Good morning, ladies and gentlemen, and thank you for waiting. Welcome to our Cyrela's conference call to discuss the third quarter of 2021 results. Today with us we have Raphael Horn, CEO, and Miguel Mickelberg, CFO and Investor Relations Officer. We would like to inform that during the company's presentation, all participants will be able to listen to the call only. We will then begin the Q&A session when further instructions will be given. In case you need any assistance during the conference, please request the operator's help by pressing star zero. We would like to inform that the conference call will be held in Portuguese, presented by the company's management, and for the English conference, there will be simultaneous interpretation. This event is also being broadcast simultaneously via webcast.
Before proceeding, we would like to clarify that this conference call contains forward-looking statements that are subject to known and unknown risks and uncertainties that could cause the company's actual result to differ materially from those in the forward-looking statements. Such statements speak only as of the date they are made, and the company is under no obligation to update them in the light of new information of future developments. Investors should be aware that overall economic conditions, industry conditions, and other operating factors can affect future results of the company and may lead to results that differ materially from those in the forward-looking statement. Now, I would like to turn over to Mr. Raphael Horn, who will start his presentation. You may proceed, sir.
Good morning, everyone. The third quarter of 2021 was marked by a deterioration in the macroeconomic perspectives of the country. Inflation was above forecast, and that added to increased uncertainty related to the maintenance of the Brazilian tax framework have led to increased interest rates also with the consequence, turbulence in the prices of assets in the capital markets and also operating impact in our sector since higher inflation and higher expected interest rates potentially cause reduced demand.
On the other hand, because of the advances in vaccination in the country, we're able to resume our activities in our sales booths, and the quality of our products was good, and we got solid operational performance in the period despite the challenging scenario.
We reported a sales performance of BRL 1.3 million in the period, 20% lower than in the same period of the previous year and 13% lower than in the last quarter. Launches increased 33% vis-a-vis the same period of the last year, and 14% vis-a-vis last quarter. Year-over-year, sales reached BRL 3.9 million, 29% vis-a-vis the same period in 2021. Launches total BRL 4.5 million, 53% above 2020. Cyrela presented net income of BRL 231 million positive cash generation and for more than one quarter.
On one hand, news regarding pandemic were positive, but on the other hand, the challenges we mentioned indicate that we need to be cautious, and we are going to deliver the best results to our shareholders. Now we are going to comment on our operating results. We launched 12 new products, 33% more than the last quarter. Excluding swaps, it was 56% higher than last year. The share was of 90%.
In slide six and seven, we talk about the main launches. Moving to slide eight, let's talk about our sales performance. In the third quarter of 2021, we reached BRL 1.4 billion in sales, a reduction vis-à-vis the third quarter of 2020. Ex-swap, it was 30% higher than the nine months of 2020. The state of São Paulo accounted for 67% of our sales. Now let's talk about the speed of sales in the third quarter, which was 49.6%. Considering sales by the batches of vintages, we sold in the third quarter, 33%. On slide 10, we'll talk about the total inventory. At the end of the quarter, it totals BRL 6.5 billion, an 18% increase because of the launches.
Our inventory movements can be seen in the chart in the left-hand side. Here on slide 11, you see finished units. We sold 70% of our finished units. If you consider the ones that were delivered and the pricing in the market, the finished inventory had a drop of 13% vis-à-vis the second quarter of 2021. On slide 12, you will see delivered units. In this quarter, Cyrela delivered six projects. Total 295 units with a PSV of BRL 642 million. In the year, we delivered 2,600 units in 15 products with a total PSV of BRL 1.4 billion. On slide 14, you see the financial results. The net revenue reached BRL 1.3 billion. That was 11% higher than the same quarter the previous year, 9% higher than second quarter.
The gross profit totaled BRL 447 million, 18% higher than the last quarter of the previous year, and 3.4% higher than the second quarter. Here you can see the values too, of the accumulated amounts for the year. The net income was BRL 267 million in the second quarter of 2021, and in this quarter, BRL 238 million. Slide 15 talks about profitability. In the third quarter of 2021, our return on equity measured as the net income over equity average was 15.4%. Slide 16 talks about debt. The debt was BRL 3.4 million, but then our net debt was BRL 381 million. In total, 86% of our gross debt is in the long term.
Our net debt over equity was 3% lower than last quarter. Slide 17 is about cash generation. In Q3 2021, the cash generation was over BRL 177 million, BRL 87 million in the last quarter. Now, Raphael and myself will move to the Q&A session. Thank you.
We will now start the Q&A session. If you have any questions, please type star one. If at any point your question has been answered, you may remove your question from the queue by pressing star two. We will take questions as they are received, and we also ask you to pick up the phone while we ask the questions to improve the audio quality. First question from Gustavo Cambauva from BTG Pactual.
Hello, good morning. I would like to ask a question about your perspectives in terms of launches in the future. You mentioned about how difficult it is today to predict the macroeconomic scenario, and I believe you're more cautious at this point. The fourth quarter historically has always been very strong for you in terms of launches. You have a good land bank. I would like to understand your perspectives about launches in the first quarter and also in 2022. Do you believe that maybe this will be reduced in terms of the volumes when compared to last year or even this year? Do you believe that there is room for growth? What are your perspectives for next year? Thank you.
Hello, this is Raphael. We are cautious, and we should be, because we should be cautious in Brazil, and every time there is some sort of oscillation in the economy, we should pay attention to that. Because of the interest rates and everything, we should pay attention. This is not good for the country, it is not good for any industry, and neither will be for ours. The company still have good conditions for our operations. Brazil is used to operating with very high interest rates. I think that is not as harmful here as it is in other areas of the world. Of course, we are not excited, so we are not extremely optimistic, but it's Brazil with caution.
We'll keep on moving. We'll keep doing what we do. We do have a good land bank for 2022 and 2023. We are not considering growing right now, but we have good products expected for these upcoming years, and we believe it will be okay, but we don't know what's going to happen. It could go bad or not. I think up to 2023 we have a good option. What we won't do right now is start buying land at this point. We'll just use the land we already have in our land bank. I don't think it is time to speed up business.
That's great. Thank you for your answer. It was clear. You talked about maybe not buying so much land. I think that the macroeconomic scenario maybe has not changed in terms of those who sell lands. Maybe we don't see offers better than you had six months ago. Has that changed at all, or you haven't seen any changes in that aspect?
I don't think it has changed. I think it will change if we have a crisis. We see changes when there are crises. The financial conditions have deteriorated significantly, but I don't think it is a crisis yet. Not in the country, not in our industry. If you have long time of crisis, then the prices of land drop then. But that requires time. We haven't seen those changes in the prices of land. Of course, if there is a crisis, there will be opportunities, but I don't think this is the scenario. There will be less competition for land, but we haven't seen a price drop.
Great. Thank you very much, and have a good day.
Our next question is from Aline Caldeira from Bank of America.
Good morning, Raphael and Miguel. We have two questions. Looking into inventory, can you please tell us what you have performed already and what exact product mix you expect for next year in terms of what are the physical assets that you are going to deliver to the market next year? My second question is about the sales dynamics. The problems about the third quarter have to do with the timing of sales, or maybe the performance is not so good. What do you think happened?
Aline, I think that SOS sales speed of sales is going to drop when compared to the past. For the past two or three years, we've had good results, the SOS was high. I think we should wait a little bit and because we expect it's expected to drop.
Yes, there were some launches at the end of the third quarter, but we are pleased with our current SOS on average. Some products are even surprising us, while others performed below our expectations. We should expect lower SOS because in the past two or three years, we had good times. Of course, good times don't last forever. Now, I think we have SOS levels that are more realistic. We don't see the boom we had in the past. Now we need to sell our inventory well during the construction, and we are used to that. Sometimes you sell everything at a launch, sometimes you sell everything until you deliver the keys, which is the most important thing for us. It's not good to take inventory after the building is ready. That's not the scenario we are having today.
We hope not to be there at any point. We want to sell our units until the delivery of the keys, and that's what we've been accomplishing so far. That's the indication that we get from this trend. Miguel is going to answer your other question.
Good morning, Aline. Talking about inventory profile, we had a good year in terms of luxury units, also finished units. Finished inventory dropped. It is concentrated in some business products, hotel units that are harder to sell. Those luxury projects and recently delivered projects are doing fine. Next year, we will deliver $5.3 billion considering the PSV. 83% of those projects are sold and the inventory is less than $700 million. About 70% is Cyrela and about 26% of Living.
You don't have a lot of Minha Casa, Minha Vida. The percentage sold is lower for 2023. 63% of what we'll deliver in 2023 has already been sold. We are not going to deliver so much inventory. Those seasons, those batches are well sold into the future.
It was clear. Thank you very much. Have a good day.
Next question is from André Dibe with Itaú BBA.
Good morning. Thank you for your presentation. I have a question regarding the gross margin. You mentioned and released a smaller contribution of the concessions. If we look into your peers, they reported a stronger gross margin in this quarter with a positive effect of the INCC in the portfolio, with about two months gap in the portfolio. The effect of the INCC gap works for you as well, and was there any other factor that could have played a role and, you know, affected your margin? Finally, I would like you to comment on costs. Should we expect more stable levels of cost from now on, or is there anything else to be concerned?
Good morning, André. Thank you for your question. About the gross margin, our correction has a one month gap differently from other players. INCC of May had been strong for us and that affected the second quarter. We also recognized the financial invoice of our performed portfolio. IGPM dropped and our portfolio is based on IGPM. It was about 9% in the second quarter, but it was about 2% in this quarter. So we have about BRL 300 million of our finished units sold based on IGPM.
We recognized a little bit less in some Vivaz projects where our margin is a little bit less than 30%. In the year, the accumulated margin was 19%, so the margin that was recognized was lower than in the second quarter. Regarding the cost dynamics from now on and also pressure related to inputs, there was some cooling down in terms of reduction of the prices of inputs, but the price levels are still very high. Into the future, it's difficult to understand how this is going to go because we depend on commodities. Nobody expected the changes in iron ore that helped reducing this cost. Scenario is nicer, is better now, but it's difficult to predict into the future.
Thank you. It was a clear answer. Thank you.
Our next question is from Amanda Schiz, XP Investimentos.
Good morning. Thank you for taking my question. I have a question about debt. The leverage is low and the gross debt is relevant. Most of the debt to date is tagged to CDI. I think it is part of your strategy to reduce the exposure to TR. Because of the drop we've seen in the last years, but now we expect an increase in interest rates in the short term. Do you plan to change your strategy and maybe increase your exposure to other indexers? Are you going to keep using CDI? Could you please expand on that? Thank you.
Thank you for your question. Historically, Cyrela had more debt for support to production rather than corporate. It was difficult to see this ratio of two-thirds SFH and one-third corporate. It changed because the corporate debt was cheaper with an increase in interest rates, but the scenario has changed. We are going to change our debt composition and capital structure. We have some real estate cases that are tagged to an indexer that are in the levels of two digits, and it's going to be even lower than the ones tagged to CDI. It's going to be good for us. We are restructuring our debt. Of course, it's gradual and it is released. Of course, the scenario can change, of course, but we are looking into that and we are making changes to our debt composition.
Thank you very much.
Next question is from Bruno Mendonça, Bradesco BBI.
Good morning. I have two questions. First, would you give us an update on the operation of Vasp and whether you feel comfortable saying that we can make up for the worst scenario in the middle and upper income group and compensate that by increasing the ones at a lower rate? What about any specific initiative to keep the rhythm? Sorry, I missed part of his question.
I don't think the INCC was terrible for everyone, not only for high-income consumers, but also low-income consumers. I don't think that MAP suffered more than lower income groups. From higher interest rates, maybe is worse for MAP consumers, but I'm not sure. I don't think that MAP margins are going to be more impacted than Vivaz. I think that the scenario is worse for all of them regardless. I don't agree with the direction.
I don't think Vivaz suffers more than MAP. It wasn't good for anyone. Having said that, the scenario for both groups are scenarios we're excited about. In the past three years, it was easier for us to sell our units. The margins were better. From now on, we don't expect things to be so good. We expect harder times. Because of INCC, we are going to have shorter margins. This is maybe the 25th time this happens in Brazil, and it seems that the situation is okay. Unless interest rates go as high as 15%, if it is still maintained at 10% or 20% a year, it's not such a terrible disruption for us, and this is what we expect. Of course, it could get worse, but it doesn't seem to be like that. About CashMe, I don't think so.
I don't think it affects our current growth scenario. We'll keep on growing. I don't think the scenario has changed at all. CashMe is a small company. It's easier to grow, and that's what we plan to do.
Thank you very much.
Next question is from Marcelo Motta from JP Morgan.
Good morning. I have a question about loans. Loan rates provided by banks, how do you program yourselves to sell a unit that's going to be delivered in two or three years? We don't know whether the loan rate is going to be a 10% or a 20%. How do you deal with that, not to generate a problem to you in the future?
Along the same lines, I would like to understand what happened in the third quarter, because it seemed that the interest rates in the banks went up in the end of the fourth quarter that would affect the fourth quarter. Indeed, a drop in SOS should be confirmed, but maybe it should be more similar to the average of SOS in September or in the previous quarter. I would like to understand what happened in the third quarter that led to this drop.
Thank you for your question. Indeed, it is difficult to be ready for increases in interest rates. When we make a credit assessment of our customers, we use in the analysis a loan rate that is higher than the one being practiced at that day.
When it was 6.7%, our credit assessment used 8.2% of a loan rate. Today is at 8.3%. In our credit assessment, we are using rates of 9.5% for the credit assessment, and we could increase it even higher if we believe that it's not conservative enough. As to LTVs, the customer needs to pay at least 30% until getting the keys, which is much lower than the LTVs practiced by banks today. That give us some pad. We are very conservative in our credit analysis, both to LTV and loan rate. As to sales, the increase in interest rates is not very impactful because the customers are not concerned with the interest rates of the loan is going to get in three years' time.
If the credit analysis was okay, then they don't think about that. We have high income consumer customers. For example, family income starts at BRL 15,000 a month. We haven't seen this impact. We don't see customers having their credit denied, for example. We are navigating fine. There will be an impact on sales in the short term, especially in the sales of launches because of the increased loan rates. In the mid and long term, also a higher interest rate means lower demand and lower affordability. We don't see launches being impacted now by increased rates.
Okay, thank you.
Next question is from Thais Alonso, Citibank.
Good morning.
We can hear you. Go ahead.
I would like to ask about the forecast related to provisions published this month. What about this provision? What are your expectations? What about the volume of launches for this year that will increase more labor? The market indicates that it's going to be higher labor costs. The projects that are going to launch soon, have they taken that into consideration because of feasibility?
Thais, let me answer your questions. Regarding provisions, this is a number that has disappointed us. The highest impact we've had are on civil and also lawsuits related to repairs of old units, and they account for about 60% of civil lawsuits and also the volume of contingencies for the year. We hope this volume to be reduced because we are getting fewer lawsuits, but this has disappointed us, unfortunately, in the past years. Regarding your question about labor costs. Since we are launching more projects than we are delivering every month, every month we require more labor.
On the other hand, the speed of the demand growth is slower. We have more than doubled the number of construction sites in the past two years, but now we are not growing as fast. We pay attention to it because labor costs could generate a pressure, but we were concerned about that in the end of last year, and we were able to do fine. Labor costs just got the increase based on the increases demanded by the union. Since the growth rate is not so high, probably this is going to mitigate this type of pressure. The employment rate is high. That's also good. We do pay attention to that. As to feasibility, we increased our funding for unforeseen events, so we have an extra cushion there if there is any sort of oscillation.
Thank you.
That concludes the Q&A session now. I would like to turn the floor over to Mr. Raphael Horn for his final remarks. Please proceed, sir.
I would like to thank everyone, and we'll meet again next quarter. Thank you.
This concludes Cyrela's conference call. You may now disconnect and have a good day.