Good morning, ladies and gentlemen, welcome to this video conference to discuss the results of Q1 in 2023 of EZTEC. I'm Pedro Tadeu Lourenço , head of IR in the company. Today with us, Silvio Ernesto Zarzur , Board Member, CEO, Chief Development and Commercial Officer. Flávio Ernesto Zarzur , Vice Executive President and Chairman of the Board. Mr. Marcos Ernesto Zarzur, Member of the Board. Marcelo Ernesto Zarzur , Vice Executive President, and Emílio Fugazza , our CFO and IRO. This event is being recorded, all participants will be connected in listen-only mode during the company's presentation. Later, we will begin the Q&A session when further instructions will be given. Should you require the assistance of an operator, please use the chat. Should there be a failure in the connection, use the links available from our IR site.
Also on our site, you may find the slides for this presentation in the download section. Information is available in Reais and in BR GAAP and IFRS. Before proceeding, we would like to mention that any forward-looking statements that may be made here relative to EZTEC's business outlook, such as projections, operational and financial targets based on beliefs and assumptions on the company's management and on information currently available. Forward-looking statements are no guarantee of performance. They involve risks, uncertainties, and assumptions because they refer to future events, which depend on circumstances that may or may not occur. Investors should understand that general economic conditions, industry conditions, and other operational factors may affect the future performance of EZTEC, thus conducting to results which differ materially from those expressed in such forward-looking statements. I now turn the floor over to Mr. Fugazza to begin the presentation.
The floor is yours, sir. Good morning to all. It's always a pleasure and honor to be here to discuss the results of the 1st quarter of 2023. We start on a slide with launches in the quarter. We are pleased to announce the first launch in partnership with Lindenberg. We created this partnership in 2022. After 13 years working together, we have a very strong relationship with Lindenberg. We start with JOTA by Lindenberg at Rua Gregório Serrão in the region of Vila Mariana in São Paulo with a PSV, our share of BRL 127 million. The launch took place in February. 32% of it has been sold. This launch gives us a lot of strength to move on.
We have been gearing our best efforts to launch Lindenberg Ibirapuera in the region of Vinte e Três de Maio in Paraíso, where the IBM building used to be, very close to the Ibirapuera Park. Our share is practically BRL 600 million. The sales suite is open, and we should start selling these flats in Q2 2023. Speaking of our operational performance, we saw sales grow in 2023 in this first quarter. If we compare with the whole of the average of 2022, we sold for BRL 114 million. This was after a convention that we held, a sales convention attended by over 1,800 sales professionals, and that helped us kick off 2023. It's also important to say that net sales were BRL 366 million.
Remember that part of the cancellations, more than BRL 20 million, were upgrades and downgrades. Therefore, there were cancellations on one side, but we sold on the other side. The cancellations were only for BRL 26 million. This places us in a uniquely position in terms of cancellations. On the next slide, I would like to mention the deliveries, which is a very important topic in 2023. It will be an year for the company where we will have the most deliveries ever. We have a table here. In Q1 2023, we delivered the Z Ibirapuera project, which was sold 100%, fully sold. In Q2, we should deliver Meu Mundo Estação Mooca, where we are developing a project under the Minha Casa, Minha Vida program. Then Jardins do Brasil.
Our share is over BRL 200 million and this is being held in Osasco. In Q3, we have Parque da Cidade and some other projects in Guarulhos, such as Jardino, Piazza and Internacional under the Minha Casa, Minha Vida program, which is being delivered and all the costs have been accounted for. In Q4 we are going to deliver Air Brooklin, BRL 400 million, 84% has been sold. Eredità Mooca also. The sales are going very well. We mention the inventory. The inventory at the end of Q1 2023 was BRL 2.5 billion. I would like to mention that we have approximately BRL 120 million in apartments that are being rented out.
This is a strategy that we adopted in the last few years, it makes it easier to sell those apartments, those units at higher prices. This has worked well for us. We mention the inventory of residential projects, here properties under construction, which are an important part of our assets, they will be ready to generate value for the company once we start selling them. On the left-hand side, Esther Tower in the Parque da Cidade region. 54% of which has been sold. We have invested more than BRL 600 million, which includes the land, the permits, the construction and so on. On the right-hand side, Air Brooklyn Commercial. You see the glass there, metallic structures on the roof. This is beside our Air Brooklyn Residencial, which will be ready by the end of this year.
This commercial project will be ready for sale. Obviously, we have the finishing phase and so on, but these units will be sold as we have people interested in purchasing or renting it. The potential, the potential for generating value for the company in the midterm is very good. In our land bank. Our land bank is for BRL 8.3 billion. The last valuations we had in the first quarter of 2023, we launched JOTA, which is a residential launch for over BRL 10 billion. There were some variations in price which have to do with a deduction of the launch we did in the final of 2023.
We have BRL 8.3 billion, and this may be added by BRL 2.6 billion in those projects that we have under resolutive clauses, which may be ratified by the company by the end of 2024. We have our financial indicators. We start on the left-hand side with our net revenue, which at the end of Q1 was BRL 251 million. Here I highlight the variation relative to Q4 2022, where the net revenue was BRL 311 million. This variation can be explained by the fact that in Q1 2023, we had no external factor affecting our accounting in terms of revenue. That is, in Q4 2022, we sold land, we recognized launches.
In Q4, we recognized Hub and Hub T Brooklyn, and we also had something that affected us positively, and that was commercial floor sold. What we see in terms of recognition of revenue here has to do with sales in Q1. No doubt, Q1 has an impact. It's a bit weaker because of holidays, Carnival. It is a slower quarter in terms of executing the projects. The second quarter, the third quarter are less affected by this type of event. Moving on to gross income and gross margin, we see an impact here. At the end of Q1, it was BRL 71 million with a gross margin of 28.4%. Below that, we will see the unrecognized margin and income, and that is 36%.
What we expect, as was the case in this last 15 years, is for the gross margin to be reflected in terms of the rev margin of the company, the unrecognized margin. The difference between 28% and 36% has the impact of the effects of that quarter. Because there are no external factors, this impact has to do with the projects and the execution of the projects. This is practically 75%-80% linked to increase of costs relative to our projects. We have been taking questions about the types of impact that may be felt in other projects. What we see is that 80% of this impact has to do exclusively with Parque da Cidade. The other 20% may be seen in extremely large projects that should be delivered in 2023.
We haven't seen any potential future impact for those projects that will be delivered in 2024 and 2025. This is the reason why the gross or rather why the rev margin has been flat between 37% and 36%. Why 36% and 37% rather than 40%, which we had in the first quarter of 2022? This has to do with something that we have been saying for 2.5 years. This has to do with the fact that the costs are above the average INCC. It is easy to see this in the first quarter of 2023. INCC was 0.8 or 0.9 throughout the quarter. Of course, the costs that we really saw, for instance, in terms of installations, were above the costs reported by INCC.
The projects that we have underway, 90% of all of our rev has this gross margin of 36%, which should be the de facto margin of the project. When we look at the impact of Q4 and Q1, this has to do with what we see in the Parque da Cidade project. The pick-up method applied, and it gives us BRL 17 million, and that accounts for one-third of our income. If you see at the final result, the pick-up method demonstrates that the projects that we carry out on our own is consistent with a margin of 36%. This is just to highlight that the problems that we see in our gross margin have to do with a single project. On page 11, you see the financial results of the company.
We had a positive result, BRL 24 million, which is mostly the result from our investments. The company has a net cash position in the region of BRL 180 million. Our receivables portfolio, which is also important in terms of our financial result, had an impact of contained IGP on the right-hand side. You see good news relative to our direct receivables portfolio. After a long time, we finally saw a slight increase. We had BRL 385 million, which we have been receiving from our direct clients. In terms of net income, it was BRL 42 million, which is a recovery relative to Q4. In the next few quarters, we should have a better net margin. On the following slide, you see our balance sheet and capital structure.
On the left-hand side, you see the net equity, which is about BRL 4.5 billion, and third-party capital, BRL 1 million. BRL 9 million comes from loans and financing of production. The debentures as well for working capital in the company. Also we have BRL 80 million of land to pay. On the right-hand side, you see our assets. The more liquid assets are cash and investments, which account for BRL 719 million. The performing receivables, our direct clients and the clients which are being transferred to bank, and that is BRL 509 million. The non-performing receivables, BRL 562 million. The receivables are recognized in the balance sheet under the equity method and in our consolidated balance sheet, and we have over BRL 1.5 billion receivables to be recognized.
The inventory which is being built amounts to approximately BRL 1.4 billion. The land bank, BRL 8 billion-BRL 9 billion in EZTEC. We have a cost of BRL 1.14 billion, which includes also the permits. As we have said before, we always disclose the dividends, and we are going to pay out 25% of the net income of Q1 on May 31st, 2023. The ex-dividend date will be the 19th of May. Having made the general presentation, I now turn the floor over first to our CEO, Silvio Ernesto Zarzur , for his comments, and then to the VP of the company and board member. Silvio, the floor is yours, please. I would like to say good morning to all. Thanks for attending this video conference.
I would like to say that we are not very happy with the results, as you can imagine. This has to do with two things, and these summarize what is happening to us. First, an adverse economic scenario, interest rates of 13.75%, an economic scenario that is not good for the economy. It's been difficult to sell our units because of the increasing costs as well. We think this is part of the business. We will be able to reverse that situation. Once the interest rate goes down and the interest rate of mortgages, we believe we will be able to sell more in a better macroeconomic scenario. We believe this is going to happen. A few things will help us. The interest rate has to improve slightly to enable us to sell more.
This is what my experience tells me. On the other hand, there is a problem in terms of the rocketing costs in building and construction. We have been working hard to sort it out, and we are going to solve it. We are concerned, but we are confident the company, the technical directors, all the other directors, the company as a whole are gearing efforts to solve these problems. We believe that there will be a few things ahead of us that will cause us problem, but we are working hard to work in the engineering industry as we used to. We are working hard to do it fast. I think that very quickly, we will be able to bring things back to normal. We have very good land plots that we have bought.
When we talk about inventory, these are goods that have to be sold, and these are great flats in the best possible neighborhoods, and they are very well-built. We don't want to sell them at any price. We try to sell them at a good price. Let me make one thing clear. The prices of sale place us in a situation where we can have better margins and better profit. Much better than you see in the balance sheet. We are going to solve the cost problem, and this will put us back on track to have a better balance sheet in this economic scenario. If the scenario improves, then we are going to take off. This is our expectation. Our sales force is great. We have the best land in town.
We have bold designs and projects, we are very well-positioned to bring better results in the next year. That's what I had to say. Thank you. Good morning to all. Thank you for attending. I think there is very little that I can add to what Silvio said. What I can say is that what Silvio said is something that we all live with. There is discomfort, but there is also strong alignment. It's in our nature not to accept cost overrun. We had never seen it, so we feel uncomfortable with that. All the teams, managers, we are all working towards changing this situation and not having costs overrun anymore. This is what I had to add. What Silvio said, translates our feeling. Good morning to all. I'm going to stress what my brothers have said. This is Silvio Flávio speaking.
We have been working hard. We have come a long way. Parque da Cidade was responsible for the cost overrun. The project is coming to an end. In the new projects, we are not going to see the same kind of problem. Surely, if we all work together, we are going to see the kind of results that we were used to. I would like to thank you all for attending. All the brothers are here together with the shareholders, and we are all working to bring the company back to the levels that it has always worked at.
We will now begin the Q&A session. For those who want to ask a question, please use the Raise Hand facility. We will take also the questions that are sent via chat if we have time.
Otherwise, please send the question to the IR contact on our site, and our team will be more than pleased to answer any questions. Our first question comes from Mr. Bruno Mendonça from Bradesco.
Good morning. Thank you for the presentation and for taking my question. I would like to explore your commercial strategy. You have been talking a lot about it. You've talked about events and about improving service in the stores. My feeling is that you have a strategy to try and bring customers to the stores or to the sales suite. First of all, have you seen more customers coming to the stores? What is the conversion rate? That is, once customers are within the store or within the sales suite, what are the levers? Is it the difficulty in getting financing? What about discounts? What can we expect for Q2?
The second one, looking ahead and thinking about the new launches in the company, the level of inventories has been dropping 8% in this quarter. Are you going to resume launches because the inventory is going down? Are you going to resume launches because you are repositioning your land bank according to different segments? I would like to answer and then ask my other colleagues to add to what I'm going to say. The stores play two functions. The first one is to reduce commercial costs. Whenever we have people on the plot, and then we have the launch, then we start building, and then there is nobody else on the plot. We can do the launches from our sales center, but our projects, they're really big.
Our main projects are not projects that we are going to sell in six months, that's not what we want to do. There is a maturation time there. We want to sell as we build. To do that, I mean, having a store without having to take out the sales suite from the land and continue to sell from the center, that makes sense in terms of efficiency of the brokers. As well, it makes sense. Once the customer gets into a store, they have a choice between six, seven projects, they can choose to find the best match. These sales centers, they are a very strong sales tool. We should open at least another one this year. In terms of the customer, customers have understood that prices are good, sometimes they don't feel secure.
The interest rate is the highest in the last four or five years. Customers have the option of investing in a CDI and earn 13.75%. That's the kind of competition that we face. We have good prices. Obviously, customers always ask for a discount. We give them what we can, but they also need appropriate conditions for the financing. We have very good products. In terms of launches, we have seen this small reduction in the level of inventories. The cost of money is 13.75%. You know how it works. I'm going to preach to the converted. Emílio reported on the deliveries that we made and that we are going to make. We are going to have a lot of cash in the company.
We receive the transfers from the banks, we have the installments that the client pays, we have the money received from the direct financing. We get a lot of money. The cost of money is 13.75%. The faster we launch and the faster this money comes back to the company, that's perfect. Of course, we have to think in terms of security. We don't want to have a massive inventory. We have to launch the right products. We launch when the product is feasible, the cost is right, the sales price is right. We have to move forward because this money comes back to the company faster, and we can then even enjoy the benefits of this interest rate. When the interest rate was 2%, it was different. Now it's very unfavorable for us if we decide to carry the land.
I don't know how long it has been since we last bought land. We have the land there because the interest rate is extremely high. We want the money to come back to the company to increase our profitability, and we have to pay for the plot of Extra. That is an excellent plot. Paying for that plot, I think it's BRL 300 million, isn't it? Yes. It is slightly above BRL 300 million, BRL 315 million, including the construction of the store that we are going to deliver to Extra. We need money to do that. We are working to bring money back to the company because we need to make that payment and That plot will be part of one of our major launches.
The PSV is lower than we are going to receive, the one that you have estimated in the release. Once we go to the market, we look at our competitors, I think the price is a lot higher than we estimated. It's a favorable situation. The outlook is good. Markus. Markus, I would like to just add something. The stores, they attract customers, they attract new customers. With everything that is happening in the market, when we sell one flat to every 10 clients. When the interest rate is a bit lower, we sell 1 flat to 10.5 clients. That is what we want to continue to do to sell more. I have just 1 thing to add.
Despite the political scenario, which can be very uncertain, and sometimes we are unable to have visibility in the long term, what we have seen is that we have a good level of sales given the situation. Silvio said something that I would like to clarify. Customers know that what they're buying today, they're buying at a good price and they're going to make money. We establish prices to ensure we have a certain volume of sales, and we got the response we wanted. They could be better. You see, in the beginning of January, I had a figure in mind, but the performance of sales was a lot better than I had envisaged. Have we answered your question, Bruno?
Our next question comes from Mr. Gustavo Cambauva from BTG Pactual. Good morning. Good morning to all.
I have two questions. The first has to do with the gross margin. In terms of like new projects, what is your view now? The cost of construction is more stable now, but the macroeconomic scenario is not the best. When we look at your pipeline and the launches for this year, is the margin going to go back to 40%, you think? The second question has to do with something that Silvio said. Silvio said about the capital returning to the company. We always talk about Stack Tower. Could you talk about other projects? EZ Inc, Verbo Divino, Air Brooklin, EZ Marc. A very substantial amount of capital has been allocated to these projects. Is there a different strategy relative to Stack Tower in terms of sales?
How fast can the capital of EZ Inc. be recycled within the company?
Morning, Gustavo. I'm going to start by talking about the margin, and then I'll turn it over to Flávio. What we are seeing is that the cost of construction has rocketed to unimaginable levels. We were talking between 2017-2018, about BRL 3,000-BRL 4,000 per sq meter, depending on the type of project. Today, between BRL 4,500-BRL 8,000 per sq meter. They have practically doubled in some places, especially upscale neighborhoods. I mean, we have the ability to deliver higher margins, and this is what you're going to see. For example, with Park Avenue, when we begin to recognize this revenue, the EF margin under the equity pickup will go to the historic levels of the company.
For middle class projects or for Minha Casa, Minha Vida projects, they will be in line with the ref that we expect. This specifically for 2023. I'll now turn the floor to Silvio. Emilio has looked at the construction costs, but we also have demand, the demand side. There is pent-up demand because of the interest rate, and it's obvious that the interest rate depresses prices. Our land has been bought in very good condition. We have cost increases, but when I look at the margin, I think the margins are going to be two or three points below the historic levels because of the low demand, because of the interest rate. Maybe 36%, 37%. But at any time, if the sales pick up, this margin can grow very strongly. I see that the sales price is depressed.
We bought the land in very good conditions. We have good products. I'm counting on something that might not happen. This is why we are conservative. More than the cost, this interest rate is depressing our margins. Once the interest rate goes down, I think the margin will go up very strongly. I don't think we will be able to bring costs back to where they were. The interest rate, yes, the interest rate can go down. Then I'm going to talk a little bit about the commercial side, and then I'll turn the floor over to Flávio.
We have shifted the land bank of EZ Inc. to residential. We cannot wait forever. Parts of what was designed to be commercial will no longer be commercial. EZ Inc., I mean, we can transfer assets from EZ Inc.
to EZTEC Residential, and there's no problem there. The Roque Petroni land has had a commercial part on it, but it's not going to happen. It's going to be residential, and this is a very good plot as well. We are going to finish those projects that are underway. Now I turn the floor over to Flávio to talk about the commercial part of the business. We are shifting part of the land bank to residential. Would you like to add anything, Flávio? I have very little to add. In December, we sold close to 25% of the inventory from EZ MARK. In EZ MARK and Air Brooklin, we have some customers, some possibilities at an average temperature, I would say, that would allow us to rent those units. This is what we see happening in the shorter term.
In terms of the reallocation of products from commercial to residential, this is what we have been doing. In Esther Towers, we're going to have an iconic project. We plan to take the project to a certain stage, in the case of Esther Towers, and wait until we find an anchor to build the first tower and then the other towers. We need time and patience to have the best possible result. I just want to add something. Esther Towers is an extraordinary building. There is nothing similar in Brazil. There might be two or three similar ones. What I wanted to add is that this is a real pearl, and we are going to sell it as such. After working so hard, investing so much, and waiting for so much, we are not going to sell it at any price.
We are going to wait. We might rent it out. If we have a good offer, we might sell it. We are not going to sell it at any price for no profit. We remind you that at EZ Inc., we have BRL 1 billion. When we look at the land bank, such as this one at Roque Petroni. It was bought very well given the potential that it has. It's going to be residential. The Moema land is going to be residential, and so is the one in Chácara Santo Antônio. This BRL 1 billion are EZ Inc. or EZTEC. We will do what we need to. Have I answered your question?
Yes. Yes, that has been answered. Thank you very much.
Our next question comes from Mr. Castrucci from Santander. Can you all hear me? Thanks for taking my question.
I actually have two points. The first one is about the revenue you reported in the quarter, which was a bit weaker. Was this because of Parque da Cidade? What can we expect in terms of revenue recognition going forward? What was the impact on the margin because of the difficulty in passing through the INCC rates to your sales price?
I'm going to take a question, and then I'll turn over to Silvio. There is some impact coming from the fact that we have not recognized as much revenue from Parque da Cidade. Undoubtedly, there is something coming from Parque da Cidade. When you look at our REF result, as unrecognized income, we have BRL 1,118 million. Parque da Cidade accounts for BRL 70 million of this BRL 1,118 million. It doesn't really hit the REF margin.
We have more revenue. We will have more revenue as we sell the remainder inventory which we are selling now. In terms of revenue, as I said before, there was nothing external there. What happened was that we had three projects that we are going to recognize in Q2, and then we've recognized the sales all at once in proportion of the POC. Parque Evelyn, which is going to come through equity pickup, and 40% has been sold for a good price. The project we launched in Q4. All of this will be extraordinary revenue in Q2. We also have the recognition of POC throughout the quarter, and we won't have the impact of blanket holidays and Carnival. Would you like to make any comments, Silvio?
There is no direct link between the INCC and the sales price.
It's not that we haven't been able to pass through the price, but the problem is that costs were rising higher than the INCC index. If we look back in our history, there is no drop in prices in INCC. The price has been increasing if we take into account the INCC index. The cost of construction in the last year increased faster than the INCC, and this is where we were hit. You also have to think that when we launch a project, for example, Park Avenue. It's like round numbers, okay, just for example, BRL 400 million in PSE. The cost of construction is BRL 120 million-BRL 130 million. When you sell, you adjust everything according to the INCC. You also adjust the PSE of BRL 400 million.
When the INCC goes up, it improves our margin. When INCC is flat, our margin is a bit more flattened. Just to stress that information, we have this graph, and you see that in the variation, you see that we were able to link the inventory to INCC, but the INCC was 0.8 or 0.9, which was the variation of price in our inventory. Have we answered your question?
Super clear, Emílio. Yes, that was very clear, Emílio.
Our next question comes from Mr. André Mazini from Citibank.
Good morning to all. My first question has to do with the partnership with Lindenberg. It's gaining traction. You now have many important projects, but in three years you have an option, a subscription option.
EZTEC, if this subscription option is exercised, you would be sharing the control of Lindenberg. What can we expect in three years in terms of this capitalization? The second one is about cancellations in Parque da Cidade. Whoever wants to cancel the contract can do that in May, is that correct? Those who don't cancel, do they prefer to sell the unit in the secondary market or to keep the unit? How are cancellations going in Parque da Cidade? Parque da Cidade, it's obvious you always have some cancellations, especially when you give back the full amount. You open a better door for the cancellation. Those who bought, they had a very good deal. There are going to be cancellations.
We are seeing cancellations at a moderate level because those who bought got a good deal. Regardless, people go through changes. They either don't want to use the flat or they want to invest the money somewhere else. We are giving these people an opportunity to receive a full refund. Yes, there will be cancellations at a moderate level, but it is a huge building, and this is going to have an impact on our balance sheet. However, when we receive the units back, we are going to sell them at a very good price. We sold one, I think, BRL 23,000-BRL 24,000. I don't know if everybody's aware of this sale, but we did. This shows that we might see a problem at first, but the cancellations should not be a problem in time. I forgot about the second question.
About Lindenberg and the ratification of the co-control. Lindenberg. Well, Suaza, the shareholders of Lindenberg and us, we have been friends forever, and we have also been good friends with Adolfo. We have been working together for nearly 15 years. This was very profitable for us and for them. We never had a relationship problem. When you have a deal like that, we didn't do it because the company was good only. The company was good and we know. We are used to dealing with them. We know them. I think it's going to be very successful for us and for them. We will be able to do the financial and strategic management, and they have a very strong brand. Lindenberg has a huge value.
It allows us to make investments or spend to build upper scale buildings and that pays off because their brand is really strong. I think three years, I'm not going to talk about the timeline, but we are moving and we are probably heading towards acquiring half of the control. Just to complement what Silvio said, our partnership was established and of course this can be changed, but our partnership was established for the option of control to happen between the beginning of 2026 or the beginning of 2028. We have between four and six years to exercise our option. I think Flávio could talk a little bit about Lindenberg. When we have a partnership. Silvio said it really well. It's not only a commercial partnership. It has to do with values, it has to do with trust.
We're very comfortable with this partnership. We have a history together with them, and we have a good future ahead of us. This should be a long-lasting partnership, and we all feel comfortable with this partnership. Something else that is important to me is that, as has been said in terms of PDC, I think that there might be less Distratos than Silvio thinks. This project, because of its bold architecture, and we have been very careful in the execution, it is going to be very difficult to be replicated. Those who are buying the units are buying a piece of jewelry. Its value is going to go up. It's really not easy to replicate something like that. I think Marcos wants to add something. With respect to PDC, I have been working closely with the sales team.
PDC is actually a piece of jewelry. It's a very special product. I think the price is going to go up always, especially after the delivery. There's nothing like it. Nothing like it. We will be able to ask for higher prices. As regards Lindenberg, also on behalf of the sales team, I think Lindenberg has a strong history in the market. When customers sit to talk to us, their parents or someone in their family had a Lindenberg, owned a Lindenberg. It's a brand that adds to EZTEC, and we have to use Lindenberg in the best possible way. It is a partner who is going to contribute a lot for us to sell more, especially in upscale market products. Have we answered your questions, André?
Yes, thank you very much. That was very clear.
Our next question comes from Pedro Reinold from Credit Suisse.
Good morning to all. Thank you very much for the presentation, for taking my question. I have two. The first one is about the deliveries this year, the potential for cash generation. What about the leverage of the company by year-end? The second question has to do with the credit portfolio of EZTEC. Last year, we saw that the financial result was supported by a higher level, but the rates at the banks became slightly more competitive. Now we see data on inflation, and inflation is lower. Are customers now migrating to your own financing facilities? Has this been an argument? Has this been a tool for converting sales? Thank you very much, Pedro. I will ask Silvio to talk about our direct financing portfolio. It's like a bridge loan. Our direct financing facility is quite easy.
Sometimes customers have to wait to get financing from the bank, so they take our financing facility. At the end of the day, for most of the sales today, customers prefer financing with banks. The low IGP index doesn't make me think that financing directly is not a good thing. This is financing for 10, 15 years, even more. The fact that IGP is low now doesn't discourage me, doesn't lead me to say that direct financing is not good for us. I think it will be beneficial for us, and customers know that. Customers think in the long term. Sometimes they go for our direct financing facility until they have their own funds, or they can get funding from the bank. Our portfolio is very dynamic.
BRL 500 million. You know, BRL 100 comes in, BRL 100 goes out, so there is a turnover there. Thank you, Silvio. Pedro, just to give you a bit about our expectations relative to leverage. As you can see in our balance sheet, a lot of the generation of debt has to do with financing production. At this moment in time, half of what we have is linked to set hours. Of everything that we are going to deliver in 2023, there is very little financing because of the period between 2020 and 2022, when we received a lot of advanced money from the customers. This is not what we expect going forward, especially with this interest rate. This is not what's going to happen for those projects that will be delivered in 2024, 2025.
We expect to consume more production financing and our net debt will continue to grow for all of these projects that we have to deliver. You can look at the end of the year and think that instead of BRL 600 million in borrowings, we may have BRL 1 billion. Which means that we should consider situations relating to net debt. What Silvio said in terms of cash generation is true. We might have a different situation by year-end. Nothing that would change the soundness of our balance sheet. I mean, we have BRL 4.5 billion in equity in our balance sheet. Have I answered your question? Yes, thank you very much. Have a nice day. Thank you, Pedro. We have our last question from Mr. Victor Tapia from UBS.
Good morning to all. I would like to approach two aspects.
The first is the commercial strategy in a scenario that puts pressure on your gross margin. As far as we can tell, you say that the commercial strategy is not to give discounts on your inventory. Sales would be driven by the good conditions offered in the direct sales price. What is the rationale? What is the trade-off? Why not have a more aggressive price policy to monetize the inventory faster during this challenging scenario? This is the first point. The second point may be a little bit of a far-fetched idea, but what about artificial intelligence? There has been a lot of talk about it. It may be early to understand the impact of AI in construction and development, where the impact may be lower than in other sectors. This is clear to me.
Are you looking into AI and what impacts you might see in terms of processes and management, not necessarily in the construction site. In terms also of finding land or developing projects and products and understanding demand. If you allow me, you know, if you indulge. I would like to talk about the price. We give discounts. Just to give you an idea, we do studies about the effect of the discounts on our balance sheet. If you imagine that we give no discount, you're wrong, because we do. We run simulations to see the effect of that on our balance sheet. If you give discounts without thinking about the finances, this might have a negative impact on balance sheet. What hurt our balance sheet was the cost runoff in our projects. There has to be a threshold between the discounts and liquidity.
There has to be a balance. We need liquidity. We also need to give discounts, but we have to balance one against the other so we have the best possible result in the long term. We are extremely aggressive in terms of discounts. When you look at the level of prices that we sell at, it is equal or lower than the competition. Our flats at a certain standard X, Y, or Z, they are priced at the same level as the competitors. More than our ability to finance, we use our ability to sell to turn over the inventory. We use our name, we use our marketing. This works better even than the financing, which helps. It's yet one more component within a chain of things that we do to have liquidity. As for artificial intelligence, I'll let somebody else answer.
We have worked a little bit with that in sales. In terms of talking to the customers, we have worked with Watson. But for sales, that's what I know. I don't know if Emílio or Flávio have other information about it. The microphone is off. Oh, now it's on. Thank you. Thank you, Silvio. Victor, just to add to what Silvio said, I'd like to remind you that when we do a campaign, a sales campaign, and when that sales campaign includes the offering of credit on our part, which is a differential. We offer rates that start at 7.99% + IPCA or another index. The rate offered by the banks would be less competitive than ours, and we are able to do that. This is extremely important from a commercial point of view. I would like to mention three topics relating to AI.
First of all, AI is in its infancy in our industry. The development of AI in customer services. Some retailers have difficulties, but they're very different from the difficulties we face in civil construction. Customers are buying from us a much, much bigger good. It's not a fridge that costs 2, 3, 4,000 BRL. It is a good that customers are going to pay in 30 years, so they need personalized services. The customer needs to talk about his concerns, about his difficulties. It's a very different business. We support Cubo, an initiative by Itaú. We have put money, and we have been working with Cubo. Flávio is in charge here for innovation at EZTEC. Would you like to add anything, Flávio? One of the older directors looking into innovation is me.
We're looking to employing innovation where we can add value and make things easier for the company. During the pandemic, this works really well. DocuSign, Agilitas, we employed those tools. Just to add to what Emílio said, we are part of Cubo Construliving. That is a hub. It was launched in the month of April. There are five companies participating in addition to Itaú BBA, which sponsors the hub. This should become bigger. It's always good to be there in that environment of innovation. It's good to be close to Itaú, who has been a very good partner to us. As Emílio said, we have been investing. We have our own platform for customer relationship, and we are investing more there. We have a CX project, a customer experience project, which should improve the experience of our customers.
EZTEC has something special about it. We relate to different types of clients. We are segmenting these customers. We have, low income, middle income, high income, so we are segmenting the customers. This is going to be automated, and then we will have data to continue to improve. We sell a lot to our former clients, and they also bring new customers, or they buy a second unit from us because of this long-term relationship that we have. We are not retailers. We build relationships with customers, and we have three years to build that relationship from the first contact to the delivery, and then we have the maintenance as well.
I'll turn the floor over to Marcos, because an important part that doesn't have to do with AI, but we also have accesses on the Internet to generate leads, and this is converted into sales. In terms of artificial intelligence, we have an internal program for our brokers in our internal sales system called CV. We interact with the brokers. We show which customers they should call, what happened. We have all the history. We have the profile of the customer. Customers normally buy the flats 90-120 days after the first contact. We work hard on that. IT and artificial intelligence will be able to add value relative to future customers. It's important for us to be close to Cubo. In terms of our brokers and the customers we already have a contact with, we have been working in that sense.
Thank you very much. That was very clear. Thank you, Vitor. I said that this would be the last question, but Mr. Jonathan raised his hand, so this is going to be the last question. You may go on, sir. Thank you very much, Silvio, Pedro. I just wanted to ask a question about the sales performance in the beginning of April and May. If there is an improvement. Can you give us a little bit more color about it? Thank you. Thank you, Mr. Jonathan, for your question. Would you like to take that, Silvio? Three holidays, three public holidays and Mother's Day. Given the scenario, we are doing well. Given these three public holidays plus Mother's Day. As Emilio said, we opened the sales suite at Lindenberg Ibirapuera. That is a magnet. Customers are driving clients to the sales suite.
We had these three public holidays, and then we have Mother's Day day after tomorrow. It's a good result, in excess of BRL 100 million in a month. If you look at the result itself, it doesn't look so good. We believe that we will be able to perform much better this quarter. It should be better than Q1 when we look at the quarter as a whole. These three public holidays, you know, they really hurt our sales. Three holidays with sun and then Mother's Day. Now that it's going to get a bit cooler, there aren't going to be so many holidays. We will have two other launches, Lindenberg and another launch in Tatuapé. I think we are going to perform better than Q1. God willing, it's going to be a lot better. Thank you, Silvio.
Have we answered your question, Jonathan? I would now like to turn the floor over to Silvio and to the other participants for their final remarks. The company has been working really hard, and we are going to get it right. We have to make some adjustments. The company is now huge. We have many initiatives on the way. Things that Emílio and Flávio brought in from an organizational point of view in terms of improving systems. These initiatives entail costs at first, but we are going to reap the fruit. It's a great company. I have to say that we have to get better results and we are going to get them. We are putting a lot of effort into it and we are very well-positioned to achieve it.
I would like to thank you all very much for attending, and I would like to say that the same discomfort that you feel is the discomfort that we feel. Again, we are all working together to change the results and to improve the results. The results fell short of our expectations. We are very well-positioned. The financial structure is comfortable, and we are going to continue to work hard. That's it. We have been working really hard. We are sure we are going to present better numbers in the near future and let's go back on track. Yes, I agree with my brothers. Let's work and we will achieve the results. With this, we finish this video conference. Thank you all so much for attending. Have a lovely weekend. Thank you very much.