Good morning, ladies and gentlemen, and thank you for holding. At this time, we would like to welcome everyone to Direcional's second quarter 2018 earnings conference call. Today, we have with us Mr. Ricardo Ribeiro Valadares Gontijo, Vice President, and Carlos Wollenweber , CFO and IR Officer. We would like to inform you that this event is being recorded and that all participants will be in listen-only mode during the company's presentation. Ensuing this, we will go on to the question-and-answer session, at which time further instructions will be given. Should any participant require assistance during this call, please press star zero to reach the operator. We have simultaneous webcast that may be accessed through the company's website at www.direcional.com.br/ri. The slide presentation may be downloaded from this website, and please feel free to flip through the slides during the conference call.
There will be a replay facility for this call on the website. Before proceeding, we would like to mention that forward-looking statements made during this conference are based on beliefs and assumptions of Direcional's management and are based on information currently available to the company. They involve risks, uncertainties, and assumptions as 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. I would now like to give the floor to Mr. Ricardo Ribeiro, who will begin the presentation. You have the floor, sir.
A good morning to all of you. I would like to thank you for your participation in another earnings conference call for Direcional. It is important to underscore the expressive improvement of the company's figures after the disclosure of these results, and this is in accordance to a strategy that we have adopted in the last semesters. We think that our strategy was quite assertive considering the circumstances of the country's economy that have undergone changes in the last few months. Now we have been able to clarify through our figures that this strategy for change by focusing on levels one to three of Minha Casa, Minha Vida was a correct strategy, and we can see these changes reflected in our financial data. I would like to begin the presentation on slide number four, where we try to highlight the expressive change that we have put in place in segments two and three of Minha Casa, Minha Vida.
I would like to separate the results of Direcional in two segments and separate this from the rest of the company, and refer to the last 12 months that ends now in the second semester of 2018. When we compare this to the last 12 months of the second quarter 2017, we see an expressive increase in the number of launches of 58%, 100% increase in sales, and in the revenue, 138%. Besides the figures of Minha Casa, Minha Vida in all of our other segments, including the level one of Minha Casa, Minha Vida and the middle income segment that has decreased its figures in Direcional, we reached a volume of launches that is greater than BRL 1.4 billion in the last year, and a sales volume that is greater than BRL 1.1 billion.
We also had a growth of VSO in Minha Casa, Minha Vida that reached 22% this semester, a record, and an increase in gross margin that reached 37% in levels two and three of the program. We ended the second semester with a cash generation that was very significant, the third-greatest cash generation of Direcional in a semester, reaching BRL 64 million . Once again, this reflects the change of strategy and shows that our operations have been very assertive, and we have been able to translate our financial figures and cash generation. We go on to slide number five that is very important and summarizes what has happened in the company. I begin by analyzing the left top graph with the representativity of levels two and three of Minha Casa, Minha Vida in our operation.
In the first semester of this year, this represents 86% of our launches, 78% of our sales, and 65% of our gross revenue. In the right upper graph, I think it becomes very clear that this segment went from 5% of the company's revenues in 2015, reaching 65% this year. When we analyze the graph at the lower left corner with the future exercise of Direcional, what we have sold and what still has not gone through our results, it will only be part of our results when we sell the works. Minha Casa, Minha Vida represents 94% of our operations, and this trend of growth in terms of the representativity of this program and our results will grow. We also had a significant growth since the second quarter of 2016. We went from 252 million BRL to 698 million BRL.
In the last year, we had a growth of 98%, a clear demonstration that as construction continues to accelerate, the trend of growth for revenue will also continue. The most significant and relevant data is in that small right lower graph. This is a segment that has become ever more representative in our operation, and we have been able to have greater growth margins that reach 37% in this semester. The trend in the coming semesters is to continue to have an expressive growth in the company's revenue with a change of mix, where we will have a greater representativity of this level and greater margins, of course. On page number six, I would like to underscore how relevant the improvement of our indicators are if we compare the second quarter of this year with 2017.
We ended with a net income of BRL 271 million, with a significant growth of 41% from one quarter to the other. This is due to the advance of our works and an increase of sales in the second quarter, a consolidated margin that remained stable, although the revenues from levels two and three have increased. We went from BRL 51 million in gross profit in the first quarter this year, reaching BRL 70 million in the second quarter. Our SG&A with sales grew much less than the growth of revenues. It was a growth of only 12% for SG&A, making these expenses go from 23% of our revenues to only 18% in a single quarter. Another extremely significant item is the cash generation that I already mentioned during the highlights that reached BRL 64 million this quarter, and the net debt of the company had a drop of 15% in only three months.
We go on to slide number seven to speak about the operational data of the company. Our launches reached BRL 366 million, 100% of them concentrated in levels 1.5, two, and three of Minha Casa, Minha Vida. If we take into account only this segment, the growth was of 96% vis-à-vis the same period in 2017. During the semester, the growth was 17% and 83% in launches of Minha Casa, Minha Vida. When we compare the last 12 months that ended in the second quarter of 2018 with the same 12 months that ended in the second quarter 2017, our launches grew 42%, reaching more than BRL 1.4 billion. On page number eight, we will speak about the net sales evolution. In the first semester of this year, we reached BRL 319 million, a growth of 57% compared to last year.
When we consider only Minha Casa, Minha Vida, levels 1.5, two, and three, the growth reached 87%. In the last 12 months, net sales reached somewhat more than BRL 1.2 billion. When we analyze Minha Casa, Minha Vida, in isolation, this is what we see. In slide number nine, to speak about the speed of sales of our products, we had the highest VSO index in our history. It reached 22% in the quarter. Net sales reached BRL 300 million during this segment. In middle income, we had positive sales after going through a very strong delivery of construction. This increased cancellations, and in the fourth quarter of 2017 and in the first quarter of 2018, we had negative net sales in this segment.
As most of the delivery volume in this level is already a thing of the past, we will now have positive net sales going forward. It is important to highlight that as we have delivered practically all of our projects in this segment, we have only two developments pending. Most of the cash generation of the company has come from this segment. Although the growth margins are below what we would expect, the volume of cash will return to the company. When we analyze the consolidated VSO for this quarter, we had the highest level in the last few years. It reached 15%, and this is an expressive data and should remain at those levels going forward.
When we speak about the ventures of products available for sale in the second quarter of this year, we had BRL 1.7 billion in potential sales value, a little more than BRL 1 billion for Minha Casa, Minha Vida, and BRL 650 million in the middle-income segment. Minha Casa, Minha Vida already represents 62% of the potential sales volume. Additionally, 72% of our inventory is concentrated in the southeast, where we have delivered higher VSOs and margins compared to the rest of the country. On page number 11, we speak about our land bank that ended this semester at BRL 17 billion of potential sales value, and BRL 4.5 billion in the middle-income segment, and over BRL 12.7 billion for Minha Casa, Minha Vida. This will allow our operations to grow at a fast pace with an increase in our sales volume.
It is also important to highlight that we were successful in migrating some lots that originally were geared to the middle-income segment, and they will now be part of Minha Casa, Minha Vida through some projects. It is very probable that we will see a reduction in this volume of the BRL 4.7 billion that were geared to middle income. They will be launched through Minha Casa, Minha Vida projects, and an expressive part of the equity that the company has invested in this land will return to the company through a stronger cash generation, enabling us to remunerate this capital that at present, of course, is found in this land bank where there will be no launches in the very short term for the middle-income segment because of the country's economy.
Therefore, we want to bring back this capital, replace the project that we had foreseen originally for these areas that were geared to the middle-income segment. I would now like to give the floor to Carlos Wollenweber, who will refer to our financial highlights, and I am at your entire disposal for questions and answers.
A good day to all of you. We are quite satisfied with the evolution of our financial results that have become clear this quarter, thanks to our good sales performance and the continuation of construction in the levels two and three of Minha Casa, Minha Vida. In slide number 13, we show you the consolidated net revenue that totaled BRL 271 million in the second quarter 2018, a growth of 49% vis-à-vis the second quarter 2017. We had an adjusted gross profit of BRL 77 million, a growth of 143% compared to 2017, and an improvement of 11 percentage points in consolidated margin.
We always try to underscore that to understand our results, it is fundamental to break down everything by segment. We show you the results of Minha Casa, Minha Vida 2 and 3 separately. The net income of this segment totaled BRL 207 million, and a growth of 130% and 149% comparatively, vis-à-vis the second quarter last year, and gross margin was 37%, an improvement of 3 percentage points. In the middle-income segment on slide 15, we had a net revenue of BRL 32 million and adjusted gross profit aligned with what we delivered in 2017. The interest rates to production were reduced to BRL 5 million, practically half during the period, thanks to the amortization of financing for construction through the customer transfer.
It is important to observe the reduction for future exercises where we have only BRL 42 million in backlog of units that were sold and have not been delivered. We ended the quarter with only three developments of MAC under construction, all in the state of São Paulo, with a PSV of BRL 243 million. In July, we delivered one of these projects called Alto São Francisco with a PSV of approximately BRL 50 million. In the level one of Minha Casa, Minha Vida, we had net revenues of BRL 31 million, a reduction of 47% vis-à-vis the second quarter of 2017, in line with what was expected because of the volume of units in this segment. Thanks to an improvement of margin, gross profit totaled BRL 4 million in this quarter, equivalent to what was reported in 2017.
We have 6,000 units under construction in this segment, half of which are part of new constructions contracted at the beginning of last year. On slide 17, we show you our SG&A. We reduced our administrative expenses by 12% during the period, totaling BRL 25 million for the quarter. Commercial expenses totaled BRL 24 million, representing 7.6% over gross sales, a slight increase of 0.6 percentage points quarter-on-quarter. When it comes to the transfer of mortgages, we have an excellent performance. We received BRL 200 million cash from the Minha Casa, Minha Vida segment with a growth of over 200% vis-à-vis the second quarter of 2017, and BRL 84 million for MAC, a growth of 58% in the same period. We now go on to slide number 19, where we had a record cash generation for the quarter of BRL 64 million, and for the year, BRL 51 million.
As a result of this, our leverage debt net over equity was reduced by 23%, 3 percentage points lower than in the previous quarter. We have increased our cash position to BRL 634 million, equivalent to 64% of our gross debt. I would now like to open for questions and answers.
Thank you. We will now go on to the question and answer session exclusively for analysts and investors. Should you wish to pose a question, please press star one on your phone. If at any moment your question has been responded, press star two to withdraw from the queue. Questions will be answered in the order in which they are received. If you are an analyst, please speak to our press segment through Daniela Naves, through the phone 3134, or through the email Daniela.Naves@direcional.com.br. Please wait while we pull our questions. Our first question comes from Mr. Gustavo Cambauva from BTG Pactual. You may proceed, sir.
Hey, good morning to all of you. I have two questions. First, regarding the margin of Minha Casa, Minha Vida Level 2. Your margin is above what you mentioned, a stable margin that is recurrent, that is closer to 33% or 3 percentage points above. If you could explain what is underlying this margin, is it the construction? If the construction has lowered the cost, if it refers to the sales price. Once again, if you could comment on why this margin is higher than what was expected. The second question refers to the level two and three launches for the second semester. If you could refer to your pipeline, if you have invested in land, which is your growth and what we can expect for levels two and three for the second semester. Thank you very much.
Good morning. When it comes to your first question, the margins for levels two and three, in fact, we have been working intensively and we have continued to enhance our construction process. We seek an increase in productivity of our labor, which is a great challenge to enable us to be competitive in the segment. We do not have a great deal of price elasticity, and we have been able to work with prices that are somewhat lower than those that we had considered when launching the product. Most of these gains are due to the construction at historical levels. We sometimes deliver a project that was built in 15- 18 months without any increase in the INCC, thanks to our labor.
Now, when we get to 50% or 60% of evolution of our works, we begin to recognize our gains and the expectation in future quarters is to continue to deliver margins somewhat higher than what we have disclosed as being the recurrent margin for this segment, 33% or 34%, as you mentioned. But temporarily, yes, we will be able to deliver these higher margins, and this is a very positive fact. When it comes to the launches for levels two and three of Minha Casa, Minha Vida, we have increased our land bank significantly. We have projects that are somewhat smaller, 400 - 500 units, when compared to the projects that we had in our pipeline last year. They were much larger. Because of this, we have a larger number of projects undergoing approval. Any delay in the approval process can easily be substituted by another project.
We have a reserve of products, and this enables us to maintain a stable volume of launches through the quarters of the year without having a great concentration. Our expectation, therefore, is to maintain this very uniform pace of the launch of new projects quarter after quarter. We don't expect to have a concentration in the third or fourth quarter, and levels two and three will reach BRL 100 million in the first semester, and we expect to maintain these figures in the second semester. Once again, we have several products undergoing approval for launches.
Thank you very much. That's excellent. Good morning.
Our next question is from Bank of Credit Suisse. [Mr. Luis], you can proceed, sir.
Hey, good morning to all of you, and thank you for the call. I have two questions. To go back to the last question. It was said that the budget of the FGTS had been advanced compared to the calendar and that this would be used for launches in the second semester. Are you expecting any increase in competitiveness because of these resources? Have you held conversations? Are you going to reallocate these resources to the housing segment? Do you see any risk? Will there be an additional shift in the second semester referring to these unemployment compensation funds vis-à-vis your budget? Once again, if you could give us greater color regarding this.
The second question refers to the wholesale of your inventory. Which is your expectation of raising money for the fund? If you could give us an idea of timing. What is it that you will think about this cash generation if everything will go towards paying dividends, or if you will maintain your policy of 40% of cash generation. Thank you.
[Luis], I'm going to begin with your second question regarding the sale operation of unemployment compensation funds. We also have accounts receivable for real estate funds. Unfortunately, at this point in time, we cannot disclose information regarding this. We're during the silent period. The offer has been sent to the CVM, so we truly cannot comment on this. I will refer to the question on cash generation further ahead after I refer to the budget from this unemployment compensation fund. The data that we have seen at the beginning, the volume of contracting is somewhat below what it was last year. The budget for 2018, when compared to the same period 2017, is somewhat below what was expected. We have no warning or concern that there will be a slowing down in the contracting pace. We're continuing on with our operations with the same outlook of launches.
It is natural that we will have more companies operating in this level of the program. The companies that are listed and that have been active in this segment have all had a growth. On the other hand, we perceive that Caixa Econômica, which is the main agent operating this program, has been quite restrictive and cautious when granting credit. This is a reality that we are faced with Caixa Econômica Federal. I do believe that this budget will be insufficient. We will continue to monitor it, but we do not feel a concern in terms of the amount of resources so far. Now, to refer to the company's cash generation, I think that this semester, the BRL 64 million were quite expressive. We have a leverage that is quite slow, which is very propitious for the scenario of turbulence that we have worldwide.
Direcional is able to work in a more deleveraged way during this period. On the other hand, a large part of our cash generation is due to the middle-income inventory. We transferred BRL 84 million during the semester, BRL 30 million per month, practically, and we have no construction work underway. Which means that our cash generation has a great deal of liquidity because the costs at present are very low, and we have not consumed great volumes of cash to accelerate our construction for levels two and three of this program. Therefore, initially, Direcional will go through a deleveraging process, and when our business concentrates more on levels two and three, it will not make sense. Although we have a low leveraging of 3%, we could continue to go down, of course. We are going to maintain our dividend policy at 40% or 25% of our profit, whichever is greater.
But depending on what happens with cash generation going forward, we may increase those 40%. Of course, this is the board that will take the decision for this, but we do not have the outlook of working in a highly deleveraged way. There is that optimal point, and if cash generation continues to be very strong, we may have a repurchase program or a payout of dividends of 40%. This is our policy. But we will see what will happen with cash generation in the coming quarters before making a decision for our investors.
Now, to complement the answer, [Luis], we are working to resume the profitability levels that the company had in 2013- 2014. Two things are fundamental to continue this process. One is to grow Minha Casa, Minha Vida 1, 2, 3. They offer us a very sound margin. When we allocate capital to this segment, the ROIC levels are quite interesting for the company stockholders. We have to improve our capital and our balance. We have BRL 900 million allocated to our balance. This is in inventory and land bank that was geared to other segments, not Minha Casa, Minha Vida levels one, two, three. The fund is one of the ways to improve our capital allocation.
As Ricardo said, we are transforming land that is part of our equity and that was geared to a middle income for launches of Minha Casa, Minha Vida, which means that in the future, the returns of the company will be consolidated, will grow through a better reallocation of capital in our balance. Because we understand that we have an excess capital that can be used for the payout of dividends very profitably or for the buyback of shares, enabling us to transform these assets into more liquid assets.
Thank you very much for your explanations. If you allow me a follow-up. The budget for the second semester, which is the percentage that has been contracted, and what do you still need to be contracted?
What do you mean by contracted, [Luis]? Simply to clarify this.
What has already been contracted? In the first or in the second semester? Based on your planning for the second semester in terms of your budget, how much has already been contracted?
[Luis], we do this after we record the development. At Direcional, we have not worked with the approval of a project that will not be launched, and we do not keep this on our shelves because our problem certainly has not been demand. We have been able to sell and transfer at a very high pace. We do not have a single project approved that has not been launched. Of course, for the projects that will be launched in the second semester, we still do not have the PJ contracted, especially because considering the situation of Caixa Econômica, the level of capitalization of the Basel Index, the bank has inhibited contracting projects that have not been launched. They guarantee a credit that consumes capital. If we do not use this capital, it is as if we were compromising the Basel Index of the Caixa without creating any return for the bank.
They will not be able to charge interest rates on what has not been reimbursed. Therefore, this scenario does not exist for a project that has not been launched because of the restrictions set forth by Caixa Econômica Federal. Have a good day.
Our next question is from Luiz Mauricio Garcia from Bradesco. You may proceed, Mr. Garcia.
A good morning to all of you. My first question refers to level 1.5 or Minha Casa, Minha Vida. I think this applies to the other levels. The 1.5 level, can it go through the rest of the year without any budgetary restrictions? If you are having good margins from this level 1.5, what have you foreseen? If you have been able to obtain better margins that were expected. The second question refers to the round that was held with the candidates for presidency. If you could perhaps give us a hint of what these conversations have been like, if you are expecting possible changes or not for Minha Casa, Minha Vida for 2019. Thank you.
Luiz. Your first question referring to the budget of level 1.5. I am under the impression, although my data is not updated, but the impression is that the level of launches has been quite strong as well as the demand. I believe that the 70,000 units that were the original objective will be contracted, and this is a goal that will be easy to attain. Now, what the government will decide to do, if it will propose a change in the budget from one level to the other, this is very difficult to predict. We are continuing on with our operations. Our projects in the 1.5 level all would fit into level two.
We're avoiding purchasing land that will only be feasible if the level 1.5 exists. In the worst scenario, if we do have budgetary problems in the 1.5 level, we will transfer this project to level two, and we will have a more rapid turnover. I do think that this budget will be obtained before the others. However, it does make sense that there will be a migration of resources from one level to the other, so as to avoid interruptions in any level and to minimize the impact. We can pass our projects to levels two or three if there is a restriction in level 1.5. Regarding the margins of this level, when we launch a project at 1.5, because of the ceiling price, we work with lower margins. The margins are lower than those of level two.
We are surprised with the pace of speeds of the launches in the level 1.5. It has been higher than we had imagined. If we had foreseen launching a project of 500 units a year, and if we're selling 500 units per semester, we end up having 1,000 units carried out concomitantly, allowing us to reduce the indirect cost of the construction work. When we increase the volume of units under construction because of the speed of sales that is higher, we have been able to have some gains, and we have gains in the construction cost, and this will enable us to work with a gross margin that will be higher than what had been planned. When it comes to the elections, I have to admit that there truly is not very much I can say. I don't understand very much about politics.
We have to continue working with the most conservative model possible, avoiding exposures in the purchase of lands because of the uncertainties that are so unpredictable. This will depend on the vision of the candidate regarding this program. What is very clear, in my opinion, is that it is very complicated to make a change in this unemployment compensation fund because this would be very traumatic. This offers a surplus to the country's treasure, and this is the only opportunity that a family has of purchasing a home in Brazil. Any change in the unemployment compensation fund, and of course, this would be the risk of having a drastic change, would mean taking away the ability that a family has to purchase a home, and we would only work with a higher income level.
Any change would hamper 80% of the population that will lose out on that opportunity of purchasing a home or an apartment, who pay a higher remuneration for 20% of Brazilians that have no turnover in their employment, who buy homes that cost more than BRL 1.5 million. This FGTS is the best income generator in the country, and any candidate who wants to change this would be hampering thousands of Brazilians that buy their homes from Minha Casa, Minha Vida. Once again, the situation is not very clear, and what we are doing is to show the consequences of what the candidates are saying. However, I'm optimistic that this program has been very positive for the country and that the changes will not be that drastic.
Thank you very much. Regarding the reallocation of levels, the first question, could you do this also with level one of Minha Casa, Minha Vida to pass it on to other levels or not?
Luiz, everything is possible, but it will depend on the government's decision. Of course, we do not know which will be the decision taken. If we have 90% of the subsidies applied to levels 1.5 or two coming from the unemployment compensation fund, the rest comes from the treasury. In level one, 100% comes from the government funds. Any change or migration of funds from one level to the other, if they come from level one, there will also have to be a change in the amount that the treasury pays for these subsidies.
They could go from 10% to 30%, 40% or 50%, and this would allow for an increase in the number of units that could be contracted. But the great challenge is changing the participation of the treasury and the unemployment compensation fund. If level one is withdrawn from the program, if there is no change, we will maintain that ratio, 90/10, and we will have levels two and three. In level three, we have no subsidies. We have an onerous resource that is the funding of the unit.
Thank you.
Our next question comes from [Mr. Trota] from Itaú BBA. Mr. Enrico, you may proceed, sir.
Good morning, Ricardo and Carlos, and thank you for the conference call. I have two questions as well. The first referring to the growth margin for the MAC segment. The margin has been negative for this segment. Is this a problem of the mix that you are selling, or is it due to your remaining inventory? I would like to gain a better understanding of what is happening to the growth margin of your inventory. The second question, to speak about the transfers. You were quite emphatic about the transfer of the MAC and the use of this associative model and the increase of launches in Minha Casa, Minha Vida. Now, will this transfer reach BRL 200 million per semester? As a consequence, we should see Direcional quarter after quarter with a very positive cash generation. This is what I would like to better understand, if possible.
Here we have Carlos speaking. First of all, I will refer to your first question, the growth margin for MAC. At present, the growth margin is very close to zero due to two factors. One, the volume of cancellations that continues to be quite high, and we hope that quarter on quarter these cancellations will be significantly reduced. The delivery cycle was very strong at the end of last year and at the beginning of this year, and it has practically been concluded. As we mentioned, we have only two developments under construction, one in Campinas, and because of the characteristics of the city and the development, we think that cancellations will be low. The one in São Paulo that will be delivered at the end of the fourth quarter.
In São Paulo, the delivery will be in 2019. With a reduction of cancellations, this growth margin should increase in the MAC segment. Another factor is that we have a difference of margins based on the geography. Nowadays, our inventory is more concentrated in the region of Minas Gerais, where the margin, because of the cost of the land acquired for the construction of this project, had a very attractive value. Historically, the land has a lower cost in this region. Therefore, we should have higher margins when the mix in Minas Gerais will be more relevant vis-à-vis other states. This semester, we had a reasonable sales volume in Manaus with a lower historical margin. Because of this, the quarter's margin was somewhat negative. If we look forward, we think that the adjusted growth margin will improve because of these two factors, cancellations and the geography concentration of launches in Minas Gerais.
When we look at the growth margin and consider the financing cost, considering that our production financing has been dropping at an accelerated speed, this cost will be reduced quarter after quarter in the future. We should see an improvement in adjusted margins and consolidated growth margin for the MAC. What is important to emphasize is that this segment will be seeing less of it because of the margin and more because of cash generation. Our priorities are to continue accelerating the sale of this segment to capture a better cash generation. This is how we will improve the profitability and the return levels for the company.
Now, if we look at the transfers, especially the transfers of Minha Casa, Minha Vida, when we bring this information, it refers to cash generation, and this cash comes from the transfer of new units, and the transfer of new units is at an equivalent level as the sales. Once again, we were able to maintain the level of transfers and the time of transfers in a very assertive fashion. We have achieved good efficiency in this segment, and also in terms of the pace of our construction work. What we have already transferred and the performance of construction means that we're receiving a fraction of the construction work.
Of course, it will be natural to see this cash generation in the MAC segment increasing. I'm sorry, he says, "Minha Casa, Minha Vida." It will increase because of the sales volume and the growth of launches and sales in that segment, and as a reflection of the execution of the construction work.
Thank you very much, Carlos. Have a good day.
Our next question comes from [Hernan] from Santander Bank. You may proceed, sir.
Good morning, Ricardo and Carlos. Referring to the operational part, some months ago, we spoke about new land that you had purchased with a somewhat different project, projects with elevators. If you could give us more color, more details, in terms of these new units, which is the efficiency that this could bring in terms of margins or the speed of construction of these projects. It would be very positive to hear more details about this.
Thank you. [Hernan], when it comes to construction and execution of works, I would say that Direcional is a benchmark in the sector, and the challenge continues to be one step ahead than others. This is what we deem to be competitive. Minha Casa, Minha Vida, what makes us stand out is efficiency. Direcional was the first company in Brazil to adopt aluminum for projects of four or five floors. We are way ahead other competitors. In vertical projects, we have adopted a technology, which is a second revolution in terms of construction because we have hoists. We work with a form that is not 80 cm in width, but 4 m or 5 m according to the size of the façade.
This increases us to increase productivity by man 2x or 3 x compared to the normal process used in horizontal buildings where we do not have an elevator. All of this has enabled us to significantly reduce the cost of vertical projects, and buildings that were destined to middle-income families that would buy this and save in, have now been transformed into projects that are in accordance with the ceiling price of Minha Casa, Minha Vida. The challenge is to continue at the forefront, to continue seeking new technologies. This is a novelty that will truly revolutionize everything and show that we have a much more rapid middle-income construction in the coming quarters. We are highly optimistic with this new construction process.
Thank you very much. Does this mean any changes in terms of margin or project?
[Hernan], I do not think we expect to have margin gains. The fact that these projects now are part of Minha Casa, Minha Vida means that we are going to be working with margins that are very similar to what we have at present, but not a project with margins of 37%, margins of 34%, 33%, which is what we mentioned. We are going to work with this margin gain expectation. We are expecting revenue gains and gains, of course, in land that we were not able to launch because of the market situation.
Thank you.
Our next question is from Mr. Marcelo Motta from JP Morgan. You may proceed, sir.
A good morning to all of you. A follow-up in terms of the conversion of land from MAC to the low-income segment, if you could give us an idea of how far can you do this? You have BRL 4.4 billion in land. How much can be converted? How much can be sold? If this land that is converted has a lower growth margin or not. I suppose that the acquisition cost was in accordance with a middle income and therefore was somewhat higher. I would like to know if this will have an impact on margins or not.
Motta, I think that there will not be a perceivable impact on margin. We are willing to launch these projects with a somewhat lower margin because of the equity that we will receive for the company. Nothing that will lead us to think that we will have a significant drop in margins, nothing expressive. We are going to continue to work with very healthy margins when we see this migration from one segment to the other. Our expectation is to transform 30%-40% of these middle-income land for Minha Casa, Minha Vida, bringing us BRL 100 million in equity in a relatively short run. We are going to seek out this equity, bring it back to the company through the launch of these projects the coming year.
Of course, the equity comes when the work is launched, not under construction. I do believe that we will be able to convert a significant number of our middle-income projects. Of course, we are betting on projects where the revenue, the equity will be higher than average.
Thank you very much.
We would like to remind you that should you wish to pose a question, please press star one. Please wait while we pool our questions. Thank you. The question and answer session ends here. I would now like to return the floor to Mr. Ricardo Ribeiro for his final remarks.
Once again, I would like to thank all of you for your participation. I think we have had a very lively and enriching question and answer session. Once again, I would like to underscore that we have great confidence in our operations, thanks to the decisions we made in the past and that are reflected in our results, and they will continue to materialize in the coming semesters. The improvement of our figures will be continuous going forward, and we are going to work towards increasing the return that we deliver to our shareholders to justify their investment in our company. Once again, thank you very much.
Our investor relations team is at your disposal for any doubt that has not been clarified during the call. Thank you very much.
The earnings conference call for the second quarter 2018 for Direcional ends here. You can now disconnect your line. Thank you very much.