Good morning, and thank you for standing by. Welcome everyone, to the earnings call to discuss third quarter results 2023 for Cury Construtora. With us here today, we have Mr. Fábio Cury, the company's CEO, Mr. João Carlos Mazzuco, the company's CFO, and Mr. Ronaldo Cury, the company's IRO. We also would like to inform that participants will be connected in listen-only mode during the company's presentation. After that, we'll begin a Q&A session, when further instructions will be provided. Should you need assistance during the call, please request the help of an operator by pressing star zero. We also would like to inform that this call will be done in Portuguese, then be conducted by the company's management. The English version will be happening through simultaneous translation. This event is also being broadcast simultaneously over the Internet via webcast.
Before moving on, we'd like to mention that forward-looking statements made during this call concerning the company's business outlook, as well as operating and financial targets, are based on beliefs and assumptions on the part of the company's management, and also on information currently available to the management. Forward-looking statements are no guarantee of performance as they involve risks and uncertainties, and assumptions, which refer to future events that depend on circumstances that may or may not materialize. Investors and analysts should have in mind that, general economic conditions, industry conditions, and other operating factors might affect the results the company will achieve in the future, and thus lead to results that will differ considerably from those expressed in these forward-looking statements. I'd now like to turn the floor over to Mr. Cury, who will start the presentation. You may proceed, Mr. Cury.
Good morning, everyone, and thank you for participating in our earnings call for the third quarter of 2023. Here on behalf of Cury, beside myself, we have Ronaldo Cury, our IRO, and João Mazzuco, our CFO. We will present throughout the conference the main highlights and financial highlights of the company, and then we'll have a Q&A session. In September, we celebrated our third anniversary since the IPO. This is a moment for us to think about the path we've covered and also the opportunities that lie ahead. During this period, we have reached proudly notable achievements that exceeded our expectations and which underline our continuous commitment to solidity and high performance across all aspects of our business, keeping our focus on transparency, on governance, and on the commitment with our shareholders.
In the third quarter of 2023, we highlight launches in São Paulo, coming from projects at which had been launched before, which continue to present strong sales performance, such as Square Morumbi fourth phase, Cidade Mooca San Marco fourth phase. A highlight for the fact that both are already at 100% of units sold. Early in the fourth quarter, we had three main launches: Dez Parque Nações Unidas, second phase, Santo Amaro, with a potential PSV of BRL 104 million, and Cidade Mooca San Pedro, fifth phase, PSV of BRL 237 million, with 921 units in São Paulo. Residencial Quinta do Bispo in Tijuca, Rio, potential PSV of BRL 118 million with 412 units in Rio.
With the re-edition of the program, Minha Casa, Minha Vida, and the update of its rules, which include an increase in subsidies to funds and finance, a reduction of interest rates, an increase in the cap of the va-value for the units, we have more favorable situations for the sector. With this strategic look, we can increase our land bank, reaching record levels of BRL 11.8 billion in potential PSV. Cash generation is an indicator we are always after constantly as we manage our business. We were able to generate a historical record in this quarter. The financial result followed up our operational performance, improving revenues, maintaining margins at high levels, and we have reached profits that are equivalent to our whole year of next year, and we did it only in nine months.
Now, over to Ronaldo, who will go into detail about the financial operating results. Over to you, Ronaldo.
Good morning, everyone. On slide number six, I'll explore some of the highlights of our operating and financial performance for the third Q3 2023. We saw a total of launches of BRL 941 million, net pre-sales of BRL 972 million at SOS 40.4%, net cash generation of BRL 137 million, and we reported revenues at BRL 751 million, adjusted gross margin of 38%, net income of BRL 112.9 million, and net margin of 15%. In this quarter, we launched 7 new projects, which totaled a PSV of BRL 941 million, 5 of them located in São Paulo and 2 located in Rio.
The highlights were Cidade Mooca San Marco, located in the eastern side of São Paulo, launched in August, totaling a PSV of BRL 130 million, 100% of which have been sold. The Square Morumbi in the Distrito do Morumbi, fourth phase of the project, it was launched in July with a PSV of BRL 118 million, located in the south area of São Paulo, with 100% of units sold as well. Cidade Central launched in September with a PSV of BRL 171 million, located downtown in São Paulo, with about 67% of the units already sold. On slide number eight, we're gonna look at the-- our sales performance.
In the third quarter of 2023, we have reached the amount of BRL 972 million in net sales, with an increase of 9.8% when compared to third quarter of 2022, and a drop of 18.5% when compared to the second quarter of 2023. Our SOS in the third quarter was 40.4%, showing an increase of 0.1 percentage point when compared to the third quarter of 2022, and a drop of 100 percentage points when compared to the previous quarter. The PSF for the last twelve months has reached 73.6%, a growth of three point three percentage points when compared to the third quarter of 2022, and an increase of 0.5% when compared to the second quarter of 2023.
We closed the third quarter of 2023 with a stock of BRL 1,436 million in PSV, 98.2% represented by units that were launched of works not yet started and units under construction, and only 1.8% of units already concluded. On slide number nine, we can see on the left-hand side that in the third quarter of 2023, our sales mix focused on the highest brackets of the program and even outside of the program. On the charts on the right-hand side, we can see the advancement of average price per unit that were sold in the third quarter. The average price was BRL 278,000 , an increase of 9.3% when compared to Q3 2022. Also stable when compared to the second quarter of 2023.
On slide number 10, we see our land bank. In the third quarter of 2023, we have reached a historical level, closing the quarter at BRL 11.8 billion in potential VGV, which accounts for a total of over 45,000 units. Still on slide number 10, we can see our generating cash flow, which reached BRL 137 million in the quarter, cash flow. With that, now I turn the floor over to our CFO, João Mazzuco, who, who will go into more detail about our financial numbers. Please, João, over to you.
Good morning, everyone. Moving on with slide number 12, we highlight our net revenues. In the quarter, we have reached BRL 751.9 million, an increase of 20% when compared to the same period of the last year.
Our gross profit saw an increase of 21.5% when compared to Q3 2022, and an increase of 50 points in the adjusted gross margin, which reached 38% in the period, in line with the second quarter of 2023. On slide number 13, we have our net income have reached BRL 108 million in this third quarter of 2023. We saw an increase of 20.4% when compared to Q3 2022. Net income for the whole operation reached BRL 112.9 million in the quarter, which accounts for an increase of 19% when compared to the profit of BRL 94.9 million filed in the third quarter of 2022. On slide number 14, we highlight our debt profile, our gross debt profile.
We closed the third quarter with a gross debt of BRL 645.7 million, 34.2% above what we had in December 31st, 2022. Driving that increase was an issuance of debenture at BRL 150 million, which happened in September. Now, our amortization schedules extend until 2028. We closed the third quarter with a net cash of BRL 463.4 million. If we discount dividends paid out in early October, we have a cash position of BRL 313 million in net terms, in line with the BRL 308 million of December 31st, 2022. Our net cash over PL closed the quarter at 44%. That amount dropped to 30% when you consider dividends paid out in October.
On slide 15, once again, we report a solid return on equity with an ROI of 49.7%, considering the past 12 months. That reflects an operation that employs low capital, generates cash, and delivers results to shareholders. Thank you, and I turn the floor back to you, Fábio. Still in September, we won two awards. Number one, in the category, economic housing for the Nova Irajá in Rio de Janeiro, which saw a great impact in the region when it was built. Next, the number two, was awarded in the category Strategic Opportunities because of our launches in Porto Maravilha, a promising area in Rio, where we're pioneer in revitalizing the area in a partnership with the city of Rio. Our commitment with corporate responsibility and sustainable practices are part of our purpose.
With that, we announced the creation of our policy of sponsorship and donations to regulate our practices around this very important topic. As we celebrate our accomplishments until now, we draw our line, our vision for the future. We maintain the optimism that we'll continue to grow and accomplish even higher goals, counting with the dedication of our partners and employees. Thank you very much for your participation and for your interest in Cury. Any questions or demands that you may have, our IR team is at your disposal to investors, analysts, and partners. Well, with that, we conclude our presentation. I'd like now to ask the operator to start the Q&A session.
Thank you. We'll now begin the Q&A session. If you have a question, please press star one on your touch phone.
If at any point your question has been answered, you may remove yourself from the queue by pressing star two. Questions will be taken in the order that they are received. We do ask you that when you pose a question, that you pick up your handset to provide optimum sound quality. Our first question comes from Gustavo Cambaúva from BTG Pactual. You may proceed, sir.
Hello, everyone. Good morning. I have two questions on my side, and the first one, if you could tell us a bit about the expectations that you have in terms of launches for the fourth quarter and for next year. You usually speed up things early in the year, but in your release, you mentioned that you have already made two launches in—for the fourth quarter.
So I don't understand if you are be able to push back some of those launches from next year to this year. And also, if you could give us some color on growth expectations for next year. You have a good land bank in hand. You have increased by BRL 12 billion land bank. I'd like to understand a bit more the timing for those new projects and if you still expect significant growth for next year. And my second question is about the sector association, ABRAINC, what do you expect to come out of this discussion on the FGTS tax at the higher courts of Brazil? If you think this could have an impact, this will be, we'll have a ruling early or later, I don't know, and where do those discussions stand at the government level?
Is there gonna be a delay, or will they be discussing this today, this week? If you have any idea of what may come out of that? Thank you, and have a nice day, everyone.
Good morning, this is Fábio. Thank you for your question. As for your first question about launches in the fourth quarter of next year, yes, in the fourth quarter or this year rather, we continue our strong launches pace. We pulled back something from next year to this year. We have already launched three projects. We have some more to launch, already pulling back from next year, from the early next year. For 2024, we will repeat our strategy we have been using for the past two years. In other words, end up having a very strong Q1, which is the way we like to work now.
We start the first half of the year very, very strong, so we should repeat that in 2024, and we do expect to have a 2024 year, much stronger than we had in 2023. Evidence of that is what we did in this last quarter, in terms of buying land, and we still, we're still doing it. We're still buying land in the fourth quarter because of this new program that we have in place, which reinforces our activities, and we do have the ability to grow even further. So just to be sure, we expect to have a strong fourth quarter and a very strong first half, which is, again, our strategy. The first half of next year should be even better than the first half of this year. As for the FGTS tax, I'll turn it over to Ronaldo now.
He's well abreast on the topic, but no major news, right, Ronaldo?
Good morning. Good morning. Thank you for your question. As for FGTS, the tax, the ruling is scheduled for this afternoon. The government asked for more... a longer deadline. This has not been met, but the government wants a Solomon-type, King Solomon-type solution, right? To benefit everyone. Now we have to wait and see what they're gonna be ruling on. That's what we know everybody knows, right?
Okay. Okay, thank you. Have a nice day.
Our next question comes from Pedro Lobato from Bradesco BBI.
Good morning, everyone. Thank you for taking my question. First question is, what would be the ideal capital structure that you have in mind in terms of net cash?
Do you expect to maintain your net cash level at, at the current levels, and what do you expect going forward? And the second question, this quarter, commercial expenses peaked up a little bit, so I'd like to understand the dynamics behind that, that increase in this quarter in commercial expenses.
Well, Pedro, good morning. This is João Mazzuco speaking. Thank you for your question. In terms of capital structure, our strategy remains the same. We have been preserving the same structure. The idea is to concentrate on the net cash, and our debt net over PL has been stable as well, between 25%-30%.
In this third quarter, we had some events happening at the end of the quarter when we captured BRL 150 million coming from our debentures that we issued, and we paid out BRL 150 million at the turn of the quarter on October third. So that, of course, brought a bit of a distortion in the final numbers. If you exclude the dividend payout from the math, you'll see that our capital structure has been very stable when compared to our track record. The strategy is to continue on that same pace and to continue to pay out dividends, of course, at the same level we have been doing as of recent. Number two, commercial expenses, to your point, they are basically variable, right? They vary.
They are linked to sales, directly linked to sales, so it's difficult for us to get operational gains. Why? Because we're talking about commissions here, and there's an item, which are the expenses that we have because of the registrations and the amounts that we pass on. So what happens that in this quarter, in particular, as for commissions, commissions go hand in hand with the evolution of the works, civil works, and the registration expenses, they come in the wake of the transfers, right? And we have a very strong transfer amount in the second quarter, and then after that, we have registrations, and then we need to factor that in. So that's what happened, actually.
We already had previous quarters where commercial expenses went up, so that's nothing new, but we'll probably preserve the same level, 9.9%.
Okay, Mazzuco. Thank you. Have a nice day.
Next question from Antonio Castrucci from Santander. You may proceed, sir.
Good morning. I'd like to have some more color on how you see the approval of the city plan in Rio, the zoning plan in Rio, and how can you compare that to São Paulo? If you could also comment on the following: the fact that the city is interested in adhering to the program, and they also have the program Minha Casa Minha Vida going on, correct?
Good morning, Antonio. We have a very good expectations about the plan coming from the city of Rio. We expect the approval to take place by mid-December, about a month.
That's what we hear from our people in Rio, and we have very good expectations for that. Today, we have 35% of our revenues coming from Rio, 30%-35%, and with a very robust operation across the city, Rio. We're still waiting for that to be approved, and of course, that will contribute with the Minha Casa Minha Vida program. If you look at Cury, you think we are only at Porto Maravilha, but we have operations in different districts of the city. We have bought more land in other districts of the city, so we are strategically very well positioned in Rio.
The city zoning plan, of course, contributes to this, expansion that we have implemented across the northern region of the city, which basically verticalizes, those areas where we have better transportation, opportunities, and that's where we are now focusing all our efforts as we expand to new areas. So again, very positive expectations, and we expect to increase our operations next year in Rio...
Okay, thank you. Congratulations on your numbers. Thank you.
Thank you.
Next question comes from Andre Gibaut from Itaú BBA.
Good morning. Thank you for the presentation. I have two questions. I'd like to understand the competition dynamics that you're facing as small and mid-sized players resume operations, and with new entrants coming in, if you have already noticed differences in commercial terms or even in competition terms as well, especially in the purchase of new land.
You mentioned you continue to buy land, so if you could tell us a bit more about the competitive scenario? Number two, about a potential expansion of the revenue bracket expansion from the program seven to 12,000, how could that impact the numbers of the company? Thank you.
Thank you, Andre. In terms of competition, I am directly linked to the purchase of new land. The small size players do not affect us. They are looking for other types of land and plots. They go for the smaller plots of land. As for mid-size and large-sized players, those are more important, and we have met them in certain occasions, but they do not have the same buying expertise that we have. And Cury, the company, was smart enough to jump ahead of the pack.
We were quite agile, quite nimble in trying to increase our land bank, and we had the ability of increasing our land bank by 20% in the third quarter. So we have very good banks going forward for the fourth quarter. So we'll close the year expecting to have very good land bank in the years to come. That's the main component of our strategy. The idea is to have the next two to three years well mapped out in terms of land bank. Okay? That's our strategy. We have that strategy around the downtown São Paulo, the main areas of Rio and São Paulo. That's the same strategy, and we are focused on finding good businesses. We are ahead of the pack in those more important areas. Ronaldo, over to you for the second question, please.
Andre, about the bracket number four, President Lula has mentioned that before, two or 3x , that he wants to create a new revenue bracket for clients earning between BRL 8,000-BRL 12,000 a month. That would be good for us. Close to 20% of our sales are falling outside of the program, so, that would bring all of those customers into the program. All those clients will be part of the program. We have clients with revenue from four to 8,000 BRLs a month, so, we'd be close to bringing in 100% of those clients into the program. Well, that would be very good. The main concern is that can FGTS support the creation of that new bracket? We have been following those discussions in Brasília to really see how sustainable that can be.
The Ministry of Cities is also looking into it to see if the funds can support that. That bracket four will have a slightly higher rate than bracket number three, and also have a restricted budget in order to be sustainable throughout the years. That's what I had in terms of those new brackets, Andre.
Okay. Thank you. Have a nice day.
Next question from Hugo Grassi, from Citibank.
Good morning, everyone. First of all, thank you for your results. Thank you for the presentation. Two questions from my side. Number one, about new businesses, purchase of new land. You have already said that your strategy is to increase your land bank. I'd like to understand the profile of that land bank, the terms of acquisition. The last earnings call, you showed some caution because of competition.
You also mentioned the possibility of changing the geographic focus that you have now. And since then, it seems that the scenario became more favorable for you in terms of competition. So if you could also address the city plan, the city zoning plan, for São Paulo, specifically, the benefits, the incentives that they are offering, the incentives that you see, especially for HIS. That's the first question. The second question, still about regulations. I would imagine you only have the first impressions about the guarantee landmark, which has been approved by the president. In principle, it seems to allow for multiple funding lines around the same real estate asset, right? The idea was that that could serve as a way to provide guarantee to other funding lines. Do you think that's a possibility? Where does that discussion stand?
Maybe the Caixa Econômica would oppose to that. How do you see that going forward?
Good morning. Thank you for your question. As for new businesses, yes, our strategy has been to increase our land bank. Our land bank, as I mentioned before, remains the same. We are focused on the metropolitan areas of São Paulo and Rio. We have been successful. We are now buying new good areas in those two metropolitan areas. Just as we have already have always done, either by swap or as payments after the approval in the long run. And about the city zoning plan, we are waiting for the final version. It does bring incentives that are favorable to us, and it provides incentives to increase the HIS capacity within the existing land. That provides us with gains, of course.
Of course, people selling the land also know that, so lands will become more expensive, but everybody wins, right? At the end of the day, people selling the land are gonna have a higher ask, higher asking, but we can absorb that increase. So all of that is already mapped out, is already factored in in our calculations as we buy new land. In Rio, our expectation is to have the city's zoning plan to be approved by the end of the year. We are closely monitoring new areas in the northern region of Rio. We have already bought regions in the western area of the city, and also a very robust land bank in the area of Porto Maravilha, and we're gonna be launching projects there.
As for that, question about the landmark, we're still waiting for Caixa Econômica to respond, because Caixa Econômica has a very important role to play. If they do not approve, other guarantees, there's nothing we can do. So we are, with our hands tied, waiting for Caixa to, make their move. Thank you.
Thank you.
Next question comes from Victor Tapia from UBS.
Good morning. I'd like to touch upon an, an issue relative to the growth in net revenue. When we look at growth of the REF, the revenue to be appropriated, it has a relatively high pace, a velocity of sales, which is exceptional. And in this current quarter, the growth in net revenues, lagged a little bit behind.
My question is, how can we understand, in terms of production, if there's something happening and some sort of bottleneck or if something specific happened, and if you could give us some more detail on that, I'd appreciate it. Thank you.
This is João. Thank you for the question. That's an important point that you raised. Not the first time that this topic surfaces. While we grow at the pace we are growing right now, and I mean, launches, sales, revenues will face some difficulties in, in keeping up because, there is a natural delay, right? We cannot grow engineering at 30%. Of course, we're not gonna grow 30% forever, but when our growth stabilizes at lower levels, it'll only be natural to see revenues keeping up with that pace or even growing above our operations.
That's the result of the dynamics of the business. When you talk about the third quarter, we saw a slightly lower growth. We also mentioned last year that we had problems related to supply. Not only Cury, but the whole industry suffered with supply issues. Elevators were specifically an issue, one of the challenges, and of course, that adds delays to the works. But it's all falling within our dynamics. Engineering continues to grow at a very strong pace, but still lower than that of the growth of sales and launches. That's only natural.
Okay. So it is a matter of time until it catches up.
Okay. There's no specific bottleneck. I understand.
Okay. And then when we stabilize numbers, this will change.
Okay.
Yes, yes. Engineering response will always be slower.
Yeah, of course, we're not gonna be growing 30% forever, as I said. Okay.
Thank you.
Thank you.
Next question comes from Ygor Altero from XP.
Hello, everyone. Good morning. Thank you. My first question is, given the adjustments we see in Minha Casa Minha Vida, can you pinpoint the revenue bracket that has performed well or better than the others? And also about the new launches, did, I'd like to understand the rationale behind the mix of new launches across different segments. You could perhaps increase the share in the lower brackets of the program, so a bit of color on mix. And if you could also talk about cash generation, which came out very strong. So what were the main drivers for this strong cash generation, as has happened for two consecutive quarters? So if you could. Thank you.
Good morning.
Thank you for your questions. Well, our mix is quite strong at bracket number three, a bit of bracket number two. As Ronaldo said, 20% are falling out of those brackets above the program, as we say. We will remain with the same mix going into next year. The metropolitan areas in São Paulo and Rio, their main characteristic is the same. The cash generation, I'll turn it over to Ronaldo.
Hi. Ygor, our cash generation dynamics doesn't change. We always say that this, our track record shows that Cury grows by growing cash generation. That's what we expect to have also next year, the very same rationale.
Our budget for 2024 is almost complete, and we are based on the principles that everybody knows: buying land, as Fábio mentioned, our sales performance is really, really good, the quick transfers, so that dynamic should not change going forward.
Okay, thank you.
Next question comes from Marcelo Motta, from JP Morgan.
Good morning. I have two questions. First, about sales expenses. I understand that those sales expenses vary, but if we look at it as a percentage of sales, net sales, this quarter's, this quarter, the number was exceptionally high. It was between 5%-7%, and now it really went up. So what happened? Maybe you sped up launches or something else we are not seeing to understand that increase in sales expenses, and what can we expect for the first quarter and for next year? And number two, about FGTS budget.
For this year, I think things are done, an increase of BRL 25 billion. Now, when we look for next year, we will need to see an increase because the budget is at about BRL 75 billion, but even if it is in line with this year, it'd be BRL 100 billion. Still, it doesn't seem to be enough, just as other low, lower income companies are also growing, and they are forced using those resources. So how do you see that going forward, the FGTS budget? And if you launch more in the first half to explore that in a more favorable fashion and to avoid bottlenecks. Thank you.
Hi, this is João once again. There was a difference in timing between expenses that we incur into, and the sales, and the appropriation of commercial expenses. That's why we'd also rather show net revenue in our results.
So what happened in this quarter? Just to give an example. First of all, commissions come as they are accounted for as they come. So when I sell today, commissions, which accounts for an important component of our expenses, they are not appropriated or accounted for today when I sell today. Also, transfer and registration expenses also made up an important component of our commercial expenses. But there is a timing, a timing mismatch between those, and that's quite clear. We had very important transfers in the second quarter, and the relative registrations, relative expenses for registration, came only in the third quarter. So we cannot necessarily keep a constant relationship between expenses and sales. The commercial expenses tend to be more constant, and the net revenues are following a different path, and that they, they've been stable for the past quarters still.
So we've had periods before, if you look at our track record, where there was a mismatch or disconnect between between net revenue and commercial expenses, but we always resume our historical levels. As for the FGTS budget, Motta, next year, we'll discuss budget in our next meeting of the committee. There are two possible avenues. Number one, maintain the current budget as is, and then if we need to reinforce it throughout the year, we will remove money from mobility and sanitation and transferring that to housing, as this has happened this year. And another avenue which is being proposed is to maybe have a higher budget right off the bat for housing.
Irrespective of the avenue chosen, people who are today heading the, that process at the Caixa Econômica Federal and the Ministry of Cities, they are quite aware of what's happening in the market, and I do not see any risk of, money, of, of, of a lack of resources next year, no. The way this is being led does not worry me. I understand your concern in terms of, an increasing number of players in the market, players who are interested in the program, because the program became attractive once again, but the budget is enough, I am sure. Okay?
Okay. Thank you.
Our earnings call is now over. We'd like to thank you all for participating, and have a nice day, everyone. You may now disconnect your lines. Thank you.