint ventures established with other players in the sector:Best talents in the sectorR$240 MM in capital committed to fund the business
Acquisition of RJZ in May 06
CityCity
São Paulo/Salvador
São Paulo/Salvador
São PauloSão Paulo
São PauloSão Paulo
Porto AlegrePorto Alegre
Commitment to Invest
Commitment to Invest
R$120R$120
R$50R$50
R$50R$50
R$20R$20
R$240R$240
% Cyrela% Cyrela
49%49%
50%50%
79%79%
50%50%
Planned Launches ‘06
Planned Launches ‘06
R$567R$567
R$134R$134
R$97R$97
R$106R$106
R$904R$904
Market TypeMarket Type
Mid-High/HighMid-High/High
Mid-High/HighMid-High/High
Mid-Low/LowMid-Low/Low
Mid-High/HighMid-High/High
Rio de Janeiro Rio de Janeiro N.A.N.A.100%(Acquired)
100%(Acquired) N.A.N.A.Mid-High/HighMid-High/High
Total
20
Growth Through Geographical Diversification
Entered 8 new cities through JVs and partnershipsBelo Horizonte, Salvador, Porto Alegre (and South Region), Santos, Vitória, Niterói, Jundiaí and Guarulhos4 other cities under negotiations
LiderLider
Salvador
Belo Horizonte
Rio de JaneiroCampinas São Paulo
Santos
Porto AlegreNew citiesPrevious cities
Vitória
21
Entering Lower Middle Class Income Segment
Creation of a lower middle income class division in CBRJoint Venture with Plano & Plano
Talented management team
Partnerships with other players in the segmentPlanned launches totaling R$100 million in potential sales for 2006
Housing DeficitHousing Deficit
5.4
6.7
0
3
6
9
1991 2005Source: Fundação João Pinheiro
2000
7.2
Income Segments in BrazilIncome Segments in Brazil
47 mn households
Consumption
19%A/B > 10 min wages - US$ 1,240 52%
4 – 10 min wagesUS$ 500 - US$ 1,240
30%C 28%
< 4 min wages - US$ 500
51%D/E 20%
Source: Losango
Segment with the highest long-term growth potentialSegment with the highest long-term growth potential
(million homes)
22
Financing: Interest and Term Impact
Model:Unit Value: R$ 120,000Loan-To-Value: 75%Loan: R$ 90,000Mortgage Effort: 30%
Example
Rental : R$800 per monthAnnual Yield: 8%
Equivalent to Loan Instalment with Real Interest Rate at 8% and 20 years
term.
10 15 20 25 3012% 12 10 9 9 911% 12 10 9 8 810% 11 9 8 8 8
9% 11 9 8 7 78% 10 8 7 7 67% 10 8 7 6 66% 10 7 6 6 55% 9 7 6 5 5R
eal I
nter
est R
ate
(%)
Loan Term (years)
10 15 20 25 3012% 1,291 1,080 991 948 926 11% 1,240 1,023 929 882 857 10% 1,189 967 869 818 790
9% 1,140 913 810 755 724 8% 1,092 860 753 695 660 7% 1,045 809 698 636 599 6% 999 759 645 580 540 5% 955 712 594 526 483
Loan Term (years)
Rea
l Int
eres
t Rat
e (%
)
Monthly Instalment (R$)Monthly Instalment (R$)
Minimum Wages Required (monthly salary)Minimum Wages Required (monthly salary)
23
Expansion of Management Team
Stock option plan implemented in May 2006 covered all the executive officers and 50% of the managers
Cyrela has the deepest management bench in the real estate sectorCyrela has the deepest management bench in the real estate sector
Board of Directors
DevelopmentsConstructionLand New Businesses Sales
MarketingHuman ResourcesControllingFinancial ManagementITInvestor Relations
CorporateCEO
Vice PresidentRio de Janeiro
Rental /Shopping
CenterDevelopments ConstructionLand
24
Financial Information
25
Net Revenues
R$ million 2005
671,173
36,193
17,833
(36,351)
2004
513,634
36,343
7,025
(32,565)
Net Revenues(R$ million)
Net Revenues(R$ million)
689
2004 2005
CAGR.: 46.0%
524,437 688,848
524
Development Sales
Rent of Properties
Services
(-) Deduction
Net Revenues
2003
300,192
30,831
5,797
(13,514)
323,306
2003
323
9M05 9M06
698,102556,766
40,12328,097
16,37811,405
(28,707)(30,473)
725,896565,795
9M05 9M06
726
28.3%
566
26
Operating Expenses
R$ million 2005
(94,315)
(44,844)
(25,726)
963
2004
(45,335)
(33,124)
2,750
Operating Expenses(R$ million)
Operating Expenses(R$ million)
76
138
2004 2005
(138,196)(75,709)
(163,922)(75,709)
CAGR.: 58.1%
Selling ExpensesAdministrative Expenses
Others
Underwriting ExpenseOperational Expenses
Total Expenses
2003
(30,927)
(22,464)
(1,866)
(55,257)
(55,257)
2003
55
Employees Participation
9M06
(81,492)
(49,616)
(3,000)
(20,827)
3,943
9M05
(67,032)
(32,122)
-
(25,726)
823
(130,165)(98,331)
(150,992)(124,057)
---
9M05 9M06
124151
+21.7%
27
Financial Highlights - I
Gross Profit (R$ million)
Gross Profit (R$ million)
Net Revenues(R$ million)
Net Revenues(R$ million)
Net Revenues2003 2004 2005
689
524
323
CAGR: 46.0%
9M05 9M06Gross Profit Margin
2003
154
2004
213
2005
319
CAGR: 43.8%
9M05 9M06
47.7%40.6%
46.3%
274318
Growth 15.8%
48.5%43.8%
726
Growth 28.3%566
28
Financial Highlights - II
Net Income – Adjusted(*)
(R$ million)Net Income – Adjusted(*)
(R$ million)EBITDA – Adjusted(*)
(R$ million)EBITDA – Adjusted(*)
(R$ million)
2003 2004 2005
101
140
183
EBITDA EBITDA Margin
CAGR: 34.6%
9M05 9M06
26.6%26.8%31.3% 29.2%
CAGR: 32.3%
2003 2004 2005
81
154
Net Income Margin
88
9M05 9M06
27.1%
15.5% 22.3%
179191
Growth 7.0%
31.6%26.3%
131
182
Growth 39.1%
23.2% 25.1%
Net Income(R$ million)
Net Income(R$ million)
EBITDA(R$ million)EBITDA
(R$ million)
2003 2004 2005
101
140158CAGR: 24.8%
9M05 9M06
22.9%26.8%31.3% 29.2%
CAGR: 20.7%
2003 2004 2005
81
128
88
9M05 9M06
27.1%
15.5% 18.6%
153171
Growth 11.3%
27.1%23.5%
105
162
Growth 53.2%
18.6%22.3%
(*) Excluding expenses from Public Share Offerings
29
Strong Financial Position
Solid financial position is key to sustaining credibility in Brazilian Real Estate Market
Conservative financial approach towards leverage
Predictable cash flow generation obtained from a high percentage of pre-sales contracts before beginning of construction
High quality of receivables due to low delinquency rates
Total receivables exceed construction budget by 152%
82.0% Non-Recognized Receivables(related to developments underconstruction)
Net Debt Net Debt / LTM EBITDA
1- 94
- 667
2003 2004 9M06*
0.0x
0.7x
3.8x
Historical net debt and coverage ratio(R$ million)
Historical net debt and coverage ratio(R$ million)
* Considers last twelve months EBITDA
Receivables vs. construction costs(R$ million, as of September, 30 2006)
Receivables vs. construction costs(R$ million, as of September, 30 2006)
Short-term receivables
Long-term receivables
Construction budget
2,038
1,522
810
516
- 316
2005
2.0x
9M06: R$667mm Net Cash
30
Solid Mortgage Receivables Portfolio
R$ 2,038 million in customer financing receivables at attractive market rates
Financing rates at INCC / IGP-M + 12% p.a.
Very conservative credit approval policy and low historical delinquency rates
Sale secured by the unit being purchased
100% of overdue credit has always been recovered
High and mid-high income classes present lower delinquency rates than other classes
Average overdue receivables rate of 2.4 % from 2002-9M06
Average maturity3.8 years
Maturity Schedule of Total Receivables(R$ million, as of September 2006)
Maturity Schedule of Total Receivables(R$ million, as of September 2006)
Credit Portfolio andHistorical Overdue Receivable Rates
(R$ million, % of receivables)
Credit Portfolio andHistorical Overdue Receivable Rates
(R$ million, % of receivables)
2003
496
20052004Credit portfolio 30-day overdue receivables
863
9M06
2,038
3.6%2.1% 2.4% 2.4%
461
2007 2008 2009 2010 2011 andafter
418 377
200
428
154
Oct -Dec2006
1,378
31
Recurring Income from Rental Portfolio and Shopping Centers
Recurring income from offices and shopping centers covers CBR’sadministrative expenses
Prime office properties valued at R$210.5 million by CBRE
Rental income of R$ 20.3 million in 2005
Occupancy rate constantly above 84%
Prime tenants
Itaú, Credicard, Samsung, Net,Grupo Telefonica
Interest in minority stakes in shopping centers
Income of R$ 15.9 million in 2005
2002 2003 2004
94%86% 84%
R$ 30.68R$ 36.09
R$ 40.64
Office Rentals & Occupancy Rates(R$ per m2, % of total area)
Office Rentals & Occupancy Rates(R$ per m2, % of total area)
1H05
91%
R$ 44.24
Office rentals Occupancy rates
32
Appendix
33
History
Brazil Realty -Joint Venture with IRSA to develop and rent office properties (1994)
Brazil Realty IPO (1996)
First real estate development, mostly land
Partnership with RJZ to enter Rio de Janeiro market
Acquired IRSA stake in Brazil Realty
Merger of Cyrela and Brazil Realty
Public Offering
60s 90s 2000 2002 200570s
Cyrela was created in 1976 focusing on the residential development business
34
Succesfull Business Model
Know-How and Flexibilityto Pursue Business Opportunities
Know-How and Flexibilityto Pursue Business Opportunities
Expertise in Mix and Project Design
Expertise in Mix and Project Design
Smart and EfficientFinancial Management
Smart and EfficientFinancial Management
Business ModelBased on Partnerships
Business ModelBased on Partnerships
Efficiency in Construction and SalesEfficiency in Construction and Sales
Experienced Management Team with a Successful Track Record
Experienced Management Team with a Successful Track Record
Focus on Profitable GrowthFocus on Profitable Growth
35
Typical Cyrela Project
Pre-sales 0 50 70 90 100 10080 95
% Budget Costs - - 0% 40% 100% 100%20% 65%
Revenues - - 0 36 100 10016 62
Up to 100M18M 24M 30M 36M12M6M0M
Assumptions for this example:
Potential sales: R$125 million
Exchange agreements (land): R$25 million
Does not include financial revenues in customer financing
Payments
Construction
Launch Go-ahead Delivery Completionof payments
6M - 9MLicensing
– … 15 … 56 100… …
36
Income Statement
(1) Includes residential development revenues, rentals and services
R$ MM CAGR2003 2004 9M05 9M06 Growth2005
Margin % 47.7% 40.5% 46.2%
Margin % 31.3% 26.8% % %22.9%
Growth % 10.6% 62.2% 31.4%
Gross Profit 43.8%154.1 212.6 274.5 317.9 15.8%318.6
Income Taxes (18.9) (46.6) (24.4) (38.7)(17.8)
Net Revenues(1) 46.0%323.3 524.4 565.8 725.9 28.3%688.8
EBITDA 24.8%101.2 140.4 153.5 170.5 11.3%157.7
Net Income 20.7%87.7 81.0 105.5 161.7 53.2%127.8
Minority Interest (14.7) (16.1) (17.8) (23.7)(16.1)
Adjusted Net Income 32.3%87.7 123.0 131.5 182.5 39.1%153.6
Consistent Growth in Sales with Sustained ProfitabilityConsistent Growth in Sales with Sustained Profitability
37
Consolidated Balance Sheet
R$ millionCash and Equivalents ReceivablesReal Estate in Inventory
Long term receivablesOther long term assets
TOTAL ASSETSST loans and financing
TOTAL LIABILITIES
Costs to complete projectsAccounts payable
Other Current Assets
Other current liabilitiesLT loans and financingOther liabilitiesMinority Interest
Permanent Assets
Shareholders’ Equity
2003 99.8
219.3330.0
283.2130.7
[ ][ ]
1,218.4
[ ][ ]
48.7
1,218.4[ ][ ][ ]
124.3123.947.5
124.065.3
282.346.6
106.7
404.4
200481.0
192.5429.0
240.5138.4
[ ][ ]
1,312.3
[ ][ ]
142.0
[ ][ ][ ][ ]
1,312.3158.155.6
111.6143.8106.9221.572.5
88.8
442.4
9M0643.2
441.5694.5
244.4308.5
[ ][ ]
2,773.2
[ ][ ]
857.6
[ ][ ][ ][ ]
2,773.270.617.8
152.5223.091.3
169.9117.9
183.6
1,930.1
200595.5
190.3421.0
271.0556.6
[ ][ ]
1,775.3
[ ][ ]
129.0
[ ][ ][ ][ ]
1,775.395.125.277.1
205.9108.7166.078.5
111.9
1,018.8
38
Net Financial Debt
R$ mm 20042003
106.9
158.1
(170.9)
65.4
124.3
(188.8)
94.10.9
2005
108.7
95.1
(520.0)
(316.2)
265.0189.7 203.8
Long-term Debt
Short-term Debt
Cash & Cash Equivalents
Net Debt
Total Debt
3Q06
91.3
70.6
(828.9)
(667.0)
161.9
39
Cyrela Brazil Realty S.A. Empreendimentos e ParticipaçõesAddress: Av. Brigadeiro Faria Lima, nº 3.400, 10º floor
São Paulo - SP - BrazilZip: 04538-132
Luis LargmanCFO and Investor Relations Officer
Phone: 55 (11) 4502-3153Fax: 55 (11) 4502-3149e-mail: [email protected]
www.cyrela.com.br/ir
Contact IR