Cyrela Brazil Realty S.A. Empreendimentos e Participações

Cyrela reported 4Q23 net revenue of BRL1.7 billion, up 25% year over year and 5% quarter over quarter. Gross margin was 33.7% in the quarter versus 31.4% in 4Q22 and 33.5% in 3Q23; full-year gross margin was 32.7%. Net income was BRL248 million in 4Q23 versus BRL208 million in 4Q22 and BRL251 million in 3Q23, and full-year net income was BRL942 million, up 16% year over year. For the full year, launches were BRL6.6 billion PSV (+13% YoY) and sales were BRL6.4 billion in Cyrela’s share (+17% YoY). Management did not give formal forward guidance, but said 2024 launch volume will be a little higher, margins should stay around current levels, revenue may improve with construction progress, and cash generation should be neutral or slightly positive.

Raphael Horn said 2023 validated Cyrela’s strategy of differentiated products, disciplined inventory, and cautious growth, despite an uncertain macro backdrop. He emphasized that the company is not seeing price pressure in its own portfolio and that its products are holding healthy sales speeds. On 2024, he was constructive but cautious: launches will be larger, the year will be challenging, and the company will focus on landbank discipline, product quality, and opportunistic capital allocation between land and dividends.

Miguel Mickelberg walked through the operating and financial details, including 4Q23 launches of BRL2.7 billion PSV, sales of BRL2.6 billion, inventory of BRL9.9 billion at market value, and delivered projects totaling BRL2.1 billion PSV in the quarter. He noted gross debt of BRL5.1 billion, cash of BRL4.2 billion, net debt of BRL868 million, and a net debt/equity ratio of 10.7%; 74% of gross debt is long-term. Cash burn was BRL94 million in 4Q23 and BRL101 million for 2023, but he said 2024 should be better than 2023, with the company expecting neutral to slightly positive cash generation, while margins should remain around 33% to 34% and CashMe securitizations should continue near 2023 levels, when they were north of BRL1 billion.

Analysts focused on backlog margin, pricing pressure, dividends, funding for real estate, launch growth by segment, cash generation, workforce constraints, CashMe, and landbank purchases. Management said the backlog margin improved mainly because 4Q23 launches had margins around 37%, and that 2023 launch margins were about 33%, roughly in line with backlog; they do not expect a meaningful further increase. On funding, management said savings outflows make cheaper mortgage funding uncertain, while on dividends and ROE they said they constantly weigh landbank purchases versus distributions and believe ROE could improve; if not, higher dividends would be the alternative. They also said they do not feel price pressure in their products, expect 2024 cash flow to be better than 2023, see labor shortages mainly in concrete structure and hydro installations, and do not expect regulation changes to alter CashMe’s securitization strategy.