Good morning, everyone. Good morning. Welcome to another results webcast of Tenda related to the third quarter 2021. I would like to thank you for being here with us. We are going to start the event. I am Álvaro Kauê, Investor Relations Manager. Here with us we have Bia, Beatriz Silva, our IR specialist, Renan, our CFO, and Osmo, our CEO. The dynamics of the event is going to be very similar to what we saw in the previous events. If you have any questions, please click on raise hand. We are going to give a brief presentation on our results, and then we are going to start the Q&A session.
Before beginning, while we wait for everyone to join us, I am going to read the disclaimer, and then I am going to turn the call to Renan. The webcast is related to Tenda's results of the third quarter 2021. The management information refer to future events and involve risks and uncertainties. Any changes of legislation and macroeconomic conditions may affect the performance of the company. I turn the call to you, Renan.
Thank you, Kauê. Good morning, everyone. Thank you very much for attending this call. Now I would like to share my screen with you. Everything is okay. Can everybody see the presentation?
Yes, it is perfect.
Okay. Here we go. Today we are going to present the presentation. First, in relation to the results of the quarter, what we see as to the results. We see the performance of sales, which was quite high even considering the scenario we are experiencing. The company is very close to the historical levels of sales records.
When we compare to the year- to- date of 2020, we can see that we have improved quite a bit. The company keeps with a high dominance, especially for this quarter. We have been managing to maintain this dominance. We have been able to even expand this dominance, gaining in price. We have highest VSO, and we have not been losing any speed over sales. The company has increased 11.8%, and in the third quarter specifically, it increased by 4.4%. This is very relevant as we see it because we operate in the entry segment. Even so, we have been managing to reach those results. We have been able to do this because we have been operating alone in this market. The competitors are changing their portfolio when Tenda has been able to gain this market share in the affordable housing.
We became leaders in this market. It is very important to see these high levels in prices without changing the portfolio of the company. We have the same assets, and we continue working with the same products in the same locations. Even with this increase, we have been managing to reach those results. Tenda dominates this entry level. This is very important, but that was not very important for us to see some stabilization of the margins of the company along this third quarter. On the contrary, in this third quarter, we reported the margin, which was quite low of the 23.2%. We see the margin of the on-site segment. We are excluding Alea.
With Alea, the result is a bit lower. We are going to discuss this more in terms of the impact on costs and how the margin has been impacted, which was lower than we had expected. The backlog margin for future results has not dropped so much as the gross margin as we are going to see in the future. This shows the perspective that we have. Net income accompanied this drop in the margin. We closed the third quarter with BRL 6 million as net income in the consolidated terms. Alea consumed 10. According to expectation as we have provided in terms of information, we would say that Alea would consume cash for some time until we keep this business rolling. How the margin compression happened.
We delivered a margin of 22.2%. New sales with new cost, including all the increases that we had, the new sales delivered a margin of 27.7%. The new products represented 54% already of the revenues of Tenda. You see that the turnover that we have here in terms of sales is very quick. It is good for an improvement like this, a gain like this. When we look at the cost increase, it means that we are going to transform the new sales into results very quickly. The former sales, which are the sales that we had made until the second quarter of this year, they delivered 17.9% in terms of gross margin. It accounted for 46% of revenues. Why was the margin so low? This was driven by the review of the budgets of the construction works.
The recurring margin of those former sales considering the higher cost is this 24%. However, for the quarter, when you report the increase of costs, you make adjustments to all the effect behind. There is a revisional effect, which is done at once. It is a one-time review. When the cost happens, for the future, it comes back as recurring margin. Since this increase has been very relevant for the third quarter, about BRL 80 million. Out of those BRL 80 million, BRL 50 million were already included in the result. The third remaining became backlog margin that you can see here on the other slide. This budget review removed 10 percentage points of the margin of the former sales. This is the reason why we moved from 24% of a recurring margin of former sales already with a new cost.
Then we have the review of the budget, which is at one time and led to this result of 17.9%. We have another effect, which was the reversal of EBITDA. We see the results of the collection. In spite of the macroeconomic, which is so difficult, an actual loss of income power by clients. Even so, we have been managing to have good performance in the collections. That is why we have the reversal of the provisions for bad debt. We did it by means of the digital transformation that we have been implementing in the operations. This helped us in the margins of the former sales. Otherwise, it would have been even worse. We can see a very important breakdown to see what we expect for the future, which is the backlog margin for the future.
Tenda had a certain stabilization in the backlog margin from the second quarter from 32.7%- 32.1%. When we break down this backlog margin, comparing the sales, the new and the former sales, and the sales for the quarter have a much better level, something around 34.8%, and the former sales have a margin of 30%. But the complete effect when we consider the gains in prices. There is something else that should have been on the slide. The share of new sales account for 40% now. We have a very quick turnover of the backlog margin. If we continue with the price level that we have now, we are going to establish the backlog margin at better margins than we have seen so far.
This is good news in relation to the prices, and this is a result that we are going to see along the next quarters. As the company has a very quick cycle, the expectation is that this share will increase in the next two half of years, and then we are going to have new products representing new backlog margins levels. What is the evaluation that we have of the scenario? We see that since we have increased the prices, and this impacts the company for the next cycle. The vision is very positive in the long term for our company because we are in a very privileged position in the market, and which are so powerful as well. First is that have a complete dominance in the affordable segment of the Programa Casa Verde e Amarela.
This has allowed us to operate with low costs and relative pricing power. You see that we have increased the prices without changing anything in relation to our portfolio. Considering that the client has some problems related to affordability. It is so interesting to see the resilience and the dominance we have in the market. This is only possible because we have the leadership in terms of construction costs, and this is something that we have acquired along the years, and this has been the purpose of the company so far, to have this differentiating factor by means of industrial approaches. We have this perspective vision, as you have seen, and we have seen how the new sales have been so healthy.
We have a very favorable scenario in terms of the government by the increase of subsidies, and we have some guidance from the Caixa Econômica Federal that is going to be effective as of 2022. There is some time required for the systems to be adjusted, and the subsidies that are going to be granted are not yet recorded in the results. This is something favorable that we are disclosing to you because since we became the big leaders of the programs of affordable housing, we understand that competitors cannot compete anymore with us. We are going to increase the market share in the program. The government is very interested in maintaining this program.
We see this as something very positive, not only the increase that has already been defined in the subsidies, and also the intention of the government to maintain the government by means of new increases if required. We believe that the governmental scenario is very favorable to us in this aspect. At the end of the day, Tenda operates in a segment that has a very large addressable market, and we operate exclusively in the areas where we operate, namely, affordable housing. We can only do that because we are very competitive in terms of costs. The crisis accelerated the gain in market share of the company. Of course, we see the margins and some results which are not so favorable. Of course, this is the price the company has paid, but it was much more difficult for our competitors.
Now we have an empty track so that we can continue working and continue being the leaders of this market. The evaluation that we have is that even in spite of all the negative impacts, the dominance of Tenda is going to be increased in the future. Now, talking about Alea now. We have something more multimedia than we usually have. The good news is that we have been having is that we are very enthusiastic with the evolution of the project. We had the first launch using Alea brand. Last quarter, we mentioned that we gave a new name to Alea, whose concept is very interesting behind it, and we launched the first asset using this brand in Santa Bárbara d'Oeste city with the urbanistic concept that we have been implementing in this project. The performance of this first launch was very good.
First, the evaluation of Caixa Econômica Federal was of BRL 230,000. Caixa Econômica welcomed the project, and also it was very favorable in terms of the reception of the clients. The average that we have been able to implement is very high. We did not notice any resistance to technology, and we saw the value proposition of the product is very high, is very interesting. That doesn't mean, obviously, that this is the new price of Alea. No way. We're talking about the best cities in the interior of the state of São Paulo, high income bracket that would allow us to sell products at this price level. But we understand that there are different cities in the interior of São Paulo.
This is not the guidance to what's going to happen in the future, but we see this as something very positive, showing that the value proposition was very welcomed by the clients. This is a great hallmark to all of us. We keep on testing, learning so much using this project in terms of two storey. Clients liked one storey houses than the two storey houses, and we identified that in Mogi das Cruzes, and then we adapted to the new city. Another thing is that clients did not like adjoining houses. We're going to show this to you. All those interactions are so important in the initial phase of the project, and this is what we're experiencing here. We are very focused in acquiring land to have those pilots. The first projects are small projects.
We want to have them approved very quickly, to put them in the market very quickly, get our learnings. We have a list of things that we want to learn with the pilot project. We have this long list of learnings. All the land that we have been purchasing are very focused on our learning and making the project evolve along the time. The plant is nearly assembled, ready. It is already being planned. The machine planning is being done now, and we hope to complete it, and we want to have the plant already automated in the fourth quarter of 2021. The project is doing well and we are very enthusiastic. A little bit different from what we have been doing so far. I am going to show you some videos of what Santa Bárbara d'Oeste was.
The launch was virtual, so that you can understand what we have been doing. I am going to show you a video.
This is the place where you have always dreamt to live in. Alea, a gated community where freedom is the neighbor of safety. Easy access to many essential services to your daily lives. Alea Santa Bárbara is close to everything. Easy access to drugstores, hospitals, health centers, universities. Very practical. Supermarkets, and fun, and lots of services. Living very close to a shopping mall and downtown. You can reach Bandeirantes Highway and Rodovia Luiz de Queiroz as well. Alea is a refugee in the midst of nature, with landscaping to ensure life quality and privacy. 47-meter households, two bedrooms, yards, and parking spaces. This is the privacy and the comfort you were dreaming of.
Alea provides life and community and wellbeing, and that is why the gated community will have a playground, gym, and a barbecue place. The houses provide freedom to your children for them to play. To make your dream of having your house. You can have partnerships with Caixa Econômica Federal and Programa Casa Verde e Amarela. Your dream is accessible and viable. Alea belongs to Tenda, one of the largest building companies in Brazil that helped so many families conquer their place in the world. Alea has reached Santa Bárbara. Alea, the house of your dreams.
Now a virtual tour of the house. Living room. Kitchen. Laundry. Bedroom. Master bedroom. Toilet. Freedom and safety with Alea. House with your dreams. Belongs to Tenda. This is it. This is it in relation to Alea. The strategic thesis is known to everyone.
We are confident that the industrialization with Alea will allow us to operate broadly in Brazil with competitive costs, and the business case was much lower than what we actually delivered in this project. We have very good news in relation to this undertaking. If you are interested in buying a house in Santa Bárbara d'Oeste, this is your chance. It is a project to which we fell in love. Let us move on to the Q&A session. We are at your service. I will stop sharing my screen.
Everyone. Let us start the moderating part of the Q&A session. The first question comes from Pedro Hajnal with Credit Suisse. Pedro, you can unmute your mic and ask your question, please.
Good morning, everyone. Can you hear me?
Yes, perfect.
On my side. First, thank you very much for the presentation and for taking my question.
First, I would like to understand how you see the risk of labor costs in the budget reviews. Are you considering a possible increase in those costs? The other one in relation to the portfolio of receivables. It said that you have been able to reverse the provision for bad debt. When we analyze year-on-year and quarter-on-quarter, how do you see the credit portfolio and the risks? Could you make some comments about the default rate risk? Thank you.
Okay, Pedro. Thank you for the question. Okay, here we go. First, in relation to the increase in labor costs, we do not believe that the increase in labor cost is going to be so significant. It tends to be more relevant next year than it was this year.
The collective bargaining agreement was about 7%, but this was the level that we were expecting. We understand that the collective agreement has been high, and when we see other regions other than São Paulo, we don't see a lot of competition, not only in segments, but also in other areas of the civil construction. It's not going to be so impactful as construction raw materials prices. We do not believe that labor cost is going to get close to this impact, which was nearly 40%. On the other hand, we have to have very clear vision of the future. We cannot say that the cost of stabilization is going to happen. This is not the premise that we use. Apparently, the most important impacts are left behind, and steel has been the material that increased the most this year. There is a trend of reduction.
That shows that we are likely to reach a certain level in terms of steel prices. We believe that the other raw materials are going to follow the same dynamics. There are aspects in the chain that are very important. Energy, for example, and some components are pressured because of this. Some suppliers are discussing with us what to do in order to cope with the increases of energy. Also the diesel. Diesel costs would increase the freight prices for everything. Diesel would be very important for us. That would also impact the material costs. Some suppliers are asking for some higher prices now. There are some effects that are still there, and we do not expect any complete stabilization. Our concern is focused on material, not so much on labor. We had 40% increase in raw material construction costs.
We also understand that the scenario is not completely stabilized. In terms of the receivables, you're right when you ask the question. This is what has been happening to the company. We increased about 12% year-on-year, you saw on the slide, and half of this gaining price came from the installments that we agree with the clients and the payment that is made when we deliver the assets. How does this affect the balance sheet of the company? It's the only component in price whose receivable is in the short term. We stabilized because it used to represent 5% of the sales, now it stands from 10%-12% of the amount of the sales. There was one quarter and quarter and a half with this new level. If we maintain this price level, the balance is going to increase.
It will take some time for us to stabilize this business. We are going to continue using the pro soluto as a percentage of the prices, but this is going to help us increase the receivables. What have we been doing to curb this? We have been having higher provisions for the new sales. Our statistics would say that we should have the same provision that we have done so far, but we decided, considering the new sales where we have more pro soluto, we are having higher provisions in order to protect ourselves, so that we can be confident that this increase is not going to adversely affect the payment from clients. Along the time, we are going to see an increase in the receivables and a higher provision in order to protect us from this changing policy.
We do not want to face a scenario where we are going to be taken by surprise. On the other hand, the former clients, which were already in the portfolio, they have 5% as a pro soluto, and we have been having very good results from the collection. These are the clients where we see the reversal of the PDD. We see a higher provision, but the former clients are reverting this provision.
Okay, it is all clear. Thank you very much and have a good day, everyone.
Our next question comes from Thais Alonso with Citibank. Yes, you can ask your question.
Hello. Good morning, everyone. A margin follow-up question. How do you see the future increases? Or can we see a negative situation related to the energy issues? A follow-up on Pedro's question.
You said that part of the increase is related to the pro soluto and the provision is higher than the rest of the portfolio. How much in terms of price increase has been converted as increase in the margin?
Okay, Thais. Let us go. In relation to the construction work costs, we work in a very lean fashion. We have a level of assertiveness in our budget, which has been very high in the last seven years. It has always been very lean. It did not make sense to us to have more than that. What we see in the budget is that if we have inflations higher than expected, we are going to have a reduction in margin. The second question is in relation to the price. In terms of default rate, our income after the deliveries have a default of 8%-10%.
It varies from 8%-10%. Of course it is high, because it is a post-delivery. 90% of what we have as pro soluto is a receivable in practice, and for the new sales, which are higher, we are duplicating this provision in a very simplistic manner. I calculate and I multiply by two. This is what we are doing for the new sales to ensure that we are not going to have any problems in the future. Our perspective is that this will be close to 10, but we are going to continue provisioning until we have this level of confidence. Considering everything that we have in pro soluto of new sales, 80% would become results in practice. The perspectives that we have is that we have a good performance in our collection activities.
This is going to reflect on the results, but this is going to take some time.
Don't you think of selling this portfolio to make the sales lighter until the end of the year?
Yes, we have been discussing this. We have been watching the competitors in the first operations that we designed. We came to the conclusion that this would not generate value to the shareholders because the discount rate is the equivalent to the equity cost. It is a true sale. It would be removed from the balance sheet, but the discount rate is the same as the cost of equity. It would be just like replacing money for money. So we have been studying this. Our impression is that this is a new operation.
There were two operations of the public companies, and this is going to become a common practice, and Construtora Tenda is helping structure this market as well. So we have been studying this. Yes, this is likely to become a practice if the market gets structured like this at good cost levels, of course.
Okay. Thank you.
Our next question comes from Gustavo Cambauva with BTG. Gustavo, you may proceed, please.
Hello, everyone. Good morning. I would like to ask two questions. The first one is related to margin, because I would like to understand the pricing of the units. Because as far as I could understand in terms of backlog margin, for the new sales, you have a margin of about 34%. So I also understand that there are two effects. One is related to the VSO, which is quite high.
Theoretically, you could even increase the price a little bit more. The other part is the subsidy that could help you to define the price in a better way of the units. My question is, do you see any relevant space to continue testing prices at higher levels of the units? What would be the margin level that you think you can reach for the new sales? This would be my first question. The second one is also in relation to Alea. Renan said during his presentation that this average price is high. It seems much higher than we were expecting. To which point can we consider this to be a one-off event, considering the models that you tested?
Considering the acceptance and what you have been seeing in the market, can Alea work at an average price much higher than the average price of Construtora Tenda for on-site projects? What could be Alea margin? I do not know if you can disclose this in relation to this project, if the margin is much higher than you have seen, and the perspective, what is the prospects for this segment? Thank you.
Okay. I will take the first question. In relation to the backlog margin, it is important to have it clear. Backlog margin is still gross of provisions, taxes, and other lines. When we look at backlog of 34.8%, which is the one for new sales, we discount something like 6 percentage points in order to reach what becomes the margin. Because we have to consider the provision of the pro soluto that we mentioned.
When we look at 34.8% in the income statement, it will become 29%, 28%. What we have noticed, if we do not consider the increase in subsidy, we cannot see space to increase prices without losing speed, over supply . We are willing to lose speed. We need to make the equation that would maximize the value to the shareholder. We understand that to maximize the value would come to 22%- 32%, depending on the region where we are operating, and on average, a range of 29% - 32%. This is when the maximization of the value to shareholder happens in our equation of supply over, speed over supply . We are willing to reduce the speed until we reach this range of gross margin.
Since we have a prospect of a price increase, we understand it is important to continue raising the price to reach this level of 29%- 30%. What we are going to look in the future, we are going to continue giving a lot of attention as we have done in this third quarter, is to stabilize the sales so that the recent margins can be healthier than we have seen. Considering the impact on cost increases. Yes, there is space, but we believe that this space for price increase will have some costs, will have some pains. Rodrigo, can you talk about Alea?
Yes. It would be nice to give a long-term perspective as well. The margin for the quarter was very bad, really, for a different number of factors.
When we look to the future, we understand there are some risks, and there are also strategies which can be very positive. We do not know if the raw material costs have stabilized. What makes me uncomfortable now is the disorder in the global supply chain. In addition to that, we have the increase in electricity costs. We also have the increase in the steel prices. The container prices are also quadrupling, and this impacts the price of imported products. This disorder is very impactful for our short-term profitability. On the other hand, what happened is that the little players are out of the market. They are selling their units, that along the time they produced, they needed to sell the asset to become cash. We do not see that the small players are going back to the market, and some other competitors have also left the market.
When you look at the program as a whole, the level of contracting has reduced every month. The government noticed that this is a problem. It is a problem because the government has the resources of BRL 6 billion for loans, and they need to use those resources. They have to use, they have the incentive of using it, because this would generate , this would generate resources and services to the public, and our program is much lower than would be required. This is our strategy, our thesis. When we position ourselves as providers, we could have some turbulence moments, but we would convert to a return which would be very attractive to the shareholders. It is difficult to say how many quarters are going to be required for this stabilization to happen.
The short-term effects are the effects that would hurt the most, especially the lack of resources. However, we believe that in the medium and long terms, Tenda would leave this supply crisis much stronger. It's difficult to mention or to predict what would be the margins for the next quarters, but the return that we were expected is reachable in the long term. Speaking of Alea, the average price of Santa Bárbara d'Oeste is a one-off situation. It's a very noble region. The location is very favorable. What this project shows us is that there is no resistance in relation to the project. Caixa Econômica Federal evaluated it at BRL 230,000, and the clients are willing to pay BRL 210,000 for the project. The acceptance is very high. Could we work at higher prices? I think we're operating in regions where the average price is different.
Maybe it would be possible. We still have to make some pilot projects to see if this is a reality or not. We will try to sell at prices higher than we expected. We were thinking about providing these houses to an average income of BRL 2,100. We are going to use the same psychology. It's possible that we can reach these higher levels than we imagined before, initially.
Okay, Rodrigo, it was very clear in relation to Alea. When we look at your land bank, what we see is this, the average price at about BRL 150,000, for example, for the pilot projects that you have. For Alea, as far as I can understand, it was evaluated at this order of magnitude as well.
What I understood from what you said is that maybe in the other regions, you're not going to be able to reach this level of price. But at the same time, this public with a higher income, they're willing to live in those units. This non-resistance that you mentioned would allow you to expand the number of products, or it allows you to diversify the products, have two projects in the same city until it grows more. Or maybe the target public is going to be this family whose income is about BRL 2,100?
Yes, for the time, this is the income bracket that we are targeting, but we are thinking about a different product whose acceptance would be higher. I could give you an example which can be more tangible. We have another project, a launch of Piraí City. Piraí has 35,000 inhabitants. A very small city.
It doesn't have demand which is high enough for you to make this project viable. The traditional prices of houses, they work of 500 units. We cannot do that in Piraí. We had a project with 160 units, and we are selling. Then we have had very good performance in Piraí, but it's a much smaller city than Santa Bárbara d'Oeste. It's a very small city. Piraí is a very small city, and we're selling to a family whose income is BRL 2,200. It's very important to have those pilot projects so that we can understand what expectations we could have. Okay, thank you. Have a good day.
Thank you, Rodrigo. Thank you, Renan. Our next question comes from Alex Ferraz with Itaú BBA. You can ask your question.
Good morning, Osmo, Renan, team. Thank you very much for the presentation. I have two questions.
The first one, I don't want to be repetitive, but still talking about margin, I would like to understand what is the effect of provisions. You said that there was an increase in the steel for the quarter. I would like to understand the rationale. You decided not to include this increase in prices. Was this negotiation very heavy, or was there any other raw material that caused an impact and the renegotiation was much stronger so that we can explain this one-off impact? The second question is in relation to the cash. You mentioned of securitization. What is the dynamics of cash generation in the future? You review the parameters of Caixa Econômica Federal. You are storing some raw materials. How can we look at the cash generation if it becomes more normalized since it has been negative in the last quarters?
Thank you for the questions. In relation to the margin, in fact, in the beginning of August, we had an important increase in steel, and we mentioned in the release that this increase of prices was being negotiated. We have a number of reviews that happened in July and August. More than 15 items varied. It is not a concentration. Steel increase is half of the increase, per se, but other prices increased, aluminum frames and doors and other bathroom pieces. This was something very important that happened in terms of raw material increase. That is why we are providing more information because there are lots of disorders, imbalances that can happen and can affect the raw materials. Freight, for example, depend on diesel. Diesel prices are so important. It is something for us to be on the watch out.
The review was related to this. We have been trying to increase the prices every month, as you saw on the graph. We have a reasonable concern of increase 10% from one month to the other and have no sales. We have been doing this at a certain pace that we believe to be healthy. We increase, for example, 4% in the same portfolio. We were doing this gradually. We believe that we can do this without affecting the rest of the operation. The operation works nearly as a factory, so we need continuous volume to continue producing the units, and we have the industrial approach as a major factor for cost reduction. We have been doing this, increasing prices without having any price disruption.
Yes, we are going to calibrate the increasing prices, but we cannot run the risk of failing to sell 50 units, and this can damage our business. We believe that this dynamic has been very healthy, increasing 4% for the quarter without losing VSO, without impacting the portfolio. This is what we have been doing so much, and this gives us very good prospects for the long term. In relation to cash generation, two important things that happen in terms of cash generation. First is Caixa Econômica changes the way they pay the companies. First, they wait for the record of the asset, and then it will start paying the companies. It removed about 70% of the cash generation for the period. It is as if you got it worse for the working capital for some time, and then we are going to carry over to the next period.
But this is not likely to change the cash generation way ahead. In terms of the anticipation of the purchase of raw materials, is something that we have been stopped doing. We believe that there is going to be some level of stabilization. We believe that this is going to continue for some time, but we believe that as of next year, this is going to be stable. We do not believe that this is going to be a practice for the future because the biggest concern in terms of raw material cost has already stopped. It doesn't make for Tenda since it's a stable operation. If we have the assumption that the prices would stabilize, this would not impact in cash generation.
Okay, Renan, thank you.
Our next question comes from Bruno Mendonça with Bradesco BBI. You may proceed, sir.
Hello. Good morning.
Thank you for the presentation. It's important the additional disclosure that you have just given us. I would like to talk about capital structure and indebtedness. You reported higher debt than historical levels of 20%. Is there an internal discussion of keeping the leverage level at a different level to set off the ROI at a lower margin, or do you have any plans to reduce it? Still talking about indebtedness, your debt has some concentration on CDI. CDI is changing, so how do you see the mix of debt and structure? This is my first question, then I have another specific question.
Okay, Bruno, here we go. In relation to capital structure, our policy is net debt over equity plus or less 10.
We believe that this stretch is interesting, 30 points, and we would like to go back to this level as soon as this scenario is stabilized. We'd like to remind you that we have important investments to make in Alea in the next three years. Alea is an operation that is likely to consume CapEx and OpEx for the next three years. So 2021 up to 2024, we believe that we are going to consume from BRL 300 million- BRL 400 million. The core business is likely to stabilize and generate cash so that we can pay this initial investment in Alea, and then we have other sectors to invest.
So we want to do that, keeping ourselves to the level of + 10, less 10. And we are going to work in this range. At some moments, we are going to be close to + 10 and/or less 10.
We are not thinking about reviewing this leverage according to return. So we do not consider changing this policy, and we want to converge into this along the next years. So we're considering this convergence in the future. Yes, you're absolutely right when you mention the CDI. It causes a lot of impact. But what's our hedge? Our hedge is our cash. Cash level of Tenda is very healthy. BRL 1.3 billion is the debt, so this high level of cash is nearly all invested in CDI, and it keeps up with the CDI increase. So most of the amount will not be hurt by the increase of CDI. As we said, Tenda wants to maintain the debts linked to CDI. So even when we have some debts using IPCA, we are going to migrate to CDI. Why is that?
Because CDI volatility is much lower than the volatility of IPCA, especially when we are talking about marking the market. So it makes sense to maintain our debts linked to the CDI.
Okay, it is clear. The second question is a bit more specific. So that we can estimate what is the trend of margin recovery. You show the very interesting graph showing a drop of margin according to the periods, especially the last three quarters. But it says that only 46% of the revenue of the quarter came from the former sales. I thought that number was quite low. Could you confirm my understanding? The 46% you mentioned are reduced by the reverted items of the previous quarters. If you consider only the evolution in construction works without cost adjustments, the former periods would be much more relevant than this. Correct me if I am wrong.
And another point is that the margin of the former cycles are not the 17% that you reported. If you adjust according to what we recorded in the past. Confirm my understanding, and how come the 24% would talk to the 30% of the backlog margin of the previous sales? Because this gap is quite big. Is it related to taxes?
Very good questions. In relation to the 46% of the revenues from old sales, when you have the cost reviews, the impact in accounting would be the return of the revenue. Yes, the mix would be the opposite. Yes, in our vision. If you have a normal quarter, the formal sales should represent 56% of the revenue for the quarter. For the half of the year, not the opposite. Yes, you are right.
And in relation to the recurring margin of 24% of the former sales, we have a discount of five or six points of the backlog and results, and they converse 30%- 24%. So where does discount come from? PDD, taxes, and provisions. Five to six points, when added all those items together. And for new sales, we have the doubled PDD, which we are doing this as a protection since we increased the percentage for the portfolio. These are the main components that explain the backlog margin and the margin that we appropriate in the result, okay?
Okay, great. Yeah, that is the answer we wanted. Yes, so the mix should be inverted. For the fourth quarter, I can consider a base at that level.
Yes, assuming that no cost reversal. Yes.
Okay, great.
Our next question comes from Marcelo Motta with JP Morgan. You may proceed, Motta.
Thank you, Álvaro. In relation to growth and launches, as Renan mentioned, it does not make sense to deaccelerate the company because you always have this pipeline of construction. But on the other hand, you are facing a very difficult scenario. The predictability of cost is very low, so the lower launch was more related to approval than you making it accelerate. Wouldn't it make sense to wait for some stabilization before step on the gas to grow? In other words, it is very difficult to predict the margin. But as from what Renan mentioned, you want to continue with this speed of launches, right?
Yes, Motta, you are right. Our priority is to manage to stabilize the margin. We were growing at a rate of 10% a year.
Next year, we believe that this is a year. It is likely to be a year when we will be willing now to grow, so that we could see this margin stabilizing. Maybe we can make some adjustments in this regard.
Okay, perfect. Thank you. That was it. That was the question I had.
Okay, nice. Our next question comes from Fanny with Santander. You may proceed, ma'am, please.
Thank you, Kauê.
Fanny, we cannot hear you.
Oh, can you hear me now? I am sorry. Oh, good morning, everyone. My question is very brief. I am sorry we go back to the topic. When you make a budget, your budget, so that we can understand the risks and looking ahead, how much on average do you include as raw material adjustment going forward?
Fanny, we prepare the budget to purchase land and everything else. We consider the projection of inflation for the coming year, and we also include this in the viability of the project. Generally, this would vary from 4%-5% a year.
IPCA then?
Yes, IPCA. Yes, INCC and IPCA. For next year, the trend of what we have as market indicators is 7%. So this is how we prepare the budget. When we purchase the project, the purchase, we add something else. We do not want to have any problems in case a cost variation happens. So we overestimate a little bit, not on the everyday accounts, but when we do the purchase, but not for the backlog margin. INCC only.
Okay. Thank you so much.
Our next question comes from Daniel Gasparete with Credit Suisse. You may proceed, Daniel.
Good morning, everyone. Thank you, Kauê. Going back to previous topics, to understand about Alea.
Osmo talked about the pilot projects in relation to the demand. I would like to understand a little bit about the cost. How do you see the behavior of cost and the margin expectation in relation to Alea? Osmo, you mentioned the disruption in the supply chain, and Alea is based on this supply chain. So I would like to understand how you see the construction of this chain and if you felt that there was some destabilization more than the on-site chain. Since it is exposed to dollar, the variation is higher. In other words, how has it behaving in the last 12 months? What are your expectations and what do you expect in terms of margins in the future? Thank you.
Gasparete, how do we work with Alea margin? We have two costs that we look at when talking about Alea.
One is the standard cost, would be the cost that the house would have if we operated without any process improvement or any improvement in the supply chain. Then the PDD cost, the cost of the action plan. When we implement all action plans that are undergoing in the company, how much would be the cost considering Alea regime? Of course, what we are interested in is the cost considering the action plans, because this is the cost that we are going to see in the future. The standard cost is very high because has not favored from scale gains and not even from the supply chain advantages. So this cost progressed more than on-site segment construction assets. Alea raw materials had fewer differences than the on-site project. So maybe we made some mistakes because we did not maybe cut so many costs with Alea.
The business case became better because the raw materials of masonry activities, concrete walls, were much more aggressive than the raw materials for Alea. Different raw materials.
Okay, Osmo, in terms of supply chain, did you feel any difficulties when you were putting together this supply chain?
No additional difficulties. The context that we have been living, which is very tense with online, happens on Tenda, but the conversations are more related to strategic sourcing than purchasing. Strategic sourcing activities have been doing very well at the speed that we expected. Thank you. Have a nice weekend, everyone.
We have another question from Giovanni, and this question is for you, Osmo. Do you consider increasing the size of Alea in the future from 47 meters to something bigger?
In the pipeline for next year, we are going to test a project with larger houses.
Not high income houses, 55 sq m. Considering this favorable acceptance and that took us by surprise with the public with a higher income, we are going to test this appetite with higher incomes of projects of the type of Alea. We are going to look at that. The business case continues to be providing products to families whose income is BRL 2, 100.
Okay. To ask a question, you can use the raise hand button. I do not see anybody else in the line, so give you some more seconds. If you want to ask a question, feel free. Okay, Osmo, Renan, I turn the call back to you for your final considerations, and we are at your service from the IR.
I would like to thank you for attending the call. We are at your service, all of us from the IR team.
I would like to thank Marcos Pinheiro, our new CFO, who is going to lead the finance team. He is going to replace me, and I am going to move to another position at the company. I would like to thank all of you, the investors and the Tenda's team.
Thank you, Renan. Considering the questions, and we understand the topic of the quarter was the margin. This was the worst margin ever recorded since 2014, if I am not mistaken. It is not something that we would like to be reporting. But in fact, it is interesting to say that for a long time, Renan and I have the market perception that we are much more conservative than the expectation of the market in general. There was a reason for that. We did not believe that the levels that we operated of three or four years ago were sustainable.
The dynamics of the market as a whole had profitability that would attract prices, but that would cause some disturbances in the market, and the market would converge into levels which would be more balanced. I understand that we move the other way. The profitability of this segment, the entry segment of Programa Casa Verde e Amarela, is much below of what we imagine which is going to be the profitability for simple reasons. Because there is no program at the current levels. The contracting of this quarter, this year account for half of the contracting levels of last year. If nothing is done, the loans are going to hold back all the money that should be addressed to housing. We have seen signs that all governments would provide support to us. Those movements change to move from one side to the other.
We are likely to go back to attractive levels of profitability. I cannot tell you for sure how many quarters we are going to need. It is a moment where we see a lot of disorders in the supply chain and the economy, and also the employer's compensation fund also is being affected. Something more radical needs to be done. Radical actions may take long to action, but I believe that something is going to happen. In summary, it was a very negative quarter, but ironically, it would position Tenda in a very positive way because the small players are out of the market. We will have different positions in relation to housing lease. We have a pathway towards the Programa Casa Verde e Amarela, but I believe that this can be a very important point to have a turnover in the margin.
We do not believe we are going to see good results in the short term, but we believe that.