Good morning, everyone. Hope everybody is well. Thank you very much for attending this event. I am Alvaro Kaue, responsible for the IR area of the company. Today we are going to start another event to discuss the results of our company, and the dynamics is going to be very similar to the previous presentations. Renan will describe the numbers, and then Rodrigo will end the presentation. Then we are going to open the Q&A session. If you wish to ask a question, you have a Raise Hand button on Zoom platform, and we can moderate your questions at the end of the event. Before introducing the speakers, I would like to welcome Beatriz. Beatriz Silva has joined our IR team. For the months to come, we will have a lot of contact with you, and Bea will be participating with us. Welcome, Bea.
We wish you all the success. Before beginning, I am going to read the disclaimer very briefly, and then we are going to start the presentation. Renan Sanches, our CFO, will give the presentation, and also Rodrigo Osmo, CEO. This webcast refers to the results of the second quarter 2020, and this refers to future events. Any changes of macroeconomic policies, politics, and legislation may affect the performance of the company. Renan, I will turn the call over to you.
Thank you, Kaue. Welcome, Bea. Thank you very much for attending our call. We are going to try to be very brief when discussing the numbers, and then we will open the Q&A session. The operational performance of Tenda was very interesting. You could see in the previous results, in the preliminary results, we can see that the level was very positive for the quarter.
We operated in nearly all the areas where we have business, and this has transformed into a record sales volume of BRL 1.6 billion for the half of the year, and the second quarter was also a record. We have been making a lot of digital transformation efforts, providing a lot of flow for the company, in particular in the selling expenses. We noticed that selling expenses over gross sales, which we believe is the best index for the analysis, and we are also at the historical levels of 5.8%. We have seen a lot of results, and our journey is quite interesting. We hope to see other improvements in the future as well. In terms of transfers, we also posted significant results, an important catch up in our results. We have seen stability in this area.
Caixa and the Ministry of Regional Development have been making some changes since 2020. But this number of transfers did not transform into cash generation. We burnt an important volume of cash, BRL 111 million in our cash. Tenda, BRL 103 million. And Alea, BRL 8 million. The reason for this cash burn was the change in the model adopted by Caixa Econômica Federal to transfer the amounts to the companies. To be more clear, Caixa, up to April this year, had adopted a model that as soon as we had the project, we managed to transfer the client to the bank, and the money related to this transfer would come into the cash of the company. As of April, we have to register in a registry office the deed of the project before we receive the amount from the transfers.
We have an agreement with Caixa, and then this contract has to be registered in the registry office, and this has been taking three months. There is this initial deviation from the cash generation because part of the cash burn is driven by this fact. This would have affected in the quarter when the change happened, and then it should go back to normal levels. This is a new model of how the bank is going to operate, but we are not likely to see this difference in the future. The sector as a whole will have a level of receivables which is higher than we had before, because of this change in the way Caixa Econômica will operate. In terms of backlog margin, we can see that the levels are lower than what we had expected, and also according to the guidance.
The adjusted gross margin of 27.8%. We can see that it is an important drop of nearly 3%, and the backlog margin of 32.7%. We can see that it's nearly a 1.5% drop in the backlog margin. This is an important effect that we can see that the impact was driven by the increasing costs, especially related to raw materials. The raw material price increase was very relevant, impacted our margin of nearly BRL 50 million when we needed to review the budget. We have had some discussions in the third quarter of going through some other revisions. We see that this movement is much more persistent than we had originally imagined. As of the beginning, in the third or fourth quarter last year, we had a feeling that this cost increase would not go back to lower levels.
We had this feeling that the cost would increase, and then it would drop, but we didn't see this movement. We were not expecting how long this moment or this instability would last. It took longer than we had expected. We had this higher effect than we had planned on our margins. This also affected the net income that amounted to BRL 34 million for the quarter. We delivered BRL 71 million for the half of the year, higher than 2020. The company expected to deliver more than this by means of larger margins. But all our attention was turned to this short-term result in relation to costs and how the cost can impact the business as general. And trying to provide a broader vision of how the company sees this moment and how the market is going to solve this, especially Tenda.
We noticed that throughout the years, there has been an important concentration on the housing segment, and we can see how the FGTS fund uses in popular housing, and we can see the associative credit , and this is what the large and medium companies use. And in blue, you see the transfer of finished product. We can see that there's a growing presentation of large companies, large and middle-sized companies. And why is this happening? It's happening because it's not feasible for companies which do not have a solid structure to operate in this program. The entry barrier that we see is related to operational efficiency. If the company is not really efficient, it cannot have the profitability to operate in the segment, and the concentration has been increasing along the years.
Tenda is one of the companies whose share has been increasing in the program. The operational efficiency is so important, so much so that we can see our trajectory or journey. First is related to growth. Tenda has been growing in a constant manner along the eight years. With or without crisis, we can offer this stability. Our business has no simplicity in demand, different from other segments. This constant growth allowed the company to have two important reductions. First, one in related to the selling G&A on income. We reduced by 37% along these eight years, the selling G&A over income. As you can see on the graph, the curve continues with a downward direction, and it is also different for the construction cost. In real basis, the construction cost of the company was reduced by 38% since 2013.
A well-structured company whose business model is focused on efficiency and that managed to have gains and scale, as in our case, can survive in the segment where we are operating. That is why we are increasing the concentration and the share in the program. We would like to make this very clear because if we look at it in a deeper level, let us see how the Casa Verde e Amarela segment plays out. We can see that there are three different segments. It is like the bracket 1.2, bracket 2, and bracket 2 and 3 at high. We give some nomenclature specific in our companies, and we can see what is the market share of Tenda in stabilized items. Here is the largest areas where we operate, representing more than 80% of the company. Rio de Janeiro and São Paulo. The market share in those areas are close to 85%.
Our leading position is absolute in the markets where we operate. It is only possible because of the operational efficiency that we showed. This leadership has allowed us to mitigate somehow the impact on the construction costs that we have been having by means of increasing prices. At a certain point of time, Tenda understood that it would make sense to increase prices even with the cost increases, because it was increasing the dominance and the market share of the company. As you saw, we can see how this was relevant, and you can see the market share that we presently have. But the cost increase is continuing. It is much longer than we had expected. Because of the revision of how this is going to last and how much longer this is going to continue to last, it changed our strategy, and we had to increase prices.
You saw the quarterly prices higher than the first quarter. But when we have a breakdown on a monthly basis, it is very clear what is the price movement of the company. From May to June, we increased the average price by 4.1%, and from July on, we increased by 1.2%. We managed to do this at a sales volume, which was very significant, very close to what we expected without losing the VSO. We only managed this volume without losing VSO because of our complete dominance over those markets. We can imagine going forward that we are going to work in a segment where this moment of high costs will have established margins, and this increase in prices is an evidence of all this. This would be a movement that is enough, and we are going to come out of this moment dominating the market.
It is such a relevant market share showing as evidence of all this. This was only possible because of the operational efficiency that we built along the eight years. If we look back and when we think about the future cycles, we can see that Tenda can capture all this dominance. One of them is what you see on the screen, which is the significant increase in price without losing sales over supply. This long-term scenario is very encouraging for the company. We have options for business models. Alea is one of the business model, and Rodrigo will talk about the new initiatives that we have adopted, such as our operation in Minas Gerais. In addition to this strategic way of working in the long term, we can see that the margin reduction is irreversible.
The result of the second quarter was very low, and we have future results that are going to have lower margins as well because this price increase will work for new sales. But I have sales that have been made at lower prices and at higher costs that are going to be included in our results. We need to revise the guidance for the year that it was 30%-32% to 28%-30%, which is according to what we usually deliver year to date. We have to balance the result of the second quarter along the next quarter so that we can be within this 28% and 30% limit that we established. We believe this is quite feasible. On the other hand, this complete dominance, even considering this high increasing price, will establish the margins for the long term.
Even with this price increase, it seems to be viable for the company to increase the perspective of net guidance for the company that was BRL 2.8 billion to BRL 3.2 billion. We say that this guidance is viable considering the performance of the first six months. Usually, the first six months are worse than the other half year. We are confident that these two guidances that we are revising are viable, and they make sense considering the market moment we are experiencing. This is for 2021, so that we are going to reestablish the margin for 2022 considering the stabilization of prices. This is the main message that I would like to give in relation to the core business. I would like to turn the call to Rodrigo so that he can talk about what we have in our pipeline.
Bea, welcome. Good morning, everyone. We have a very important announcement to make. I would like to welcome Andre Massote. Mr. Massote joins us as a Statutory Director of the company now, and he used to be the CEO of Precon, which is an operation that takes place in Minas Gerais. He has two very important competence to bring to us. One is the knowledge in the market of Minas Gerais, and maybe even more important is his experience with concrete precast industry. Minas Gerais has been our frustration in terms of market. It is a market whose demography is exuberant, and we have not been able to operate efficiently there. It is a very difficult market. It is a place where real estate developers for low-income bracket operates. It is super competitive, and the legislation is very complex. The topography is very challenging.
Belo Horizonte is a city filled with mountains, so the topography is very challenging, as I said. While Massote was the CEO of Precon, Precon was the market leader at Belo Horizonte, even in this challenging scenario, and all the competitors operating there. So he's going to bring his knowledge, his competence, so that we can seek the leadership in those markets. And we are the leaders in all the markets where we operate. We are going to fight for leadership in the Belo Horizonte market as well. In addition to Minas Gerais, Precon was also a leader of precast concrete in the area. And it used to lead the operations area. So we wanted to work with professionals with the highest knowledge in this area in Brazil. We are going to focus Minas operation in precast concrete.
And should the study confirms to be promising, the metropolitan area of Belo Horizonte will be our pilot area for this initiative. We still don't know the potential of this market, but we usually like the fact that the level of industrialization is so high in this segment. So we want to increase the industrialization of our processes. This is something that we have been looking for on a constant basis. Good luck to those two resources that are joining the company. Speaking about Alea now, Alea has been making headway in its business model. We launched the brand Alea, which is a brand that we like so much. It has a lot to do with the life quality concept that we want to offer our clients.
We have two projects that have been approved and already launched in Mogi das Cruzes city, and we hope that in the years to come to have other launches. And the plant is doing well in its assembly. We want to complete the factory. Randek is one of the brands of our machines, and they're going to take part in the assembly of the factory so that all the facilities can be ready for operation at our plant. Now, we are going to open the Q&A session. Kaue, would you like to moderate?
Yes, of course. Thank you, Renan. Thank you, Rodrigo, for the presentation. We'd like to remind you that if you wish to ask a question, you can use the Raise Hand function down here, and we are going to moderate your question. Our first question comes from Andre Mazini with Citibank. Mazini, you can ask your question, please.
I'm Andre. In relation to the area of operation in Minas Gerais, you said in the first quarter, the presence was nearly negligible in terms of sales of the last months. Could you provide us some information about the history of the company in Minas Gerais? There are some incumbents of low income, and the growth is more in CVA or FGTS. You see some opportunities now, and you brought in somebody who's very competent in the area. So could you talk about the dynamics? Why did you decide to grow in the area of Minas Gerais? Also in relation to the off-site in Minas Gerais, would you produce in São Paulo? It seems that Randek machines are for wood. Are you thinking about having a factory in Minas Gerais to make the wood prefab?
Minas is one of the largest demographies considering all the markets where we operate, but our operation has been decreasing year- on- year in the past six years, and this was not our strategic decision. We face difficulties in operating in Minas Gerais. First, it's a very competitive market, so it's very important to have a local density of talent. So we need people who have deep knowledge of the area. Because you're competing with sharks, with giant companies. So it was very difficult for us to create this local structure in the city of Belo Horizonte. The other reason we face so many difficulties, as you said, most of the players in Belo Horizonte work with a product which is more expensive. And we operate at bracket 2.
Why is the bracket 3 product more successful in Belo Horizonte, and we face so many difficulties to implement our product there? Because the topography is very complex in the area, so it's difficult to stabilize the stands, so not many pieces of land are viable. And since there are no offers, there is a repressed demand with people with a higher purchasing power. So it's very likely that our operation in Minas Gerais has an average ticket which would be higher. We're not talking about working with affordable housing, but more close to Casa Verde e Amarela program than an operation which is equivalent to that Tenda would have in other areas. Obviously, Massote would solve both problems because he's a big talent in Minas Gerais because we have brought in this talented resource, and also because we are looking at the markets of bracket 2 or higher.
In relation to the factory in Jaguariúna. Jaguariúna factory has nothing to do with the prefab factory. If we come to the conclusion that the operations in Minas Gerais or in Belo Horizonte will be totally focused on prefabricated, we are going to change our decision and make a plant in the area.
Our next question comes from Gustavo Cambauva with BTG. Gustavo, your line is open.
Hello, everyone. Good morning. You touched upon a point about which I would like to understand a bit more in relation to the increasing prices not having impacted the sales. You've mentioned the dominance and everything, the share, but I would like to understand how can we expect the prices to go up. You said that if prices go up, you have other indicators that go down.
I imagine that what is happening is that there has been a downgrade of the families that purchase your product. But I would like to understand to which degree this will not impact either the VSO or even the potential market, even though there are not so much offer, maybe the demand would not match your product. So how do you see this? So how far can we go considering the means of payment or the money available from the purchaser? So how do you see how you're going to gain margin or if you already reached the limit?
Hi, Gustavo. Thank you for the question. Well, in fact, the dynamics that we have seen so far is that the competitors that work in the extreme of the regions that we call mass, they're raising their average ticket.
Either they stop operating the area, or they would increase the description of the offer, and they would sell the unit at more expensive prices, and that would be favoring Tenda. This is one way of using the market to our favor, considering the digital transformation that has allowed us to increase the prices without losing volume. We are working smarter, and we are capturing clients that did not have Tenda as its first option, and now Tenda is at the top of mind. This is why we had this improvement. It is hard to say how far we can go. What we can say that the low-hanging fruits have already been picked. I would say that we can increase 6% in price without losing volume. But it is a balance that we still have to verify at the company.
We have always had this assumption based on historical levels, that each 1% of price increase, we would lose 15% in demand. This is no longer true. We have been increasing prices without losing demand. Maybe this ratio may change in the future considering the market dynamics that we see. Tenda will continue testing this, not necessarily for us to have much larger margins that we used to have in the past, but the cost increases continue happening. We have some auctions that will happen in July and August, and we are already finding ways to counter those price increases. We are going to continue with these dynamics. We might lose some VSO, but we are going to consider what would be the size that would make sense for us to operate. After all, maintaining the demand is very important.
If we lose 1% in margin, it will hurt our company. We have a concern with the volume, with proportionally in relation to the market. But this dynamic is changing a lot, so we are no longer so adverse to testing price increases even if the volume of the company drops. We are going to work with this. We believe that the most important things have already been done. But we have a new sales team considering this price increase. I know that this is very dynamic. This is something that changes all the time.
But considering the dynamics the way it is today, considering what you have done in terms of price increase and what you see on the table in terms of recent negotiations with the supplier, could you say that the margin seems to be at the low for you? If the balance would consider stability when you capture this price increases, or do you believe there are going to be other adjustments or other corrections?
For the year you mean?
Yes. Looking at this year, the beginning of next year. If we focus on the units with new prices and new launches, do you believe there is a trend of improvement? We see there was a revision for the quarter, but disregarding this, do you think the levels are going to be better?
Yeah, they should be better in relation to the second quarter from now on, if we manage to implement these price increases and if the cost increases are not so high. We are likely to see improvements every quarter, and we are likely to have this stabilized to margins that we had originally expected.
Thank you.
Thank you.
Our next question comes from Alex Ferraz with Itaú BBA. Your line is open, Alex.
Good morning, Renan, Rodrigo, Kaue. Welcome, Beatriz. Thanks for the presentation. I have two questions. One is a follow-up on Cambauva's question. Price and market share, considering the lower brackets of CVA. The feeling that we have considering the gain market share is that this is driven because the program has been emptied. Because considering the price increases, only the most efficient players can continue working considering those challenging dynamics. Would there be any gain in land bank? Maybe the negotiations for lands play a part. Maybe we could expect some medium-term gain. There should be some adjustment factors to offset this. The other question is relating to the cash and the leverage.
We can see that the cash burn was stronger in this quarter, and it is well explained in relation to the real estate offices and registrations and also Caixa Econômica Federal, new adoption of the new way of working. What are you expecting?
Alex, thanks for the question. In relation to the market share gain, the way we see it is exactly the way you see it. We understand that some players have left the market, and only those whose operational efficiency is solid can continue working. We see this in practice. We see this in the numbers that we have been following. In terms of gains in land, we don't think it's likely, Alex. The way it works, the way the land market works, if the cycle is good, the land prices will go up.
If the situation is not favorable, they will wait. We are not likely to have any inflations on the price of the land in the next cycle, because in fact, there are players who do not want to buy, and Tenda is becoming the only alternative for the person to sell land. That doesn't mean that the seller is willing to sell at a discounted price. The owner of the land has been holding the land for decades, and he will wait for a favorable price for him. We may have an inflation impact on the price of the land. I don't believe this is important for us to recover the margins. The level of leverage that we see today, even though it's very comfortable nowadays, it's not according to our policy. This is not where we want to operate.
This is not the level we want to operate. We want to operate at +10, -10 of net debt over equity. We moved to 12 because of the change made by Caixa. We would never expect that this would happen. Otherwise, we would have planned for that. We wouldn't like to be operating at this level, even though we understand this leverage level is very comfortable. We believe that the main topic here is to generate cash, of course, and with this, we are going to go back to the leverage levels in the quarters to come. But we even studied the possibility of securitizing the receivables, because this will be value generation from the viewpoint of the shareholders, and these are more expensive than loans. They have to be at a lower cost than the equity. At present, they are at the limit.
We are studying this topic very closely. It is a market that is being restructured now, and what we are doing would not necessarily generate value to shareholders but will help us open or break into new markets. We are watching this closely, but we have not made any decisions in this sense.
Renan, thank you very much.
Yes, Gasparete with Credit Suisse.
Good morning, everyone. I have two questions. I understand that this quarter you are considering revising the budget. I would like to understand where the increase is coming from. Steel or other items. You also mentioned a moment of stabilization of costs. Why do you believe that you are going to go back to previous levels? Do you believe that the capacity of suppliers, or do you believe it is simply a cycle of commodities? This is what I would like to understand in terms of costs. As to margins, I like to see the marginal gross margin. I would like to understand the gross margin of the new projects, considering the price increases that you have implemented. Basically, this was it. Thank you.
Great. You said you would ask a question. You asked three questions. The more, the merrier. I n relation to the first topic of the new budget reviews, what we have seen, Gasparete, from July and August is an increase that has been diluted. Concrete 4%, aluminum frames, wood frames. There are many items, and none of them is so relevant as we had in the first quarter. But when you put all the impacts together, you can see the effect.
The main, in addition to the steel, about which I am going to talk about, is the concrete at 4.6%. Concrete wood would account for 17% in the cost of our construction work. The effect is very relevant. The steel for August, we are negotiating at 30% from the fourth quarter last year. We have seen an increase of nearly 60%, and there is likely to have an additional amount of 30%. We are very likely to suffer from the steel price increase . Steel is the most critical material in our supply chain today. We have a structured solution to solve this. It is not the best way of negotiating, because we understand this is a chain that involves few players, and the strength is on the side of the supplier, and this is not likely to change in the near future.
The best way is to study how to replace steel. How do we see it? The lower buildings, we have a technical solution for that. We are going to replace steel with glass fibers, so you can use them on the walls and on the foundations, but not for the top of the buildings. These are for buildings without elevator. We can replace 50% of steel with the glass fibers. For tall buildings, we still do not have a technical solution with what we are going to replace steel. The glass fibers is a solution for lower buildings. We also going to adopt drywall in the internal walls. The topology, the implementation , i t has a very strategic relevance. This will replace the use of steel. The more we reduce steel in our works.
And we also have to consider Alea, which uses zero steel. So 50% of the business will not be close to the steel chain. And our operations in metropolitan areas will reduce the consumption of steel, considering all the initiatives that we are adopting now. So we are trying to find solutions so that we will not be using those materials. And this is something that's going to affect the result of the third quarter. In terms of cost, maybe I was not very clear. Tenda has never believed that the cost will go back to previous levels. So there was this expectation in the previous ideas. This is not a cycle that we've seen in Brazil.
When we look at the crisis that we experienced in Brazil, what we saw in Brazil, even in 2014 and 2015 in the real estate areas or developer areas, is that costs stopped increasing with no inflation. We've never seen those prices drop, those costs drop, especially when we're not talking about free markets such as cement and steel. So we have to face the new reality considering the new costs. That's why the gain productivity was important as a result of our strategy, because those players that did not consider this were out of the market. This becomes ever more important in the next cycles considering the high inflation. This is how we see it.
In terms of the marginal gross margin that was mentioned by Rodrigo, which is one of the indicator that is watched closely by us so that we can look at prices in the future. All those sales that we made between May and June deliver a gross margin of 29% and 30%. So we start raising the bar as to the margin of the company. We continue with the initiatives of increasing prices, but we believe that we will continue gaining advantages in the constructions so that we can reach stability in the future. From June and July would allow us to have this margin from 28% to 30%.
Our next question comes from Fanny with Santander. Fanny , your line is open. Go ahead, please.
Good morning, everyone. I have two questions. First, could you discuss how, as you have Alea's ramp up, how can this help in the consolidated margin as a whole? Because Renan, you were talking about how you would like to reduce your dependence on steel. And in relation to Alea, could you talk about the new projects? How are the clients accepting this? Because this is not what clients are traditionally expecting . So how do clients see this new project? And the third question, in relation to the digital transformation, we can see that it has helped you a lot in decreasing your selling expenses. If you talk about the initiatives, how are you being able to capture these new clients that would not traditionally come to Tenda? And where do you think the selling expense would reach considering this digital transformation, please?
Renan, how would you like to answer those questions?
I answered the two questions asked by Gasparete. Maybe you can take the three questions.
Alea may not impact our margins. It may harm our margins in the next four years. It's not a startup. Until it reaches the optimum operating scales, it's likely to operate at sub-optimum margins. We do not believe that Alea will contribute positively on the margins of the company. In terms of acceptance of the product, one of the project was done with Tecverde, and the concept was not the concept that we had imagined for Alea. We have isolated in an opening land division. We built the houses in order to learn. This was part of our learning curve. This wouldn't be a nice parameter for us to understand acceptance. The project in Mogi das Cruzes city, we saw that the evaluation by Caixa was very favorable.
We have a third launch, which is likely to be done in the third quarter, and Caixa was very favorable in terms of Caixa's perception of quality. This has been very positive. There is no clear resistance in relation to technology. Obviously, we have to be very careful because it's not yet a consolidated technology in Brazil, and we have to look at it very carefully should there be any resistance to the acceptance of the product. We are monitoring all this, and this is one of the biggest concern that we currently have. In terms of digital transformation, this has been fundamental to our sales strategy. The company today operates on digital continuous improvement. We have 17 initiatives underway. We have a very large area called performance marketing, and we have been managing using all the channels that we have to gain productivity by means of digital channels.
In terms of cost reduction, it's difficult to say because on the one hand, we have been gaining efficiency. If we have to increase prices, we have to look for clients in a level where they have higher purchasing power. To increase prices, we have to ignore people who would not be in this level of price. We gain on the one hand, but on the other hand, we can also lose because we are going to have this higher discipline. This is it.
Our next question comes from Aline Caldeira with Bank of America. Aline, you can proceed.
Hello, everyone. Good morning, Renan, Rodrigo, Alvaro. Bea, welcome. Some of the topics have already been approached, but I would like to understand in terms of mix, what's the strategy? On Tenda Day, we talked about the total expansion. First, I would like to understand how this expansion in São Paulo is seen by you both using the new strategies in terms of cost and price. What about working in Campinas and also the investments in Minas Gerais?
Thank you for the question. In fact, in Tenda Day, we showed our interest in being more effective when we look at São Paulo. We show the difference between of what we launch today and what we want to launch in the future in the metropolitan areas. Half of the growth would have to come from São Paulo. We took internal initiatives so that this would materialize. It's working out. The point in São Paulo was the competitiveness, considering the topology that we had. Many of the actions were implemented, and 50% of the land that we bought had to be in São Paulo.
So we had a very interesting performance, and half of the growth would have to come from São Paulo. It is interesting to see that we have been able to purchase in São Paulo using more swaps that we used to have. So the strategy was very successful. This is very dynamic and our eyes are still there. We have been able to deliver what we estimated when we discussed from the strategic viewpoint on Tenda Day. The other portion, the other share comes from areas where the performance was not so good. So for the new areas, we have Campinas. So the first launch in Campinas is likely to happen. The demography in Campinas is very interesting and the income level is very interesting. So it is a region in which we have a lot of interest. Also Belo Horizonte city.
Our performance has been dropping and we want to restore this operation both in terms of structure and business model. This is related to the revision that was mentioned by Rodrigo. This is all on track in relation to the growth of the company for the metropolitan areas.
Great. Thank you. That was very clear.
Thank you.
Our next question comes from Marcelo Motta with JP Morgan. Your line is open, Marcelo.
Thank you. Alvaro, good morning, everyone. Can you hear me?
Yes. Now, we can.
The question is about Alea. On Investor Day, you mentioned this strategy all the gains in construction cost and maybe you would look for land which is closer to the city center and not gain in the margin of prices. This is what I understood. You wanted to maintain the margin but be focused on the launches. But considering the increase in the raw material costs at all levels, would your strategy change with Alea? What is your strategy now? Would anything change considering the Tenda Day and what we discussed?
Motta, it is too early to say anything. What we expect from Alea is to have a surprising product for the clients in the interior areas. It wanted to be the best product offered at the price point. Alea is likely to operate in a profitable manner, paying its capital cost in four years. So what we have to do from now till then is to have an execution plan that is better than the alternative. If there are no competitors, our product will be better than the product offered by the competition. So it will depend on the dynamics of the market.
We are far from the stability point in order to discuss the positioning of the product now. The fact is that Alea is likely to be the best alternative in the market where it will operate.
Osmo, t hank you.
Our next question comes from Bruno Mendonça with Bradesco BBI. You may proceed.
Hello, good afternoon. You mentioned a lot about elasticity of price and how the equation is changing with weaker competition. Is it fair to expect that the VSO will be lower so that the price can be managed better? Just a moment, I am sorry. The idea is to reduce the VSO so that you can manage prices better. If cost evolution continues, could you transfer this or pass on to the price in a slower way? The second question is relating to the guidance, the sales guidance that you provided. How much is price? Or is there anything related to the larger number of units being launched or being sold? I am sorry for the baby in the background.
Bruno, i n relation to this elasticity, yes. We understand that there are situations when reducing the VSO would make sense so that we can make adjustment to the margin once we reach this scenario. The regions are so different. And there are some regions that we operated at lower margins and a high turnover. Now, considering the costs are moving up, we feel the need of making adjustments to the VSO so that we can continue operating there. It does not make working at lower margins. We could use lower margins considering that the turnover in some areas is higher. It is not something that is not going to be considered.
We are going to start discussing this considering the cost increases. These are choices we are going to make in the future. Maybe the consolidated figures will drop, but we will continue as leading market leaders. This is an alternative, but it did not seem to be very necessary. But if the equation makes sense, we are going to do this. The second one is in relation to the guidance. This is related to volume. The increase in guidance that we estimated for the sales, it was related to the volume. The price impact 4%, 5% of new sales. This is part of the BRL 200 million that we are imagining to consider. Two-thirds would refer to the higher volumes. In the first quarter, the launches were good, and that is very interesting for the results of the second quarter.
We have these dynamics of seeing the competition leave in the market, and we believe that this is going to translate into increases.
Thank you.
Our next question comes from Renan with XP Investimentos.
Good morning, everyone. My question is related to cash burn. We can see that there was an impact on the method of operation of Caixa Econômica Federal, and it has a temporary nature and is likely to stabilize in the future. Can we expect materials to be purchased and be stored? Because we are likely to expect an increase in prices, especially in steel. This might lead to an increase of purchases of raw materials so that you can store them for the future. Is that it?
Yeah, this is something under discussion. We are likely to continue studying all the alternatives considering these strategic supply methods. If you ask me today, do I expect purchases to be made in advance? No. But if we understand that this would add value, this is something we are going to do. It is possible that we might purchase some materials in advance to bring in some stability, but it does not seem to be very relevant at the moment. The use of some alternative materials to counter some of the increases.
Is it an initiative that is already being implemented?
Yes, it is being implemented when I mentioned the glass fibers and the other cases we are still studying. The test cycle is long, and we need certifications as well. The good news about glass fibers is that it was certified in the beginning of the year for general use. It was not certified before. So we have two situations.
It's relatively cheaper than the steel, and didn't use to be. The second point is that it was certified, and that's why there was so much interest in glass fibers. What we see is that some products have not been certified yet. There are some alternative products that have not been certified. What we can see for 2022, there is not much more than what we have mentioned, such as the glass fibers and the drywall.
Our next question comes from Thais Alonso with Citibank. You may proceed.
Hello, good morning. The cost increase that you mentioned of 30% is already reflected in the margin. The second question related to the competition. We can see the interest rate moving up and [inaudible] is stable. The competitors have moved. You see this movement.
Thank you, Thais. In relation to the first question, the new negotiation related to steel price increase has not been closed yet, and it's not in the backlog margin that we have projected so far. It would be a new cost impact. On the other hand, the prices that we raised since June is likely to amortize the backlog margin. There are some other items that are going to play out, but we believe that the worst moment is history. This is our expectation. When we close the negotiation, it will offset our margin. This will reflect our margin, but it will be offset. In relation to the second question, each competitor should answer your question. But from the conceptual viewpoint, the market works when you look at the gross margin and less to the VSO.
Most real estate builders, if they decide to sell volume to maintain profitability, they will do it. Most companies do this. On the other hand, it's difficult to start operating in a sector where the player is more efficient. It seems to be a very traditional mindset where company place bets when it has to try to be more efficient in a market in which they are not or reduce the VSO because of the interest rates is going up. Usually, the sector prefers to work with the high income and higher VSO. But we believe that the mass segmentation is not going to be so relevant for some time now.
Thank you.
To ask a question, use the Raise Hand button. If there are no further questions, Renan, Rodrigo, we can move on to the final remarks. Thank you.
May I, Renan?
Sure.
The snapshot of this quarter was not very positive. The margin dropped significantly in addition to cost increase. We believe that we are very well positioned from the strategic viewpoint. This cost has not affected Tenda in particular, but the market as a whole. It was a barrier for the entry level. We called it mass internally, and the entry barrier is the operational efficiency. This has always been our obsession. Now, this obsession is being translated into an absolute dominance in the areas where we operate. Two years ago, the launches were in bracket 2. When you look at 2021, those players left the market and the traditional players have already left the Casa Verde e Amarela bracket. This is very surprising data. 80% of our share is in the mass segment in the four major markets where we operate.
Because we are playing alone has allowed us to increase prices. It is not that we are not affecting the VSO. But what we want to say is that the VSO is still very attractive even with the price increases. We see a scenario when we can recover a margin to 29%-30%, taking a leading role in this market of low-income families with a low risk of being challenged by other players who, as we see it, wouldn't have the power or the competence to operate in this segment. The quarter was not very favorable, so we are likely to have two or three other quarters until we neutralize the backlog margins. In spite of these financials, which were not very positive, we are very optimistic in relation to the future of the company. This is the final message that we would like to leave with you.
Wonderful. Thank you, everyone. Have a nice weekend. Thank you very much for taking part in our call. We, on behalf of the IR team, are available to take any questions you might have. Have a good day, everyone.