Good morning everyone, and thank you for waiting. We would like to welcome you all to Direcional's earnings release for the third quarter of 2018. Today we have with us Mr. Ricardo Ribeiro Valadares Gontijo, VP, and Carlos Wollenweber, CFO and DRI. This event is for analysts and investors only and is being recorded. All participants will be in listen-only mode during the company's presentation. After that, we are going to have a Q&A session. Then you're going to have further instructions for that. Should any participant need assistance during this call, please press star zero to reach the operator. This event is being broadcasted over the web. You can access it at www.direcional.com.br/ri, and you can find the slides there too. The speakers will control the presentation of slides, and the event can be replayed soon after it's completed.
Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Direcional management and on information currently available to the company. They involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions, and other operating factors could also affect the future results of Direcional and could cause results to differ materially from those expressed in such forward-looking statements. Now, I'll turn the conference to Mr. Ricardo Ribeiro, who will begin the presentation. Over to Mr. Ribeiro.
Good morning, everyone. I'd like to thank you all for coming to us for our earnings release for Q3 2018, and we are going to present these results to you now. We completed this quarter with a very marked increase in our numbers.
The main highlight is that after a few quarters when we had losses and the average bracket was the main cause. But now we have good results in the last line of our statement of income. When we exclude all the negative results we had before due to the sale of property fund, it was a one-off situation, a non-recurring one. I'd like to make clear here that we improved significantly in our most important figures. When we compare the first months of 2018 to the same period of nine months in 2017, we had an increase of 94% in net sales and 144% in net income. This shows that we are more efficient in what we propose to do. I'd like to start this presentation on page four.
Here we are highlighting the evolution of our operations in our 1.5, 2, and 3 Brackets of the My House, My Life program. Our main focus right now has been on this segment. We had an increase of 88% in launches over the last 12 years, compared to the first same period in 2017. Over the last 12 months, we reached BRL 1.6 million. As for net sales, if we compare the end of September year-on-year with 2017, we increased 74%, over BRL 1 million. When you see the net revenue, the growth was 141%, reaching BRL 721 million in the 12 months ended in September. What's even more important than that is that when we compare the revenues with the net sales, you can see that we have a very good potential of growth, 50%, and 100% to get to the volume launched.
The prospect of growth is very strong in our revenues, and this is going to have a reflection in our financial results in future quarters. Moving to slide five, we can talk about the highlights of our operations. At the end of September now, in the 1.5, 2, and 3 Brackets, we had 87% of our launches, 79% of net sales, and 74% of gross revenue in 2018. If we analyze the gross revenue only, the My House, My Life project reached this very high figure now in 2018, and this is a segment where Direcional has the largest gross margin. It was 37% in this semester if we exclude the interest coming from production costs. In My House, My Life , these are sort of low because we are very quick to sell that and to repay the financing institutions.
We had a marked growth in gross income, and this is due to two points. One is the growth in revenue, and the other one is the growth in gross margin because we are more present in Brackets 2 and 3, and this is part of our total revenues. When we analyze the result of future quarters on the bottom left on this slide, we can see that My House, My Life represents more than 95% future results for our company. This shows that the prospect of increase of gross margin will continue to grow because 74% of our income right now connected to Brackets 2 and 3 are close to our RES income. Moving to page six. If we compare the results in the third quarter with the second quarter of 2018, you can see there was a very good improvement in our figures.
Our net income grew 14% as compared to second quarter, and gross profit grew 24%. Gross margin moved from 26% to 28%. Expenses with sales and administration, the SG&A, moved from BRL 50 million to BRL 52 million. It is pretty much stable. The adjusted net income, because we sold to the property fund, as I said before, we improved that to BRL 12 million, which is very impressive. We were BRL -4 million in the second quarter, now BRL 12 million positive, so it is a difference of BRL 16 million.
As for cash generation, BRL 287 million. We had part of it coming from recurring operations, and the rest came from the sales I mentioned before. Now, we move to slide seven, and we are going to talk about the launches. The growth was very impressive. If we compare quarter three this year to last year, we had a growth of 358%.
If we compare January to September 2018, year-on-year compared to 2017, the growth was 123%. Over the last 12 months, we are now over BRL 1.8 million in launches. If you add that to Brackets 1.5, 2, and 3, we had some projects also in Bracket 1. This is covered here, too. On slide eight, if you see the net sales, this quarter, we sold BRL 549 million net, of which BRL 230 million were inventory sold to the REIT program. If we compare the last quarter of 2018 to 2017, the growth was 177% in net sales. 17%, sorry. The cumulative result is shown here, and over the last 12 months, we are over BRL 1.5 million. On page nine, you can see the launches for quarter three, and most of them were concentrated in September, the last month of the quarter. This influenced our sales speed.
It was impacted because we have a very short period of time for these sales. When we consider the launches for this quarter only, it was a very slow speed. In October, we were very strong in sales, especially because we had all these launches at the end of the past quarter. When we analyze the sales speed of the inventory, what we had available for sales at the beginning of the third quarter, and we did not take into account these late launches, if we offset the effect of these few sales, then the sales speed is record, is 23%. In the standard segment, the VSO is 3% influenced by cancellations. These cancellations in lower standard constructions is going down. I think we are going to have a good small volume of cancellations in the next quarter.
This is only going to happen when the client's credit is approved by the bank. On page 10, let us talk about the inventory. We have BRL 1.7 billion as potential for sales. The completed stock for My House, My Life is only 2% of the total stock, and it is concentrated almost in only one project in a city near Brasília, where the loan was granted by a bank that lends very little to My House, My Life , so we had an adverse effect. Our sales speed is going to recover, and I think in the coming months, we are going to sell our unit. As for the average level, we have 24% of that in our total stock. It is almost all completed. Most is in the southeastern region of Brazil.
As for our land bank on page 11, at the end of the third quarter, we are close to BRL 20 million, and BRL 15 million for the My House, My Life constructions. Almost 70% of our land bank is in the southeastern region and 20% in the Midwest. Now, Carlos is going to touch upon our main financial highlights, and I will be available for questions at the end of the presentation.
Good morning. We are very excited about the great improvement we had in our operating and financial results every quarter. It is clear that we are now in a first cycle of growth of revenues, operating profit, and improvement of our profitability. As said by Ricardo before, in this quarter, we reverted the last line of our statement of income, and the result is positive if you adjust that to the projects that were sold to the property fund.
Now I would like to mention the financial highlights. In slide 13, you can see the growth of the net consolidated income, BRL 310 million in this quarter and BRL 773 million in the nine months, a growth of 54% and 33%, respectively. Our adjusted gross income, adjusted by interest, totalize BRL 92 million in the quarter, BRL 227 million in this year, an increase of 215% quarter-on-quarter and 144% year-on-year.
I would also to emphasize also that we had a very good REF result, and My House, My Life segment grew 63% as compared to the quarter three of 2017, and total BRL 662 million. Moving to the next slide, we had a growth income in the My House, My Life Brackets 2 and 3 program of BRL 244 million, and the cumulative result in this year is BRL 598 million, a growth of 168% at 148%.
The adjusted gross income is adjusted to the growth of revenues due to the consistency of the gross margin delivered in the last quarters, varying from 35%-37%. In this quarter, the gross income was BRL 90 million, and this year, BRL 218 million, a growth of 169% and 156%. In slide 15, we show the results of the MUC segment. We completed some constructions, and especially now that we sold the average projects to the property fund. This segment is losing importance in our accounts, but it is extremely relevant for cash generation. The adjusted gross income in this quarter was only BRL 1 million, but the sales of assets to XP brought additional cash of BRL 256 million this quarter. In the next slide, we are showing the performance of Bracket 1 for the My House, My Life program.
This quarter, we had a gross income of BRL 49 million, and this year, BRL 111 million, with a reduction of 42%. We had an increase in gross margin in this segment because we had new constructions contracted since 2017. The gross income this year was at BRL 10 million, almost the same as 2017, in spite of the reduction in revenues. In the next slide, you can see our SG&A. We have improved the management of Direcional. Our general expenses were 10% lower than the first nine months of 2017, and this is due to the growth in revenue too. Our G&A was 7.5% this quarter over gross revenue as compared to 13.5% this period last year, which is an expressive change of 6%.
Our total sales expenses totaled BRL 27 million this quarter, BRL 71 million last year, a growth in the volume of sales, which is in line with our commercial strategy, and it is 6.9% of our net sales in the first nine semesters. If we exclude the writing off of BRL 95 million coming from the sales of 11 projects of the MUC to the property fund.
Our net income in this quarter was BRL 12 million and a net margin of 4%. It is very important to mention that together with the sales of our assets, we also have sold a debt of BRL 19 million. So we discounted taxes from stocks as sales expenses, commissions, marketing, and other costs with taxes, which were not incorporated to the assets and of units sold, which would lead to losses in the future. In slide 19, you can see the performances of the rollovers.
In this quarter, we had BRL 307 million in transfers and BRL 765 million. It is an impressive increase of 179% and 131%. If you consider My House, My Life only, we grew 237% of BRL 522 million. Finally, you can see cash generation and the capital we structured. This quarter, we had a net cash of BRL 41 million and operating cash and BRL 246 million, which are non-recurring, totaling BRL 287 million this quarter, BRL 338 million this year. Our net debt is 5% lower than net equity. In October, we paid dividends of BRL 19 million, which is about BRL 0.61 per share. Now I am available for questions and answers.
Thank you. We are going to start the Q&A session for analysts and investors only. In order to ask a question, please press star one. If at any time your question is answered, press star two to leave the queue. Questions will be answered in order we get them. Analysts can contact our Press Advisor, Daniela Naves, calling 3134-54466, or you can use the email daniela.naves@direcional.com.br. This is for the press. We have the first question from Enrico Trotta, Itaú BBA.
Good morning, Ricardo and Carlos. Thank you for the presentation. I have two questions. The first is about the monetization of the MUC assets. You're going to focus on these assets when the inventory is completed. What is the timing you have in mind? The sales speed is very low due to cancellations. Can you also elaborate on your plans to monetize the land bank that you have in the MUC segment? You've spent some capital to buy this land, and it's a lot of money. Perhaps if you monetize that, you can improve the ROI, the ROIC more quickly.
The second question, if we can talk about the land bank for My House, My Life . You have about BRL 13 million. It's nine years that you have available of land if you have one launch per year. A lot is paid as part of a barter system in a way, but does this make sense? Can you have another approach in the market? What can you do for the future? Does this make sense to have more land? Right now, you have a lot of land, and you can build for nine years, as I said, use the land you already bought.
Trotta, you've mentioned some interesting points. We do have some inventory in the middle bracket. It's about 20% of our total inventory. This medium bracket inventory will take us about two years to be sold. There are some products that are harder to sell, and this goes up to BRL 80 million of this inventory. But these are from hotels. Some of these hotels had losses, but now all of them have a profit. As they are growing, the Brazilian economy is growing, the hotels are going to have better results. I think we'll eventually be able to sell them. We hope this is going to happen over this period.
As for the rest of the inventory, it's a good inventory. Cancellations have gone down strongly in absolute values. In two years, I think everything will be sold. When we talk about equity invested in this middle bracket land, of course, we want this equity back in the company. In the last quarter, we turned this medium average land to the My House, My Life project.
We adopted a very effective construction system, so the cost of construction was very low. It could meet the My House, My Life standard. I think 50% of our land in our land bank for the average bracket are going to be converted to My House, My Life . Eventually, with lower interest rates coming from the banks because of savings accounts, perhaps we'll be able to sell that at a higher price than the normal price for My House, My Life , because the savings financing is becoming more competitive.
In Belo Horizonte, for example, where we have a lot to sell, the cap is BRL 200,000, but now we may manage to sell for more. So we are combining My House, My Life with other forms, and I'm convinced that we are going to try and get rid of this quickly. There are many projects we are working on.
As the ideal fraction is paid when we sell, we are going to compensate for that. As to My House, My Life and the land bank, we have a very high volume of inventory. If we analyze the figures, basic analysis will tell this is more than enough for our launches. But we have some operations in regions where we started working three years ago or less than three years ago.
We are still trying to buy land there. In areas where we have been for longer, then we have enough land, and most were bought via barter, so there is not much pressure for us to launch anything. But we are buying land in areas where we have been acting for a shorter period of time, but not at the same pace we had over the last two years, where we improved a lot here, up to BRL 15 million.
Carlos speaking here. I think our cash flow that Direcional is going to generate in 2019 and 2020, it is going to be above the net income we are going to report because we have land that we bought and paid cash for the average bracket, and now we are going to use it for the My House, My Life . We also have some inventory. Even after selling only the 11 companies, we have performed already, and it is going to generate immediate cash. In these two years, we are going to generate cash for the company above the net income we are going to report.
Thank you for the answers. A good day to you all.
Our next question from Gustavo Cambauva, BTG Pactual.
Good morning. I have two questions, too. One relates to My House, My Life . There are restrictions for Bracket 1.5 because they are very subsidized. I would like to hear from you about that. What is the impact that these changes or the eventual cancellation of the 1.5 Bracket can bring to you? Can you move perhaps in some projects from 1.5 to 2 and 3 at the same profitability and sales speed? What is the impact of these restrictions on your operations, in short?
The second question is about Bracket 1. The gross margin is much lower than you used to report, which was about 20%. It went down before, but this quarter, the revenues went up, but the margin is much lower than 20%. I would like to understand if there was anything that happened in this quarter and perhaps new developments have this lower margin anyway, or how can we work on that for the future for Bracket 1 projects contracted recently.
Thank you, Cambauva. As to your first question, Bracket 1.5, I think there is one point we should have very clear. In My House, My Life , the subsidies and the funding for financing is restricted to what our Severance Fund offers the FGTS, Brazilian FGTS. It has to be sustainable. Companies that are reliable and want to be sustainable, they need to understand that right now, that we will not have any more subsidies unless we have more money coming from the government. The Severance Fund cannot really pay for 90% of that they are doing, so we need to have a healthy liquidity position. I think this level is very good because it shows that the demand for very popular housing in Brazil is very high and very solid. We do not have an oversupply like we had in the medium level.
It means in Brazil we have a huge demand, but a limited capacity to invest if we go on with these restrictions coming from the Severance Fund. Right now, the country cannot invest more in popular housing. We have a high level of unemployment. The economy is not booming, but we hope it will in the future, and we are going to have more job positions for our people. This is the current reality in Brazil. Subsidies are restricted. Demand is higher than investing capacity, so it is reasonable to use these subsidies as well as possible. Let us sell to more people with the same subsidy. For this to happen, you need to focus the program on the segment that needs less subsidies to do more with less. As the 1.5 Bracket has doubled the subsidies of Bracket 2.
I do not know about next year, but for this year, we should think about reducing the subsidies for the 1.5 Bracket, move it to Bracket 2 to do more with less. But we cannot be sure at this point because we have no definitions for next year. Based on this assumption, it is just an assumption, it is not reality, I would say that Direcional is not really being affected. The land we had for the 1.5 Bracket, our policy is that we would never buy land that would be used for 1.5 Bracket only because we knew it would never work. We are using more subsidies than necessary in the 1.5 Bracket. So in theory, we had some projects that would be 1.5. If they exist next year, we are going to migrate to Bracket 2.
The sales speed will be slower, but it will be around 20% per quarter as we have had. But if we keep the 1.5 Bracket next year, it is a possibility we are going to have launches at the 1.5 Bracket, and the sales speed will be 30% in the quarter or above what we had. So we are not concerned about the 1.5 Bracket in our operation. We are super okay with that, and we are prepared to operate and no concern at our end. Just to add, this year, about 30% of the volume sold was in the 1.5 Bracket. Next year, due to the type of land we have available, this is going to go down.
What we notice is that we have launched products, and we have sold them in Brackets 2 and 3 at a lower speed, but we are selling 100% of all the units as we build. What matters is that we cannot complete a project with unsold units. The second part of your question was about services provision. We have a services income, and this comes not only from Bracket 1. Revenues grew a little here due to the construction works contracted since 2017. So in 2017, 2018, we contracted BRL 285 million in new projects in Bracket 1. The margin is better, about 15% or around that, 12%, perhaps. But as part of these revenues, we have the commission we pay to the associated brokers, property estate agents.
We pay this commission to these associated state agents, and this is invoiced, and then I have a debt note for these payments made. The margin is zero. Whatever I get, I distribute to them. At the end of the day, the consolidated margin from what we call the FCFE, then it is consolidated. We have part of it coming from commissions on sales this period, and this is why the margin went down. If you see the consolidated results in this segment compared to revenues, the margin is 8%-10%. It will not change much.
Thank you. It is clear now. Thank you very much.
Next question from Luis Stacchini from Credit Suisse.
Thank you. I have two questions, too. The first refers to the planning of launches and the pipeline for 2019. What you have planned for next year, there is more competition for funds coming from FGTS. You have more people in this segment. Do you have a strategy for that? More launches at the beginning of the year? There will be a volatility. We do not know what to expect for the second half. What are you planning for the market in 2019? The second question is about cash generation and dividends. If you see the nine months, you have generated cash. You have this additional distribution of BRL 45 million, and now it is close to zero. My House, My Life would support a recurring cash generation. What is your opinion? How can you speed up this distribution of dividends?
Well, Luis, thank you. As for 2019, we were questioned in 2017 about the volatility in our launches. We had more launches in one quarter, fewer in the other. This volatility is nowhere to be seen in 2018. We, in 2018, have been launching more projects at a very stable level because we have more projects being launched every quarter. If we had a delay in one, others, we are running ahead of schedule, so we managed to minimize all the questions that we had in 2017. We said this would not happen again. It actually did not happen in 2018.
For 2019, we have many projects under approval right now. If everything runs smoothly and we have the right adjustments made to My House, My Life to avoid discontinuity, if subsidies are shared in a balanced way in all the brackets, and we are expecting that to happen. In 2019, we are going to have more launches than in 2018, and it is going to be distributed equally in all quarters. We have many projects in over 20 cities.
In 2019, if we have money coming from the FGTS, we are going to be the same as 2018 with a balanced number of launches, and we are going to have the same in 2019. Now we are very prepared to deliver a very satisfactory level of launches. Another important point is that Direcional, to have the right profitability for our capital, we do not really need to grow much more than we have done with the volume of launches we have had. If we sell at the right phase compared to our launches and we have the right revenue, we are going to have the right remuneration for our capital. We have a robust land bank. We have an important pipeline of projects.
We are going to have even more launches at a better profitability, but our structure and G&A are okay for the volume we launched last year, or this year, sorry. As for cash generation, the operating cash generation has been very strong, BRL 92 million in these three quarters. We still have the quarter four ahead. We want to keep this distribution policy. At least 40% of our cash generation will be distributed along the year.
We had this non-recurring generation because of the fund. So we had BRL 246 million more in cash. It is BRL 340 million almost this year. So we have advanced BRL 90 million in October, and the rest is going to be distributed when we have the assembly at the beginning of the next year.
Thank you very much for your answers. Good day.
Next question Andre Mazini from Citibank.
Carlos, thank you for the call. I have a question about the land bank. You said about half of the land bank that can be converted to My House, My Life . What about the second half? How much was paid as part of a barter agreement or in cash? Can you sell those that you paid in cash, or can you have launches for the upper level? That is the first question. The second is about Brackets 2 and 3 in My House, My Life . What part is okay? In what part you need a different cash cycle, et cetera? Thank you.
Well, we have BRL 30 million of our equity in the middle-class land, and we are considering converting that to My House, My Life . Two have already been launched, one in Manaus, one in Belo Horizonte. So we have the margin for the project, and we are going to bring back some capital.
We are converting projects in Manaus and Brasília too. We have others in Belo Horizonte that we are going to manage to convert. So 30%- 40% of the capital invested in middle-class land will return to us as we launch the My House, My Life project. We are very excited about that, very positive. As for the other land, we are not planning to sell them. They are good pieces of land, good location. Most of them are in Brazil and Belo Horizonte. Eventually, we are going to have launches for that, perhaps above the My House, My Life level, so that we can have a return of this capital. But we are not planning to do that in the next two years.
But if the market improves and we have an opportunity to launch these projects and have a return on this capital, we are going to do that. We call it middle class, but the product will be about BRL 350,000- BRL 400,000 per unit. So it is lower middle class, probably. Whenever we trust that the rates will go down and the banks will be prepared to make loans and the inventory of middle-class properties in the market goes down. Can you repeat the second part of your question, please? I could not get it.
What is the percentage of your production of My House, My Life is mechanized? You have a very industrial process in place, and how much of it can still be mechanized, and what is the margin?
For My House, My Life , we build 100% of aluminum molds. Direcional is now using, w e are now at another level. We are launching new products. We call them vertical products, 15-20 stories high, and we are building with aluminum molds. We hoist them. It's not panels, but the technology is pretty much the same. All the process is industrialized. We do not have construction work at Direcional that is not using these aluminum molds.
As to the margin, we grew a lot in our revenues, a growth of My House, My Life this year. We grew over 150% in volume of revenues, but the margin has been stable along many quarters, 35%-37%, normally. When we buy land and when we have our launches, our projected construction cost is higher than what we have in practice. We are still forecasting a less heated market, fewer jobs, cheaper materials, so we have a higher margin, a gross margin which is higher than our forecast.
The forecast we had when we bought the land and launched the project, I mean. Now we are trying to be as effective as possible using industrialization. This is reflected in our margins. We are very modern in our techniques. When we see 2020 on, we think there is a possibility that these gross margins will go up again to 33%-34%. Right now we are close to 37%, which is very healthy. But in terms of recurring margins, considering the current conditions of this program and increasing competition we've had, the margins will be around 33%, 34%. The consolidated gross margin is growing, but that's the margin for this segment. If we have more coming from My House, My Life in our revenues, we are going to grow.
Thank you very much.
The next question, Luiz Mauricio Garcia from Bradesco.
Good morning. Two questions. One is just a follow-up about the restrictive environment and more competition we have for My House, My Life . What's your strategy? How can you keep your size? How can you keep this margin of 30% with the My House, My Life ? If you keep that, your ROI would be very good. In this more competitive environment, what is the strategy you are planning to use to be different as compared to the other players, new entrants, and to go on being profitable? There will be a decrease in gross margin, as Ricardo said, due to this environment. But what are you planning? Keeping it lower? What's your positioning in this new environment? The second question is about cancellations.
It grew somewhat in all segments, but you had it more in My House, My Life because the launches were at the end of the period, so you couldn't really sell at a high speed. What do you expect as to cancellations? Are you going to have it stabilize or even decrease?
Luiz, as to your first question, competition in the My House, My Life segment, we noticed many companies said they are going to join the program. Some are listed companies. I think this is positive. These are serious construction companies. They meet all performance targets. They pay their taxes. Their employees have all labor rights. We need to have a healthy competition in Brazil, all of us competing on the same basis. In the past we had this competition, but it was not a healthy competition. We didn't have loyal competitors.
But what we expect that everybody competing in this program, we hope they will work based on the same premises, and the difference will come from efficiency. And this is what we are preparing ourselves for. We want to be very efficient. If everybody is playing at the same level and we have a level play field, I'm not concerned about the competition. We just have to work harder. As for eventual changes in our practices with pro-soluto, et cetera, to keep the company growing, we are not really considering changing significantly. This is not in our mind. Well, maybe we'll increase the pro-soluto for a given product because we have defaults, perhaps in these cancellations. But we are keeping our policy, and we want to avoid changes in these cancellation policies. Our market share is small in My House, My Life .
In round numbers, My House, My Life is building 400,000 units. Direcional is close to 10,000 only. So the market share is very small. So we can grow a lot, or at least we can keep the level of launches we have right now. We can build more than in 2018, in 2019, but the market share is very small. So we are efficient. We are growing in places where our participation is not marked, like Fortaleza, the interior of the state of São Paulo, but we can grow despite the competition. If it's fair competition, it's very positive. This is what we want to fight for. This is our challenge. So again, as to cancellations, we had an increase in cancellations this year. As you mentioned, our launches were close to the end of the quarter. So launches were above quarter three.
In quarter four, we are going to grow again in sales because of these late launches in the third quarter. But as the volume was lower than expected, and it was really late. So the cancellations in quarter two had a heavier weight on our sales in quarter three. I think this is going to change in quarter four, and you're going to see an improvement. There was another effect in quarter three. Direcional is not launching or selling.
We do not have guaranteed sales where the sale is recognized after the buyer's financing is granted by Caixa or Banco do Brasil. We do that earlier in this process. So we do that before the contract is signed between the client and the lending bank. So we have more cancellations because of that. If we just considered all the contracts after the execution, the volume would be lower.
But the cancellations were 20% in quarter three. We sold in advance, so 80% were kept. We are growing, and we need this growing market for this decrease in fixed costs, a marked decrease. So it made a lot of sense to keep this policy this year. When we move on in the future, then we are going to slowly use this guaranteed sale option to minimize cancellations. So with these effects in quarter three and this change in policy next year, you're going to see we're going to have fewer cancellations. But I think we made the right decision considering the scenario we had in front of us this year.
Thank you, Ricardo.
Our next question by Marcelo Motta from JP Morgan.
Good morning, everyone. Can you say something about sales in the third quarter? You had these late launches in the third quarter. What do you expect for the fourth quarter? What about the inventory in the middle-class level? You mentioned the hotels. They are all ready, and you have expenses. It takes two years to sell all the units, as you said before. What are the costs, and what impact does this have on your results?
Well, Motta, we have very positive expectations for quarter four due to the launches we had in September in quarter three. We are now selling these units. October was a very strong month because of these late launches in September, and we are optimistic for our operations in Q4. I think our volume of sales will be very healthy. We are not concerned about this sales speed we had concerning the launches for September. As for middle-class inventory, our stock is we have two projects about to be completed.
Very low inventory for sales. One is close to zero. It is a project in Campinas. The other one under construction is in São Paulo, near the Ipiranga district. We are not concerned. They are in cities where the demand is very strong. We will not have any problems with cancellations or a high inventory and low sales speed.
As for the rest of the stock, the inventory, in my view, the liquidity is good, is healthy. Just leave the hotels aside. The gross margins are above the average of the inventory sold. When the inventory was sold at the sales price, the loss was about BRL 94 million. We gave this discount to bring this inventory to the market price. But the inventory we have now will have healthier gross margins, and the sales speed will be okay. I am not concerned about this inventory.
Thank you very much.
Thank you. The Q&A session ends now. I would like to give the floor to Mr. Ricardo Ribeiro for his closing remarks.
Okay. Thank you all for your participation. It was a long conference call, which I love, and it is very good to have this long Q&A session because we can be very clear about our strategy, answer all questions, and tell you about what we expect for the future. Thank you very much. We are very optimistic and very positive about the results in this quarter. From quarter four, we will not have any adverse effects on our results. Results will not be masked, because we masked, in a way, our efficiency gains. I think in the future, our strategy will be very clear.
You are going to see that over the last two or two and a half years, we did the right thing at the company, and we are going to pay the shareholders capital even better. If you believe in our operation, in our work, you are going to be very proud of what we are doing. Thank you very much. Our IR team is available if there are other questions you would like to ask, and the journalists, as I said, our press advisor is available to clarify your doubts.
Thank you. This is the end of our conference. You can now disconnect. Have a good day.