Hello, welcome to today's second quarter 2026 results conference call and webcast. My name is Leslie. 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, administrative and financial director . Please go ahead.
Thank you, Leslie. Good morning, a warm welcome to our conference call on the second quarter 2026 results of Consorcio Ara. This call will be also transmitted by a webcast accompanied by a slide show for visual support. With me on the call to discuss the results are Luis Felipe Ahumada Russek, Vice Chairman of the Board, Miguel Lozano, Chief Executive Officer, and Felipe Loera, Chief Financial 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 Private Securities Litigation Reform Act of 1995. Consorcio Ara believes that such statements are based on reasonable assumptions, but there are no assurances that the current outcomes may 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 will wait until then to open the queue for questions. Results for the first half of 2026 compared to the first half of 2025. The financial and operating results of the first half of the year confirms Ara's robust performance and mark a continuation of the positive trend seen over the past six quarters. In the first six months of 2026, total revenue, meaning the sum of housing revenues and revenues from other real estate projects, came to MXN 4.59 billion, a solid 17.1% advance compared to the same period of last year.
Housing revenues total MXN 4.45 billion, an increase of 17.9%, corresponding to the sale of 3,140 homes with an average price of MXN 1,418,000, 14.0% higher. The growth in housing revenues during this period was driven primarily by the Residential segment, followed by Middle-Income housing, where sales totaled MXN 2.15 billion, 23.2% higher, and Residential home sales reached MXN 1.28 billion, a very solid double-digit growth of 64.7%. Meanwhile, sales of Affordable Entry-Level homes totaled MXN 1.02 billion, 18.5% lower, due chiefly to the completion of our development in the city of Tijuana. We already have another development operating in that city, which will be contributing revenues beginning in the third quarter of this year.
Revenues from other real estate projects, mainly from the sale of land and from shopping center leases, totaled MXN 142.3 million, a 3.1% decline due to lower sales of commercial land. Looking at the sales mix for the first half of the year, Affordable Entry-Level homes contributed 22.2%, Middle-Income homes 46.8%, and Residential 27.9%, while other real estate projects accounted for remaining 3.1%. In the first six months of this year, besides the growth in revenues, there were also notable increases in operating income and EBITDA. Operating income totaled MXN 420.7 million, 11% higher than in the first half of 2025, and EBITDA totaled MXN 624.4 million, a growth of 15.2%. At the bottom line, net income totaled MXN 363.8 million, up 3.5% year-over-year. This solid result has been complemented by a steady reduction in working capital turnover.
In the last 12 months, this indicator declined by 154 days, contributing to a positive free cash flow to the tune of MXN 378.9 million in the first half of the year, which comes to MXN 259.5 million after interest paid. Results for the second quarter of 2026 compared to the second quarter of 2025. In the second quarter of 2026, housing revenues came to MXN 2.24 billion, a 12.3% growth over the same quarter of last year. These revenues correspond to 1,549 title homes, which comes out at an average price of MXN 1,446,000, a 17% increase over the average price reported for the second quarter of 2025. The revenue growth was propelled mainly by the Residential and Middle-Income segments. Sales in the Residential segment in the second quarter of 2026 came to MXN 675.8 million, rising 64.5% over the same period of 2025.
While in the Middle-Income segment, revenues total MXN 1.1 billion, 24.9% higher. Affordable Entry-Level sales reached MXN 461.2 million, declining 34.1%. Revenues from other real estate projects, mainly from the sale of land and shopping center leases, total MXN 71.7 million and dropped 12.1% from the second quarter of 2025, primarily due to lower revenues from the sale of commercial land. Looking at the revenue mix in the second quarter of 2026, Affordable Entry-Level homes contributed 20%, Middle-Income homes 47.7%, Residential 29.2%, and other real estate projects 3.1%. In the second quarter of 2026, operating income came to MXN 190.3 million with a margin of 8.2%. Net income was MXN 162.3 million with a margin of 7%, and EBITDA was MXN 292.3 million with a margin of 12.6%. In the second quarter of 2026, we generated positive free cash flow to the tune totaling MXN 360.4 million.
Financial position as of June 30th, 2026. The positive generation of free cash flow enabled us to close the first half with a balance of cash and cash equivalents totaling MXN 2.19 billion, 4.4% more than the balance at the close of last year. Accounts receivable ended the second quarter of the year at MXN 563.4 million, 20.6% lower than on December 31st, 2025. Accounts receivable turnover was 23 days. Total inventories as of June 30th, 2026 amounted to MXN 19.78 billion, a 2.1% increase over the close of the previous year. As of June 30th, 2026, total debt came to MXN 2.52 billion and declined by 5.2% from the balance reported as of December 31st, 2025. Attributable primarily to the payment of straight unsecured loans. Short-term maturities, meaning debts coming due in the next 15 months, made up 65% of our outstanding debt, and long-term debt, 35%.
As we have mentioned on other occasions, we are working on rolling over the ARA 23X notes, which expire at the end of November this year. As of June 30th, 2026, 67.3% of our outstanding debt was in the form of the ARA 21-2X and ARA 23X notes. 11.6% were simple secured loans for our shopping centers, 11.6% were simple unsecured bank loans without real estate collateral, and the remaining 9.5% were lease liabilities. Net debt at the close of the second quarter of this year was positive by MXN 326 million. The operating strength of Consorcio Ara is also reflected in the growth of its EBITDA in the last 12 months to MXN 1.24 billion, nearly 17% above its comparable year-over-year.
With this performance, we close June 30th, 2026, with a solid financial structure and very healthy leverage reflected in net debt to EBITDA ratio of just 0.26 times and a core debt to EBITDA ratio of 2.03 times. If we state this ratio on coverage of net interest, meaning interest expense less interest income, it would be 7.52 times. How did the industry perform? According to Mexico's National Institute of Statistics and Geography, INEGI, as of May 2026, in annual terms, industrial activity showed no change. The construction industry as a whole is low, 0.6%, while the building subsector, which includes housing and industrial base, declined by 3.3%. According to data from the Unified Housing Registry, in the first half of the year, 272,685 homes were registered.
A significant 198% increase over the same period of the previous year, driven primarily by the registry of homes under the Federal Housing Program. 66,130 homes were produced, 7% higher than in the first half of 2025. Regarding mortgage lending between January and April 2026, which is the latest information available, based on data from the Secretariat of Agrarian, Land, and Urban Development or SEDATU, INFONAVIT granted 54,710 loans for the purchase of new homes, an increase by 8.3% compared to the same period last year. These loans represented an investment of MXN 44.3 billion, 16.5% higher. The average size of a new home loan between January and April 2026 was MXN 811,000, a 7.5% increase compared to the same period of the previous year.
FOVISSSTE, for its part, granted 4,278 loans for new homes in the first four months of the year, 5.4% more than in the same period of last year. The investment in these totaled MXN 5 billion, advancing 21.9%. The average size of a new home loan granted between January and April 2026 was MXN 1.17 billion, a 15.6% increase compared to the same period of the previous year. As for commercial bank home financing, in the first four months of 2026, 27,529 mortgages were granted for the acquisition of new and used homes. 2.2% reduction compared to the same period of last year. Investment in this totaled MXN 69.8 billion, 2.8% higher. The average size of a loan granted between January and April 2026 was MXN 2.53 million, a 5.1% growth compared to the same period of the previous year.
In the first half of 2026, 58.7% of our revenues came from homes financed by INFONAVIT, 11% from FOVISSSTE, and the remaining 3.3% from commercial banks and homes purchased without financing. Shopping centers. Our shopping center division also continued to strengthen its operating and financial performance in the first half of the year. Revenues in the second quarter of 2026 totaled MXN 103.7 million, a 7.1% growth over the same period of 2025. While Net Operating Income came to MXN 93.5 million, 1.7% higher. Revenues in the first half of the year rose to MXN 277.4 million, also 7.8% over the first half of last year, and Net Operating Income totaled MXN 190.4 million, a 6.4% year-over-year decrease.
These results correspond to shopping centers that are 100% owned by Ara and are consolidated into our financial statements, 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 shopping centers and in uni and mini shopping centers stands at nearly 212,000 sq m. The occupancy rate as of June 30, 2026, was 94.1%, a level which confirms the appeal and position of our assets within the market. Dividends. It is worth noting that Consorcio Ara is known for its capacity to generate cash flow, which has allowed it to maintain a policy of dividend payment, which is commendable given the investment-intensive nature of our industry.
Yesterday, the dividend declared in the eighth general ordinary shareholders meeting was paid out, totaling MXN 200 million, equivalent to 22.1% of 2025 net earnings. The per share dividend was around MXN 0.16472, a yield of 4.4% on the stock price at the close of 2025, which was MXN 3.74. This dividend was paid out from the Net After-Tax Earnings Account as of December 31, 2013, which means it was not subject to tax withholding. Renewal of market maker contract. On July 3, we renew our market maker service contract, which we signed in June 2019 with BTG Pactual. This contract will help continue supporting the market liquidity of Ara shares. Annual and sustainability report 2025. We invite you to view our 2025 annual and sustainability report, which is available on our corporate website.
In addition to discussing Ara's financial performance, the report covers our corporate governance, sustainability, ethics, and transparency, the quality of our products and services, the ARA Foundation, and our commitment to the environment. It has been prepared as recommended by the Global Reporting Initiative 2021 standards under in accordance reporting option. It also incorporates indicators from the Sustainability Accounting Standards Board of the IFRS Foundation, specifically those relevant to the real estate and home builders industry. Conclusion. We currently have 46 active projects in the various markets where we operate. In this third quarter, we will begin construction on two projects in Mérida, marking Ara's entry into a new market and a significant step forward in our growth and geographic diversification strategy. Both developments are expected to generate the first title transfer sometime in the first quarter of 2026.
The consistent results over the past six quarters are increasing confidence that we will achieve the target set at the beginning of the year. In the second half of the year, we will continue to concentrate on the disciplined execution of our strategy and on meeting the goals set for 2026 while maintaining our focus on profitability, cash flow generation, and value creation. Thank you, we will now move on to the question and answer.
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 lines, 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 lines, followed by those we receive from the webcast. The first question from the audio lines is from Mr. Carlos Alcaraz from Apalache Research . Please go ahead.
Hello. Good morning. Thank you very much for the call and for taking my questions. I have two of them. The first one is, what pace of home sales do you expect for the Tijuana project? When do you estimate that the mix of affordable entry-level homes as a percentage of units will stabilize? My second question is regarding the two new projects in Mérida. What is the initial investment amount in this place, and what are you currently seeing in Mérida that is prompting you to enter that market?
Okay. Well, thank you, Carlos. Yes. As we mentioned, we opened a new project in Tijuana. It's to serve the affordable entry-level segment. It's already in operation, with title delivering having commenced in early July. It has been a very good market for us. For this second half, we expect to title around 400 homes in this project. It's going to be significant in this second half. As we mentioned in the previous conference call, we expect mainly in this second half of the year, we expect to see a recovery in the affordable entry-level segment, to be, at the end of the year, around 28%-30% of our revenues. Your second question, well, we are very happy to enter. It's our first entry to this market in Mérida. As you know, Mérida has a very good demand of housing.
These projects are also for Affordable Entry-Level segments. An important aspect is that it's our first project with a land contribution scheme or joint venture, whereby the land is provided by the land owner. This approach is very favorable from a working capital perspective. The investment is not going to be significant because we are not buying the land. That's very positive for our cycle. The maximum is around 650 units. It's smaller than the projects that we usually have for this segment. That's what I can tell you about Mérida.
Okay. This 650 units is about to price, right?
Yes.
Okay. Got it. Thank you very much, and have a great day.
Thank you, Carlos. The same.
Thank you very much for your question. Our next question is from Mr. Anton Mortenkotter from GBM. Please go ahead.
Hi, Alicia. Thank you very much for the call. I am sorry. I am not sure if this was related to the prior question, in the reports you mentioned that during this quarter you have some costs related to houses that you have not titled yet. Is it possible if you could provide maybe a number or some figures related to what the impact of titling those house could be reflected for the next quarter's EBITDA?
Well, yes, Anton. Hi. For this second half, we expect a recovery in the gross margin and in the operating margin. We have a number of projects with fixed costs that will start generating revenues in this second half of the year, not only in Tijuana. We have two projects in Puebla and also another project in Morelos. That is an important consideration. At the end of the year, we expect to have around a gross margin of around 26%. It is not the main reason, but also it is important to tell you that we have a few projects in Mainly one space where we have not been able to fully pass on inflation-driven cost increases, as we did not want to slow the pace of sales.
In those cases, maintaining a strong sales momentum has been the priority, even if it means some pressure on margins, it is not a significant impact in our gross margin. Something important to consider is that over the past year, home price or the housing inflation has been above 200 basis points above general inflation. In some projects, you can transfer these increases in our cost, there are some specific projects where it is possible, as I mentioned, we do not want to slow the pace of sales. Mainly, it has hurt our gross margin because, as I mentioned, we have fixed costs in four projects that did not have titles in the first half of the year. We are, in fact, in some, we are already titling houses.
Very useful, Alicia. Thank you.
Thank you, Anton.
Thank you very much for your question. Our next question is from Mr. Enrique Cantú from GBM. Please go ahead.
Hi, Alicia. Thank you for your time. I just have one question. During previous conference calls, you mentioned that you were assessing whether to develop or monetize the non-housing land bank. Could you share where you stand today? Also, are there any regions that you are currently prioritizing?
Sorry, Enrique. Could you repeat?
Yes, of course. It's about that in previous conference calls, you mentioned that you were assessing whether to develop or monetize the non-housing land bank.
Oh.
Could you share where you stand today?
No, we don't have any news on that. We are working on that. There's no news at this moment.
Okay. Thank you.
Thank you, Enrique.
Thank you very much for your question. As a reminder, if you have a question over the audio lines, please enter star eight on your telephone keypad. We have finished with the conference call questions, and we'll now continue with the webcast questions. If you have been listening to the webcast and would like to ask a question, you may type your question in the chat located on the right-hand side of your screen and click submit.
Thank you, Leslie. We don't have questions in the webcast. Thank you very much for your interest in Consorcio Ara.
Consorcio Ara would like to thank you for participating in today's conference call and webcast. You may now disconnect.