Good morning, everyone. Welcome to the Lavvi's conference call to announce the results of the second quarter of 2024. The presentation and comments about the results will be presented by Mr. Ralph Horn, CEO, Sandra Attié , CFO, and Francisco de Paula, IR Manager. This call will be presented in Portuguese with simultaneous translation into English. To change the audio, click on the lower part of the screen and choose your language. This conference call is being recorded and will be available on the investor relations website of the company at www.lavvi.com.br, just as the slide deck that you are seeing here. All participants will be connected in listen-only mode during the company's presentation. Then we are going to start a questions and answers session when further instructions will be provided.
We would like now to reinforce that forward-looking statements are based on beliefs and assumptions of Lavvi's management and are based on information currently available to the company. These statements involve risks, uncertainties, and assumptions because they relate to future events and therefore depend on circumstances that may or may not occur. Investors, analysts, and journalists should take into account that events related to the macroeconomic scenario, to the segment, and other factors may lead the results to be materially different from those expressed in such forward-looking statements. Now, we are going to start the presentation, turning the conference over to Mr. Ralph Horn. Please, Mr. Horn, you may start.
Good morning, and thank you so much for your presence. It is an honor to have you with us at this webcast to talk about Lavvi's results for the second quarter of 2024. Once again, we are very pleased with the company's performance this quarter, which led us to the best half-year ever. In the six months, we made almost the same volume as the whole year of 2023. In addition, we had record net revenue both on the quarter and the half year. Considering recent launches and inventory sales, our SOS in the last 12 months was 53%, a consistently strong level.
We had some one-off effects that affected our gross margin in the quarter, which will be explained during the presentation, and we expect to recover in the second half. Net margin remained good, closing the quarter at 22% and the semester at 23%. In addition, we continue to pay out dividends to shareholders every quarter. We also generated BRL 67 in the quarter, offsetting the cash burn at the beginning of the year.
Finally, we are excited for our next launch, which is going to take place this weekend in São Paulo. We have made a new international partnership for the first residential project in the world with the Portuguese brand Boca do Lobo. Our project looks beautiful. Thank all shareholders and partners. Now I give the floor to Sandra.
Thank you, Ralph. Good morning, everyone, and thank you so much for your attendance. As we reported before, this has been the best quarter ever in terms of launches and sales. We launched Palace fifth phase with almost BRL 300 million with PSV. These sales were made mostly according to the short table with an average of a 12% fee. The project was very well accepted, and this is the last chance to live in this complex because other phases are almost sold out. We are still selling.
Today, we have 53% of our PSV. On slide number six, you can see Alive. In addition to booking the sales of the building this quarter, we have advanced the opening of the last building, closing at BRL 1.2 billion of launched PSV in the quarter. So far, we have sold 60% of this PSV with sports services, partnerships with schools, pet space, salon, all of this to facilitate the lives of our customers. Still this quarter, under the management of Cyrela, we have opened the last building at Eden with BRL 360 million VGV where we have a 47% share at equivalence, and we closed the quarter with 44% sold in that building. Lastly, on slide number eight, you can see the fourth building of the new Barra Funda. This building included, we closed the quarter with 81% of PSV sold.
Last building will be reported in Q3, totaling the BRL 300 million PSV. On slide number nine, you can see the trajectory of launches and sales. We have had a 45% growth in launches and 116% growth in sales quarter-on-quarter with a consistently high SOS in the last 12 months, 53%, as you can see on slide number 10. In the quarter, we launched and sold as much as the whole year of 2023 in terms of Lavvi's percentage. Now, moving to slide number 11, you can see our inventory. We continue to sell well also in our Inventory based on December 31. Even though we launched BRL 1.4 billion in our share, our inventory grew only BRL 200 million, closing at BRL 1.7 billion. 44% of this inventory is related to recent launches, or two-thirds to launches since 2023.
Despite the delivery of One in the beginning of the year, we have only seven inventory units ready at the end of the quarter. This number has gone down to four. On the next slide, you can see our land bank with a potential PSV and 4.1 as our share. Only 6% is meant for the Minha Casa, Minha Vida segment, My Home My Life. We continue to negotiate very good land, both for the high income and also low income segments. Now I would like to give the floor back to Francisco to talk about our financial performance.
Thank you, Sandra. Good morning, everyone. I'll start on slide 14, and I'll talk about the great operating results already mentioned by Ralph and Sandra, reflected in our accounting numbers. The first thing before I start going over the numbers, according to the POC that makes the revenue be booked as construction goes on, the fast pace in sales may take a while before it's fully reflected in our financials. Net revenue this quarter rose 4%. Even though this might seem very small, it's related to a very strong comparison basis when we had launched Saffire, our high-income project.
We had an accounting record in Lavvi's revenue. We grew 31% in the quarter. The gross margin is 31.8% and 34.4% in a half year, 1.7 percentage points above the same period in the previous year. Net income reached BRL 66 million in a quarter and BRL 136 million in a half, with a net margin of 23.4%. As a result, the ROE is 21%. Now moving to the last three bullets on this page.
We see that the backlog revenue grew. We generated BRL 67 million cash, and we closed the quarter with a net cash of BRL 125 million , a very healthy financial position. Moving on to slide 15, we see the revenue growing 31% in the semester led to BRL 580 million in a quarter. In the same period, six months, the gross profit grew even more strongly than the revenue, characterizing the margin gain year to date, with the margin reaching 34.4%. It is also important to note the gross margin for the quarter, whose retraction to 31.8% is a one-off effect and should not represent the new level for the company. It was impacted by very specific factors in the period and are detailed in our earnings release.
If we can add all the factors mentioned there, we have 3 percentage points of impact where the adjusted gross margin for this quarter is close to 35%, in line with our usual margin level of the last 12 months. Among the offenders, for example, I might mention the booking of the building of our Alive project, considering that we sold all the building to a single buyer. The financial result is in line with the company's expectations, and reflect the issuance of our corporate CRI at the gross amount of approximately BRL 220 million . General expenses and also commercial expenses grew each close to 25% compared to Q2 2023, both reflecting a greater volume of launches and also its corporate structure that we have currently.
Lastly, as a result of all these charts, we have recorded a net income of BRL 136 million year to date with a great net margin of 23.4%. On the next line, number 16, you can see the aggregate numbers of the last 12 months. In the last column on the right-hand side, I highlight both the profit and net margin. Net margin was 26% in the last 12 months, and total profit in the 12-month snapshot amounting to BRL 270 million , thus placing Lavvi with this net margin as one of the most profitable in our industry. Moving on to slide 17. ROE is virtually flat considering the beginning of the year and well above the same quarter last year, when it was 13%, reflecting a gain of 8 percentage points. If we look at the 12 months, a quite significant improvement.
On slide 18, once again, you can see the accounting principle of POC that will take a while before it reflects the sales in our accounting statements. On the last column, we have the backlog revenue as a result of sales that we have already done that will become part of our financials in future months. This 35% margin means that BRL 156 million of gross income. On slide 19, you can see the increase of the long-term debt reflecting recent inflows. I would also like to highlight the increase in our securities, whose profitability is around 100% of the CDI. We closed the period with a net cash of BRL 125 million, with a net debt equity ratio of 7.9, reflecting the net cash position of the company, that is very healthy.
In conclusion, on our last slide, just to say that the board has approved just this week the amount of BRL 15.7 million in dividends to be paid out. According to schedule on the screen, we are going to pay out these dividends in August, and as it has been our usual practice of paying out dividends every quarter. In conclusion, the last bullet, we have almost BRL 445 million paid out to our shareholders since 2021. Now I end, and we are open for questions. Thank you so much.
We are going to start the questions and answer session. If I want to ask a question, please press on the Q&A icon on the lower part of your screen and type your question. If you want to ask a question over the microphone, click on raise hand button. Please wait while we collect the questions. We have Gustavo Cambauva from BTG to ask the first question. Mr. Cambauva, please.
Hello. Good morning, everyone. I have two questions to ask. The first one, could you give us more details about the gross margin? You've sent some details in your press release, and the gross margin fell in the quarter. How do you see the evolution of the gross margin looking into the future? There is a recovery in Q3, but when you mention the discount to advance a flow and more payments, do you think this is going to continue? Also thinking as the company's strategy, considering that you have a very low inventory. When you look the trade-off between margin and advances, is it worthwhile giving up the margin?
My second question is, could you comment on your prospects for two launches of the Roque Petroni, and the Beneficência Portuguesa project? I would like to hear both timing and your expectations in terms of sales. How are you working on that? Could you give us more details about the status of these two projects? Thank you so much, and have a good day.
Hi Gustavo, Francisco . We are going to start with the margin. There have been many factors, and after the second quarter, we started recovering it. Quarter-on-quarter, we see that margins can be very volatile. In the second quarter, slightly weaker than the margin. When we look at the last 12-month snapshot, looking backwards, the adjusted margin is around 35%, and this might be a level that will be much more reasonable for us to try and forecast.
This depends very much on product mix, among other factors, but in the second quarter, this is one-off downwards, and this is not the new normal. As to Palace and the launches of the quarter, we said that this is one of the factors that offended the margin in the period. Actually, we work or try to work on advances. We really like doing that, but this is in our vision. It depends very much on the product and customer. Even though we like working with short cycles, it's worthwhile, we advance money. The standard table is just standard, so it's customer on customer, depending on the customer profile, the region.
Then I can complement. Hi, Cambauva. How are you? In Palace, we sold basically to Chinese, and all of them with a high profile. They make a down payment that is high, and they pay the rest afterwards. Roque Petroni, we already have arrived. We are going to open it shortly. We have a new brand, Boca do Lobo. It looks very nice, very unique. Different brokers or realtors are really excited. We will hear more about that on the next few days. BP is a launch with Cyrela. We have 60%. It might take the whole semester, many units.
There is a studio or building with 80/60, with more than 700 units. Another residential building with 32 floors, more or less. It is a huge launch in that area. There have been no launches for a very long time. We are really excited and hopeful that the inventory in the area, because we have very nice leisure. The product looks very good, too. We hope that we will get the prices right. It is slightly more expensive, but we might have made a mistake, but we hope that we get it right.
Just a follow-up about the Roque Petroni project. How do you see that region? Because there is slightly more competition, there are some other projects. Any concern? What is the strategy? Is your product very different from what you have? How are you working on that?
Well, in the beginning, I was kind of fearful, but we opened our booth there in the beginning of June, and we had a price that was slightly below the competition, because we are afraid, because there is a lot of competition. But the feedback from real estate agents is good. We say that our project is much better than the competition in terms of leisure. Maybe Eden is our level, but Eden is more expensive. This is not the margin that we would like to have. There is a building that was sold to Brookfield, and we want to sell 30%, 40% in the first month, and it is good. The agents there are really excited.
Thank you so much, and have a good day.
Our next question comes from Mariangela de Castro from Itaú BBA. Ms. Castro, you may ask your question, please.
Good morning, everyone. Thank you for the presentation, for taking my question. How do you see costs? You said that it is 74 percentage points above INCC. Is it because of materials, labor? And what are you expecting for the next quarters? The inflation for materials has a slight high as compared to what we were seeing in the last month. And the other is for My Home , My Life . How do you see the supply of land in the city? You are going to complete the new Barra Funda. I think that there is another launch that you have already bought the land. But how do you see next year? Should we expect any novelty? How do you see the offer of land to continue with your operations?
Hi, Mariangela. Thank you for your question. I am going to answer about cost, and then Ralph is going to talk about My Home , My Life. About cost, 0.74 is not an increase. It is a lag between the INCC that corrects our portfolio and the INCC that corrects the cost of our construction. So the portfolio is corrected by INCC - 2, so two months before. And the construction is INCC - 1 for construction. So in the quarter, constructions increase 0.74 more than the revenue.
Next quarter, the revenue is going to get the slightly higher INCC that already corrected the construction, and then the construction is going to be displaced for the next period, and it's not going to reflect a higher INCC. That is why we say this is a one-off and we recover it in the next quarters. This 0.74 is not a higher cost for our construction.
It is because of this construction inflation rate that we are using. We have an, on average, half percent that we have been carrying over since the past, in 2021 when the Ukraine war started. We are recovering. Today it is half percent and it is stable. The costs are stable, and sometimes there is a little bit of volatility in the prices. It went down and then up. We are not worrying about these cost increases. Now I will give it the floor to Ralph.
Hi. As to My Home , My life, this year it evolved a lot. We were excited with the Barra Funda launch. We have another launch in São Paulo, in the region of Santo Amaro, and we are really excited. We are seeing some other plots of land, but we always want to do good business. We have a lot concern. This is not our core business. We want to be in the party and enjoy it. Now that the government has released for investors, I think that it is going to become increasingly more interesting. On the other hand, if you look at São Paulo, HIS, it is high. We want to have more people in the mid-high. Our passion is the middle and high-income customers.
We want to deliver the first construction at the end of next year, in December 2025. So far so good, but I think that we want to have more confidence to be more aggressive. Today it is impossible to outsource construction. Everyone is operating. No one wants to outsource. Everyone wants to have an enterprise. We need to grow slowly so that we do not make any mistakes.
Okay, thank you so much. This is very clear. Should we expect any launches before the delivery of the construction? Or do you want to see how these two first products behave, and then we think about new launches?
We are supposed to launch one now in December. In 2025, we will have delivered. Today, we have an idea. Today, we have already 60/30 of the construction done. We have an idea, but of course, we have not delivered it yet. We are slightly more confident than last year. We are going to make the launch in the second half of the year, so nine months after the launch, and then we will know even better. We are going to become increasingly more confident. We are working. Then we can get it right. We are only going to buy the land. We are going to wait for approval before we buy the land.
Thank you so much for your answer.
Our next question comes from Luma Paias from UBS. Ms. Paias, please.
Good morning. My first question is about Novvo. Could you tell us how you see cost? Many companies operating in a low-income segment, the cost of labor is the main adverse effect. What do you see in the future? My second question is about launches. What should we expect in terms of volume for the rest of the year, and also in terms of strategy for mid and high income? The macroeconomic scenario is slightly more challenging than we initially expected.
Hi, Luma. This is Ralph. About costs, in My Home , My Life we have just one project. We are not seeing any major stresses. I can't tell you much. The construction is a little bit late, but we are going to make up for that. It was one month late, now it's just one month. They say that they are going to make up for that. Other than that, we are not seeing any stresses in construction. About the strategy for launches in Minha Casa, Minha Vida are mid and high. Second half, we are going to have BP, as we mentioned, Tucumã, over BRL 1.2 billion, and Roque Petroni, BRL 350 million.
We have another high standard to be approved, but the rules have changed. The city changed its rules, and that's why the approval is late. We have Klabin to launch, and we have another big launch in Paraíso, Rua Cubatão. Next year, maybe this quarter, we are going to launch one in a partnership with Cyrela in Perdizes. Next year, we are working to launch the Repique. We have BRL 2.5 billion, 4,000 sq m land. We're focused on approval on the license. We have other plots of land that we have a verbal agreement, and it will take until November or December to close the contracts, and we cannot disclose which ones they are yet.
Thank you so much.
Our next question comes from Pedro Lobato from Bradesco. Please, Mr. Lobato.
Good morning, everyone. Thank you for taking my question. My question is about capital structure. There was cash generation. How do you see the evolution of leverage, considering that you have more launches in the year? On top of that, as to dividends, you have the policy of paying the minimum every quarter. Do you see any space for extraordinary payout of dividends? How much would that be, if that's the case?
Hi, Pedro. Thank you for your questions. We had better operations in this quarter generating cash, and which made us look to the purchase of land and to include some plots of land that are being negotiated. This year, next year, we see a burn of about BRL 150 million. There is cashes generated. We think about investments for the company to continue to grow. About dividends. As we always publish, we pay every quarter the minimum, and now in the second half of the year, we'll pay attention to the next two launches, and depending on how they perform, we might consider paying extraordinary dividends before the end of the year.
Thank you, Sandra. As to the land, are you seeing any changes in requirements in terms of having to invest more cash in plots of land, or do you buy in cash?
It's a case on case. We are going to have cash, but in installments. We want to have large plots of land where there's enough space for leisure when they do not accept the swap. We have a negotiation that is in installments, and it's a case on case. It depends on what they will accept, whether they accept the exchange or if they want cash.
Thank you so much.
Our next question comes from Rafael Rehder from Safra.
I have two questions. Following up on what Ralph said, now that the text is regular, do you see projects evolving at a faster pace? Second is the tax reform in Brazil. I know that we do not know the final outcome. Things are still going to change. How do you see with regards to construction materials and labor, what do you expect to be the final impact?
Well, about the city, I think that, yes, it has started to evolve, but there is still an issue that even though the law has been published, the city has not yet defined the commission. We do not know how this is going to work, and many plots of land in São Paulo has to think of a soft ground. The law is favorable, that if you do not work on the underground, 25% of the plots of land in São Paulo are related to the soft ground. So if we need to approve it in the short term, we need to wait. We think that in the next 90 days, there will be a commission, and we are going to understand what they want. If we do not have any soft ground, well, then it is different.
Well, Rafael, your question is very difficult to answer about the tax reform. The market was asking a discount on the 60% rate. It is 40. So we still have an impact. There will be an impact in the rates that we are going to pay. I think another point that we need to clarify, it starts in 2027, but the inventory that I have in 2027, will it pay the new tax rate?
This is going to apply to the whole project. So today, we assess projects counting as a hatch, and if you change the rate in the middle of the way, there will be an impact. But we still do not have full visibility on this impact, but it looks like we are going to have higher rates. If it goes up by 4%, prices go up by 4%. So it is straight. We need to find more in the Senate for that.
Okay, Ralph and Sandra, very clear. Thank you so much.
Our next question comes from Ruan Argenton from XP.
Thank you for your question. Two things I would like to touch on. Number one, Ralph talked about Roque Petroni, where sales structured for funds. Do you expect the same impact, the same negotiations, same thing that happened with Alive? Are there any negotiations like that in the future? And the second question is about backlog revenue. I would like to understand, when do you expect the POC to become stronger going through and will be reflected in your financial statements?
Well, Brookfield as an impact, we lose more or less one point in the margin. We have no other negotiations right now that are similar. So on one side, we think this is good, but on the other hand, the cash flow is not so good because there is a collateral in 25% of the price of the building. But for cash flow, it is not so good. So for the time being, we are not doing anything. We are going to deliver everything that we have promised. And this is it. For the time, we do not have anything else.
Thank you for the question. This is Francisco. About the POC revenue, it is quite significant in terms of bottom line, and this is going to be reflected in our bottom line a long time. The standard and the pattern in our industry is accounting. Lavvi is undergoing strong growth, strong growth of sales, strong growth of everything. When we have a very fast matching, very fast launches, and the sales go up very fast, it takes a while for accounting to reflect all of that.
This is about the current launches. Now, about the old launches, for example, Villa Versace. This is a project that is more advanced in the second half. For that project, we have a lot of POC. So it is project on project. Also in the future, when we deliver, and the other ones that have been launched this year. In summary, in the second half of the year, Villa Versace revenue will increase and accelerate the level of POC or the percentage of completion.
As a reminder, if you want to ask a question, please click on the Q&A icon that is on the lower menu of your screen. Or if you want to ask a question on the microphone, please click on Raise Hand button. Please wait while we collect the questions. Our questions and answers has now ended. We would like to give the floor to Mr. Ralph Horn for his closing remarks.
I would like to thank everybody for your conference call. We are working very hard and focused on the company to make it grow. We are expecting two good launches to end the year at a great stage.
Our conference call has now ended. Thank you so much for your participation, and have a good day.