Hello, and welcome to today's first quarter 2023 results conference call and webcast. My name is Leslie, and I will be your event specialist today. All lines have been placed on mute to prevent any background noise. Please note that today's conference call and webcast are being recorded. During the presentation, we will have a question-and-answer session. To follow the conference online, please visit https://consorcioara.transmision.com.mx. The word transmission is with one S only. If you would like to view the presentation in a full-screen view, please click the full screen button in the upper left-hand corner of your screen. Press the same button to return to your original view. It is now my pleasure to turn today's program over to Alicia Enriquez, Co-Chief Executive Administrative and Finance Officer. Please go ahead.
Thank you, Leslie. Good morning, and a warm welcome to our conference call on the first quarter 2023 results of Consorcio Ara. This call will be also transmitted via webcast, accompanied by a slideshow for visual support. With me on the call to discuss the results are Germán Ahumada Russek, Chief Executive Officer and Chairman of the Board, Luis Felipe Ahumada Russek, Vice Chairman of the Board, and Miguel Lozano, Co-Chief Executive Operating Officer. I want to alert everyone that certain statements and comments made during the course of this call must be considered forward-looking statements as defined by the Securities Litigation Reform Act of 1995. Consorcio Ara believes that such statements are based on reasonable assumptions, but there are no assurances that current outcomes would not be substantially different from those discussed today.
All forward-looking statements are based on information available to the company on the date of this call. The company is under no obligation to publicly update or revise any forward-looking statements as a result of new information that may become available in the future. As usual, at the end of our prepared remarks, there will be time for Q&A. We'll wait until then to open the queue for questions. I will now turn over the call to Germán Ahumada Russek, Consorcio Ara's Chief Executive Officer, for this morning's remarks.
Good morning, thank you for joining us on this call. Results for the first quarter of 2023 compared to the first quarter of 2022. Our revenues in the first quarter of 2023 totaled MXN 1.65 billion, close to 1% growth compared to the same quarter of last year. This result was very close to our projection, just 2% lower than we expected. We consider these results to be satisfactory given the various challenges we faced. Generally speaking, our home sales remained steady, we encountered delays in the construction of some developments. There were atypically heavy and constant rains throughout the first quarter that triggered flooding and mudslides in the city of Tijuana, home to one of largest Affordable Entry-Level developments.
There was also a shortage of labor in Quintana Roo and Guerrero states where we operate 10 developments. Housing revenues in the first quarter of 2023 totaled MXN 1.59 billion, just about stable compared to the same period of last year. These revenues came from the sale of 1,324 homes at an average price of MXN 1.2 million, a 15.6% increase compared to the average price in the first quarter of 2022.
Breaking down our revenues by Affordable Entry-Level homes brought in MXN 450.4 million in sales, 16.8% below their level in the first quarter of 2022, primarily due to the completion of three developments and, to a lesser extent, unusually heavy rain in Tijuana, which, as I mentioned a moment ago, delayed the construction process. In the Middle Income segment, revenues totaled MXN 600.4 million, a 12% year-over-year growth, and Residential home sales came to MXN 543.3 million, a 5.4% increase. Revenues from other real estate projects the first quarter of this year came to MXN 60.4 million, a growth of 20.3% compared to the first quarter of 2022, supported by higher revenues from our shopping center division.
The revenue mix for the first quarter Affordable Entry-Level homes accounted for 27.2%, Middle Income homes 36.3%, and Residential homes 32.8%, while the remaining 3.7% came from other real estate projects. In the first three months of the year, operating income totaled MXN 171.7 million and rose 12.4% over the same quarter of last year. Net income was MXN 160.1 million, a 15.2% increase, and EBITDA was MXN 229.8 million, a growth of 5.1%. During this past quarter, we were able to recover our profitability because we did not have the one-off expenses that affected us throughout 2022.
The operating margin was 10.4%, improving by 110 basis points from the first quarter of last year. Net margin was 9.7%, 120 basis points gain, and the EBITDA margin was 13.9%, rising by 60 basis points. Between January and March, Free Cash Flow to the Firm was negative by MXN 43.5 million, chiefly due to supplier payments, and this mainly in connection with land purchases purchased in 2022. Financial position as of March 31, 2023. As of March 31, 2023, cash and cash equivalents totaled MXN 3.02 billion, 4.1% lower than at the close of 2022, but still a fairly solid level.
The slight decline is attributed to the supplier payments, as I mentioned just a moment ago. Accounts receivable ended for the first quarter of the year at MXN 619.9 million, a 6% reduction from the balance reported on December 31, 2022. Accounts receivable turnover was 1.1 months. Total inventories as of March 31st, 2023 amounted to MXN 15.65 billion, basically unchanged from the close of last year. On the same date, cost-bearing debt came to MXN 2.34 billion, a slight increase of 1% compared to the close of the previous year, attributable to financial leasing liabilities. Short-term maturities, meaning debt coming due in the next 15 months, made up 9.7% of cost-bearing debt, and long-term debt, 90.3%.
As of March 31, 2023, 63.5% of our cost-bearing debt was in the form of the ARA 21X and ARA 21-2X notes. 18.1% were simple secured loans for our shopping centers. 11.7% were simple unsecured bank loans without real estate collateral, and the remaining 6.7% were lease liabilities. Net debt remained negative because the balance of cash and cash equivalents exceeded our cost-bearing debt, resulted in a net debt position of negative MXN 673.9 million. Leverage ratios remain at optimal levels. Cost-bearing debt to EBITDA was 2.45 x. The net debt to EBITDA ratio was negative 0.7x , while the interest coverage ratio was 4x .
If we base this ratio on coverage of net interest, meaning interest expense less interest income, it would be negative by -60.8x because interest income exceeded interest expense. March 22nd, Fitch Ratings ratified its long-term national scale rating of A+(mex) for ARA with a stable outlook. At the same time, it reiterated its AA-(mex) rating of our ARA 21X and ARA 21-2X notes. In its announcement, the agency cited ARA's strategy of diversifying revenues across various market segments and its approach to maintaining a solid financial profile with a high balance of cash and temporary investments. It also mentioned our leverage consistent with the rated rating level. Our positive capacity for generating free cash flow while continuing to invest in banco de reservas. This report can be viewed at www.consorcioara.com.mx.
Housing industry performance. According to Mexico's National Institute of Statistics and Geography, INEGI, in the first two months of 2023, industrial activity in general grew by 3.5% compared to the previous year. Construction industry growth was 3.3%. As in 2022, it was driven mainly by civil engineering work and the building subsector, which includes housing remained stable. According to data from the Unified Housing Registry group, in the first two months of the year, 28,142 homes were registered, a 35% increase from the same period of last year. 17,069 homes were produced, 6% lower.
Regarding mortgage lending in January of this year, based on data from SEDATU, Infonavit granted 9,397 loans for the purchase of new homes, a slight increase of 0.5% compared to the same month of 2022. These loans represented an investment of MXN 5.81 billion, 14.3% higher. The average size of a new home loan in January of 2023 was MXN 645,000, a 13.6% increase compared to January of previous year. Fovissste, for its part, granted 850 loans for new homes in January and February of this year, 68% less than in the same period of 2022. The investment in this totaled MXN 553.1 million, 71.5% lower.
The average size of a loan granted in the first two months of this year was MXN 651,000, which was 11% lower than the same period of last year. As for commercial bank home financing, in the month of January of this year, 6,943 mortgages were granted for the acquisition of new and used homes. A 5.9% reduction compared to the same month of 2022. The investment in this totaled MXN 14.5 billion, a 13.4% increase. The average size of a loan granted in the first month of this year was MXN 2.08 million, 20.5% higher than in January 2022.
In the first quarter of 2023, 38.9% of our revenues came from homes financed by Infonavit, 13.8% from Fovissste, and the remaining 47.3% from commercial banks and homes purchased without financing. Shopping centers. In the first quarter of 2023, revenues totaled MXN 99.6 million, an 8.4% growth over the same period of last year, while net operating income was MXN 69 million, 11.2% higher. These results correspond to shopping centers that are 100% owned by ARA and are consolidated into our financial statements. Centro San Miguel, Plaza Centella, Centro San Buenaventura, and Plaza Carey, Uni and Mini, as well as 50% of Centro Las Américas and Paseo Ventura, according to our stake in those properties, which are entered under the equity method.
Total gross leasable area in our six shopping centers and in "uni" and "mini" shopping centers is 205,070 sq m. The occupancy rate as of March 31st, 2023 was 91%, a very competitive level. Main resolution of the general annual shareholders meeting. Yesterday, Consorcio Ara shareholders met for a General Extraordinary and Ordinary Annual Meeting. Among the most important resolutions passed were a dividend payment totaling MXN 200 million, equivalent to 31% of our 2022 net income. Dividend per share amounts to 0.1618 MXN per share, a yield of 5.06% based on the closing price of 2022, which was MXN 3.20.
This dividend is paid out of the company's retained earnings from pre- 2014 fiscal year's accounts and the net fiscal earnings account, which mean, it means it's not subject to tax withholdings. You may recall that Consorcio Ara has a policy of paying out dividends to its shareholders equivalent to up to 50% of net income from the prior fiscal year, provided the company has a sufficient balance in the net fiscal earnings account and is generating positive free cash flow. Shareholders also voted to approve the cancellation of 23,918,976 shares acquired using the stock repurchase fund, representing 1.9% of our total capital stock. After that cancellation, our capital stock consisted of 1,236,120,087 shares.
Conclusions. To reiterate that what I said at the start of this call, in light of the challenges we face in the first three months of the year, we consider these results to be satisfactory. Over the rest of this year, we will continue working on the operating on the opening of 11 developments located in Mexico State, Quintana Roo, Nayarit, Puebla, Jalisco, and Veracruz. This will enable us to continue diversifying our revenues across the three segments we serve: Affordable-E ntry Level, Middle Income, and Residential level of housing. At the moment, inflation in Mexico for 2023 is expected to be lower than in 2022, which should also mean lower interest rates hikes.
Based on the data published in the first few months of the year, experts now see generally stronger GDP growth and expect the pace of new jobs to remain fairly solid. This encourages us to continue our investment and growth plans for the year. As always, we will be on the alert for any signs of change in the environment. We have experienced financial solidity, operating capacity, and a great team of employees that will support us in meeting the constant demand by housing in the country. Thank you, and we will now move on to the question and answers.
We will now start the Q&A session. We would like to take any questions you might have for us today. If you would like to ask a question over the audio line, please enter star eight on your telephone keypad. In case your question has been answered, you may cancel it by pressing star eight again. If you have been listening to the webcast and would like to ask a question, you may type your question using the chat area located on the right-hand side of your screen and click Submit. We will begin by answering questions from the audio line, followed by those we receive from the webcast. The first question from the audio line is from Gordon Lee from BTG Pactual. Please go ahead.
Thank you. Thanks very much for the call. Hello to everybody. I have two quick questions. The first, Germán, I noticed that you spoke about a few challenges in the first quarter, the lack of labor in Guerrero and Quintana Roo and the rain in Tijuana. I thought it was interesting that you didn't mention input cost inflation, which is an issue that you had spoken about in the past. I was wondering whether we could interpret from that in general, you're seeing less pressure on that front at this point. The second question just with regards to share buybacks. Should we expect the company to buy back shares more or less at the same pace this year as it did in 2022? Thank you.
Well, inflation also, of course, it was very important, but fortunately, we were able to pass on the costs of the inflation in the price of the houses. And it didn't stop us in the sale of the homes. I think inflation is very important, but we have every three months, we re-review what was the inflation and we increased the prices of the homes accordingly. Now, I think on the second thing, we will also buy back shares when it's possible. When we have somebody that is selling shares and nobody is buying, we will be willing to buy those shares.
Yes. We estimate to buy back around MXN 100 million, but we are open as Mr. Ahumada mentioned, to buy back more.
Perfect. That's really clear. If I could just have one quick follow-up on the inflation question, Germán.
Yes.
I think in... I can't remember if it was the fourth quarter or the third quarter last year, you had mentioned that inflation had somewhat of an impact on demand, right? Inflation of homes. House price increases. Are you still seeing that? Or do you think the buyers are more comfortable with the level of pricing at this point?
Well, what happens is the inflation, if you see the general inflation and the inflation of the construction for the homes, from October of 2020 to September of 2022, it was much higher, the inflation of the construction of homes. Now, it has been reduced, and we expect to be close to practically the same type of inflation. It doesn't mean that the people, there are some people that, of course, with inflation, they are not able to buy the most affordable homes because they do not get the, they have not gotten the increase in salaries as the inflation. We have been able...
That is the main reason why the Middle Income and the Residential homes are selling at a faster pace than the affordable entry level homes.
That makes a lot of sense. Thank you very much.
Thank you, Gordon.
Thank you, Gordon.
Thank you very much for your question. Our next question is from Juan Macedo from GBM. Please go ahead.
Hi. Thanks for the call. My first question is regarding the non-recurring VAT expense. We saw nothing was paid in this quarter. We were wondering, has it been fully paid out, or could there be more payments in the future? My second question... Oh, yeah. You can answer .
Sorry.
I have the second one. My second question is regarding projects. Could you give us a breakdown on how are sales and development growing in your main projects, please?
Okay. Well, regarding the first question, now for this year, we've grown, well, we are not expecting to have the same expenses that we have in 2022. The second one.
What was the second one? I didn't understand-
Uh.
Very well, the second one.
Yeah. I was wondering if you could give us a breakdown on sales and developments of your main projects.
Well, in terms of our projections per segment, our mix, revenue mix, it would be very similar to the revenue mix that we had in 2022. According to our projections, we expect to have around Affordable Entry-Level segment, around 34% in Middle Income and 30% in Residential. Our main projects, as you know, are located in the State of Mexico, Quintana Roo, Guerrero, also in Tijuana. Fortunately, in these states, we have products for to serve these different segments. Our average price would be around, it could be around MXN 1.2 million. As Mr. Ahumada mentioned, we are expecting to open. We are working on 11.
It doesn't mean that we will open the, the eleven, the eleven projects, but we are working on them, permits and infrastructure. There are out of the 11, there are especially two that are more difficult to get the permits. One is in San José Texopa, in the State of Mexico. The other one is Altavela Diamante, which is in Nayarit in Vallarta. This is too bad that we don't have yet the permits because we are going to finish Altavela Diamante first, and we will not have enough... We will open another project in Nayarit, in Vallarta also, which is it's Middle Income and Residential.
Great. Thanks for that color. Just one quick follow-up as well. We were wondering how was the Paraiso Country Club project going?
Yeah.
In the last quarter, you mentioned there could be some deliveries. We were just wondering how that was going.
Paraiso unfortunately is going to be practically finished by the end of this year. Finished, let's say the real estate project. We still have to sell or to see what we will do with the course, with the golf course. It is too bad that it has finished. We are going to open next year another project that we already have the land that is very close to Paraiso. It is not the same type. It doesn't have a golf course, but it will have some nice features. We are doing everything trying to keep on opening projects where some of the projects are finishing or the new opportunities arise.
Great. Thanks for the detail, and thanks for the call.
Thank you.
Thank you very much for your question. Our next question is from Hugo Becerra from GBM. Please go ahead.
Hello, good morning. Thanks for taking my question. I was just wondering if you could give us some of your expectations for revenues and EBITDA in 2023. If we should expect any kind of similarity to this quarter. An additional question would be on working capital dynamic with the decrease in cash flow that we saw this quarter, should we expect any other outlays, or can you provide any detail on that matter?
Okay, Hugo. Well, for this year, we are expecting to have our revenue growth very similar to 10% or very similar to the growth that we had in 2022, that it was 9.1%. For this year we are working on that to have a growth of 10%. As you saw in this quarter, we improve our EBITDA margin, and it would be around at least 14% for this year. For this year, regarding to free cash flow generation, well, we expect to have a positive mainly in the second half, when we are going to have some projects giving us titlings, giving us revenues.
Thank you very much. Okay. Regarding working capital dynamics, can you sort of provide some color on that matter as well?
Well, I think that, well, we expect to have the same level that we have in 2022 because we, as we mentioned, we are going to open new projects. We expect to have the same level that we had in the previous year.
Okay. Thank you very much.
Thank you, Hugo.
Thank you very much for your question. As a reminder, if you have a question over the audio line, please enter star eight on your telephone keypad.
Okay, Leslie. If we don't have more questions on the line, we are going to read the questions that we have in the webcast. The first question is from Alejandro Llobera, a private investor. The question is: "On the last 12 months, EBITDA was MXN 957 million. Can you comment why net debt increased MXN 745 million? Land reserves only increased 133. Thanks." Well, yes, our EBITDA was the amount that you mentioned. I didn't understand, Alejandro, if you have a specific question on that. Regarding to the net debt. Well, last year we bought some pieces of land. That's why we used some resources of our cash and cash equivalents.
Although this balance has decreased in the last quarter, we think it's fairly solid. We are not worried about our cash position. Well, last year, we bought around MXN 4 million, MXN 400 million in land. For this year, we are expecting to buy at least MXN 3 million, but it hasn't been easy for us.
MXN 300 million.
MXN 300 million. It hasn't been easy for us to buy land in the north area of the country, which we want to do. Have more land, Alejandro. Well, the second question is from Mindset Capital. Says, "I briefly lost the line. Can you please repeat your comments on share buybacks?" For this year, we expect to invest MXN 100 million, well, we are open to catch any opportunity in the market. The third question is, "Could you consider dual listing to list shares in the U.S. market to improve the valuation of the company?" This question is from Brandon Rodriguez del Rio. No, at this moment, we don't have plans to be listed in U.S. market.
The fourth question is from Darío Flores: "Have you ever considered make more share buybacks instead of paying dividends?" We think that the best for Ara and the best for our investors is to have a mix, I mean, to pay dividends and also to be active in the buyback program. We like to have a balance on that. The fifth question is. It's from Andre Rodriguez del Rio. "What steps are you taking to close the value gap now existing between the stock price and the book value per share? The share buybacks are way too insignificant for the company size today. Will you pick up the pace?" Well, unfortunately...
Well, in fact, we would like to be more active in the buyback program. A problem that you know is the liquidity. There are, well, it has been very reduced in the last month, so it hasn't been easy to buy a significant amount. As I mentioned, we are very open to buy back more. The sixth question is from Jose Nava: "Good day. Thank you for your presentation. My question is if there is any plan for Consorcio Ara to take advantage of the nearshoring phenomenon in Mexico." Well, we think that the effects could be in the midterm . Yes, we are ready to take advantage of any opportunity. Our land is very well located.
The, also the land that we are looking for, we are going obviously to take into consideration all these movements of companies. There's another question from Carlos Alcaraz. He asks, "Thank you very much for the call and taking my question. I have two questions. What will be the main factor during 2023 for growth in revenue, volume or price? Regarding the labor shortage in Quintana Roo and Guerrero, have you observed a stabilization in this issue, or do you consider that it will continue to affect? Thank you." Well, regarding the first questions.
In Morelos, I think, more or less it has been stabilized.
In Guerrero.
In Guerrero. I'm sorry. In Quintana Roo, it's still difficult because there is the construction of the Tren Maya that requires a lot of.
Labor.
-labor. In that, we have to be open to different challenges and. Still, I think, more or less, we have been able to be able to continue the work.
Regarding your question on revenues, well, in fact, we have 38 projects or developments in operations. In terms of, I mean, we not depend on the openings that we have been mentioning. I think we have all on the table to grow 10% in this year. The last question is, do you have a plan to higher the price of the stock? As we have been mentioning, we will continue to buy back shares, and we are open to catch any opportunity in the market. There are no more questions, please, Leslie, if we can finish the call.
That was the last question. This concludes the question-and-answer session for today. Consorcio Ara would like to thank you for participating.