Good morning. Thank you for standing by. Welcome to the conference call of Lavvi to announce the results of the second quarter of 2023. Today with us, we have Messrs. Ralph Horn, Sandra Attie, and Francisco de Paula. This conference call is being recorded, and all participants will be connected in listen-only mode during the conference call while the company makes its presentation. Then we are going to start a questions and answers session when further instructions will be provided. Should any of you need any assistance during this conference call, please request the help of an operator by pressing star zero. This conference call is also being simultaneously webcast on the internet. It may be accessed at the address ri.lavvi.com.br, where you can also find the respective slide deck. Slide selection should be controlled by you.
A replay of this conference call will be available right after it ends. As a reminder, webcast participants may ask questions through the website to Lavvi. These questions will be answered after the conference call ends by the investor relations department. Before continuing, we would like to say that statements made during this conference call relative to Lavvi's business prospects, operational and financial projections and goals, are beliefs and assumptions of the company's management, and are based on information currently available to Lavvi. Forward-looking statements are not guarantee of performance because they involve risks, uncertainties, and assumptions, as they refer to future events and therefore depend on circumstances that may or may not occur.
Investors and analysts should understand that general economic conditions, industry-specific conditions, and other operational factors may affect the future results of Lavvi and may lead to results that will be materially different from those expressed in such forward-looking statements. Now, I would like to turn it over to Mr. Ralph Horn, who is going to start the presentation. Please, Mr. Horn, you may start.
Good morning. I would like first to thank you all for being here. It is an honor to have you here with us on this conference call to talk about the results of the second quarter of Lavvi of 2023. Before moving to the slides, I will make overall comments. We are very happy with the first quarter of the company. Looking back, the scenario seemed very challenging at the end of last year for this year. For example, our peers launching.
Here at Lavvi, we had a cautious optimism. We were optimistic because of the quality of our landbank. But we were careful because interest rates were very high. We started the year with a high growth in launches, even compared to the year before. In Q2, we were even more successful with more launches, the highest PSV in history with the super exclusive Saffire launch. So very luxurious, great leisure area with two apartment towers of very high luxury. We have also a studio tower. Also, our VSO was excellent with excellent impact on the company's bottom line that led to excellent profit. We closed the quarter with a net cash of BRL 184 million, without dividends amounting to BRL 16 million approved. We will be paying in August. Along the year and for 2024.
I would also like to say the recent announcement for the industry, which may be very favorable. In medium -high, after recent studies, it is going to be more advantageous. So continuing. I was disconnected. I apologize. I was saying, after recent studies, we concluded that it will be better to approve the Roque Petroni in the city administration because of the new zoning plan. We are going to delay this plan a little bit so that it becomes more profitable in the future. In the economic sector, because of the program and also because we bought a specific plot of land that was very good, and we are studying how to convert it to Minha Casa, Minha Vida, and we could have almost one -third of our land bank in that sector. As a reminder, Novvo is the brand that we have just launched for the economic sector.
It is close to a subway station, and we will be launching it this year. Thank you very much to all our partners. I would like to give it over to Sandra.
Good morning, everyone. Starting with operational information. In May, we launched Saffire, a deluxe project in Indianópolis. It has been signed by the Lebanese designer, Elie Saab. It is an exclusive area, full leisure area, which will certainly charm our customers. It is almost BRL 900 million PSV in three towers, with different sizes, including also a separate studio tower with 97 units, has been 100% sold in less than one week. So far, we have exceeded 40% of the PSV sold, which you consider a success for this kind of product. Now, moving to the next slide. We have closed Q2 with BRL 887 million launched with Saffire. Also, we have sold 100%.
In Lavvi percentage, we have had a growth in 50% of launches and 19% in sales as in a quarter-over-quarter comparison. Our VSO is presenting some quarter-on-quarter volatility. But if we look at the last 12 months, it is at the level of 50%, one of the best VSO in the market, comparing to our peers and area of operation. Our focus is on speed, turning over our assets, optimizing our returns. On slide number seven, you can see our inventory. It grew little in the second quarter because of volumes launched. Two-thirds refer to projects that were launched less than one year ago, whose constructions haven't even started. Also, I would like to emphasize, we only have eight inventory units ready. A very small percentage. On average, we have about 70% of our projects fully sold in PSV, or 80% in units.
At the end of the year, we are going to deliver Wonder by Braskem, which has been sold in 93%. We have a lower rate for individuals negotiated with the bank. We have better affordability even though our portfolio has a 40% LTV for this project, facilitating credit for our customers and facilitating processes and funds. Now, moving to slide eight on land bank. We did not buy any new land in Q2. We have lowered BRL 887 million because of Saffire ending the quarter with BRL 3.1 billion land bank. We sold all the two plots of land that were off -balance, and we have already recorded one of them in the central region of São Paulo with a potential PSV of BRL 900 million. The second land with a potential PSV of BRL 2.1 billion, is going to be registered, and we will soon close our landbank of BRL 6.2 billion.
As Mr. Ralph Horn said, we are optimistic with the new rules of Minha Casa, Minha Vida. In total land bank, we are studying to include another BRL 2 billion in that segment. On slide number nine, this is the net growth avenue. in 2022, we began studying the low -income, Minha Casa, Minha Vida segment, apparently going against because costs were pressured and could not be transferred to sales prices because of the cap price of the program, and therefore compressing margins. This was an opportunity for us to buy the first plot of land at very good conditions. Now we have launched the brand Novvo, and we are optimistic getting closer and closer to our next launch. I'll give it back to Francisco to talk about the financial highlights.
Good morning, everyone. Thank you so much, Sandra.
On slide number 11, I'm going to summarize the highlights of the period. Here you can see the operational indicators as Sandra mentioned. Sandra talked about the operational highlights, so I'm going to talk about the financial highlights. We started it with net revenue of BRL 484 million, 58% higher year-on-year. The adjusted gross margin is 33.3% in the quarter, and 32.7% year to date. This is 1.4 percentage points higher year-on-year. Back then, last year, we had strong pressure on costs, but now it's better. Year to date numbers, the margin is close to 33%. Net income is BRL 69 million in the period, a significant net margin of 24%, thereby reaching BRL 155 million in the last 12 months, and a year -to date margin of 21.5%.
All of this have lifted our ROE to go up by 13%, recovering as compared to the end of last year. We keep the trend that it's going to go up. Backlog revenue has grown 27% year-on-year, reaching BRL 1.3 billion, with a gross margin of 34%. Cash generation, we're still generating cash in this period, and we reached BRL 17 million, BRL 27 million in year -to -date numbers. With this, we closed the quarter with a solid net cash position of BRL 184 million. Now, on the next slide, I'm going to briefly talk about what has not yet been mentioned before. In terms of the bottom line, we didn't have much of a change. This almost stability between quarters reflects the fact that our net capital position is a very robust position in a period with a Selic rate that didn't change much.
For the first six months, it's a result of the net investment income that we have had because of one-off events in the period that have been overcome in the second quarter already. Still on the bottom of this slide, you can see G&A going up at similar percentages for both comparisons, about 30%, getting to BRL 22 million in the first six months. This growth in expenses agrees with the company's project. With a growth in revenue at a level that is much higher than this, there is a lower G&A over net income ratio closing at 4.9%. Commercial expenses, we have reached BRL 36 million in year-to-date numbers or 8% of the net revenue. With all of this, the net income has more than doubled as compared to last year.
It is close to BRL 70 million in the quarter and close to BRL 100 million in the first six months of the year. On slide 14, backlog revenue, BRL 1.3 billion with adjusted margin of 34.4%. On slide 15, here you can see cash burn. In the columns that are highlighted, we have the adjusted cash that has been mentioned before, totaling BRL 17 million in the quarter or a positive performance in the beginning of the line. The bottom line, net debt over shareholders' equity, this indicates a net cash of 36.6% of our equity, which we find very healthy. Lastly, the last slide on my part. Now continuing the company's intention of paying earlier the dividends for the year. We had a board meeting held this week approving the dividends for this quarter.
They are scheduled to be paid, as you see on the slide, and it will be next Friday, August 25th. On the last bullet, you can see that since mid-2021, there is almost BRL 420 million that was paid to our shareholders, which is equivalent to nearly BRL 2.1 per share. Thank you very much.
Thank you. We are now going to start our questions and answer session. If you have a question to ask, please press star one on your touch phone. If your question is answered, please press star two to take your question from the list. The questions will be answered in the order we receive them. We kindly request you to pick up your headsets when asking your questions in order to assure optimal audio quality. Our first question comes from Ruan Argenton from XP Investimentos.
Thank you all so much for the question and congratulations on the results. There are two things that I would like to focus on. Number one, how do you see your positioning in low income? The plots of lands, they have good potential. How do you intend to pay it a long time? Can you tell us about the share of low income in the company margin? The other thing is about the evolution of revenue. This quarter, the revenue was very positive because of the Saffire launch. But how do you see this along the year? How do you see the prospects of recording the revenue along this half year?
Good morning, Ruan. How are you? Ruan, first about Minha Casa, Minha Vida. Of course, obviously, with the new market rules, we need to be very cautious.
We had bought a plot of land that was very well bought, very easily feasible, hopefully. But it is doing very well because we bought it when Minha Casa, Minha Vida was not fashionable. We are buying some other plots of land at the rate of 150,000 per hectare, and we bought a 40,000 square meters. That is good for low income revenue that can be used in Minha Casa, Minha Vida. We are analyzing the profitability of this project for the company. We are going to make a decision in the next few months which way we are going to go. For now, we are developing the two projects to fine-tune them. We do not know in details where one can be better than the other.
We also have the intention of continuing Minha Casa, Minha Vida, not too aggressively, but very carefully and growing in the same way that we grew in mid and high levels. We want to grow a lot, but carefully.
Ruan, good afternoon. This is Francisco answering your question. Thank you for the question. I will talk about revenue for the next six months and to close the year. Well, in fact, the first half of the year was very strong. That Q3 that is going on, we are not going to have any launches. We will have launches again in Q4. This is very robust to close the year.
As Ralph said in the beginning, the company decided, the controllers decided that a very good plot of land that we have a 40% interest of Lavvi, we had scheduled it to launch this year, as we had scheduled it earlier this year for the whole year. Because of the scenario, and we think with the new master plan of the city, we can make it even more profitable with the new conditions, we delayed this project for next year. Anyhow, we have product for next year, so the pipeline remains robust both for this year and next year without any launches this quarter, but more for the Q4. Ruan , about the competition in our industry. Yes, we think that there will be competition, but as a mid and high, the best location will always be a winner. There is no market without competition. It is impossible.
We need to be ready to fight and to do our best. We have been going to see market leaders, analyzing all the projects, the floor plans. We are talking with many salespeople who have the feeling. We are going to fight to do our best. We are very much focused on that.
Great. Thank you so much for your answer. Have a good day.
Our next question comes from André Dib from Itaú BBA.
Good morning, Ralph, Sandra, Francisco. Thank you very much for the presentation. Thank you for taking my question. My first question is about the price dynamics. Would you talk about that? Do you see a price mismatch between launches, inventory, under construction in the market? If you do not think, do you see any pressure?
Do you see any opportunity or any chance for improvement in terms of projects that are in the market, projects that were launched in 2021? This is the first question. It is about price dynamics. The second question is a follow-up on the first question that was asked about low income. What is the margin that you are expecting for this new segment? These are the two questions.
Hello, André. How are you? We are seeing a very weak market. It was weak until last month. Last month, there has been a reaction. We study all projects in the market and the speed of sales. We do think that prices are going to get better. The first reaction of consumers, everyone will try and recover to drive up prices. I am seeing prices going up a little bit.
It's not too much because it's not going to improve overnight. There will not be a boom. I'm not seeing this. For Minha Casa, Minha Vida, we're expecting margins of about 35% growth over the bottom line. We need to be able to buy the right plot of land for a good project, and everything is going to work. There's a very strong demand for Minha Casa, Minha Vida. If they don't like it, they won't buy it. We need to be very careful and pay close attention to this sector too.
Thank you very much. Have a good day.
Our next question comes from Elvis Credendio from BTG.
Good morning, everyone. My first question is about cash generation, that the company has generated cash in the quarter.
What is the cash generation that you expect from now on, especially now that you are planning to grow in the low-income segment? A follow-up regarding low income. How do you intend to operate, as compared to mid and high income in terms of number of projects, area? Will sales be separate because the operations are completely different?
Hi, Elvis. Good morning. Thank you for the question. This is Sandra answering your question about cash generation. About cash generation, we are in line with what we have been saying, that in 2023 and 2024, we will burn cash at about BRL 350 million, and starting in 2025, we will generate cash again. We burn cash in 2023, 2024, and after 2025, we are going to generate cash. This year so far, we have started generating cash, but we still need to pay land that we bought.
Most of the cash burn, almost half of it, slightly more than half, regards investments in land.
Hello. As to Minha Casa, Minha Vida that you asked. Number one, we see this as two completely separate companies. This is the main difference, obviously. Is engineering. Our engineering is used to high standard that looks luxury. It's completely different. Now we have a different kind of engineering, cost. Engineering decides the projects. It's not sales. We have a separate land development engineering, separate teams. What we can use is the back office. Legal, financial, and then we can share. In terms of engineering, we have a team that we have hired especially for that, and we insist very much on prices, especially with Cyrela people, that we compare to know whether we are doing well in terms of engineering costs.
It's completely separate and we are very excited with this new segment. Thank you for the question.
Excellent. Thank you.
Mr. Pedro Lobato from Bradesco BBI wants to ask a question.
Good morning, everyone. Thank you for taking my question. First of all, could you give us some more color in terms of the new São Paulo's master plan? You mentioned the avenue in São Paulo. We can have earlier launches considering what's changed. From what you know already, do you think that you'll be able to have a higher PSV, any scale gains? You also talked about low income, and so I would like to see you in the mid and high income, whether there has been any impact in the changes of the new master plan. The second question is more related to cost.
The environment is much more favorable in terms of ore and steel. Do you see that? Will this have any impact on the front end?
First, about the changes in the master plan. We see that the new master plan is very good. Many problems that there were in the master plan have been solved. The issue of only making small units, the garage, the parking spots. There are some things that make difference that we decided to change. As Sandra said before, is our plot of land in Roque Petroni. We decided to delay it in one quarter in terms of the VGV. There was another plot of land that we will be launching, that we bought in the district of Paraíso, with 9,000 square meters that won 10% PSV. These are the two main projects.
The other ones, the difference is when we buy. About competition, everyone started seeing the plots of land in a different way because many things that in the past were not feasible now have become feasible. We don't see that it's as crazy as it used to be in the past. We are not seeing that. People are not yet so eager. The year is better, but there's no boom that people are buying like crazy. We have a stable environment in terms of the purchase of land.
Pedro, thank you for your question. As to construction and raw materials on the whole, the scenario is much more accommodated as compared to last year. Last year at the same time, April, May, it was the worst time. There was the war in Ukraine. There was a lot of price pressure.
Last year, the growth was 1%, 2% per month. Our costs were growing in excess of that, and this has helped us in our year-to-year comparisons. Overall, on the whole, both in here and looking at the industry, we think that in parts of inputs, this is much more settled. Calmer too.
Our next question comes from Rafael Rehder from Banco Safra.
Good morning, everyone. I have one question, and if I could have a follow-up. You mentioned making transfers. Do you have good rates? I would like to understand better this dynamics. Volumes transferred, is it still going up? But net withdrawals from savings is close to being over-contracted. How are you talking to banks? What about your transfer projects? Is credit more limited? This is what I would like to understand.
Hi, Rafael. Thank you very much for your question.
Yes, banks are more restrictive. As the LTV is very favorable, we don't really feel the impact with bank refusals transferring 40%, even with higher interest rates. We've been able to transfer everything. What we delivered in the beginning of the year, transfers were okay. We have just started these transfers now at lower rates. This only adds values. In terms of being able to transfer to banks and being affordable to customers, this is easier because we already had a healthy portfolio. It makes sense. Did I answer everything?
No, that fully answers my question. It really makes sense. A lower volume and then the transfers are smaller. Because with rates of 11.5%, with this LTV, with the deliveries at the beginning of the year, this was easier. Thank you all so much.
Thank you.
Our next question comes from the webcast by Mr. Saulo Santana.
Good morning. Congratulations on your results. With possible taxing on the payout of dividends, do you think the company would increase the payout of dividends this year, considering that you have robust cash?
Good morning, Saulo. Thank you for your question. This is Francisco answering your question. Well, as to dividends, we have been paying every quarter the minimum 25% as required, and we will have the next payout on August 25, next Friday. As to the tax reform, we are monitoring, our partners, internal and external lawyers are watching it. If dividends start to be taxed, we are going to increase the payout of dividends significantly. In any way, if the scenario is normal, in addition to paying the required 25%, because every quarter we have a meeting to approve the financials of the quarter. We present the cash flow, just not a snapshot of the quarter.
We have a forward-looking cash and cash to fund construction and everything. If or when we have any surplus, we may consider with or without tax reform. But in the basic scenario that we see the market, the expectation is to pay 25% of the minimum mandatory dividend. We are not planning to increase it immediately, but we always analyze it, whether we could pay out a more sizable amount. I hope I have answered your question.
Ladies and gentlemen, please stand by while we collect questions. Excuse me. We will now end our questions and answer session. I would like to turn the conference over to Mr. Ralph Horn for his closing remarks. Mr. Horn, please.
I would like to thank everyone for your presence in our conference call. We are optimistic. The market has been weak for two years. We think there will be a recovery.
We are not too optimistic. We are not going to see a boom, but it will be better. We are also optimistic with the new changes in plan. We are in high and low, but we are also optimistic with the changes in the low-income segment. We want to grow more and more, always carefully, but as much as possible as our caution allows us to do. Thank you very much and have a good day.
Lavvi's conference call has now ended. We thank you very much for your participation, and we wish you a good day. Thank you.