Good morning, and thanks for waiting. Welcome to the conference call of Direcional to discuss the earnings regarding the second quarter 2016. Today with us, we have Mr. Ricardo Ribeiro Valadares Gontijo, Vice President, and Fernando José Mansur Ramos, Chief Financial and Investor Relations Officer. We would like to inform you that this event is exclusive for analysts and investors, and that the event is being recorded. All participants will be in listen-only mode during the company presentation. We will then start the Q&A session when further instructions will be provided. Should any of you need assistance during the conference call, please reach the operator by pressing star zero. This event is also being simultaneous webcast on the web, and you can access it at www.direcional.com.br/ri. In there, you will also find the respective company presentation. The slide selection will be controlled by viewers.
The replay of this event will be available soon after its closing. Before moving on, we would like to let you know that any statements made during this conference call relative to Direcional's business outlook, operating and financial projections and goals are based on beliefs and assumptions of the company management and rely on information currently available. Forward-looking statements are not a guarantee of performance. Investors should understand that general economic conditions, industry conditions, and other operating factors may affect the future performance of Direcional and lead to results that will materially differ from those in such statements. We will now turn the floor over to Mr. Ricardo Ribeiro, that will start the presentation. Please, Mr. Ribeiro, you may go on.
Good morning, everyone. I would like to thank once more for you all joining us in another call to release Direcional's earnings.
I am going to go through the main highlights of the second quarter that clearly show what we have been saying about the main foci of the company throughout recent quarters, and that we have been delivering what we say we are going to, which I think is very positive. I am going to start the presentation on slide number three. One very relevant highlight of this quarter was the company cash generation. We closed the second quarter of the year with BRL 61 million in cash generation. Certainly was one of the best quarters of the company, and this cash generation represented a free cash flow yield, for you to have an idea, of 7% in a single quarter. In the second quarter alone, we generated more cash than in the whole of the year of 2015, which is quite representative.
Cash generation enabled us to close the quarter with a very solid capital structure, which has been a policy of the company since its foundation, as I could say. We closed the second quarter with net debt to equity of only 14.8%, which enabled us in the beginning of the third quarter, more specifically on July the 19th, to have an extraordinary payout of the dividends of BRL 19 million. Basically, we try to have the most suitable capital structure as always, and we are going to continue to do so. Whenever possible, we are going to try by mean of actions that we can have to maximize return to our shareholders. In addition, we saw that it was very clear in this quarter the continuity of the company to focusing on Minha Casa, Minha Vida 2 and 3 segments.
We increased the number of launches and sales in the segment. We continued to acquire land plots in strategic regions where we believe our land bank is still not quite expressive, and we have room to increase launches for the next quarter. We closed the first six months of the year with 12 new land plots with a potential of sale of more of BRL 1 billion. I am going to talk a bit more about these plots later on in the presentation. Moving on to page number four. I think it is very important to make it clear for the market how we have been able to implement our policy of focusing on the segments where we can extract the best return on capital invested by the company.
This is almost a retrospective of the last 12 months of the company focusing on the Minha Casa, Minha Vida segment. It is very clear if you watch the chart that the effort is starting to pay off, and that this is going to be clearly in company numbers quarter by quarter. Further on in the presentation, you are going to see that when we analyze the incoming of cash coming from these segments in the second quarter alone, we doubled the volume compared to the first quarter, going from BRL 24 million -BRL 48 million. When you take a look at the land plots acquired in the last 12 months, we compared the last 12 months that ended in the first half of 2015 and 2016. We increased almost 100% the number of acquired land plots.
In the last 12 months, we acquired more than BRL 2 billion in potential sales for land plots, specifically for the Minha Casa, Minha Vida segment. As for launches in the same period, we increased more by 290% the volume of launches when we compared the period of 12 months ended in the first half of 2016 to the same period last year. You see that most of those launches were concentrated in the month of June, which is the end of the second quarter. I believe this growth will reflect on the growth of sales in the coming quarters. Now, going on to page number five, talking about launches more specifically. In the second quarter of this year, we launched BRL 200 million, 100% on Minha Casa, Minha Vida Segments 2 and 3.
That is a 15% growth year-on-year and almost 100% compared to the first quarter of 2016. If we consider the Minha Casa, Minha Vida launches alone, we had growth of more than 180% compared to the same period last year, and more than four times the volume allocated to Minha Casa, Minha Vida in the first quarter of this year. In addition, when we compare the first half 2016 to the first half 2015, the growth of the personal was 55%, in Minha Casa, Minha Vida alone, more than 173%, very much in line with our strategy. We closed the first quarter of the year with 80% of volumes launched, allocated to the Minha Casa, Minha Vida project. Going to slide number six, about sales.
We had contracted net sales of BRL 66 million in the second quarter of 2016. All launches that happened in the quarter were concentrated in the month of June. Because they are products of the Minha Casa, Minha Vida, sales are just accounted for after the customer is approved in terms of credit by the bank. This takes a bit more time, but avoids cancellation. If we think of sales of launches in the second quarter, it is a volume that is quite insignificant if you think of the total volume of the quarter. In the first half of the year, we had sales of BRL 185 million, representing an increase of 53% compared to the same period last year, even in a more challenging scenario. Minha Casa, Minha Vida in the first half of 2016 accounted for 50% of our sales.
Although only 17% of the inventory available for sale. That makes it clear that we are having a speed of sale that is much faster in the segment. On page seven, I would like to talk a bit about cancellations. In the second quarter of this year, we had a decrease compared to the first quarter, but still they are one of the main reasons for the drop in margins. We had 455 units canceled, a decrease again of 17% compared to the number of units canceled in the first quarter. When you think of units sold, it is almost BRL 67 million, a drop of 24% compared to the first quarter this year. It is important to highlight that we are still having a good speed of sales of the units that were canceled in the quarter itself.
Of the 455 units, 266 were resold in the same period, which accounted for 58% of the units. When we compare the first half of 2016, we resold almost 59% of the units that were canceled, which is a slight improvement of the units that we had sold last year. The market is absorbing the units that are being canceled. We do not see a decrease in the speed of sales of these units. On page eight, I think that the speed is a bit more clear. If you are talking about the speed of sales of the company, we closed the second quarter 2016 with 5.6%, which is a drop compared to the first quarter 2016. This drop is very much explained by what I said before. Basically, the fact that the launches were concentrated in June.
Because of that, sales that result from those launches were basically none in the quarter, which hurt the speed of sales of the company. When we think of the first half of 2016, we had a speed of sales of 14%. Again, it is very important to separate the Minha Casa, Minha Vida to mid and high-end segments and commerce segments because the speed of sales of Minha Casa, Minha Vida was 21%. We see that it is 50% better than the other segments. Again, remember that of the launches of the second quarter, we still did not have sales, otherwise we would have better numbers. On page nine, we talk a bit about our inventory. We closed the second quarter 2016 with BRL 1.1 billion in terms of market value.
That is growth of a bit less than 12% compared to what we had of units available for sale in the same period last year, and also in the first quarter of this year. However, again, it's crucial to mention that the increase was exclusive for the Minha Casa, Minha Vida segment because of the launches in the second quarter of this year. Again, this is a product that shows a speed of sales that it is much higher than the other segments, and we believe it is a much healthier inventory than we had before.
If we consider only inventory outside the Minha Casa, Minha Vida, then we reduced the units available for sale by almost BRL 60 million when we compared the end of last year to what we closed in the first half of this year, even launching in the first quarter almost BRL 55 million to the mid-market. Going to page number 10, then we talk about finished units. Then you have a more important carrying cost, and we have to pay attention to that. So in the first half of this year, we sold 33% of the units that we had available for sale by the end of 2015. Again, that shows that the market is absorbing our products. Along the first six months of 2016, we had new developments, and also we had the cancellations of finished units.
In a nutshell, what happened in the first half of the year, we started with 899 finished units available for sale. We sold 295. We had 188 units that were finished that were either delivered or canceled along the quarter. We closed with 792 units that were finished and available for sale. So we decreased the number of units for sale by 12% in this quarter. On page 11, we highlight what we have been doing in terms of land bank, especially for Segments 2 and 3 of the Minha Casa, Minha Vida project. It's clear that we are focusing on land plots for the segment. In the first half of the year, we acquired 12 plots of land with a potential of sales of BRL 1.2 billion, and we had most of 86% of payments will be settled through swaps.
We closed the second quarter with a land bank with a potential of sales of BRL 10.6 billion, of which BRL 4.7 billion are for the Minha Casa, Minha Vida project. Now I'm going to turn the call to Fernando, that is going to talk about the main financial highlights of the company, and I'm going to be available for your questions in the end of the presentation.
Well, thank you very much, Ricardo. Good day, everyone. Now we are going to talk about the general financial results. On slide 12, we are going to talk about gross revenue that closed the second quarter at BRL 411 million. That represents an increase of 3% when compared to the second quarter 2015. In the first six months of the year, gross revenue totaled BRL 842 million, 1% above the results presented in the same period last year.
To understand the variation, we have to assess the development and service providing services separately. As for service provision, gross revenues in the second quarter was BRL 229 million, a decrease of almost 5% compared to the same quarter, which shows a growth in the pace of delivery and the fact that some large constructions be close to the end of their completion. As for gross revenues in development, we closed the second quarter in BRL 182 million. A reduction of almost 5% reflects a drop in net sales in the period inventory. Year to date, gross revenue in development totaled BRL 374 million, growth of 42% compared to the same period last year. This variation is directly connected to the evolution of net sales, both in developments that are directed to the middle class, as well as Minha Casa, Minha Vida.
As a consequence, the development segment accounted for 44% of consolidated gross revenues in the first half of 2016, compared to 32% in the first half of 2015. The trend is that the development segment continues to gain share in the Direcional's growth revenues because of the strategic directions the company has adopted, focusing on Segments 2 and 3 of the Minha Casa, Minha Vida program. Adjusted gross margin closed the second quarter at 22.9%. The drop compared to previous quarters is associated to two factors. First, a slight reduction in gross margin in the development. Secondly, and more important, the significant impact that cancellations had on the results of our development segment. Although the number of units in the second quarter dropped by 24% compared to the previous quarter, the amount returned to clients reached BRL 24 million, a growth of 47% in the same period.
The increase in the deduction of revenues in a scenario of a drop of gross revenues naturally results in a significant impact in the percentage gross margin. On slide 13, we talk about G&A expenses. In the second quarter, we had BRL 27 million, with nominal growth of only 2% compared to the same quarter 2015, well below the inflation rate. This movement has to do with the several initiatives the company has been taking to keep admin expenses at a level of 6.5% and 7% of our net revenues, which we believe is suitable. Commercial expenses, BRL 13 million in the period, in line with the previous quarter. Despite the retraction in gross sales, a larger volume of launches in the second quarter helped us to have stability in this line.
With that, accounting net income was BRL 22 million in the second quarter, with an accounting net margin of 5.8% in the quarter and 6.6% in the first half of 2016. Adjusted net margin, excluding equity and minority share, was 7.8% of net revenues in the quarter and 8.2% in the first half 2016. Going to page 14. In the second quarter, Direcional had strong cash generation in the amount of BRL 61 million, measured by the variation of the net debt in the period. In the quarter, cash generation reached BRL 65 million, a result that is consistent with what we saw in the last three years. This performance was influenced by two factors. First, the expressive evolution in the total volume of transfer of clients compared to the previous quarter, both in the type of associative and in the developments that are in the SFH in Brazil.
And second, a strong reduction in the accounts receivables in terms of services. This cash generation helped the company to reduce its financial leverage once again. On slide 15, when we take a look at net debt to equity in Direcional, we have a number of 14.8% that shows a leverage level that is extremely healthy. In the second quarter, we raised BRL 75 million in funds by means of corporate debt instruments with a period of two years. The decision was made with the objective ensuring that the company has a suitable level of liquidity to cope with the difficult macroeconomic and political scenario the country is going through. Currently, 66% of our gross debt is of financing to construction operations, which are amortized at the time of the transfer of customers.
If we just consider these operations, we would have a net cash of BRL 342 million, as we can see in the lower left chart. Direcional closed the second quarter with BRL 660 million in cash. The variation of our cash position can be explained by the raising of corporate debts in the amount of BRL 77 million, a net raising of financing to production in the amount of BRL 19 million, and finally, cash generation in the amount of BRL 65 million. The results of the period, the comfortable level of leverage, and the prospect that the company will continue to generate cash in the next period enabled the board of directors to approve the payout of dividends in the amount of BRL 40 million, as we can see on slide 16. This is one more decision in line with the company's process to adjust its capital structure, which we have talked about previously.
Dividends of BRL 0.27 per share represent dividend yield of 4.9%, considering for the calculation the quote at the time that the share became ex-dividend. Finally, it's important to highlight that this amount will be considered as advance for the effect of the current dividends proposal policy that we have. Now we are going to open for the Q&A.
Thank you. We will now start the Q&A session. This is exclusive for analysts and investors. If you have a question, please press star one. If your question is answered, you can press star two to remove your question from the queue. Questions are going to be answered as they are taken. For journalists, please contact our press services with Renata Matos at 3134315442 or email renata.unac@direcional.com.br. Our first question comes from Gustavo Cambauva from BTG Pactual. You may go on.
Hello. Good morning, everyone. I have two questions.
The first, a bit to do with Ricardo's comments in the beginning of the presentation, considering the sales of Segments 2 and 3 that were in the end of the second quarter. Ricardo said that because launches were concentrated in the end of the second quarter, sales were not heated. So could you give us some color, what's going on in this quarter? I don't know if you can disclose the percentage of the segments in terms of sales, the speed of sales, to talk a bit about the demand of this product. The second question is with also regards of the Segments 2 and 3. You said that you had a project that was pending approval that should be launched in the third quarter. I would like first to know if it was launched, and also what approval processes are like.
If you see any kind of difficulties, if you think that goal of BRL 800 million of launches for the year is still reasonable, or if you're thinking of revisiting that. What do you have in terms of launches? Thank you very much.
Well, this is Ricardo speaking. First of all, it's important to make very clear for you what the Minha Casa, Minha Vida launch process is like. Legally speaking, we can sell a unit after the development is recorded. However, in the Minha Casa, Minha Vida project, after the recording of the development, we have to have the contract with the individual, and we also have to have a contract with the bank so that we can connect the client to a unit that is being sold, and also we have the approval of credit already connected to that specific unit.
We have to have this contract with the legal entity. We have to have the approval of credit, so that takes from 30 - 40 days. In the launches that we had in the end of the second quarter, we have two of them that have already started sales at the normal pace, and the others, we are still waiting to start sales to individuals. In the months of July, the reflex of sales is still low. But this will increase in August. When we talk about launches of the second quarter that we effectively have not considered launch, but we have project approval, we already have the development recorded, and we are already signing contracts with the legal entities.
Sales are probably going to start in the third quarter, but still with a low reflex in the quarter because of the time that we need to sign all the contracts. Now, when we think of prospects for launches, of course, in Direcional, and this has been our policy, we have to launch according to demand and avoiding competition with products inside the company. When we launch, we get the number of launches in the second quarter, and we annualize that. We have BRL 800 million. Although the first quarter, we didn't have as much. But I think this is a healthy number. As we are approving projects, we may reach that, but it's hard to say if we are really going to launch that because we are monitoring the market.
But I think that in terms of approval, we are going to maintain the same pace of the second quarter, and we are not seeing bottlenecks in the sale of this product. And we expect things to continue like this. Although we have been noticing banks that work with the Minha Casa, Minha Vida project being a bit more selective in analyzing the credit for this customer. Which I think is quite healthy, and I said that before. When we analyze the economic situation the country is going through, we want default levels to continue to be controlled because this is crucial for the business and for the program to survive. It has to be a program that is healthy and profitable for the banks that work with it. So I am all in favor for a very selective credit analysis.
This is very clear. I just have a follow-up. What you see, the greater bottleneck is in the approval of credit and less in the demand from buyers.
The bottleneck in terms of turning launches into sales. Yes, this certainly has to do with the second step when we compare the Minha Casa, Minha Vida program compared to any other launch. We have 45+ days because we have to sign the contract with the banks as well. As for speed of sales, they are basically the same, and we do not see anything different in the month of July. We did have a poor weekend because of the Olympics, especially in Rio, but that is it.
Okay, thank you very much. Very clear.
Our next question comes from [Banco Votorantim], [Baniela Madeira].
Good morning, Ricardo, Fernando. I would like to have an update in terms of the backlog of BRL 900 million.
Do you have anything that can happen in terms of restrictions with the government and everything?
We still do not have 100% clarity of how the government is going to behave with regard to these projects. We do not have a final decision of how the government is going to approach them. Of course, these are projects that have tighter margins because they were contracted already with a significant period. One of the projects that was not feasible was a project that we canceled this quarter. All of them are feasible, but with tighter margins. We really do not know what the government's policies and definitions are going to be like. As soon as we have any definitions, we are certainly going to announce that to the market for you to have your projections within the parameters that the new administration is going to make. We cannot say.
Just in terms of follow-up, do you think the revenues would be the same for the next quarter since most of these projects have not started construction yet, and we still depend on the performance of Segments 2 and 3 of Minha Casa, Minha Vida and the SFH?
This is a very good question, and I think it is an important question. I think certainly the pace of revenues from services, if the construction is not started, is going to go down because we are delivering more projects. You saw a drop from the second to the third quarter. This is natural, and I think this is something that we can easily calculate. However, what is going to define the total consolidated revenues of the company is the speed of launches of basically Minha Casa, Minha Vida 2 and 3, and even with greater impact, the sales of inventory.
I do believe that in this segment, we have a trend that revenues is going to be stable, not much change. The greatest impact of sales of Segments 2 and 3 that have been launched in the last two, three months is going to be seen next year. We do have to have the sale of inventory, but in Segment 1, you are right, we will probably see a drop in revenues.
Okay, thank you very much.
Our next question comes from Alex Ferraz from Itaú BBA. You may go on.
Good morning, Fernando, Ricardo. Thanks for your presentation. I have two questions. First, we have seen that the Ministry of Cities would launch the 1.5 segment in the beginning of August. I would like to know your opinion about this launch and if you are interested in the segment.
Apart from that, you had mentioned in the first quarter that part of the cash generation was restrained because some projects were in the end of construction. Some of this amount was postponed. Is the amount already part of the second quarter, or is it coming for the next quarter?
The Segment 1.5 is a segment that has been talked about a lot. It seems that it is going to be an important segment for the government. We still have not had any official announcement. So when it does, it is very important for us to analyze what parameters will be demanded from the segment. We still had some doubts in terms of the parameters for the segment. Are we going to have a list of beneficiaries? What is going to be the size of the units and et cetera?
I think it is going to be an appealing segment, and some of our products may fit the segment. In there, we would have, obviously, an acceleration in the speed of sales.
I think these are projects that are very close to be approved with developments that are going to start sales very soon. Direcional has been focusing on units that have sales prices likely above 1.5 segment. But with the new plots of land that we acquired, especially in the last 12 months, we do not have much to offer in the Segment 1.5. So we see products that are going to have a higher speed of sales, but that will have a lower share in the coming months when the new plots of lands are going to be available for sale. But it is still very early to say, because we do not know what the rules are going to be, and we do not know the impact of the segment for the company. But we are quite optimistic about that.
This is Fernando speaking. As for the accounts receivables for segment one, we observed in the second quarter that the balance of retention of 5% is starting to go down. So along the second quarter, we had some constructions that went to the final 5%. In some, we were able to release resources, but net, we were able to decrease the balance of 5% by BRL 10 million-BRL 15 million, which helped us in the bottom line results for the quarter.
Okay, thank you very much.
Our next question comes from Luiz Maurício Garcia from Bradesco. You may go on.
Good morning, everyone.
With regard to Segments 2 and 3, the level of margin that you are expecting is what? What should we expect? If you could talk still a bit Segment 1.5, it is still in the beginning, but probably it is going to have a price that is above Segment 1. Is it going to offer better margins as well? My second question is with regard to Minha Casa, Minha Vida land bank. The company is speeding up its acquisition, but still not as much as some other players. What would you say in terms of competitive environment for Segments 2 and 3, and what would be possible bottlenecks for you to speed up the acquisition of land plots? Not only launches to be able to be a good competitor in thi s egment.
What do you see ahead in terms of the pace of acceleration for Segments 2 and 3 in the coming quarters?
Okay, Luiz. Segments 2 and 3 gross margin is about 32%. This is the number we have been working with. This is the gross margin we have delivered in ongoing projects. Of course, we want to have the best margin possible, but basically, we're working with a number of 32. Your second question, talking about the Segment 1.5. Although we still do not have all parameters defined, which are very important for us to know exactly how appealing the product is going to be. We do believe and expect that margins are above Segment 1, because this is a market project. It's going to be sold, the cycle is longer. The capital that is invested in the SPEs is going to be there for a longer time.
It's important that it has higher margins in terms of return. Gross margins, you have to consider the cost of sale, the cost of approval of credit. Certainly for the segment to be appealing, gross margins have to be a lot higher than Segment 1. I think this is a type of product that sometimes has tight margins, and it will only make sense if we have a very high speed of sales. It's too early to say, but I think that it's going to be higher than Segment 1. I don't know if it's going to be appealing enough for us to invest in the project. We'll have to have the rules defined to know that. As for the acquisition of plots of land, right now we have a bit more than BRL 4.5 billion that is allocated for Segments 2 and 3.
If we analyze what we launched in this quarter, we get from BRL 0.8 billion -BRL 1 billion. 25% of turnover of a land bank a year. If you think of the size of our land bank and what is being launched, we think it's a very healthy land bank, but in some cities in which we operate, we see room for growth, and that's why we are continuing to acquire plots. Otherwise, we would be satisfied, and we would just replace what is being launched. But because there are cities in which we are starting operations and we have room for growth, you'll probably see our land bank going up. An important difference or differential in Direcional is that we are not going to grow by spreading operations. We have a level of SG&A that is around 7%. It's basically at the borderline of healthy.
We have to increase operations in which we already have installed SG&A before going on to new cities. I believe that our focus undoubtedly is going to be increasing margin, increasing profitability before going on for the expansion to cities in which we do not have structure or offices or installed capacity. The acquisition of plots is going to continue at the same pace. We have been able to acquire plots within our policy of avoiding cash exposure. We do not see any change in that. Nothing has really demanded us to change our policy. We are very comfortable with it, and I think we have been successful so far. No changes with this regard.
Okay, thank you very much.
Our next question comes from Nicole Hirakawa from Credit Suisse.
Hello. Good morning, everyone. I have two questions.
The first is in regard to Minha Casa, Minha Vida 2 and 3 segments. I would like to know, how do you go from Segment 2- 3? Do you have a social factor that is involved there? We know that Segment 3 holds higher financial rates. Does it have an impact in margins as well? As for the backlog of Segment 1, you did talk a bit about that, but I would like to know what needs to happen for you to launch more units in Segment 1. Are you going to focus more on Segments 3? Do you think the government is going to assure funding for all the segments? Thank you.
Nicole, I am going to apologize, but I really did not understand your first question. Could you please elaborate on that?
I just would like to know.
In Minha Casa, Minha Vida 3, the cost of financing is increasing, and I would like to know if the margin of 32% you mentioned is taking all that into consideration, or if we are going to see any additional pressures, especially when you consider Segments 2 - 3.
Yes, you are right. We did have a deterioration when we consider average number. In some segments, there was an increase of subsidies and maintenance of interest rates, and then affordability improved. But altogether, I would say that Minha Casa, Minha Vida 3 is a bit more complex or a bit more challenging for clients to get the right amounts of credit to buy the unit. But the margins that we have mentioned do consider all the terms of Minha Casa, Minha Vida 3, and they are minimum margins for us to be in the business.
We are not going to go in any product that will not deliver these minimum margins. Otherwise, the project wouldn't be feasible. But I think that 32% is quite reachable. I am talking specifically about Minha Casa, Minha Vida 3. Going back to segment 1, you probably would like some kind of follow-up in the end of my answer. But we still do not have 100% clarity with regard to the amounts the government is going to allocate for this segment. We see that the focus, and I think this is correct, is to resume developments that were stopped so that we can deliver units, because if we have constructions that are stopped, you can have squatting and lots of problems. So I think this is correct.
For constructions that haven't started, we still don't know how they are going to work, if they will fit Segment 1 or Segment 1.5, or if it is going to be a new Segment 1 or with new prices or the old Segment 1, and this is going to be crucial for us to know what projects are going to go on, what projects are going to be changed. But I do believe that we will have an answer very soon, and then the company is going to make its decision of where to go on with the project.
Thank you very much. I do have a follow-up question. I would like to ask about the social factor. You said that so far, the social factor is on hold in the first six months of the program. Do you have any news on that?
I really don't know how to answer your question. I will try and check, and I'll get back to you, but I really don't know. I don't know what it is like right now. I'm sorry.
Okay, no problem. We can talk about that further on. Thank you very much and have a good day.
You too.
Our next question comes from Guilherme Capparelli.
Good morning. I also have a question about growth margin. You mentioned that you had a recorded impact, but in Segment 1, specifically, that cost savings, renegotiation with suppliers, labor, is it at its limit? Do you think that margins are going to continue at this level for the coming quarters? The second question, which is a follow-up of Alex's question.
The company is expecting to keep its cash generation closer to the second quarter, which was higher in this quarter compared to the previous one? Or do you think it's going down?
Okay, Guilherme. As for Segment 1 projects, we expect margins to continue stable. Indeed, we're able to have some savings that already reflected the margins in the previous quarter, but I think it's healthier to consider margins to be stable from now on within what happened in the second quarter. As for cash generation, I do believe that this quarter was quite relevant. We had a very substantial cash generation, and I believe that this is going to go down in the coming quarters. I don't believe it makes sense to annualize the cash generation of this quarter, otherwise it would be too high. It's funny.
In our business, we are demanded on a quarterly basis, but we are talking about a long cycle. I really think that we should analyze these numbers. So this was an outstanding quarter in terms of cash generation, but cash generation is going to go down in coming quarters.
Thank you very much. Quite clear.
Our next question comes from Marcelo Motta from JPMorgan. You may go on.
I have two questions as well. When you take a look at your balance sheet of BRL 300 million in revenues from services, how you're going to recognize that, if you could give us some color on that. Or if you're going to have any changes, how you see that with regards to the following quarters.
Well, this is Fernando speaking.
As for accounts receivable of services, we closed the quarter indeed with a significant drop in the balance that we see in our balance sheet, and this is a reflex of two things. First, we decreased the balance of the 5% that is blocked for Segment 1. Second, this is a reflex of the pace of work that is ongoing. The BRL 300 something million in accounts receivable should go into our cash in the next two quarters. But this is something that has inflows and outflows every day, according to the level of revenues that we have for each one of the constructions and according to the receivables that are coming in from constructions that also happen on a daily basis. So we do not believe we are going to have any changes in the behavior that we have seen in the past three quarters, to say the least.
As for gross margin in the segment of development, which was your second question, we did indeed have a much heavier impact in this quarter in terms of development growth margins compared to previous quarters. We did have a simulation in terms of management. Just for you to have an idea, the consolidated gross revenues of the company margin, if we had no cancellations, could have been 4 percentage points above what it was. This is a bit of the impact that cancellations had on our quarter earnings.
Okay, thank you very much.
Ladies and gentlemen, we would like to remind you that to ask a question, you just press star one. Please wait while we collect the questions. Okay, thank you. The Q&A session is now closed. I would like to turn the floor to Ricardo for his final considerations.
Well, just as an answer to Nicole's question, I believe that she's still online. As for the social factor, I checked that. I had not heard of the non-existence of this factor, and it is going to continue. For buyers that are single without dependents, the banks are applying the social factor, and they give lower credit compared to the full credit of 100%, Nicole. As for my final considerations, I would like just to thank you again for joining us. If you think operationally here in Direcional, our focus is on sales. We expect to deliver more satisfactory results than we had in the second quarter, especially in terms of finished units. As sales happen, we believe the level of cancellations go down, consequently, margins go up.
We also have better cash generation for us to continue adjusting our capital structure as fast as possible, but in a way also that is very conservative, considering the country scenario, for us to provide better returns that make sense for the risks that we have in the real estate business. Thank you very much. Remember that our IR team is always here for you, in between calls, and I myself am always available to answer your questions. Thank you very much and see you next time.
Thank you. Direcional's conference call to discuss the earnings of the second quarter is now closed. Please disconnect your lines now and have a good day.