Good morning, and thank you for waiting. Welcome to Cury Construtora's 2023 2Q earnings conference call. Today, we have with us Mr. Fabio Cury, CEO, Mr. João Carlos Mazzuco, CFO, and Mr. Ronaldo Cury, Investor Relations Officer. We kindly inform that all participants will be in a listen-only mode during the company's remarks, right after which we will open the floor for questions when further instructions will be given. Should you need any assistance during the conference call, please press star zero to reach the operator. We also inform that this conference call will be conducted in Portuguese by the company's management, and there is simultaneous translation available into English. This call is also being simultaneously broadcast online via webcast.
Before proceeding, let me mention that any forward-looking statements that may be made during the conference call relative to the company's business outlooks, projections, and operational and financial targets, are based on beliefs and assumptions of the company's management, as well as on information currently available to the company. These forward-looking statements are no guarantee of performance. They involve risks, uncertainties, and premises, since they refer to future events and therefore depend on circumstances that may or may not occur. Investors should understand that overall economic conditions, industry-related factors, and other operational factors may affect the future results of the company and lead to results that differ materially from those expressed in said forward-looking statements. Now, I would like to turn the conference over to Mr. Fabio Cury to start this presentation. Mr. Cury, you may proceed.
Good morning, everyone. Thank you for attending our earnings conference call.
Today, we have Mr. Ronaldo Cury with us, our investor relations officer, and João Mazzuco, our CFO. During the conference, we will present the main highlights of the operational and financial performance of Cury. In the end, we will open the floor for questions. We are very happy to present our achievements of the last quarter with record-breaking numbers, both in terms of our operational performance, sales, transfers, and units produced, as well as financial results, revenue, income. We have reached record-breaking levels. Today we also have a strong volume of launches, and we reached cash generation of BRL 109 million in the quarter. After celebrating our 60th year, we have the best quarter in a long time.
During the first quarter, the highlights in terms of launches were Jaguare, Cidade Jaguare, with nearly 80% of the units sold, with a PSV of BRL 148 million, and Rio Branco in Niterói, with a PSV of BRL 257 million and more than 74% of the units sold. For quarter three, we will start the second phase of Cidade Mooca, an important region in São Paulo. Since 2021, we have launched more than 2,500 units in this region. In this new phase, we have a total potential PSV of another 1,200 units. In August, we launched Cidade Mooca San Marco, with a PSV of BRL 130 million, with 565 units.
This region has been providing us with very high speed of sales due to the high demand, motivated mostly due to the strategic location. In addition to the performance represented, we are very confident about the future. In June, we approved several measures, and the announcement of a new cap for the units of the Minha Casa, Minha Vida program in the amount of BRL 350,000 should bring this positive impact, significant impact, since this will allow for a great portion of our units that were previously out of the program. These units will now be able to benefit of all the advantages offered, the lower interest rates, which will make them more accessible for a larger number of buyers.
The new measures announced by the Minha Casa, Minha Vida program, combined with our business model, our unique business model, which has been demonstrated to be very assertive, have been expanding our avenues for growth and are increasing our confidence in our future results. We will maintain our essence to operate in the metropolitan areas of the states of São Paulo and Rio de Janeiro with associative credit and through sustainable management focused on profitability, cash generation, and shareholder remuneration. I'd like to turn the conference over to Ronaldo to give more details about our operating and financial reports.
Good morning, everyone. On slide six, I will explore the highlights of our operating and financial performance in 2Q 2023. We recorded the total launches of BRL 1.2 billion, net resales of BRL 1.2 billion, a net SoS of 45.4%, and operating cash generation of BRL 109 million.
... We also reported net revenues of BRL 727.7 billion, an adjusted gross margin of 37.9%, a net income of BRL 124.1 million, and a net margin of 17%. In quarter two, we launched eight new projects with a total VGP PSV of BRL 1.2 billion. Five of them are located in São Paulo and three in Rio de Janeiro. The highlights were Rio Branco 220, located in Niterói, and launched in April 2023, with a total PSV of BRL 257 million and more than 74 of the units sold-- 74% of the units sold.
Cidade Jaguare, in the western part of the city of São Paulo, launched in April this year with a PSV of $148 million and nearly 80% of the units sold. Barra da Tijuca launched in June with a PSV of $178 million and more than 55% of the units sold. Now, on slide eight, we will explore our sales performance. In quarter two, 2023, we reached $1.2 billion in net sales, a new record with an increase of 10.7% compared to quarter one, 2023, and an increase of 33% year-over-year.
Our SoS in Q2 2023 was 45.4%, an increase of 2 percentage points compared with Q1 2023, 3.8 percentage points year-over-year compared to the same period, 2022. The SoS of the past 12 months reached 73.1%, an increase of 1.1 percentage point compared with Q1 this year, 3 percentage point, points year-over-year. We continue to see strong demand for our products in Q2. We still have an intense activity in terms of launches, resulting from our strategy to concentrate a larger volume of launches in the first half of the year.
We finished quarter two with a stock of BRL 1.4 billion in PSV, and 98.3% of this PSV is represented by units launched from works that have not yet started or units under construction, and only 1.7% of the units are completed. Now, on slide number nine, we see on the left chart that our sales mix is still focused on the higher levels of the program, and on the right side, we see the evolution of our average price by unit. In quarter two, the average price was BRL 278,000, a 4.2% increase quarter-over-quarter, and a 16.7% increase year-over-year.
The variation in the average price by unit this quarter had a great influence of the mix of products that we launched in the period, with a higher selling price. On the next slide, we closed quarter two with a total BRL 10.2 billion in potential PSV, corresponding to a total of more than 40,000 units. On the right side, we see our cash flow generation, which reached BRL 109 billion in the quarter. Now I'd like to turn to João Mazzuco, our CFO, and he'll give you more details about our financial results. João, please.
Good morning, everyone. On slide number 12, we have our net revenue. In quarter two, we reached BRL 727.7 billion, a 20% increase year-over-year, and a 22.3% increase quarter-over-quarter.
This resulted from increase in sales and also the greater evolution of our works. Still on slide 12, we have our gross profit. In the quarter, there was a 23% increase quarter-over-quarter and 27.44% year-over-year. Our adjusted gross margin reached 38% in the quarter and has been stable in the past few quarters. The same applies to the REV margin, which was reported at 41.9%. This margin represents only the costs over the net revenue of units sold, excluding taxes and other effects such as provisions and etc. On slide 13, we have our net income. When it comes to the controller, it reached BRL 121.4 million in quarter two , 2023, a 40.7% increase year-over-year.
Still on slide 13, we have the net income of the entire operation, which reached BRL 124.1 billion in quarter two, an increase of 33.6% compared with the BRL 92.9 million in quarter two, 2022. On slide 14, we have the profile of our gross debt. We closed quarter two with a total gross debt 3.9% up compared with December 31st, 2022, due to the increased balance and increase in production. We didn't have any fundraising or amortization during the period. We closed quarter two with a net cash of BRL 335.8 million, an increase compared with the BRL 308 million that we had in quarter one, 2023. Our net cash over PL closed the quarter, ratio closed the quarter at 30%. Our amortization schedule finishes in 2028.
On slide 15, once again, we had a very robust return on equity of now ROE of 49%, considering the average PL over the past 12 months. This consistency in our returns reflects an operation that continues to be loyal to all our strategic principles, which are very well known by all of you. Thank you very much. Now I give the floor back to Fabio. During July, we're top 3 in different important categories in an important ranking of investor relations, the Institutional Investor ranking. This recognition is a reflection of the efforts of our entire team and the management, with all our knowledge, transparency, and the best practices in the market, which allow us to increase the trust of our investors in us. We continue to be committed and focused with the development of our ESG journey, we are announcing today our first sustainability report.
We would like to note that you're all invited to access and read it to get to know more about our ESG initiatives. This document is an important step in our reporting to the society and in our ESG journey towards a more sustainable future. I also reinforce our commitment to adopting sustainable practices in all parts of our business. We're very proud of all these advancements and commitments in social responsibility, corporate responsibility, and in the search for solutions that can contribute to conservative development. Thank you all for attending. Thank you for your interest in Cury result. If you have any questions, our IR team will be at your service. This is the end of this conference call. Now I'd like to ask the operator to open the floor for questions. Thank you. Thank you. We will now open the floor for questions.
If you have a question, please press star one on your phone. If at any point your question is answered, you can press star two to remove yourself from the, from the line. The questions will be received and it will be answered in the order they are received. Please pick up your handset to ask your question to ensure optimum sound quality. The first question is from Rafael Rehder, from Safra.
Good morning, Fabio, João, and Ronaldo. Thank you for your presentation, and thank you for taking our questions. I have two questions. My first question is about the extension of your financing term with Price for 120 and the consigned FGTS. In our understanding, until July, Caixa was being very restrictive in the loans granted. We are hearing from some competitors of yours that the volume is increasing.
I want to understand how you see this movement. About the consigned FGTS, when do you think it will be effectively implemented? My second question, I would also like to know more about your appetite for Pro-Soluto, because it is a tool for gaining margin, but now with the new changes that increase the affordability, I want to understand if there will be any change in your Pro-Soluto policy. These are my questions. Thank you.
Good morning, Rafael. This is Fabio Cury. About the term for the 420, 35 years, yes, in July, Caixa was still being more restrictive in terms of its policies, but this has changed-- this changed in August. We're looking at our transfers, and of our transfers, 80% of what we transferred, we were already able to approve within the period of 420 months.
Now we are much better in terms of capacity in the month of August. For consigned, we understand that we will only be able by the end of the year, so it's not something immediate. About Pro-Soluto, nothing has changed. Even with the new measures approved and implemented, our policies will remain the same. From the Pro-Soluto, until the keys are delivered to customers, our strategy will not change.
Perfect. Thank you. Very clear.
The next question is from Pedro Lobato, Bradesco BBI.
Good morning. Thank you for taking my question. On our side, we have a question focused on the competitive environment in São Paulo, considering the changes in the program. We saw a lot of players that are not working exclusively with clients that fall within the criteria of the program.
Of course, the smaller players are suffering with the cost. Thinking of this probable increase of the competition in São Paulo, what do you expect to be the margin curve and the timing to reap the benefits? For those who already have projects ongoing, what will change in the dynamics in terms of procuring land and new offer of products?
Good morning, Pedro. We think the competition is the same or perhaps slightly stronger. We will maintain the same pace of procurement, or maybe we can wait for this opening of capital to be able to speed up the race for land. Our policy will be to bring more lands to our portfolio. This is our policy now. We will procure more land, but nothing has changed in our strategy.
We will buy land with the same criteria, with the same characteristics that we used to. Buying lands for payment after the launch, so same criteria for São Paulo, Rio de Janeiro, central regions, with the same characteristics. Now, after the launch of the program, the new measures of the program, we may even go back and revisit some of our lands in lower ranges besides some of the lands that were... We had standing by, we will resume some of the projects that we already had planned. Looking back at the SBPE plus faixa 4 projects that we have, particularly in Rio de Janeiro, and we will also prospect some new lands for the lower ranges.
Thank you. Have a great day.
The next question is from Juan Arguinones from Spain Investimentos.
Good morning. Thank you for your presentation.
For my question, I have two questions. First, I want to understand your pipeline of launches. Can you please further explore what changed in terms of your launches with the new updated measures of the program? Are you planning to anticipate some of the launches that were planned for 2024, anticipate them to 2023? My second question is about the change in the cap. For some regions, for some markets, there was an increase in their attractiveness due to the caps. I want to understand how are you thinking? Is the situation better in some of the regions where you operate?
Good morning, Juan. Yes, about the launches, we have our pipeline for this year.
As things progress, yes, it may happen then in quarter four, we can maybe anticipate some of the launches planned for quarter one, 2024, and anticipate them to quarter four this year, depending on what happens during quarter three and four. Nothing major, because we are on schedule, but there could be one-off anticipations. As you heard in our previous answer, when we look at the lower ranges and regions where Cury has already worked in the past, they go back to being a fit. For example, Alto Tietê in São Paulo, the region of Campinas, the western part of Rio de Janeiro, Campo Grande, Santa Cruz, São Gonçalo. These are regions where Cury used to operate, so we know these regions very well. We stopped working there because we were strongly based on ranges three and four.
We understand that now it's the time to go back and start reconsidering these regions where we could go back to operating.
Thank you. Very clear.
The next question is from Tainan of the UBS.
Good morning. Hello, Ronaldo, Mazzuco. Thank you for the opportunity to ask a question. I'd like to explore the RET 1 return. Can you please give us a breakdown of the sales by range, by zone, so the representativeness of the zones one, two, three in your sales? Understand whether you have any plans to increase your exposure in range one, considering the financial incentive of RET 1 , and how would you operationalize the billing in this case? How do you use the different percentages for one unit or the other, 3% and 4%?
Thank you. Good morning, Tainan. This is Ronaldo.
RET 1, the law was approved, we're still lacking the normative instructions from the IRS that will make the program clearer. What we have here in the first quarter is that 5% of our sales went to these families that make up to BRL 2.640 thousand per month. We understand that in our new sales, when the rules are established, instead of charging 4% RET 1, we can charge 1% RET 1 from these units. This is the rule, and this is how we plan to work. Of course, we're still lacking some regulation. In the first half, this would account for 5% of our sales, and in the second half, this could increase. We are already looking at more products, including more products for the lower ranges, particularly for the range 1.
Thank you, Ronaldo. Very clear.
The next question is from Daniel Gasparete, Itaú BBA.
Good morning. Thank you for the call. I have two questions. The first question is, what are your expectations about potential new creations or increases in cap or changes in the income levels accepted in the program? For example, you were talking about a potential BRL 7,000-BRL 12,000 in income. What are your expectations in terms of changes in the program? I'd like to know about the Rio de Janeiro market, not just in terms of the potential growth and the return plan, but also the program Cheque Cidadão for public servants, the BRL 25,000 that are being offered to public servants. Do you think this will boost your sales, or what changes in the strategy of the company for Rio de Janeiro? Thank you.
Thank you, Gasparetti. This is Ronaldo. Good morning. Thank you for your question. Thank you for attending our call. About the changes, what we are expecting and what's being discussed by this administration is the creation or not of range four. Range four would raise the cap to R$500,000 for families with an income up to R$12,000 per month. This is still being discussed by the government, so it's not unanimous. We don't know whether it's going to be something temporary or permanent, the creation of the new range 4 for the program. Our expectation is that this will be defined by the end of the year, whether this new range will exist or not, and Fabio will talk about the Rio de Janeiro market.
Good morning, Gasparetti. We have two different ways to work in Rio.
The master plan is something we've been paying a lot of attention to. It should be voted by the House of Representatives by the end of the year, and this will change the game completely in Rio de Janeiro, and it is in line with what's happening in São Paulo, particularly with the social interest habitations. This will change the approvals and the permits for this type of housing, particularly in the transportation access of Rio de Janeiro. This is a very important benefit and potential benefit in Rio, and this should be defined by September. About Cheque Cidadão, it is now being regulated, and the rules are being established, and we are expecting to see more... To hear more about this in the next 60 days.
It could be up to BRL 25 thousand reais in terms of a grant to public servants, and this will subsidize our market. This will be very important for equity in Rio de Janeiro, Gasparetti.
Thank you. Good morning.
The next question is from Andre Mazini, Citibank.
Hello, Fabio, this is Ronaldo João . Thank you for the call. Can you give us more light on the direct sales portfolio? Can we think that this portfolio is now associated with units that used to be out of the program and now with increase in the cap to BRL 250 thousand, these units will meet the requirements of the program? As a consequence, you would have a smaller direct sales portfolio looking forward, considering the expanded share of the program now. My second question is a follow-up about the master plan for Rio de Janeiro.
What will effectively change that will potentially benefit you? Basically, they will approve different types, smaller units with no parking, which is a type of building that you like to build. Not necessarily larger apartments with parking spots, which is not at usual in your portfolio.
Andre, this is Fabio. I'll start with your second question, and then we'll talk about our portfolio. About the master plan for Rio de Janeiro, one of the most important points is the parking. In Rio, parking is still mandatory, and we think this is completely unnecessary, and it really restricts the projection of our projects there. They will stop that. Parking will no longer be mandatory, particularly in the transportation access of the city of Rio de Janeiro.
Also, in this part of the city, they will also change the usage coefficients and the format of the buildings. This will increase our capacity in terms of densification of our project in these regions. This will completely change the utilization of these areas and these regions in the city of Rio de Janeiro. This will really improve our outlook. We see some areas with 20,000-30,000 square meters where 1,000-1,500 apartments are approved. In São Paulo, this number would be 3-4 times larger. With the new master plan, we may have a much larger, a much, much higher densification, and there's no need for parking spaces in the transportation access, where they have the subway and bus lines in Rio de Janeiro.
Oh, it is in line with the interest of the housing project of Rio de Janeiro. Now João will talk about our portfolio.
Good morning. About our portfolio, Mazini, theoretically, you're right. We do expect a larger fit of customers that are accessing us today through direct sales and will now start accessing us through the program because the interest rates are more attractive. A great part of the customers that come from our direct sales, they are customers, by, at an, a higher average price, so projects where we have higher prices on average. These are customers that are not willing to take on loans. They don't need loans. Of course, some of them could take loans from SBP, but they choose not to.
Now, with the lower interest rates within the realm of the program, it is possible that they will change their mind. There's also the income level, because customers from our direct sales, also related with what I just told, they buy at higher prices, and they also have a higher income that will not necessarily meet the requirements of the program. We will be paying attention moving forward. In respect to the pipeline, we are seeing a stable behavior in terms of the debt, in terms of delinquency and monthly payments over the total volume, projects under construction, completed projects. We are at a very comfortable position in that sense. You see that the largest percentage is projects under construction, works ongoing, so we increased the share of our portfolio that now corresponds to works in progress.
In terms of duration and maturation, you see that on average, over 1 year, we have 35% maturation, and within three years, we have 70% of payments due. It is. We can say it's a short-term portfolio, and the behavior of this portfolio has been pretty stable.
Thank you, Fabio and João.
The next question, Aline Almeida, Bank of America.
Good morning, Fabio and Ronaldo. Thank you for using my questions. I have two questions. First, I want to hear from you, what is your level of comfort with the budget of the program? There's a problem with the credit for loans seems to be resolved now, next year there are still some doubts concerning the growth expectation of the companies and the environment itself. How does this converse with your growth plans?
The second question is a follow-up of Gasparetti's and Mazini's question about the master plan for Rio de Janeiro. Can you tell us more about the timing of this new master plan? How much land bank you have in-house that could be revisited and now meets the requirements of the program in Rio?
Hello, Aline. About the budget, first, let me say that we were very happy with the increased budget for the program this year and also the FGTS, so this gives us more comfort to change. The government is following this closely. They are really focused on giving enough resources and funds for the program. For the upcoming years, we will be monitoring this closely, the pluriannual budget of next year. The government knows they will have to increase it, just like they did.
They will have to get money from other areas, from sanitation and the guarantee fund. There's a part for sanitation, for urban mobility, and for health, and they consume very little of their annual budget. Our expectation, just like we saw this year, we think they'll do the same next year, and they will increase the budget for housing. As for our growth plans, yes, we are planning to grow next year, but we have to do it cautiously, and we don't think this budget will be an impediment to sustain our growth plans for next year. Fabio will talk about the master plan for Rio.
Hi, Aline. The expectation is for the plan to be approved by the end of September, and it should become effective right after that.
About our land bank, which is about BRL 3 billion in Rio de Janeiro, the areas that should be impacted by the plan, the changes in the master plan, for example, in Porto Maravilha, there will be no change. No significant changes coming from the master plan, which is good and is a good, a significant part of our business there. Of the BRL 3 billion, I think BRL 1 billion, about BRL 1 billion will be impacted by the changes in the master plan. These will be beneficial changes that will significantly improve our potential for construction. Furthermore, it will also facilitate our search for new products, new lands, new possibilities. When we increase the constructive potential of the lands, we will have more possibilities, and this is what we're doing.
We're prospecting land, considering what we have in-house, this is what I have to tell you for now.
Thank you. Perfect. Thank you, Fabio and Ronaldo.
The next question is from Elvis Credendio, BTG Pactual.
Good morning, Fabio, Ronaldo, and João. We have two questions. First question: How do you see the first results of the changes in the economy in the speed of sales of the company? We know we're still awaiting some changes, final changes, and the FGTS in the future. What are your first impressions in July and early August? The second question is about the size of the company. Looking at your growth, the company has been showing strong sales, and we expect an improvement in demand. Growth and margin. How are you planning to capture this improvement in the affordability of your customers looking forward?
What is keeping you from sleeping? Do you think there will be more competition? The land bank will be an impediment or engineering? What will be the impediments for a stronger growth in the future?
Good morning, Elvis. Thank you for your question. The new measure with the government, we already see the results of that, the new cap and the new term of the program. We are already seeing this in our cash and our transfers. We had an increase in August compared to the previous period. This already increases our transfer capacity. About competition, we do expect the competition to increase, and what is from CP is increased competition, particularly in the procurement of land. One concern that we always have is the increase in engineering costs.
We're always paying attention to any oscillations in the cost of engineering in the market. What we can tell you now is that concrete and cement had a price increase. We always have price increases for particular supply, so this is our main concern, so that we can keep our engineering pool of costs as lean as possible. We're always looking for the best products in terms of land procurement. Thank you, and good morning.
The next question is from Antonio Castrucci, Santander.
Hello, good morning. Thank you for answering my question. About the entry of the company in lower ranges, do you plan to open new markets in the São Paulo, when you go to the lower end of ranges one and two?
What would be the % of your launches that will be focusing on these two lower ranges?
Good morning, Antonio. Yes, the idea is to go back to markets where we used to operate. As I said, we used to work in Alto Tietê, Mogi, Suzano, Roá. We have worked strongly in Campinas, in Hortolândia, Sumaré, Campinas itself, and other surrounding cities. In the metropolitan area of Rio de Janeiro, we have worked in Baixada, West in Campo Grande, Nova Iguaçu, São Gonçalo. These are places where we have worked with ranges 1 and 2 in the past, and they have been put on hold, and now we're going back with the new range 1. What the size will be, it's not that large.
We have a very good position in ranges three and four we will explore these new ranges with a smaller portion, and then we need to study and understand whether we can increase our scale and have good margins so that we can expand our scale. At first, it will be about 5%-10% of our total volume that will be in ranges one and two in the next years.
Thank you, Fabio.
The next question is from Marcelo Motta, JP Morgan.
Good morning. I have two questions. My first question is a follow-up about the FGTS budget. When we think of 2024, considering that everyone is growing, if the budget stays at BRL 85, this would bring a more negative outlook, considering that everyone is growing their budget in the same way.
What would be the budget required in 2024 to accommodate this growth that we will see in the industry? I'm sure you're monitoring this internally. My second question is about the land bank. You said it's something that's keeping you awake, so would you be willing perhaps to work with the registration of larger lands, larger than what you operate with today, to generate more balance and to put you in a more comfortable position? Or do you plan to continue to work the same way? Between having more lands to ensure growth or operating light, asset light, what would be your option?
Good morning, Motta. I'll start with your question about next. As for lands, we don't want to buy in advance.
We want to continue doing it as we have always done it. I must admit to you that it's becoming more and more difficult considering the volumes that we are taking on. The idea is to maintain the same strategy, to buy in a barter fashion or paying after the launch. Of course, this could happen. Maybe in the future, we will come to the conclusion that we should make some down payments to be able to secure one or another area. Then maybe we will have to restructure our capital to make it work, make it happen. I don't think this will be our business model.
Maybe for a one-off project, but the business model will remain the same, to have a comfortable land bank that allows us to continue working at least in the next two to three years. About the FGTS, Motta, we have a budget this year of BRL 97 billion, and for next year, these BRL 97 billion should be repeated according to the conversations we've been having with the government and the National Housing Department. Now, whether this will be enough to support growth of the contracts of the program, we believe so, but this should be discussed by the curator board of the fund in the upcoming weeks. They're making some projections. If they need to increase it, they may increase this budget. They are now studying this subject in depth to avoid any shortages.
The government is really focused on ensuring the funds, ensuring the funds required for Minha Casa, Minha Vida, and particularly for the markets.
Thank you. Very clear, Ronaldo. Thank you.
Cury Construtora conference call is now over. Thank you all for attending. You may disconnect your lines now. Have a great day.