Morning, and thank you for holding. Welcome to Even's earnings call concerning the results of the fourth quarter of 2023. I would like to point out that for those who need simultaneous translation, the tool is available on the platform. to use it, you have to click on the button Interpretation, the globe icon at the bottom of the screen, and choose your preferred language, Portuguese or English. For those who will listen to this teleconference in English, there is an option available to mute the original audio in Portuguese by clicking on the Mute Original Audio button. We would like to inform you that this event is being recorded, will be made available on the company's IR website, where the complete material concerning the earnings call will be available. It is also possible to download this presentation by way of the chat icon in both Portuguese and in English.
During the company's presentation, all participants will have their microphones on mute. Following that, we will begin the questions and answer session. To ask questions, click on the icon Q&A at the bottom of your screen, then type in your question to join the queue. When you are called, a request to activate your microphone will show on the screen, and then you must activate your microphone to ask your question. We would like to advise you to ask all your questions at once. We would like to clarify that any statements that might be made during this teleconference regarding Even's business prospects, as well as its operating and financial projections and goals, are based on the beliefs and assumptions held by the company's management and on information currently available.
Forward-looking considerations are not a guarantee of performance and involve risks, uncertainties, and assumptions since they refer to future events, and therefore depend on circumstances that may or may not happen. Investors should understand that general economic conditions, industry conditions, and other operating factors may affect Even's future outcomes and may lead to results that materially differ from those expressed in these future considerations. Here with us today are the chief executives of the company, Mr. Marcio Moraes, CEO, Mr. Marcelo Dzik, CFO, Mr. Tiago Krall, Strategic Planning and Investor Relations Director. I will now give the floor to Mr. Marcelo Dzik, Even's CFO.
Good morning, everyone. It is a pleasure to present Even's results for the fourth quarter and the consolidated results for the year of 2023. This presentation will focus on São Paulo's operation, disregarding our participation in Melnick.
The consolidated figures and their thorough breakdown may be found in our earnings release on Even's Investor Relations page. I would like to begin with the operating highlights for São Paulo in slide three. We ramped up our volume of launches, which amounted to 10 in the year, totaling BRL 1.9 billion, which represents an increase of 135% when compared with 2022. As for our net sales, we saw an increase of 43% compared with 2022, amounting to BRL 1.4 billion in the year, considering Even's share, which is evidence of strong absorption of both our launches and our inventory. In 2023, we delivered six projects with a total of 903 units in approximately BRL 1.3 billion of PSV. Worthy of note is the delivery of Fasano Development Residential and Hotel in Itaim, the highest quality product that consolidates Even in the luxury market.
We kept our structure lean and efficient despite the increase in operating volume. Our general and administrative expenses represented 5.9% of net revenue and were 8% lower nominally when compared with the previous year. In the next slide, you will see Even São Paulo's financial indicators. In 2023, net revenue totaled BRL 1.8 billion, a 39% increase when compared with the previous year. We reported a gross profit of BRL 403 million by the end of the fiscal year, which is a 40% increase when compared with 2022. The adjusted gross margin in the year was 24.9%, while REF and inventory margins accounted for 24.8% and 31.4% respectively. The yearly net income for São Paulo operation was BRL 174 million, which represents 2.6x the net income for the previous year and an ROE of 12.4%, 7.5% above the reported result in 2022.
In the next slides, we will break down our gross margin. In Q4 2023, the launch and the structured sale of 100% of the studios in Casa Sabiá project affected the margin in the quarter by -3.2%. If we disregard this operation, our gross margin amounted to 27.2%, which is consistent with the positive evolution of our margins on a quarter-over-quarter basis. Our combined REF and inventory margin is 29%, reinforcing the trend of gradual growth that we should observe in future results as we proceed with the execution of our construction work coming from both inventory and new launches. Despite the accounting loss brought about by the operation, the structured sale reduces risk and exposure to the compact units segment which is consistent with the strategy adopted by Even in past years.
It's worth noting when we consider the flow of receivables in the short term for contracted sales, projects economic and financial indicators at present value are preserved. Moving on to launches in slide six. We see there were four projects launched in São Paulo in the quarter, amounting to a significant PSV of BRL 1.2 billion, of which BRL 969 million corresponds to Even's share. We keep our focus on the upper middle and up to luxury segments, which account for 93% of the year's volume as shown in the graph. In the next slide, you can see the renderings of the projects launched in 2023, highlighting the launches in the fourth quarter, Estoril Ibirapuera and Casa Sabiá Moema, which amount to BRL 950 million of PSV Even's share.
In slide eight, we highlight Faena São Paulo project, a luxury development with a hotel and an art center from an international brand that represents a PSV of BRL 1.3 billion Even's share. This project, whose first phase is in pre-launch, will transform the Faria Lima region. In slide nine, we update you on our partnership with RFM, which is in line with and complementary to our operating strategy, and that has a fully formed land bank worth BRL 600 million Even share. For 2024, we anticipate the first launches of high-end projects in Jardins neighborhood, the first of which will be Edifício Jardins located on Alameda Tietê. In slide 10, we demonstrate our sales performance. Net sales volume in the quarter amounted to BRL 441 million, which is an SoS of 16%.
We sold 32% of the launches in the quarter, confirming the efficiency of the strategy we have for the products we put in the market. I also want to point out our net sales of inventory amounted to BRL 699 million in the year, which contributes to a healthy inventory with the low levels of finished units.
Concerning cancellations, we closed the quarter at BRL 71 million. This higher number when compared with the previous year, is mainly related to the increase in sales volume. It is worth noting that we still have one of the lowest levels of default on record for our clients' portfolio. In the next slide, we see our deliveries. In 2023, we delivered six projects, which together have a total of 903 units and approximately BRL 1.3 billion of PSV. For 2024, we forecast a significant number of deliveries of a total amount of BRL 2.2 billion.
In the next slide, we show you the pictures of the projects delivered in 2023. In slide 13, we break down our inventory. We have a total inventory of BRL 2.4 billion in São Paulo, and only 9% of which corresponds to finished units. When broken down by segment, we have high concentration in the middle to luxury segments, 78%, whereas the compact unit segment represent only 4% of the inventory. Moving on to our land bank in slide 14, we currently have BRL 5 billion worth of land bank, considering Even share consisting of 17 lots or phases, mainly located in prime neighborhoods of São Paulo, especially in the south and west regions of the city. In the fourth quarter, we updated the lots which underwent changes in projects or an increase in their potential value, which increased our PSV by approximately BRL 1.3 billion.
In slide 15, as a relevant part of our strategy, we present our solid capital structure. We ended the quarter with a gross debt of BRL 1 billion, mostly dedicated to financing production, and with a cash position of BRL 537 million. Our net debt is 26.2% of the company's consolidated equity. Here we highlight the schedule for amortization of our corporate debt with very long maturities. In the year, we burned BRL 438 million in operating cash dedicated to purchasing of land and the construction of ongoing projects. It was financed with credit lines dedicated to financing production and with cash flow linked to the operating cycle of the business. In 2024, we still anticipate burning operating cash driven by the relevant number of ongoing projects. There will be, however, a reversal to this trend in 2025 when we anticipate a significant generation of cash.
In December, we announced the payment of interim dividends to the amount of BRL 50 million paid in January. Dividends paid out totaled BRL 100 million, representing 46% of the profit in the fiscal year. In slide 16, we present the consolidated financial indicators. We ended Q4 2023 with net revenue of BRL 939 million, an 89% increase when compared with the same period of 2022. The consolidated figure for the year was at almost BRL 3 billion, which is a new record high for the company, a 28% increase when compared with 2022. We delivered a gross profit of BRL 224 million in the quarter with an adjusted gross margin of 25.9% and BRL 647 million in the year. Lastly, we delivered a net income of BRL 57 million in the quarter, corresponding to a net margin of 13.8%.
In 2023, our net income totaled BRL 216 million, more than twice the number for the previous year, and with an ROE of 11.2%. I will now give the floor to Marcio Moraes, Even CEO.
Good morning, all. I would like to begin by thanking the analysts, investors, and everyone else for being present at another earnings call concerning Q4 2023. 2023 was a year that brought us very positive results. We began the year very cautiously due to the many uncertainties, both economic and political. Therefore, we did not launch any projects in the first quarter. However, due to the growing sales demand, we resumed the launches in the second quarter, and we closed the year with BRL 1.9 billion worth of launches in São Paulo, concentrating on the high-end segment and on special developments such as Casa Pinheiros, Estoril, and Casa Sabiá.
We delivered consistent results in the four quarters with a significant growth when compared with the previous year. We brought the profitability of São Paulo's operation to a level above 12%. We are very clearly in condition to continue growing as we recycle our inventory and launches. We paid out good dividends to our shareholders in line with our value generation strategy. In spite of growing, we were able to maintain lean operations with a nominal decrease in our administrative expenses. We took advantage of good opportunities to invest in the purchase of land, keeping our land bank at around BRL 5 billion, with large lots for differentiated products in the high-end segment, in the best neighborhoods of the city, and with advanced stages in their approval process.
Concerning our partnership with RFM, aligned with and complementary to our operating strategy, we created a significant land bank, and the first launches of high-end projects are scheduled for 2024 in Jardins neighborhood. I also bring your attention to our Faena São Paulo development, a luxury project in its pre-launch phase that will transform the region of Faria Lima.
In conclusion, I stress once again our optimism about the prospect for this year. We will maintain our focus on sales, monitoring the market, and decide how to proceed at every launch, but always assured of our operating capacity and our ability to generate real estate business with high added value. Thank you for your attendance. We can move on to Q&A.
We will now begin our Q&A session. Remember, to ask questions, you must click on the Q&A icon at the bottom of your screen and type in your question to join the queue. When you are called, a request to activate your microphone will show on the screen, then you must activate your microphone to ask your question. We would like to advise you to ask all your questions at once. Let us now proceed to our first question. It comes from Rafael Castrucci, sell-side from Safra. Rafael, we will open your microphone so you may ask your question.
Good morning. Thank you for taking my question. I have two questions. The first, I would like to ask you to give more details on your pipeline of launches for the year, and also talk about now this first quarter, if you can give more details of how sales are doing.
Good morning, Rafael. Marcio here. The first quarter, when you deal with the high luxury, it is always a little weaker. We focus more on remaining inventory, so we are closing the first quarter, which seems to be very good. We will announce it in the beginning of next month. We have been working much more on the inventory than on launches. The Faena launch will happen now in the beginning of the second quarter. Regarding pipeline for this year, we have two projects already on the go. Harmonia Vila Madalena, which are the one in line. It will depend on how the market responds. We see an improvement in this end of March and early April. I think we will have a good year, approximately the same volume we had in 2023.
Thank you for your answer. Good morning.
Thank you. Now the next question from Ruan Argenton, sell-side from XP Investimentos. We will now open your microphone for you to ask your question.
Hello. Thank you for your presentation. I have two points I would like to discuss. First, what is your scenario for gross margin? You made it very clear in the presentation that this structured sale of the studios of the Casa Sabiá project. I would like to understand how you see this margin, both on Estoril and also the main tower of Casa Sabiá. If you can expect that as these projects are gaining sales, if you can expect that better margins will happen. The second point, I would like to understand if it just refers to some updates in projects or if you have some projects that you have changed, but you still have to resubmit these projects for approval, if there is going to be some gap in your pipeline for 2024.
Hello, Ruan. It is Dzik here. Thank you for your question. I will talk about gross margin, and then Marcio will answer about land bank. We had an event, an atypical event, which is very specific. We make it very transparent, which is the sales of the studios from Casa Sabiá project. We declare an accounting loss, but the economic indicators and every other indicator will be maintained. It is a project we have been monitoring these previous quarters. It is a gradual progression of our margins and our combined margin, REF and inventory, it is at a level of 29%. Our planning here is with the next launch, we will see these margins above 30% in our pipeline. We are balancing these old margins with the new margins, and these old margins will stay behind, especially in 2022. We see this gradual progression in coming quarters.
Ruan, Marcio here. Regarding the gain in pipeline in the land bank, we have two-thirds of that gain will come from projects. It was not regarding master plans or anything like that. There is no need to resubmit. They were just improvements in the project. One-third was, yes, an increase in gains regarding the master plan, but they have already been submitted. There is a line in the city hall. It is well-known, but it is moving along according to our expectations. Yes, one-third of that gain was related to the new master plan.
Thank you, Dzik, Marcio. Have a good day.
Next question comes from Hugo Grassi, sell-side from Citi. We will now open your microphone for you to ask your question.
Hello. Thank you for the result. Congratulations for the result. Thank you for the question. I would like to insist on the Faena topic.
This project has been in the pipeline for some time. I imagine you are already mobilizing these pre-sales. I would like to hear from you what you have in terms of the temperature of this project. You have already mentioned that the timing for launches in this first quarter is slower. What is your expectation for SoS and margins for the product? I know it is difficult to talk about it in advance, but anything you can give me is welcome. The next topic is cancellation. You came from a year with a very huge number of deliveries. So of course, there is an increase in cancellations, but you are before another year with a high volume of deliveries. in 2024, especially in the second half, I would like to understand how you understand in these terms of cancellation.
Can we be assured that the next vintage will have a lower cancellation than one had been? Do you believe we will have an escalation in these cancellations?
Marcio here. I will begin with Faena, and then Dzik will answer the other question. We started Faena last year, more to announce the product, and especially the operator. It was like a warm-up to check with the market, to tell the market what we will produce. Our idea is really to open the sales stand now in early April. We have some reservations already made. I think we are going to have good surprises. It is a product that has been welcomed very well. Our presentation of this product was really good. It was a differentiated product. So our expectations are really good. It is not a dash race, not a short-term thing. We are going to begin the first phase now.
But yes, we believe we have great prospects for this project.
Dzik here. Let me talk about cancellations. Yes, we had a slight increase in volume of cancellations from 2022 to 2023, but more related to the increase in volume of sales. We know deliveries is an important point, especially in the affordable segment and the middle income that depend on financing. As we increase the ticket and we are very concentrated in the high end. So our average ticket more than doubled. We are talking about BRL 2 million, BRL 3 million, BRL 4 million . So it is true that cancellations in deliveries, we lose a disconnection. What happened? We had a little bit more cancellations because of young sales. We did not have an impact in the sense of transfer this finance. What we see clearly nowadays is our portfolio is very healthy. We have been highlighting this.
It is a little bit of the environment in the market. We did not have decrease in prices. One part is because of Even, it is the high end. So we get much more money before the delivery of the keys. There is also some change that happens. So yes, this can happen, BRL 10 million, BRL 15 million. These are relative volumes. But our portfolio, the cancellations are very low. It is a very calm situation.
Thank you. It was very clear. Congratulations.
Thank you. Moving on to the next question from Matheus Meloni, sell-s ide from Santander. We will now open your microphone for you to ask your question.
Hello, everyone. Thank you for taking my question. I have two questions. The first one, to understand regarding the cash. I would like to understand a little bit of your expectation for leveraging in 2024. The second question is regarding the luxury segment.
If there is a demand for this kind of project, how it is performing.
Hello, Matheus. Dzik here. Burning cash in the quarter, we are speaking about the year, especially on the construction of the work, government financing projects. The burn of cash, mainly in the year, is complementary to the investment in land and the payment for land. The same thing in the fourth quarter, the same thing for the whole year. Regarding leverage, the leverage will change depending on the new purchases. We have a lot of things in the pipeline, as Marcio said. I will not give you a guidance or a specific number. It is a good expectation, but it will depend on the market. It will depend on the conditions we will meet along the year.
When we talk about dividends, just to wrap up this issue of leverage, our strategy is to keep the company light. We want to pay dividends. Last year, we paid basically 50% of our profit in dividends. If we have a similar scenario for this year with some provisos, we are going to do the same thing this year. Going back to the issue of leveraging, we expect some level of burning cash less than last year. This is in our planning, especially because of deliveries. We have very concentrated in the end of this year and beginning of next year. We are going to have a year of significant generation of cash. I will give you a ballpark. It cannot change, but we think about 10% of our shareholders' equity of burning cash in 2024 with a reversal of this trend for 2025.
Now, I will link this to the high end in the luxury market. We have been monitoring very closely. We operate in this market. We understand it well. The SoSs of these projects along the year have been showing this, a good adherence to this project. There is competition, but it is not so heated. What we also say is that these larger areas, these differentiated products, these are long processes of purchase. We have a lot of things in the oven in our pipeline that we have been working on. The land we have been launching now, we started forming this land bank three, four, five years ago. Even the Faena, we began the acquisition with the Mazzoni family in 2010. These good projects are not simple. They are not easy to do. I think we have good projects, and we have a very good land bank.
The only thing I would like to complement regarding luxury market is that people sometimes imagine we have an excess demand, but luxury in São Paulo is not just São Paulo. We have an average of sales of the luxury apartments to outside of São Paulo. People in Mato Grosso or Goiás states. The São Paulo market is also a market that sells to outside of the city. We are very optimistic. It is a very resilient market, and we are going to have a very good year.
Thank you very much.
Thank you. Next question comes from Elvis Credendio, sell-s ide, BTG . We are going to open your microphone for you to ask your question.
Good morning, Dzik, Marcio. I have two questions here. First, regarding land bank that you mentioned, this issue of burning cash, but also the purchase of lands. I would like to understand how relevant the purchase of land is this year. If you see opportunity to buy land bank as you have been doing these previous years. The second question is the scenario regarding costs. We have some worries regarding the cost of labor. I would like to understand how you see this issue of labor cost, if you are comfortable or cautious about that.
Thank you for your question. Let's start here talking about the land bank and cash burn, and then just a correction. In the question you talked about the cash burn in 2025, but just a correction. We talked about cash burn in 2024 and cash generation in 2025.
This number I told you, that can change, but this has to do with the behavior we expect that will be similar to 2023. It will depend on purchasing. We have good projects in the pipeline. They are at advanced stage. But it will depend on our business team of the market, depending on the purchasing, we can burn more or less cash. But in 2024, we see cash burn, and 2025 cash generation, but in 2024, a lower level of cash burn.
Good morning, Elvis. Regarding costs, we do not see a great variable here in the cost of materials, oil and power, aluminum, raw materials. Labor has always been a concern, forming new labor, new qualified labor. But we see this with tranquility.
We are a company with more than 40 years with all the suppliers that have been with us for a long time, and we have some suppliers that suffer a little bit more. But we do not have this problem. We haven't had this problem. We do not see this as a problem. And we have been training new teams and keeping our old suppliers. When you have a line of suppliers that have been serving you for more than 30, 40 years, we are going to have a priority in their service. In some products, we suffered in 2022, 2023. Specifically in some points like elevators that delayed some of the deliveries because of the lack of a team to assemble this. But the market is more stable now. The issue of labor is a question of updating the teams, the workers.
We're going to have to invest in training. As an industry, I think we have to take better care of this, but we do not see any problem with this. Thank you.
Thank you. Have a good day.
Moving on. The next question from Pedro Lobato from Bradesco BBI. We're going to open your mic for you to ask your question.
Good morning, Marcio, Dzik. Thank you for giving me this room. I would like to know a few more details. Marcio commented that the first quarter you'll focus more on sales of inventory, remaining inventory. Held off on launches. I'd like to understand if we can see some impact on the margins, if you have been able to keep the same profitability levels of this remaining inventory. The second point is I'd like to understand this level of inventory.
If you have been the whole year at the same level, what kind of level of inventories can make the pipeline in the year to be delayed or reduced because of maybe an occasional concern of inventory, although you have a very low level of finished inventory.
Hello, Pedro. Thank you for your question. It's Dzik here. Perceptions in the first quarter, Marcio talked about this. Our market's very seasonal, especially the high end, so the year takes a little while to really begin. But we see this movement, especially after Carnival. So the volume of visits to the stands and sales. The margins are preserved. There's no surprise, no difference in prices. With the information we have been conveying, we believe, of course, it will depend on the mix.
But quarter-over-quarter, we see a recomposition of margins, and our REF margins and inventory margins will recover, and the new launches will balance these margins positively. Regarding inventory, it's not an exact number. We are paying close attention to market issues in our inventory. We have a very healthy inventory. Only 9% of our inventory is finished units. It's very little. One-third of this finished inventory is from Ibis Hotel, which we know they went through a difficult moment due to the pandemic, but they are recovering. So we have some ways to perform a sales, maybe a structured sale or a retail sale. So it's an inventory that we'll be able to sell along the year. We're going to monitor market. As we see the high end today, looking internally, our inventories are at a very healthy level. The deliveries are in the long term.
We have very little finished inventory. Our sales planning is under control. If things get more difficult, we're going to monitor if the inventory is not being absorbed. But in this context of market finished inventory, it's a more technical analysis. We do not have a definite number, but our inventory is healthy.
Thank you, Dzik.
Thank you. Reminding you that to ask questions, you have to click on the raise hand or Q&A button on the bottom of your screen and type in your question to join the queue. When you are announced, a request for you to activate your microphone will show on the screen, and then you activate the microphone to ask your questions. We advise you to ask all your questions at once. Continuing, our next question is from André Dibe, sell-side from Itaú BBA. We're now going to open your microphone for you to ask your question.
Good morning. Thank you for the presentation. Thank you for taking my question. I have just one question in relation to price, property price. You have been working in this higher-end segment. How you see the differentiation of products regarding price, how this dynamic helps to gain price, and think about the market as a whole. Outside of this high-end product, what do you see would have to happen for us to see prices evolving again?
Thank you for the question. Dzik here. Talking about prices in high-end. In our strategy, this is very clear. We can see this very well in the launches that we did last year. We believe in bigger projects. It's more difficult to form the areas, but our lots have on average 5,000 sq m, some of them 7,000 sq m, 8,000 sq m.
We have launch projects with this land. A bigger lot means better amenities, better leisure area. We invest a lot in leisure. A bigger lot also allows for a more optimized floor plan. We do not lose. Sometimes there are restrictions. We have been investing a lot in services. When you have bigger projects with bigger units, the volume of scale, and high-end has been demanding this, we can offer a better quality of service, and with an administration fee, a condominium fee that is lower. We can see this on Fasano. We have a hotel with a five-star service, but the condominium fees are even lower than in other higher-end projects. But in some other projects, we have similar situations because of scale and the quality of our common areas.
Talking about market and price, what we see as a next step, and we also monitor this, we have been talking about the market, have been talking about interest rates. A cut in interest rates, this is always very good for the real estate market. The luxury property has increased in price when you see these past few years. But the upper middle, the upper income segment, units of BRL 1 million- BRL 3 million, this price is a little out of date, especially when you compare with high-end. We think it is because of the depending of mortgage financing. We believe that with lower interest rates, with lower financing costs, this step between good neighborhoods and really good neighborhoods, this gap will decrease.
We see some room for some price appreciation in Brooklin, Campo Belo, Alto de Pinheiros neighborhoods, in Moema, so that the upper middle products, we understand, will probably have good value, appreciation in value if the macroeconomic environment that we have seen is maintained.
I think it is basically this. What we see is a growth, is an increase in price per square meter in the most important neighborhoods in São Paulo, Jardins, Vila Nova Conceição. The prices grew much more than in nearby neighborhoods like Moema, and we see this in the price. We are able to gain prices in Casa Sabiá and Estoril, which are more prime neighborhoods, and it is what Dzik said. We have been expecting some gain in prices also in these other neighborhoods in Jardins. They have a good price, but it is not going to go down.
We see some gain in price with the decrease in interest rates and also an increase in speed of sales.
It is very clear. Thank you. Have a good weekend.
The Q&A session is now concluded. I would like now to give the floor to Mr. Dzik for his final remarks.
I would like to thank you all for attending, and I would like to congratulate our collaborators for the results of 2023. Thank you.
Even Construtora e Incorporadora's call concerning the results of the fourth quarter of 2023 is now concluded. The investor relations department is at your disposal to answer any further questions you may have. Thank you all the attendees. Wish you a nice day.