Ladies and gentlemen, good afternoon.
Thank you for holding, and welcome to MRV Day 2024.
We have today Mr. Rafael Menin, MRV & Co.'s CEO, CFO and IRO Mr. Ricardo Paixão. We would like to inform that this event is being recorded and broadcast simultaneously on YouTube. After the company's presentation, there will be a Q&A session. Further instructions will be given then. I would like to turn the floor over now to Mr. Rafael Menin, MRV & Co.'s CEO. You have the floor now, sir.
[Foreign language]
Good afternoon, everyone. We usually have our call in the morning, but anyway, good afternoon. Welcome for attending yet another MRV Day. We'll have the chance to have a conversation to talk about our recent past and once again restate our future or near-future commitments. This is our agenda, so there will be a review for 2023, a vision into the future, core business opportunities, and we'll be talking about important opportunities to.
[Foreign language]
Okay, let's get started. We started out a different cycle unlike no other. The company stands out because it has always grown with good profitability, a very conservative financial policy. However, in late 2019, we started out a new phase. We began to diversify our operations. We acquired Resia, former AHS, and then we started Luggo. We sped up the operations of Urba and then Sensia, and then we had an external event, an expected event, which was the pandemic, and that brought about major challenges to the whole industry. Anyway, this combination of several initiatives underway at the same time, on top of that external event that brought about inflation or higher inflation rates, we had to work from home. And let me remind you that at the same time we had a major shift in the senior management of the company.
People that had been working for 40, 30 years ended up retiring. So that's yet another variable that helped complicate things, especially in this three-year period, 2021-2022. As you know, this was a very negative cycle. Despite positive sales, about 130,000 apartments were sold during this period. However, our financial and operational results were way below our expectations. Just last year, we had an important turnaround. I'll be mentioning a few operational KPIs. They were back to pre-pandemic levels. Now our operation is stable. Our strategy is different today. It used to be growth-oriented. Today, we want to generate more value to each one of these subsidiaries, especially MRV, because that's the cash cow that generated Resia, Urba, Sensia. And every new operation requires capital, effort. It requires a learning experience on top of the pandemic challenges. There was that level of uncertainty.
We now, however, are more confident in the company's future. Financial results will be positive, and MRV, the focus of our meeting today, will go back to being the leading company in the home building industry in the country. I'll turn over to Kaká. He was going to go over last year's results, and then I'll get back to talk about 2024, 2025, and especially our vision for the company's future. Good afternoon. It's great to be here. Here's the remote. Well, let me start. This is the review of last year. Just like Rafael said, we had the operational turnaround for the company last year, 2021, high volumes. Prices were lower, and margins ended up being lower. So 2022 was a challenging year because we managed to raise prices, so we improved margins for new sales.
That was way better in 2022 than 2021 and 2020, but we lost volume. In 2023, we managed to conclude that cycle. Prices are growing up more than inflation rates, so new sales margins are at 32%. Q4 was a little higher than that. And here's what's relevant: volumes have picked up with the challenge of boosting prices and maintaining high volumes. We managed to do that last year. So the highlights are 45% growth. That's for the development division, 45% growth. From BRL 5.8 billion-BRL 8.5 billion, that's our indicator. So there was a 13% growth of ROL. We have to build before we incorporate that investment.
So these are results down the road. 7,200 was our all-time record average gross margin, increased by 3.4, reaching 22.7%. We ended Q4 with a little over 24%. Gross margins have picked up, also in new sales being translated into the reported numbers.
45% average ticket increase on the BRL 69,000-BRL 246,000 reais in late Q4 of last year. Onto the projections and what was actual soft guidance of last year on February 17th of last year. Out of those four indicators, we managed to reach three of them: ROL 7.2 at the top of the range, gross margin 22.7% mid-range, net debt over equity 45%, a little below. You all know we had a follow-on in last June. Cash generation, we had estimated between BRL 0-BRL 200 million. We ended up burning BRL 200 million. The two main drivers there are: we had been growing. We were on a growth-oriented phase, about 160,000 units a year, and we were preparing the company for that strategy. The first element was the land bank. For some years, we ended up buying more land than what the operation withstood.
What's happening last year and this year? We're now paying for those pieces of land we purchased way back when. So we're buying more than what the company would actually need, over BRL 100 million in cash generation. The other driver was that we ended up having good sales performance. However, that was based on new projects. The average pocket was below expectations, so there were some delays in collecting. That's why we ended up having less cash generation than expected. All right. Onto the projections for 2024 and 2025, ROL from BRL 8.0 billion-BRL 8.5 billion. It's going up based on the numbers we gave you in Investor's Day last year. Gross margin between 26%-27% after interest. We are decreasing that range.
Cash generation is between BRL 300 million and BRL 400 million based on the guidance we gave you, bringing that guidance to the lower point of that range. Net debt/equity 36%-34%. This is below what we expected last year. Net profit, there was no guidance before MRV the incorporation. Now we are at BRL 250 million-BRL 290 million just for the MRV development division. Onto 2025 now, ROL BRL 9 billion-BRL 9.5 billion, more than the guidance of last year. Gross margin between 29.5% to 31%, a narrower range, a little below what we expected. Cash generation between BRL 500 million and BRL 700 million. Again, lower guidance. Net debt/equity 26%-20%, a lower number. Net profit BRL 700 million-BRL 850 million. So it's again within the guidance, but bringing that down slightly than predictions of last year. So these are the numbers we are going to deliver.
That's the commitment we are making to the market for both 2024 and 2025. So we want to be as transparent as possible. This is the first information we are communicating to everyone at the same time. I'll turn back to Rafael to talk about the future plans of the company. All right. We have been vocal about our plan. The plan is called 4035-1515, given the cost scenario, price increases. We are confident this project will be successful. First operational phase, 36,000 net sales, and we're expecting to reach the 40,000 mark. Gross margin reaching our goal, which is 35%. Of course, financial statements are seasonal in nature. It will vary depending on the quarter, but we've had seasons with that good operational quality. Both financial statements and the cash generation will become what we expect. The average ticket is about BRL 250,000.
That would take us to an ROI of BRL 10 billion. Net profit BRL 1.5 billion. Cash generation, again BRL 1.5 billion. To have cash generation in line with net profit. Of course, we have to properly manage our capital. Kaká talked about the land bank. We have over BRL 2 billion worth of land that has been paid. That's our land inventory. It's a huge amount of capital, and we made the decision to allocate that capital. That decision was made five, six years ago when capital was less expensive. The company had no leverage whatsoever, and we expect to bring that to the books more quickly. You know how bureaucratic our country can be, especially for large pieces of land where we allocated more capital. It took us way longer than expected to regularize that situation. We have plots of land for over 10 years.
Taking a more positive approach, some of that land has been concluded. That regularization has been finalized. So the intention is to allocate less capital. So that's why net profit will follow cash generation accordingly. Let me say that again: 40,000 units. It's important, just like Kaká mentioned two slides ago. First, you make that sale. Last year, BRL 8.5 billion net sales. And now there's that delay. You have to build those units so that you can get ROL reaching sales, BRL 1.3 billion of ROI that will be captured. And they are referring to sales of last year. Let me analyze the external scenario now. Inflation rates are under control. Our internal ICC of the company has been below INCC. And on the other hand, the ecosystem of Minha Casa, Minha Vida is very favorable.
Just yesterday, I gave an interview, and I said that this is the best scenario for the economic development. That's the best environment we've seen in the past 10 years. The adjustments made vis-à-vis interest rates, ceilings a little higher. The adaptation of the subsidy table, we had the RET 1, and we're expecting the FGTS Futuro project. With all these new adjustments, this new format of Minha Casa, Minha Vida, that helped us. This external environment is therefore very favorable for the Minha Casa, Minha Vida housing program. Let me make a comparison of the company's price variation: 57%. Prices in the Minha Casa, Minha Vida, 48%. And the INCC was 40%. So we were performing way below the INCC. And in the past 1.5 years, we're now back on par.
Late last year, since then, we are 8% above when you take Minha Casa, Minha Vida and 17% above INCC for the entire portfolio. New margins is now already at 36.5%. We are now at the tier one for the other companies in Brazil.
This is another important aspect. MRV is the only company that has proposed to simplify its operations despite the growth in the net operating revenue that will happen in the next two or three years. We're the only company that has operated simultaneously in 120 cities for a long time. We did this for a long time, for five or six years, 40,000 units in 120 cities. So no other company has this proven capacity to operate on such a large scale, not only considering the number of units per year, but also the geographic coverage.
Now we are making 40,000 units or close to that in 100 cities, and we aim to get to 80 cities. In those 80 cities, there is a lot of market for us to build 40,000 units. Since our plan was to reach 60,000 units per year in real estate development, we believed that it was important to have larger. Since the project today is to stay at 40,000 units per year, it's much more efficient to make the same 40,000 in 80 cities because these are the cities that we believe that have the higher purchasing power, an interesting competitive environment in terms of competition with proper laws. This is a differentiation factor. No other company has such operational flexibility as MRV.
So if there is a market that has a competition or supply and demand that's not adequate, we can reduce and improve capacity in another market. If operating in 100 cities or 80 cities in the future is more complex, of course, it's more complex. You have to have a larger team. But on the other hand, it causes the company to have an efficient operation. We've seen some difficulties here and there regarding labor, higher competition for land, for brokers. And this is not what we see. Let's mention São Paulo, which is the place with the highest competition in Brazil. And it's a huge market, very competitive, but it accounts for 7% of our portfolio. So if São Paulo deteriorates, we don't believe this will happen. But if it gets worse in any way, the profitability of the company would not be affected.
On the other hand, other companies are more dependent on São Paulo or Rio de Janeiro, which are two very good markets. But there may be some momentary imbalance in such markets, and we're capable of responding and reacting quickly. For example, the Midwest. This is a region that is not so competitive, but it has very good and important economic growth in recent years. So we have a very differentiated sales over supply in the Midwest of Brazil. So increasing activities here and decreasing there is the capacity of MRV that's very positive. This is also an important data that's collected from Google, and it shows how strong our brand is all over Brazil. This is the share of interest. So how customers looking to buy property, what is their search like, and what are the brands that they look for?
So on the left, the Southeast, we are the leader in terms of search for properties. South as well. In the Northeast, east, in the middle, 60% of searches go to MRV. In the North, although we've been there for not so long, 51% also have considered MRV as the first company, more than all the other companies together. And that's also repeated in the Midwest. Here we have the operational indicators. As I said, during the COVID period, we faced a lack of material. We could not work due to COVID in the construction sites. So that was a complex period. PI and PS, one is the speed of production, and the other is the number of employees equivalent to make an apartment in Rio. So if you look at the indicators in the semester, we've reached the same indicator.
So the efficiency level of MRV in the second half of 2023 went back to pre-COVID levels. In IP or in PI, we are even better than we used to be. When compared to INCC, there's still a gap to be filled because steel and concrete prices have gone up much higher than inflation. And our basket of materials is different from INCC. So the weight of steel and concrete is higher for us in our construction process. So we have to bridge this gap towards the future. So we're still higher than INCC. But since prices went up higher than INCC, this delta from INCC to IVP is offset by prices that went up more than the delta of 24%. Now, Kaká will talk about the financial indicators. Okay. So you may realize that we've got the strategic view: 40,000 units, 35% gross margin, 50% net margin, 15% cash.
We are reinforcing how we'll do to get to each of these indicators. So far, 35% gross margin. Now I would like to highlight how can we do to get from 15% net margin. There's some data here that's interesting. From 2014 to 2019, if we add up all the expenses as a percentage of the net operating revenue, there is 18% lower. It's the difference between the gross and the net margin. From 20% to 22%, 19%. That's easy to see. The financial result is the main reason for that because it's gotten worse with time, with higher leverage, and SELIC interest rate going up. In the year 2023, there was 25% mainly due to swap of financial result as the main villain. So going from 35% gross margin going to 15% net margin is slightly worse than we did in the past.
So we are very comfortable that we can go and reach this 15% net margin considering that we have 21% of expenses as a percentage of net operating revenue. So what's SG&A? SG&A, there would be a dilution of SG&A. We work with the banking sector and raise prices much more than inflation, IPCA, which would be the correction of fixed sales expenses and administrative expenses. So if you look at sales expenses and divide by the contracted PSV, we are there. So it's only catch up on net sales in order to close with revenue. There were some delays in constructions lately. It's also solved. So we go back to the level of 1%. Equity income, there's been an improvement, especially due to the operation of Prime. The operation in the subsidiary in the Midwest has allowed us to substantially improve this equity income indicator.
Financial results, we know it takes some time. Between the time you decrease the leverage of the company, there is a decrease in interest rates, SELIC. With that, there would be a reduction in financial expenses. As for income tax, we are setting 2%, but there's a slight improvement regarding RET. I'll explain RET 1 soon. We are giving you a breakdown in a very open way on how we'll get from 35% gross margin to 15% net margin. The opportunities in our core business, there are some important things to mention. Historically, considering that Pro Soluto as a percentage of sales was between 14%-15% in 2020, beginning of 2022. From then on, we had to increase prices during 2022.
Caixa Econômica Federal, as you may know, funds the lowest of two values, either the assessment of the property value made by Caixa or the sales price. Since we had to increase prices a lot, there was a gap, a mismatch between the sales price and the assessment or evaluation. During 2023, we closed this gap. We have to mention as well the help we had from the purchase capacity that we noticed, helped by Minha Casa, Minha Vida housing program in the second half of last year. Several things contributed to improve the customer's affordability during last year. That allowed us to reduce our risk, the percentage of properties that we financed, which was 21% in mid-2023, and now it's back to 16%. Our goal is to go back to 12%. There is a path to get there to remove the extremes.
So we are adjusting credit renting policies, our policy to reach that figure. Another important measure is the future FGTS, use of FGTS in the future. With becoming valid in April this year, it will improve the affordability of customers even more, allowing us to reduce the credit facilities granted by the company. This is a reduction of the credit. By granting less credit, we can have less Pro Soluto portfolio assignment. So the Pro Soluto is reduced. That makes sense. With the decrease of Pro Soluto, there is a decrease in the Pro Soluto and the spread in credit and spread. That causes us to strongly believe in the decrease of these rates towards the future. These two things together will allow us to reduce financial expenses in the future. Another very important leverage is Flex Portfolio assignment.
Outside Minha Casa, Minha Vida, we have a Sensia product line, everything above BRL 350,000 or above the upper limit of Minha Casa, Minha Vida. So we have bank financing, which is what people use to fund the property. We have associative credit. And with the same financial model that we use within Minha Casa, Minha Vida, we use the same methodology for Sensia. And we also have direct financing with MRV. So that's an additional funding source developed by the company. We've invested a lot in that. So that allows us to provide an extra funding source. We're looking at the direct funding portfolio. We used to have a portfolio in which we corrected IPCA + 1, - 1. And now it's IPCA plus 0.85% during the duration of the contract, before keys and after keys are delivered.
That caused the interest that paid during construction and after construction to increase. In addition, the real estate is the collateral for credit. So when you deliver the keys, we can deliver with LTV 65%. So it's a comfortable value in terms of risks going forward. And the third point, receiving 100% of the PSV. So during the construction phase, so we assign receivables, we get 100% of the value of the property, which is differentiation for this direct financing portfolio. This chart is interesting because this gap that's closing, the dark, is the all-in rate. IPCA plus. So we went from plus 15 to 8.5 average rate. This portfolio rate has increased the remuneration. If we look, it's close to 10.7, 10.69. And we also see a decrease pace with SELIC going to the future. So soon we'll reach the break-even point of this portfolio.
So what the customer pays me is what costs us and what the end investor will receive in this transaction. Another opportunity we have is about 2015, 2020. 60,000 units per year was our goal. We're targeting growth. The land bank increased by 116,000 additional units and 52% of land swap in purchase. And that caused us to have more capital employed in the land bank more than necessary or more than the optimum point. In 2023, we determined that from now on, there will be 40,000 units per year. So we have BRL 2 billion accumulated in land bank that's paid and in inventory, 77% of land swap in purchase. So what's the main opportunity now? We have a land bank that's larger than it needs to be. So the land bank is larger than the current size of our operation.
But we have the opportunity to reduce the Land Bank in three years. So from now on, we'll only buy 85%-90% through financial swaps. So that decreases the capital allocation from now on. And that will allow us to use less capital and have higher returns in a lighter company. So more effective use of capital with the current Land Bank. With the current Land Bank, we established at 40,000 units. We have purchased less than we have launched. That's how we use the current Land Bank. And the priorities are to use at least 90% in financial swaps. Also an important leverage to reduce the Pro Soluto credit, several housing programs. Any company that's exposed to all these housing programs that you can see on the screen, several are in operation and others will be in the future. We've discussed with federal governments, state, and local governments as well.
And we've been able to increase. This is a complementary program to the federal housing program, Minha Casa, Minha Vida. There are local and state housing programs that allow us to provide less credit to customers because there are subsidies. Another news, the new Minha Casa, Minha Vida, there has been an increase in the maximum subsidy, BRL 55,000, reduction of interest rates and financing extension of terms up to 420 months, increase of maximum property value to BRL 350,000. More recently, there was a reduction in the tax burden of RET 1%. And what's lacking is the future use of FGTS, the severance fund for real estate financing. And that will cause the affordability of customers to increase in our participation in Faixa 1 will increase. The RET is 3 % increase for Faixa 1. We'll be able to charge 1% instead of 3%.
This has become effective on March 7. So everything we receive, regardless of when the sale was affected from March 7 onwards, we'll be able to tax in 1% instead of 4 %. So there is 35% MRV portfolio in Minha Casa, Minha Vida with an average impact of BRL 70 million on net income on cash.
When we take into account the future and we increase the percentage points there, that'll be very beneficial. All right. There will be more affordability. We'll improve gross margin, Pro Soluto reduction, and increasing the participation of the Faixa 1 in the sales mix. Back to Rafael to discuss about our subsidiaries. Well, these companies brought in complexity. They demanded capital, human resources. However, we are positive these three subsidiaries will bring in a lot of profit.
Luggo is a great company, the only multifamily operation in Brazil, a very digital project, a lot of services provided, very democratic in nature. The best indicator is to say that our latency is almost zero. Rental prices are well above those of similar dwellings in similar regions. So we remain convicted or convinced that this model will pick up even further in Brazil. This is a mature solution. The company is five years old. We have improved our funding model. We have improved both the hardware and the software. So we are heading the right direction with Luggo. Urba, it's a company that is almost 10 years old. It grew very little at the start, but it picked up in recent years. Those people that live in the countryside would like to purchase a plot of land. So we provide good urban services at reasonable prices.
We can securitize the portfolio. These developments have high margins, but the turnover is slow. Today, we have a company with a lot of profitability and we'll be able to turn the assets around more quickly than the industry average. We expect positive cash generation for 2024 for these two companies. The income will be neutral to positive. Onto Resia. We are very strict as far as the Golden Rule is concerned. There will be no zero cash burn there. Resia can start its ongoing projects without the need of capital. So that's the Golden Rule. We cannot burn cash there. We have been considering for quite some time now that Resia has a huge hidden value. This company will be very valuable once we have a decreasing interest rate. We don't know when it's going to happen or how big that drop will be.
It's just a matter of when and at what speed. But this will happen. As interest rates go down, the Cap Rate goes down as well. And the company's profitability will increase very quickly with the cost of capital smaller in the American market. So we are positive. This will be a very valuable company. However, Brazilian investors have a hard time understanding the American market that poses some complexity to that kind of operation. But when we talk to foreign investors, they have that mandate to invest in Brazilian companies. And this is a multifamily company that can be very big five to seven years down the road. There are some complexities as far as capital allocation. But those conversations have evolved. And we are considering a change in the capital stake of the company so that Resia has more operational flexibility.
We can generate more value to MRV & Co. Brazil. We're still considering different alternatives. In the near future, we may make an announcement to that end. In conclusion, let's watch the video. It's a great landmark to us. We have delivered our 500,000 key. We've delivered 500,000 apartments. 1.6 million Brazilians live in a product that we built. No other company has managed to deliver a number of this magnitude. They don't even come that close. So this is the result of a lot of hard work in the past 44 years, a lot of discipline, a very engaged and special team. And I am proud of the team we have. And we have that green blood running in our veins. And we work hard to deliver better apartments in fantastic places with a unique value proposition.
That indicator of searches I mentioned, we are by far the most sought-after brand in Brazil. We are synonymous with real estate in Brazil. Throughout that history, we have always been very ethical, respecting every stakeholder, being very attentive to the environment and the communities where we operate. BRL 2 billion investments in infrastructure, 1.5 million jobs created throughout that time. Escola Nota 10, grade 10 school, that's a very nice project, 4,500 employees that we have trained in these many years. So our track record is beautiful. Not only financial indicators are positive, and the profit we've had throughout so many years, cash generation, at the IPO, two follow-ons, at LOG spinoff, Resia, Luggo, Urba, Sensia, the follow-on we had last year, many, many good things happened. That's why we have reached 500,000 apartments. 1.6 million people live in our projects.
That's the legacy we would like to leave behind for future generations. We are fortunate enough to be able to touch so many lives for so many years. That makes us extremely proud. Let's watch the video before we move on to the Q&A, please. We delivered over 500,000 keys. We've seen so many nice things, smiles, embraces, fights, victories. We've seen it all after 500,000 apartments. For more than 40 years, we have so many positive stories. We transformed the economy, the society, and the world. Especially, we touched the lives of people. Accessible housing. We make that available by doing many things, creating jobs, making the economy run, training people, and maintaining the business sustainability. Despite those many things we've seen in the past 40 years, there's still a lot more to come.
With that feeling as if we were delivering the first apartment, 500,000 keys are just the beginning. We'll now have our Q&A session. If you would like to ask a question, please click on raise hand. If your question is answered, you can lower your hand, please. Mr. Gustavo Cambauva from BTG Pactual will ask the first question. Good afternoon, folks. I would like to actually ask two questions. Number one, when you talked about your guidance projections for 2024 and 2025. Do you know how much of that would come from the portfolio? Because that will impact cash in the short term and also your profit projections and even further down the road. Can you give us a breakdown of how much it will come from the portfolio in 2024, 2025? And my second question is related to gross margin guidance.
When you look at the previous guidance, you are again making a small adjustment. In the meantime, the program conditions have improved. There is RET 1 and Future Workers' Compensation Fund. So I would like to hear your take. What actually is behind that adjustment in your gross margin? Let me start by answering your first question. We have BRL 1.34 billion from these operations in 2024. That has an impact taking away what you had to amortize. The positive impact is between BRL 350 million-BRL 400 million for the year. For 2024, we have BRL 1.15 billion in line with the amortization for 2025. Portfolio is about BRL 400 million, positive in 2024. And for 2025, it's moving sideways with a downward trend. Kaká, I think you should talk about the rate compression. I think we showed it in the slide, but I think you should point that out.
And if we did not break that down or if we break that down, I think it will be easier to understand that. All right. I can do that. For 2024, well, let me backtrack a bit. 75% of portfolio for Pro Soluto, 2025 Flex Portfolio. Flex is our direct financing program. And that Flex Portfolio is growing. And Pro Soluto is coming down. So it makes sense to do the Flex than Pro Soluto. First, because it's longer. It's a 12-year. The Pro Soluto is 22-23 months. So it makes sense to advance that Flex flow than the Pro Soluto. For 2024, Pro Soluto will be giving out more or the same amount we are amortizing. There won't be any increases, therefore. As we said, the Flex Portfolio, the direct portfolio, rather, we'll see that rate compression will be reaching break-even very soon.
And also for the Pro Soluto, 75-100 basis points for our compression rate based on the recent operations we've had. It makes sense. Thank you. And what about this smaller rate? And that contributes onto your financial results down the road. So we are already including that for the net margin guidance. Yes, that's correct. We are using those focus curves. If it goes down faster than we expect, of course, these results will improve even sooner. All right. Onto gross margin. For both 2024 and 2025, here's what we see. It's a time shift since we have that cash dynamics. That's our number one metrics. It takes us more time with the new or newer projects. So that revenue will be acknowledged or recognized later on. It remains the same. The program conditions are even better as you said. So we had more gross margins for new sales.
So when you convert new sales to accounting margin, it would take us 18 months. Now it takes 24 months. I have a buffer between the sale and the start of the project between 6-9 months. That's why the cycle was postponed slightly. When you look long-term, there are no changes whatsoever. We have a cutoff between one year and two years. What we see is that when we cut it off, we'll be getting a little sooner from the revenues and, as a consequence, the margin. Yes, it's very clear. Even for 2024, it's taking more time to start the project, per se. Exactly. You're absolutely right. Thank you so very much. Good afternoon. Thank you.
[Foreign language]
Let me pick it back on what Cambauva said.
[Foreign language]
Looking at the picture you showed about stability. Gross margins, net margins. I would like to better understand the timing. So there are two fronts, right? Number one. How soon that profit will become feasible? Taking into account everything you said, reduction or the matching of the cash flow, that's the first question. Profit and how soon that can be booked. My second question is, Rafael, you said that the profit should be the same as the cash generation at some point in time. However, in the meantime, since you're liquidating that portfolio, these two indicators will remain with that mismatch, if I'm correct in my interpretation. So how soon do you believe you'll be getting the BRL 1.5 billion? And how soon that BRL 1.5 billion is equal to the cash?
So, still talking about the 15% of future net margin. A number draws my attention, that financial results, how the 35% will become 15% of net margin. The financial results is 2% of the net results. That's BRL 200 million. It's just a fraction of what you have today. So here's my question. What is the capital structure that you envision down the road? How much equity do you think you should have then? And how soon do you believe you'll be getting there when you won't be allocating capital from the land bank? Well, it's a very long-winded question. But in a nutshell, how soon that stability can become a reality for the company? Thank you.
Good afternoon, Bruno. Okay.
In terms of stability, the moment in which we'll reach the 35% indicator, well, given the beginning of cost program price development, we expect to reach a 35% gross margin of new sales this year. From then on, keeping that 35% of gross margin for new sales, the income statement of 2025 will relate to new sales of 2023 and the income statement of 2026. We end 2023 or start 2024 with a margin of 33% and we'll end 2024 with a margin around 35%. This year, the gross margin for new sales will be likely 34%. Considering the income statement with a time delay, the income statement of 2026 will be very similar to what we do in 2024. Of course, if the margin next year is above what I'm saying, they will have an extra margin component in 2025.
So even in 2026, there will be a bit of the operation of 2026 because what we expect in terms of growing prices, cost trends will be somewhere around in some quarter of 2026, this 35% will become true. As for your question about profit and generation, you're correct. In the year of 2024 and 2025, there is still some mismatch. It will depend, Bruno, on our appetite to sell the portfolio. There is a guidance for profit and for generation and profit. And if we decrease the base of sales of the portfolio, you favor cash generation and decrease income statement. Of course, there is the component of a spread, an interest rate, the spread at which we'll be able to sell the portfolio that is going down. As Kaká said, it's becoming better. And every issue of Pro Soluto and the Flex direct financing spreads are going down.
Looking at today's snapshot, it is expected that we'll gradually sell less of our portfolio in the future unless the spread really drops. And if it becomes really close to our cost of capital, we could maintain a higher sales of portfolio. And considering the Land Bank, which we call the warehouse, today we have more than BRL 2 billion paid for land in inventory. Since it used to be 67% in Swaps and now we'll be close to 90%, this inventory will decrease. And when that happens, the cash flow comes before the income statement. So these are leverages that could become real in the next two or three years and cause us to have a cash generation going even faster than the net income.
But the guidance he's giving to our looking at 2024 and 2025 is what you can see in the presentation, knowing that there is some flexibility coming from the sales of our portfolio and the expenses with land bank that is the same, but now going forward, it will start to go down. And you talk about the net income of 15%, the breakdown that Kaká mentioned, how you get from 35% to 15%. An important item is financial expenses. In the past, the financial revenue is within the line of revenues and expenses. And so as the leverage of the company goes down and SELIC interest rate goes down as well, this expense decreases. And the financial expenses is the same thing for companies at CDI. Some part is linked to the TR reference rate. And so this expense also goes down.
A part of it is amortized when the construction is finished. So several factors that added to the cash generation and deleveraging of the company will cause financial expenses to decrease. We said -2, but it was positive. It was +3. So this is a midterm scenario for the next two or three years. We'll get there. But when you repeat a transaction that generates cash with leverage levels close to zero, that indicator could be positive. But obviously, it will take some more time to get there. Is it clear, Bruno? Yes. Great. Yes, there are some variables that only time could tell. Yes, but it's clear. Thank you. My pleasure talking to you, Bruno. Have a good weekend. For you too. The next question comes from Ygor Altero from XP. Mr. Altero, your mic is open. Hello, everyone. Thank you for the presentation.
I have two questions. First, I would like to understand how much Resia is contributing to this scenario of improvement that you envisage for 2025. From the things you mentioned, you mentioned future FGTS. So from what I understood, it's more about reduction of pro soluto. That's the main benefit of this FGTS future. So how much room is there? I mean, increasing speed of sales, sales over supply? Well, let's start with the future FGTS. As mentioned by Kaká, the future FGTS unlocks an 8% extra payment capacity for bracket one customers. A part of this will go to reduce pro soluto, which is very important for this customer. Some will go to increase in the sales over supply and some to increase margin. It will be a bit of each depending on the product, the region, the stage of the construction.
But it's a very important measure because 35% of our portfolio in Minha Casa, Minha Vida is on Faixa 1 or group one. So increasing the customer's affordability, this 35% exceeds 40%. So this is a very important decision that will capitalize on our recovery to cause the company to attain very healthy indicators soon. As for Resia, there are some important points for this year, the goals, some important goals. First, to get the right timing for the sale of each property, we are doing fine. It's a product that's close to stabilization that could be sold in April. Maybe we postpone it a bit because what we notice in the US market is an increase in demand for multifamily properties. And with the increase in demand and interest rates going down, the cap goes down. So we have three to four projects to be sold this year.
We've been very vocal in MRV Day that we'll sell those four projects. The moment of sale will happen in April or July or August. We have to feel the temperature of the market, take the temperature because there's a positive trend. The trend is for the market to improve every month. Our strategy of selling the four developments is maintained. We don't want to burn cash at all. The golden rule will be followed. The longer it takes, the better the outcome of each project. The profitability of Resia depends on the timing of sales. The fact is that this is a class of assets that's worse. The cap rate reached 4% and now it's 6%. Although there is a decrease, this class of assets will have a much lower profitability than the historical profitability of Resia.
Also, there's another aspect of the discussion regarding some corporate transaction. If it happens this year, this will bring more flexibility to Resia because leverage is calculated in a very different way in the U.S. as compared to Brazil. For example, the sale we did in the fourth quarter at Resia with a very low margin, 8% or 10%, 12%, I don't know, if we had waited until half of the year, we would have sold at a higher price. We sold it because Resia is under MRV & Co., and it consolidates Resia's debt. If Resia didn't impact the debt of MRV, the sales decision could be postponed. But because clearly the U.S. market will improve this year and next year will improve even more.
So we saw that in 2023, very few new assets started to be built, 2024 as well, which means that in 2025 and 2026, there will be few properties for lease and for sale in a scenario that cap is going down and interest rates are going down. So if there is an increase in the corporate structure of Resia, the decision to sell assets could change as well. Is it clear? Yes. Thank you, Kaká. Thank you, Rafael. The next question comes from Aline Caldeira from Bank of America. Go ahead, Aline. Good afternoon. Thank you for answering my question. I have two questions. The first is we've touched on the guidance a lot. So the first is about land. How do you see competition for land, especially considering this most favorable environment for Minha Casa, Minha Vida?
How would you work if you have to disburse more cash in such a competitive environment? The second question is regarding the cash generation leverages. I think we could say that the cash recovery in terms of generation that you show in the guidance for 2024 and 2025, a part would come from Pro Soluto, land, and the recovery of income, net income itself. Could you explain the weight of these strategies and to explain what cash generation evolution will be more important? Okay, Kaká speaking. Now, regarding land, what we see is that the land bank currently is bigger than necessary. So our appetite for purchases is smaller. That, together with the fact that we are covering a very wide geographic area, we're very confident that we do not need to buy land and increase the land bank. One, it's not the purpose of the company.
Second, there is no need in the vast majority of cities we operate. It may happen in São Paulo, but this is not one of our main cities. There's 10% we are releasing to buy land is to be used in capitals if necessary. You could rest assured about that in terms of disbursements to build. We are comfortable regarding that. The second question is about the strategy of the leverages. Yes. Among the leverages we observe is the fact that our operation costs 25%-26%. That's what expenses cost in terms of revenues. We should reach the indicator at some point this year. Then we'll cash generate an X sale of portfolio. Not considering that I have to pay the assignments and also new portfolio assignments. This indicator has improved regardless of assignment per portfolio.
The land for 2024 and 2025 is very low. It won't be the main impact. This land that we purchased with time, a very large 4,000, 5,000 units whose capital is already allocated, even if we launch them quickly this year, maybe it takes some time until it's used, sold, and comes back as revenue. So it takes us a bit longer to see that effect. So there will be very little impact in the next two years of this land that's already here. But in two years, they will be back. The reduction of the Pro Soluto is the main leverage we have for the short term. Perfect. If I could just add a follow-up question based on Bruno's question about capital structure. When you look at the cash generation excluding portfolio sales, we see an operational generation close to net zero.
So that would imply that the company is trading the debt for receivables anticipation. What does it make sense that knowing that the reduction of portfolio has a lower duration and it costs more than the corporate debt? In our mind, these figures will converge. We're developing a new funding source. And in some cases, there will even be a gain, especially considering the increase of Flex. So Pro Soluto is clear for us. We reduce the amount of Pro Soluto assignment. And the Flex portfolio that's longer, it's the opposite. It's longer than we have in terms of indebtedness and a source in which what we would receive from customers, we'd be able to transfer. In Flex and in Sensia product, we have associative credit, other sources of credit or funding.
In the short term, there won't be an improving interest rates, but there are projects available in associative credit.
So you have to look at flex much more as an option, a product that we created, and now it's becoming cheaper. From now on, what we'll see for Sensia that accounts for 15% of the company's PSV is this option. Customers will buy using flex, other associative, and FP. So this portfolio, flex is our internal name, but it's a direct funding. It's likely to fall. The Pro Soluto will fall from 20% to 12%, and the term is being reduced. The Pro Soluto after keys, less and less. The 12% is the total pre and post-delivery of keys. The lower the Pro Soluto, the lower the term and the less the Pro Soluto after keys. There may be a time in which the cost remains high. Since the company is generating cash from operations, we may no longer sell Pro Soluto portfolio.
This won't happen in 2024, but maybe in 2025, the strategy may change. I mean, again, it depends on cost and the trade-off of cash generation, income statements, select interest rate. But a good estimate we made, but depending on the scenario, debt cost, sales cost, this can change or not. So it's important to think of it as an option. We wanted to make clear, Aline, what is our best estimate for today given today's scenario? This is why I answered for Cambauva. Cambauva. Okay, that's very clear, Kaká and Rafael. Goodbye, Aline. Have a good weekend. Our next question comes from Rafael Heder from Safra. Your mic is open, Rafael.
[Foreign language]
I'd like to have a follow-up on the gross margin of new sales. You said you probably will reach in 2024.
I'd like to understand the assumptions you're using. It's only for regular prices moment or for an increase of regular prices or what you're accounting for or considering coming from RET1 or a special tax regime? Do you think this margin gain is feasible or you could negotiate a land price that would increase the cost of purchase and therefore would not deliver this gain of margin that everyone is waiting for?
Well, gross margins from new sales, that's regular price increases. We'll keep on boosting prices above inflation rates. That's been considered in the premises. What's already working, RET1, and there's nothing of future workers' compensation fund in the calculation. Why would price or the price of land would go up? This is something we've already purchased. It's in our land bank. We know what the swap percentage is, how much we'll pay.
Gains from less taxes, that's our margin. Yes, you're right. Do you think that they could renegotiate prices? The landowners would like to renegotiate since there's a swap. Oh, the swap is a percentage of the sales price. If prices go up, they'll make more. Taxes is a different story. If taxes are lower, that's our gain. There's no risk. No, that's clear. Thank you so much.
Jorel Guillotti from Goldman Sachs asks the next question.
I have two questions, actually. When you think about new projects of 2024 and 2025, I would like to better understand the breakdown by region. In other words, how many are in southeastern Brazil, northern Brazil, etc.? I would like to compare to the chart of share of interest you showed us. What's your leverage strategy for MRV & Co? And you expect a smaller net debt over equity?
But what's your take at the CO level? Do you expect it to remain flat or to come down quickly?
Good afternoon, Jorel. As to the new projects for 2024 and 2025, we have 60,000 certificates for 40,000 units to be introduced this year or next year. It's a piece of cake. That's the only metric that does not keep me awake at night. So we are spread across the board in the country. There are no issues there whatsoever. As to the location, things won't change. We're actually reducing our projects in some small cities in the countryside of São Paulo, in the countryside of Minas Gerais, smaller towns in the Northeast, but gradually, not destroying value. The mix, however, for the regions remains the same. No matter what the region is, our competitive advantage is huge.
Most of the country, more than half of the share of interest is here. It's just outstanding. Every month, we get 100,000 leads looking for one of our houses or apartments. That's the strength of our brand. And we see that, Jorel. They look for our projects. We give them a more complete value proposition. There's a price difference when compared to the market average. So when they can't afford our product, they'll resort to one of our competitors. We are oftentimes the top of mind. This is the result of many years. We've been in these cities for quite some time. We're the number one company with the best track record in the industry, 500,000 units, the best product or the best solution out there. It's difficult to measure that financial advantage, but it's a huge competitive advantage. And it takes a lot of time to build that up.
Over to Kaká to talk about leverage. Have a great weekend, Jorel. That's the MRV. It's coming down. That will come down with the cash generation and also with more profit. Just like in other operations as well, the golden rule for all three is not to burn cash. We can come to the conclusion that MRV & Co will remain that leverage route. Most of it will come from MRV, but all the other subsidiaries will have a small cash generation in these following years. Thank you. Victor Tapia from UBS asks the following question. Let me go back to the cash generation issue. You've already explained how you're going to be selling, how you will amortize receivables. The change that was getting in the way will allow you to go back to selling the portfolio.
It's something that was blocking you in the first two months of the year. There's also the issue of the spread. I was actually considering the land bank. You're preparing the land bank for 60,000 units. Now you're focusing on 40,000. You already have a considerable inventory, and new purchases are 90% coming out of a swap. Anyway, given this scenario and that discussion about cash generation and selling portfolio, are you considering any short-term solutions? Maybe selling receivables is more short-term? Maybe, just to bring that up for debate. As to land bank, I think the portfolio is well explained. If necessary, Kaká will jump in. We'll have a huge inventory. It's nine years' worth of operation. This land bank, these BRL 2 billion that is in our budget, looking ahead, we see the glass half full.
We'll have to buy as much land in the future, just like last year. The land bank decreased slightly or moved sideways. It can repeat that strategy in 2024, 2025, 2026 and become more selective in acquiring land. If there's a very competitive market, we'll be more conservative. In a less competitive environment, we can purchase a little more. So we have that flexibility to purchase the right land bank at the right price. This is interesting, Victor. The land bank acquired last year was below historical levels. So when you consider that reduced amount or that volume, we have purchased less land but at very favorable conditions. Selling land, whether it makes sense or not, just like you said, land is our product, right? It takes us a lot of time to regularize that. 4,000 units, plots of land.
If we were to sell that to a competitor, it wouldn't make any sense, especially because land is about 8%-12% of our PSV. The margin, when you sell the land, is very small. There's a lot of interest allocated there. Get rid of land that is about to be launched maybe to have near zero profitability. It's not part of our strategy. It doesn't make sense, and we won't be doing it. Looking down the road is benefit from this good quality land bank because it, of course, gathered a lot of capital, but it has become a possibility. It won't be concentrating as much capital, and we'll be helping in the cash generation strategy. As to selling go ahead, go ahead. Let me address selling the portfolio. We were positive. We'd be able to address that with CMN. We didn't stop any operations.
Everything is going according to plan, and we'll be announcing these operations that are taking place in this current quarter. Let me just double-check. Even in the short term, selling the portfolio remains a better financial solution than selling the land plain and simple. So you have nine years' worth of land banking. It's a lot, right? I don't know whether it would make sense to sell part of it. But anyway, your answer was clear. Maybe adjusting margins later on. Anyway, the answer was very clear. Thank you. Good afternoon. Ms. Fanny Oreng from Santander is asking the next question. Good afternoon. If you could pass on a little bit. Number one, could you elaborate on the estimates for both Urba and Luggo? You expected a neutral profit for 2024. What's your take for 2025? Last year, you even made that projection further down the road.
What led you to reduce negatively the 2024 numbers? You're expecting small profit, and now you are putting it back to neutral profit. My second question is more technical to Kaká. As to the flex portfolio, how do takers take that into account? You are selling the portfolio that hasn't been performing yet, right? Would that be an accrual risk of the portfolio takers? What's their take on it? Could you give us more color about this issue? That's it. Thank you. Hi Fanny. I'll be answering your first question about Urba and Luggo. Luggo has been improving its funding structure and the way we finance sales to reduce the time to be collecting it. So it will probably generate cash, and it will turn a profit in 2024 and also for 2025 if we maintain the same price increases.
What we see at MRV, we see that Luggo controlled costs, rental prices are going up in the past two years. That spread that was negative in 2021, 2022, it will become positive. Interest rates are coming down. That's what we expect. The cap rate that is valid for Resia is also valid for Luggo. At every sales cycle, Luggo will benefit from that controlled cost and rental price going up and cap coming down. It's a cash-generating company with growing margins for 2024, 2025, and going forward. Onto Urba now. Urba's inputs, we had problems with steel and concrete. The impact was even harder with Urba. In the IPO window, we sped things up. We invested even more capital than we should in land, and we had to cancel some contracts. That hurt Urba's operations to a certain extent. Last year, it turned a loss.
For 2024, it's going to break even in the income statement. It may generate some cash, but small cash. Urban developments can turn very good margins. This is according to our historical levels. Urba has delivered 45% gross margins, and we're going back to those profitability levels. So what is the historical problem with these developments? It's a very long cycle. There's no funding available, but only to those that are performing. Since we have been giving smaller discounts for receivables, we have that flexibility to reduce that financial cycle. Looking down the road, Urba will be growing organically. It will return to those gross margins above 45%. It will be a profitable company, a cash-generating company. But still, 2024 is a transition year. Onto the flex portfolio. Yes, we make that session during the construction phase. We've always had a very good track record.
We've always delivered, so investors are secure enough about that, and we are positive about it. Any delays due to the alienation or when we do not deliver on time, we have to repurchase based on the remaining balance. So zero concerns there. Kaká, we have been recycling that portfolio during the construction phase. For two to three years, we are more aware of their credit capability: 144 months, two to three years all the way to the delivery, and major installments after the delivery. So depending on the delinquency rate and their behavior during the construction, we can choose those that are delinquent, of course. We may cancel that contract, and we sell that again to another customer with a better profile. So the quality of that portfolio, even post-delivery, less than 65% delinquency rate.
So it gives us very good safety that it will be delivered, and it will be paid for. That was very clear. Thank you so much. Thank you, Fanny. Mr. Daniel Gasparete from Itaú BBA asks the next question. Good afternoon. I have a very simple question, actually. The guidance you mentioned for 2024, 2025 in Brazil in net profit to include RET 1%, is it included or not? Yes, it has that embedded. Perfect. Thank you. Good afternoon, everyone. Thank you, Gasparete.
Jonathan Koutras from JP Morgan is up next.
My question Eu sei que no Rio de Janeiro. Ela está até
You see levels of January reaching the budget ceiling, and you also have RET 1% and future workers' compensation fund. Do you envision any funding bottlenecks? Thank you. Good afternoon, Jonathan. You're right.
The program is so good, but so good that sales speed and transfer rates are well above expectations. But used real estate mortgages have been changed. Used households accounts for a third of the program now. There's a belief today that used house or apartment can jeopardize the funding. So the goal is to build 400,000 units. It's been upgraded. It was BRL 70 billion. Now it's over BRL 100 billion. Both ABRAINC and the government, the funds, Caixa Econômica, there is a good conversation going on so that we can find that sweet spot, that breakdown, that ideal breakdown between new and used dwellings so that the program can last longer. We don't want a program.
Nobody wants a program that will concentrate contracts in 2024, 2025, and then all of a sudden because of the budget supplement maybe down the road, 2026, 2027, they will have to reduce the program.
Nobody wants that. We have run many exercises with all stakeholders to come up with a good solution as to what the ideal balance would be between new and used: 70/30, 70 for new and 30% out of used dwellings. The way we see it, the breakdown should be 85/15 so that we don't run into any unnecessary risks of having unnecessary or insufficient funds for these 400,000 new dwellings a year. Oh, that was very clear. Thank you.
The next question comes from Bruno Mendonça from Bradesco BBI.
Thank you for allowing me to ask another question. I'd like to ask about Resia. You talked about some possible corporate transaction in the slide. Can you tell us more about that, at least the rationale behind it? I think of maybe a spin-off, a separation of operations to have different vehicles. Is that the idea?
And if it is, how do you envisage the timing of it? Because things are a bit uncertain in the U.S. now, and what is a structure that could make sense? How is the decision-making process about that? And if you could give us some idea of timing for this transaction that you mentioned. Bruno, right now I cannot tell you much further because we are looking at the possibilities. It would be
[Foreign language]
Time to talk a bit more about having these symmetric informations. This is when we can provide the same information to everyone. And so far, we don't have anything further other than what I already said. The main shareholder believes that Resia is a company that could generate a lot of value for MRV & Co, despite the cap not so good, profitability of sales that are poor.
But given the size of the market, the product we make, the segment we chose in the workforce, we are very confident that this company must be worth a lot. But since the market has not yet reached the same interpretation, whenever Kaká and I talk to the foreigner, he agrees, "Yes, okay. We see that this class of assets is correct. The thesis is correct. The markets are correct. But I have a mandate to look at Latam and low-income Latam." And you bring with this low-income Latam, you're bringing a company that maybe this company will have the same size of a Brazil operation 10 years from or at the end of the decade.
On the other hand, the Brazilian investors are very well knowledgeable about our investments in Brazil, the companies' history, and they have to deal with a market that is unknown to them in the US. So what we see is that having that is bringing a lot of complexity, and something that could be an excellent value leverage currently is not. I think Resia is reducing the value of MRV's share price, so fighting the market for too long maybe is not the most efficient thing to do. So there is a beginning of the discussion of possible ways to follow. We haven't yet decided, Bruno. We're still exploring. But our current understanding today, of course, things could change.
But looking at today's scenario and the information we have available now and considering in the last three years, I'd say in the US, when interest rates were 0, not even the cap rate was higher, the value was attributed to Resia. So I think we generate value for everyone if we make an intelligent movement at the right time. I didn't say much, Bruno, because this is what I can say now, and we don't have a final decision on this. We're building the idea. Still working on the idea. Yes, I understand. So the reason behind it, the rationale is to generate value for shareholders and being careful to do that in the moment and time that materializes that. Yes. Yes, Bruno. And we respect minority shareholders deeply. So every transaction we've made: IPO, follow-on, even the purchase of Resia, spin-off of LOG, we've always been careful.
We talk to investors, to the market, and we'll certainly do this in the best way possible so that everyone is comfortable. Okay. Thank you. Thank you, Bruno. This ends the Q&A session. So for the final remarks, I would now like to turn the floor over to Mr. Rafael Menin.
[Foreign language]
First, I would like to thank you for your time and attention, for the good questions, the good discussion we had today, and reaffirm that we remain confident that we've turned the page on this difficult cycle, in this difficult time. And there's a lot that we've made here in the company, and soon we'll be a company that will deliver operational, financial results and apartments to our customers, all the indicators and products at the highest possible level. I am sure that our team is very experienced, green blood.
They're highly dedicated, and soon we'll be the best company in the real estate industry in Brazil. Thank you all very much for attending, and have a good weekend. MRV Day 2024 has now ended. We thank you all for attending, and have an excellent afternoon and a good weekend.