Good morning, and thank you for holding. Welcome to Melnick's earnings call concerning the results of the first quarter of 2024. I would like to point out that for those who need simultaneous translation, the tool is available on the platform. To use it, you have to click on the button, Interpretation, the globe icon at the bottom of the screen, and choose your preferred language, Portuguese or English. For those who will listen to this teleconference in English, there is an option available to mute the original audio in Portuguese by clicking on the Mute Original Audio button. We would like to inform you that this event is being recorded, will be made available on the company's website, ri.melnick.com.br, where the complete material concerning this earnings call will be available.
It is also possible to download this presentation by way of the chat icon in both Portuguese and in English. During the company's presentation, all participants will have their microphones on mute. Following that, we will begin the questions and answer session. To ask questions, click on the icon Raise Hand or Q and A at the bottom of your screen and type in your question to join the queue. When you are called, a request to activate your microphone will show on the screen, and then you must activate your microphone to ask your question. We would like to clarify that any statements that might be made during this teleconference regarding Melnick's business prospects, as well as its operating and financial projections and goals, are based on the beliefs and assumptions held by the company's management and on information currently available.
Forward-looking considerations are not a guarantee of performance and involve risk, uncertainties, and assumptions since they refer to future events and therefore depend on circumstances that may or may not happen. Investors, here with us today, the chief executives of the company, Mr. Leandro Melnick, CEO, Mr. Juliano Melnick, CFO, and Investor Relations Director, Mr. Joelson Boeira, Administrative and Investor Relations Director. I will now give the floor to Mr. Leandro Melnick.
Good morning. Unfortunately, we will begin this earnings call in a different way, not talking about figures, rather about the impact of the city of Porto Alegre in Rio Grande do Sul due to the flooding that happened. The picture you can see on the screen will give you the dimension of the size of how serious the impact was.
This has been reflecting seriously on people's lives, on the infrastructure, public infrastructure, roads, airports, pumping stations, and the private infrastructure as well, affecting all the Gaúchos in their homes, factories and stores, society at large. In the next slide. Another phenomenon that has been happening, which is the union, the solidarity union of all society in Rio Grande do Sul. It's amazing how people has been coming together in these emergency efforts in order to act under this serious crisis. This kind of attitude fills us with hope that the emergency efforts will be able to solve the most of the problems that is happening, that is affecting the population, as well as we will be able to, in a second moment, to rebuild the states and come out of this even stronger.
Melnick, fortunately, had very little direct impact due to the flooding, both in our construction sites, as in our sales stands and our administrative headquarters. At the moment the flood started taking on the proportion we can see, we, as individuals who are part of the society and of the company, we joined the solidarity efforts. Me, personally. I personally helped with rescuing people in a metropolitan region of Porto Alegre, and several of our collaborators also helped, and we tried to see the impact of this on our team. We had 48 people of our over 700 collaborators that had some kind of direct impact, and we helped them. Even with the small number of people that affected us direct, we decided not to go back to operating in the 10 days following the flood.
We stopped all our construction sites, our administrative office, our sales stands, so we could concentrate on the emergency efforts. We acted in some of the points where we deemed they were necessary. First, rescuing people in the shelters. We have been providing support to large shelters in Porto Alegre. We helped with the logistics of distributing medicine, water, food from donations using our own infrastructure, as well as helping with money so other structures, other people could also help with the logistics. Moving on to the next slide, I will show you in more detail the impacts and the goals of the company. On our construction sites, we have 18 active construction sites, and only three of them suffered some direct impact, and none of them significant.
In one of them, in the Canoas region that was affected, two phases that have been delivered and one that is at its final stage, getting close to the moment of delivery. So some repairs will have to be made. And two other construction sites that are in their structure phase had their underground levels affected. Our headquarters and all our sales stands were not fortunately affected. Concerning clients, out of the already delivered apartments, we have 10,000 active clients. Only 68 customers were directly affected because our projects are usually in the highest parts of the city, and this flood happened because of the large amount of rain, the storms. This usually affects our clients. Regarding our employees, we mapped the situation the first day. So our human resources team mapped the situation, and we contacted and helped 48 employees that were affected.
The future impacts are still very difficult to assess, but as of now, we are already in better condition to understand what happened because this week, yesterday on Monday, we started activities on construction sites again, the ones that were not affected. Their water and power supply has already been restored. So internet and every other service, it's already regular. 40% were already effective on the first day. All our society wants to go back to our productive life, our normal lives. We want to resume that so we can mitigate the impacts, which were large. We have contacted all our production chain, and we received support and objective efforts in order to solve the bottlenecks of supply distribution.
For example, the steel production had one of the factories, one of the plants that was highly affected, and they will conduct a study trying to see how they can supply us, maybe redirecting supply from other parts of the country. Today, we understand that the impacts in the construction deadlines, absolutely they will happen. We cannot yet define how much. If I had to do some kind of forecast, I would say between 45- 90 days, depending on the kind of construction work. So that would be a preliminary estimate. In future launches, we had an immediate short-term impact. We were planning one launch for the previous weekend. It was a project that was really hot, on high demand, and this will suffer an impact of a few weeks. Also an effort from the government towards regularizing the situation.
We're talking about licensing from City Hall, and there is an expectation that along the year, launches will go back to their regular situation with very low damage, and all the launches will happen in their normal window. We are a little more hopeful that the impact of this huge crisis will be mitigated with this concerted effort of our society to which Melnick is a part. At a first moment, to rescue people and put our maximum energy in emergency efforts. On a second moment, we'll reflect and think and act on how to put the state of Rio Grande do Sul and the city of Porto Alegre back to their normality, and how to rebuild the city. The certainty that we will come out of this stronger because this was a natural phenomenon that happened and affected our city.
With this opening, that we would rather not have, but we thought it was necessary to begin by reporting what happened, how this affected our society and our company. Now I'll give the floor to Juliano so he can talk about our figures, which were very positive.
Good morning. Following Leandro's words concerning the current situation of our state, I would like to thank you all for attending Melnick's earnings call concerning the first quarter of 2024, and proceed with our presentation. Let's just start off with the highlights of the quarter on slide three. The column on the left-hand side, we see some information about the growth of the company this period.
We reached BRL 372 million in net sales, Melnick share, a 22% increase when compared with the first quarter of the previous year, making this quarter the best one yet in our history concerning sales and launches. We launched BRL 617 million , also Melnick share, which is a 43% growth when compared with the same period of last year. This volume corresponds to 84% of the total launched Melnick share in 2023. In the column in the center, we highlight some figures that reflect the company's robustness. We have a solid cash position of BRL 455 million , zero corporate debt, and BRL 51 million of operating cash generated in the quarter. The column on the right, we bring some financial figures of the company. Relative to the first quarter of 2023, our gross margin increased by 33% and our net margin by 90%.
Our net income increased by 51%, for a total amount of BRL 30 million. Let's now move on to slide number four, where we break down the launches in the quarter. At the top of the slide, we bring you the details of the two launches in the quarter, which amount to BRL 617 million of PSV, Melnick share. In the graph at the bottom side of the slide on the left, you'll notice the growth when compared with the same period of last year, of 20% of gross launches, going from BRL 559 million to BRL 674 million. 43% of net launches, going from BRL 432 million to BRL 617 million. The graph on the right-hand side demonstrates that the launches, Melnick share, in the first quarter of the year already represent 84% of the total volume launched last year.
In addition, out of the BRL 674 million launched, our participation reached 91%, which reflects our desire to increase the net PSV launched by the company within the gross PSV generated, which means growing within our own business. In slide five, we can see our two launches in the quarter. I highlight Zayt, the composition of 13 lots purchased in Bela Vista, one of the best neighborhoods of the city, with an area of almost 7,000 sq m. Its façade and interior was designed by Arthur Casas. Its type units have an average area of 500 sq m and bring the concept of horizontal penthouses on each floor, with balconies more than 100 sq m on average. It will be a unique product in our portfolio with more than BRL 400 million of PSV. We also have High Garden, with two towers and a clubhouse.
It is located in the central part of the city, has already had 50% of its units sold since its launch. Let's move on to slide six, where we present the company's net sales. The graph on the left-hand side, we have the SoS of launches in the quarter, which was 33%, whereas the inventory SoS was 16%. This corresponds to an average SoS of 24% in the quarter. It was the third quarter in a row showing an increase in the average quarterly SoS. We had BRL 372 million in net sales, 22% higher than the first quarter of last year, 73% higher than the fourth quarter of 2023. In total, we had BRL 152 million in inventory sales and BRL 220 million in launch sales.
The pie chart on the right-hand side of the slide at the top, we break down sales by business unit, where we can see that almost all of the sales happened in our developer unit. Finally, the bar graph on the right-hand side of the slide at the bottom. When we look at the projects that will be delivered this year, 87% of units have already been sold, which leaves us the rest of the year to sell the remaining 13%. In the next slide, number seven, we can see the only delivery the company made in the quarter, GO Rio Branco, which has already sold 98%, proving to be yet another commercial success of our GO line. In slide eight, we break down the company's inventory by year of conclusion.
In the graph on the left-hand side, you can see we have BRL 1.2 billion worth of inventory, of which only BRL 89 million correspond to products to be delivered this year. The graph on the right-hand side at the top, we show you the composition of our finished units inventory with BRL 289 million . BRL 21 million of which is in Urbanizadora, BRL 86 million refer to residential units, of which BRL 47 million correspond to leased units. Our least liquid inventory, the commercial units, amounts to BRL 182 million, and BRL 109 million of it is leased or are hotel units. I would like to point out our reversible lease policy, by which our tenants have the opportunity to purchase their units using the rent already paid in part or in its totality as down payment.
We have been able to convert around one third of these leases into sales.
Lastly, in the graph at the bottom of the screen, you can see the duration of our inventory, currently at 17 months. It is a slightly longer duration due to the high volume of launches in the quarter. In the next slide, number nine, we discuss the company's sizable land bank. Currently at BRL 4.7 billion of total PSV, of which BRL 3.2 billion corresponds to Melnick's share. It comprises 34 plots or phases, and 20% of these have already been approved, which enables us to launch products that are best suited to the market at the right time, rather than just the next one to be approved. The graph on the right-hand side of this slide shows the breakdown by market segment, where 60% correspond to the middle and upper income segments. Moving on to slide 10, where we present the company's financial indicators.
We see in the graph on the left-hand side at the top that the net revenue in the quarter was BRL 245 million . The graph on the right-hand side shows the gross profit in the quarter, BRL 54 million , with a gross margin excluding financing to production of 25.3%. This was 33% higher than the first quarter of 2023. At the bottom of this slide, you can see our net income of BRL 30 million in the quarter, an increase of 51% when compared with the first quarter of 2023. Net margin before minority interest was 17.3%, 90% higher than the net margin of the first quarter of the previous year. In slide 11, where we present our capital structure in the chart on the left-hand side.
We ended the quarter with a net cash position of BRL 166 million , translating into a gross debt of BRL 288 million .
Basically, all of it dedicated to financing the production of the ongoing construction work. Our total cash position is BRL 455 million. At present, our shareholders' equity is approximately BRL 1.23 billion , and our capital structure represents a net cash to equity ratio of 13.5%. It is worth noting we are a company without any corporate debt. Finally, in the chart on the right-hand side, we see that in the quarter we generated BRL 51.5 million in operating cash. In the last slide, number 12, we demonstrate our track record of dividend payout. From our partnership with Even in 2008 up until our IPO in 2020, we had an average of 90% of dividend payout. After the IPO, taking into consideration approved dividends, we have already paid out an amount equivalent to approximately 21% of the company shareholders' equity, meaning a payout of nearly 100%.
I would like to reiterate our solidarity to the people of Rio Grande do Sul and thank all our employees and collaborators for their tireless dedication to our activities of support to the victims of this tragedy. I would like now to give the floor back to Leandro, the company CEO, for his final remarks, then we will open for Q and A. Thank you very much. We will now continue our presentation. Mr. Leandro Melnick, you may proceed.
Well, we are very happy with the figures of this quarter. It is the second quarter in a row that the market, clearly in Porto Alegre, has been showing a recovery in prices, and consequently, the company's figures express this improvement. Cash generation, again, is a number that I would like to point out.
The growth, profit and margin growth, when compared with the first quarter, when we compare, considering the analysis, especially in the background of our industry, is very impressive. These figures give consistency and continuity to our policy of paying out dividends, which has been clearly a consequence of our strategy of operating and also our capital structure strategy, where we understand that in our industry and in our country, due to their own specific characteristics, it is important to maintain this financial robustness. Being a deleveraged company and having a strategy of cash generation that allows us to be consistent in our policy of dividend payout. We can see the Porto Alegre market reacting, and we bring a positive reading for future quarters, as I said in the beginning of our presentation. And now these figures, together with the current situation the state is going through.
We understand that as fast as possible, our society will be able to address the situation, and we will go back to having an operating market. Now we will move on to Q and A.
Thank you. We will now begin our Q and A session. Remember that to ask questions, you must click on the raise hand or Q and A icons at the bottom of your screen and type in your question to join the queue. When you are called, a request to activate your microphone will show on the screen, and then you must activate your microphone to ask your question. Let us now proceed. Our first question, Lucas Chinzon. Your audio is now open. You may proceed.
Hello, everyone. Good morning. First, I would like to congratulate you on all your humanitarian efforts that you have been showing in this difficult situation, and I hope this situation gets better as soon as possible. I would like to understand your view, in terms of the logistic chain of this climatic crisis. What can you see at the end regarding material supply? You talked a little bit about the steel plants, but I would like to understand the other raw materials. I think it would be important for us to have a big picture of these logistics.
Thank you for your question. It is a moment that makes it still difficult to do this analysis in a consistent way because the water levels are still very high. Whoever has been following, monitoring this, we are having the flood going up again. We had rains again, and it makes it difficult for us to see the problem. But as I mentioned, the construction work started. Our team is mapping the situation.
We are calling all our suppliers, and we can see a view of how this is going. I think we are going to have a bigger problem in the basic materials chain. Concrete is a critical point because it is local production. Not every area of production has been affected, but most of it was. It is also very difficult to understand precisely the issue of labor. But I understand that from the moment the water level goes back down, we are going to have a better understanding of what kind of labor force we are going to have. We have a more positive reading after the mapping we have done. But the vision that I brought in the beginning of solidarity, of the Gaúcho people being solidary and the country as a whole, and some companies and factories has already said they will prioritize serving the South.
If not for other reason, to help the state with the recovery efforts. It is very difficult to project. Of course, we have to give the market some kind of understanding. But our engineering department estimated that the final impact will be 45 - 90 days in the deadlines for the constructions because we have construction work at very different moments. But I would like to make it very clear, this is a very initial assessment, so it is imprecise. But it is something we can share with you.
Thank you very much.
Our next question comes from text from Victor Vasquez from [Capital].
Thank you all for your results, for the support you are giving in the tragedy in Rio Grande do Sul. Regarding the possible impact and the duration of the construction work, do you believe this possible delay will be within the contractual period of delay?
If this extends beyond the contractual period, if you think this will imply more cancellations. It is a good question. We understand that the legal contractual issue is protected. It is a force majeure situation, so this is covered by contract. It will not affect this grace period. I think that adding this to the previous question, the goals for the company in terms of deadlines, costs, and damages, they were very small, almost immaterial, considering the size of the company. Difficulty will be in understanding how our society as a whole will go back to their normal functioning. But regarding specifically the delay in the construction work and anything related to fines, we do not understand this as a critical point. We understand that this will not imply in a considerable extension of the deadline.
But regardless, our legal protections in contracts will be considered a force majeure effect.
Next question comes from Elvis Credendio, BTG Pactual. You may proceed. Your microphone is open.
Good morning, Leandro, Juliano. I would like to pay my respects and send my solidarity to the Gaúcho Society. Congratulate the company for your efforts. But my first question here is, regarding the balance sheet. You have this policy of paying out the dividends, so using the net cash. But considering the complexity of the current situation, how you see this new strategy of capital allocation for the future quarters, if you maybe will keep a little more cash?
Elvis, thank you for your question. I think so. It is an important question because Melnick has a characteristic, maybe a little bit different in terms of capital strategy and capital structure, where we prioritize the paying out of dividends since our IPO.
But we see the history in the presentation before the IPO, during our partnership with Even. It was formatted, and it existed where our figures were already audited and consolidated, following the standards of a publicly traded company. In this wider situation where the company has grown a lot, we have a 15-year history of paying out more than 90% of dividends. This is a 15-year history of a company that has a structure of growing, and we have a strategy that allows us to continue having a growth strategy the way we acquire, purchase land. Being conservative, especially in the short term, getting to the mid and long term in a positive way. This gives us a comfort in our more critical moments during COVID and now during this flood. We suffer less from this because we are very solid. We carry this as an anchor.
Many times we are questioned within and outside of the company. But in this country, with all its changes and fluctuations, this gives us the comfort to keep our strategy. We have a way of growing with low cash burn. This quarter, our cash generation was over BRL 51.5 million with operating growth, which was meaningful. Now putting this into context, to answer you safely, that we are very, very assured of our dividend payout policy because our cash position allows us to grow, keeping our SoS structure with very low fluctuation, and this is part of our strategy. So we announced BRL 48 million in dividends paid out in our last general meeting. We understand we will continue doing this. Considering the 15 past years since 2008, we went through COVID, we went through several crises, and it shows our policy is very consistent. Thank you.
Thank you. Have a good day.
Our next question comes from Mariângela de Castro , Itaú BBA. Your microphone is open. You may proceed.
Good morning, everyone. My solidarity to your situation, and I hope everyone is fine, and I hope you get better as soon as possible. Congratulate you for your efforts in the region. It's a very quick question regarding launches. You said you may have some delays in launches, but the schedule for the year will be maintained. Do you see the city nowadays as capable of absorbing these new launches? What is the impact on the SoS? Do you think there is room for launching new projects given the current situation?
Hello, Mariângela . Thank you for your question and your comments. Yes. We came from a moment analyzing the markets that was very positive, in our understanding. That was very positive for launches.
We have been comparing with São Paulo and the city of Porto Alegre has been recovered after COVID. It was a little slower, much slower. In the last six months, it started recovering, this consumption curve. SoS have been rising the last three quarters. Our non-leased inventory, because we lease our inventory significantly, especially the commercial and hotel segments. It's a very reasonable level. The prices have been rising. The level of launches in these past quarters in the city. Because the finished units inventory in the residential segment, both for low income, middle income, and upper income. So we understand the market has been absorbing these new launches.
If you understand our last deliverance, we have delivered with a practically irrelevant inventory, and all our construction work at the moment are extremely well sold. If you analyze the inventory of units under construction, the current vintage, the inventory is at a very low level. All the indicators show us that the market is recovering very well, giving us the capacity to increase our launches until the end of the year. In this first quarter, we had a number of launches that was absolutely significant when compared with the previous year. We were at a more specific point. We had a launch that was planned for this last weekend. It will probably be postponed until one or two weeks ahead. It had been a long time. We had seen so much interest and people making reservations for these units.
I think the characteristic's very positive in terms of launches when you compare with last year. I believe that because of all the effort our society, and here I include everyone, our city hall, working very hard to make the economy go back to a normal functioning. I think it will be possible to keep this schedule of launches that was forecast for the year. We are analyzing this as a positive.
Mariângela , it's Juliano here, just to complement the answer. Of course, this first quarter, we launched 84% of almost everything we launched last year. Our launch curves, we are going to have a slightly lower volume in the second and third quarters, and a higher volume in the last quarter. Maybe this time will be maybe the time necessary for things start going back to something close to normal. This postponing launches from the second quarter to the third quarter, this is not going to impact the launch schedule. We are going to recover in the next 90, 120 days.
Thank you.
Our next question comes by text from Thiago Diamante.
At the moment, there is some difficulty reaching Porto Alegre because the roads are blocked and there is a high flow of traffic of trucks. What are you able to do in terms of cost and volume of keeping the supply going?
Thank you, Thiago, for your question. We adopted, as I commented, a policy of stopping all activities for 10 days. We started last Monday, and we did this in order to focus all our efforts and all our employees' efforts into their families, their communities, with solidary work for a group we assembled in the company with over 150 people with the same goal.
We have mapped, and I said this in the beginning, we have a very recent mapping, so it's not clear yet in this regard. But so far, the mapping of the situation we have done, we see this as positive, especially in the last two days of work. We understand that the impact will happen, but maybe not as seriously as we first imagined. We do not have the complete data. We have the contact with all the productive chain, all the suppliers, the subcontractors. We are working to make sure that we can collect all this information more consistently.
And concerning costs, we do not have this clearly as well, but some information that can mitigate this damage is the effort and the positioning of some large size companies that will try to keep their supply costs low for Rio Grande do Sul, trying to redistribute in their individual supply chain, also as a contribution to the state of Rio Grande do Sul. So we do not have the exact data, but we understand the situation as being a little more positive now than it was a few days ago. As soon as we have this information, we will share it with the market.
Our next question, also by text, comes from Bayet from KF Invest.
Good morning. My solidarity to the families of Rio Grande do Sul. I would like to learn the impact of the tragedy on your land bank, if it might change the profile of future launches.
Hello. Our land bank has a very relevant characteristic for Melnick. Our land bank is very ample, very wide. It is part of the company's strategy on acquiring land through swaps, which brings us, as a benefit, the capacity to see the market and see within the company's land that can supply a product that we understand the market is prepared to consume. So at this moment, we do not see any significant change or any clear change in our launches because of the floods. We have a characteristic, as I commented in the beginning, and I reinforce it now, that our construction sites were little affected. So both our construction sites active and our delivered projects. Our land bank is not in any of the affected areas. Although our land bank in the city is very wide, it is mainly located in the highest part of the city.
So the impact was very low in Porto Alegre as well as in Canoas, in relation to a direct analysis of this land being or not affected by the land. We are going to have a change in the short term due to this event.
Melnick's earnings call concerning the results of the first quarter of 2024 is now concluded. The Investor Relations department is at your disposal to answer any further questions you may have. Thank you to all attendees, and we wish you a nice day.