DIRECIONAL ENGENHARI

DIRR3
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Direcional Engenharia : 1Q18 Operational Preview

04/09/2018 | 07:01pm

OPERATING PREVIEW

1Q18

Belo Horizonte, April 09th, 2018 - Direcional Engenharia S.A., one of the largest homebuilders and real estate development companies in Brazil, focused on developing large scale low-income projects, and operating in all regions of the Brazilian territory, discloses here its operating statements for the first quarter of 2018 (1Q18). Except when indicated otherwise, all the amounts presented in this document are expressed in local currency (Brazilian reais - R$), and the Potential Sales Value (PSV) demonstrates the consolidated number (100%).

NOTICE TO THE MARKET

IN 1Q18, DIRECIONAL ANNOUNCES NET SALES OF R$ 385 MILLION A GROWTH

OF 155% IN NET SALES YoY. NET SALES OF MCMV 2 AND 3 REACHED

HISTORICAL RECORD OF R$254 MILLION.

HIGHLIGHT

  • The volume of launches in 1Q18 totaled R$ 482 million, a growth of 137% YoY;

  • Contracted net sales amounted to R$ 385 million in 1Q18, a growth of 155% YoY;

  • Historical record of R$ 254 million under the MCMV 2 and 3 reached a PSV of R$ 554 million a growth of 138% YoY;

  • In 1T18, the VSO of the MCMV 2 and 3 segment reached an index of 20% (+5 p.p. YoY).

LAUNCHES

In 1Q18, Direcional launched seven projects/phases, all the developments launched are targeted on families eligible to MCMV Program, totaling a PSV of R$ 482 million (R$ 437 million % Direcional) and 3.192 units, a growth of 137% in relation to 1Q17. It should be noted that 72% of PSV launched are projects in MCMV 2 and 3 segment, representing a growth of 70% in relation to 1Q17.

Launches

(PSV 100% - R$ million)

1Q17 1Q18

MCMV Level 1MCMV 2 and 3

The table below shows information about the developments launched in 1Q18:

1Q18

4Q17

1Q17





Launches (PSV - R$'000)

(a)

(b)

(c)

(a/b)

(a/c)

PSV launched - 100%

481,559

490,673

203,253

-1.9%

136.9%

MCMV Level 1

135,033

70,862

0

90.6%

n/a

MCMV 2 and 31

346,526

419,811

203,253

-17.5%

70.5%

MUC2

0

0

0

n/a

n/a

PSV launched - % Direcional

436,559

451,272

123,183

-3.3%

254.4%

MCMV Level 1

135,033

70,862

0

n/a

n/a

MCMV 2 and 3

301,526

380,411

123,183

-20.7%

144.8%

MUC

0

0

0

n/a

n/a

Units launched

3,192

3,380

1,388

-5.6%

130.0%

MCMV Level 1

1,360

600

0

126.7%

n/a

MCMV 2 and 3

1,832

2,780

1,388

-34.1%

32.0%

MUC

0

0

0

n/a

n/a

  • 1. MCMV 2 and 3: developments carried out under the Minha Casa Minha Vida Housing Program (MCMV) - Levels 1.5, 2 and 3.

  • 2. MUC: Comprises projects from the middle-income, upper-middle income and commercial segments.

1

OPERATING PREVIEW

1Q18

CONTRACTED NET SALES

In 1Q18, contracted gross sales totaled PSV of R$ 478 million (R$ 445 million % Direcional) a growth of 152% when compared to the same period of previous year.

Net sales amounted to R$ 385 million in 1Q18, growth of 155% YoY. It is important to note that MCMV 2 and 3 segment reached R$ 254 million (R$ 232 million % Direcional), an increase of 104% YoY, represents new record in this segment.

Contracted Gross Sales (PSV 100% - R$ million)

Contracted Net Sales (PSV 100% - R$ million)

478

190

1Q17

1Q18

1Q17

1Q18

MCMV Level 1MUC¹MCMV 2 and 3

In 1Q18, the sales cancellations amounted to R$ 93 million (R$ 80 million % Direcional), in line with the last quarter. That high level of cancellations was mainly due to the higher volume of deliveries of the MUC segment during the last quarters.

NET SALES VELOCITY

Sales velocity in 1Q18, measured by the VSO (Sales over Supply) ratio, reached 13% of net sales. Highlight to MCMV 2 and 3 segment in which VSO reached 20%, representing the best historical indicator of this segment.

VSO Net Sales of Development

(PSV 100% - R$ million)

19%

15% 9%

11%

19% 12%

18% 11%

20% 13%

3%

2%

Sales of MUC

0% -1%

Sales of MCMV 2 and 3

250

VSO of MUC

1Q17

VSO of MCMV 2 and 3VSO Quarterly

2Q17

3Q17

4Q17

1Q18

2

OPERATING PREVIEW

1Q18

INVENTORY

By the end of 1Q18, Direcional had 7,494 units in inventory, totaling a PSV of R$ 1.7 billion.

It is worth noting the better diversification of the inventory by economic segmentation, as results of the increase of the MCMV 2 and 3 segment, which by the end of 1Q18 represents 60% of the PSV in inventory, in line with the operating evolution of this segment.

The table below presents the breakdown of inventories at market value by construction stage and type of product. The MCMV 2 and 3 segment has only R$ 43 million in PSV of units completed, representing 2.5% of the total inventory.

Inventory by construction stage (% Direcional - R$ Million)

MCMV 2 and 3

MUC1

Total (100%)

Total

(% Direcional)

Under Construction

1,003

128

1,131

1,021

% Total

58%

7%

65%

66%

Finished Units

43

570

613

518

% Total

2,5%

33%

35%

34%

Total

1,046

698

1,743

1,539

% Total

60%

40%

100%

100%

Total Units

6,016

1,479

7,495

7,495

% Total Units

80%

20%

100%

100%

The charts below show the inventories broken down by launch period, region and track record. The mainly highlights are: (i) 61% refers to projects that was launched after 2016; (ii) 74% located in the Southeast region; and (iii) decrease of 15 p.p. in the share's inventory of MUC¹ segment when comparison of 1Q17.

Inventory by Launch Period

Inventory by Region

(% PSV - 100%)

(% PSV - 100%)

Inventory the Evolution (PSV 100% - R$ milhões)

MCMV 2 and 3MUC¹

MUC¹MCMV 2 and 3

Southeast

North

16%

12%4%

Midwest8% 60% 45%

Northeast2%

74% 40% 55%

1Q17

1Q18

1 - MUC: Comprises projects of the middle-income, upper-middle income and commercial segments.

3

OPERATING PREVIEW

1Q18

PROJECTS DELIVERED

In 1Q18, Direcional delivered ten projects/phases, totaling 10,168 units and a PSV of R$ 965 million (R$ 946 million % Direcional). Within the MCMV Level 1 segment, accounting for 91% of the total in terms of units.

The table below provides consolidated information on the projects delivered:

Projects Delivered

Month

Region

PSV Total (R$ mil)

PSV % Direcional (R$ mil)

Units.

Segment

Alameda das Palmeiras

Janeiro

Fortaleza - CE

188,734

188,734

2,960

MCMV Level 1

Cidade Jardim - 1° Etapa

Janeiro

Fortaleza - CE

189,255

189,255

3,008

MCMV Level 1

Conjunto Vera Cruz - Condomínio 3, 7, 14, 19 e 20

Janeiro

Goiânia - GO

22,107

11,054

336

MCMV Level 1

Cidade Jardim 2ª Etapa

Janeiro

Fortaleza - CE

186,235

186,235

2,960

MCMV Level 1

Supremo Residence

Janeiro

Belo Horizonte - MG

55,634

55,634

128

Middle

Splendido Residence

Janeiro

Belo Horizonte - MG

54,281

54,281

128

Middle

Sublime Oásis Spa Resort - 2ª Etapa

Janeiro

Contagem - MG

175,149

175,149

296

Upper-middle

Way Planalto Residence - Torre 1 - 3ª Etapa

Março

Belo Horizonte - MG

42,603

42,560

112

Middle

Way Planalto Residence - Torre 3 - 2ª Etapa

Março

Belo Horizonte - MG

35,966

35,966

112

Middle

Conquista Residencial Ville - Quadra 12 - 3ª Etapa

Março

Luziania - GO

14,720

10,304

128

MCMV 1.5

Total 1Q18

964,683

949,171

10,168

LAND BANK

In 1Q18, Direcional acquired two land plots targeted at the MCMV 2 and 3 segment, with construction potential of 1,248 units and a PSV of R$ 177 million (R$ 177 million % Direcional). These plots are located in the state of São Paulo. The average cost of land was equivalent to 10% of the PSV and 82% of the payment will be settled through swaps, which do not affect the Company's cash position in the short term.

4

OPERATING PREVIEW

1Q18

Statements contained in this document concerning the business perspective, projections of operating and financial results and references to the growth potential of the Company, are mere predictions and were based on expectations and Management estimates in relation to the future performance of the Company. While the Company believes that such forecasts are based on reasonable assumptions, it does not ensure that they are achieved. Expectations and estimates that are based on the future prospects of the Company are highly dependent on market behavior, Brazil's economic and political situation, of existing and future state government regulations, industry and international markets, and therefore, are subject to changes that are beyond the control of the Company and its management. The Company makes no commitment to publish updates or revise expectations, estimates and forecasts contained herein arising from information or future events.

CONTACTS

IR Team (+ 55 31) 3431-5509 ri@direcional.com.brwww.direcional.com.br/ir

GLOSSARY

Land bank - land held in inventory with the estimate of future PSV of the same.

Classification of developments by Direcional, according to the economic segment to which they are intended:

MCMV - Level 1

Low-income projects under construction contracts regarding the Minha Casa Minha Vida Housing Program, contracted directly with the Financing Agent, for families with monthly income of up to R$ 1,800.00. The properties of this segment have the final price determined by the Financing Agent, under Ordinance 435/2012 of the Ministry of Cities, and their purchase may be conditionally subsidized by the government.

MCMV 2 and 3

Residential developments with cap price of up to R$ 300.0 thousand per unit, included in Levels 2 and 3 of the MCMV Program. Until 3T15, projects of this profile have been called "Popular".

Middle income

Residential developments with average price ranging from R$ 300.0 thousand to R$ 500.0 thousand per unit.

Upper-middle income

Residential developments with average price of more than R$ 500.0 thousand per unit.

MUC

Comprises projects of the middle-income, upper-middle income and commercial segments

Swap - a system of land purchase whereby the owner of land receives in payment a determined number of units of the undertaking to be built on the land.

Contracted Sales - PSV arising from all real estate sales contracts concluded in a given period, including the sale of Units launched in the period and the sale of Units in Inventory.

PSV - Potential Sales Value (PSV) - The total value potentially obtained by the sale of all Units of a given residential development at the launch price. There is a possibility that the PSV launched is not realized or differs significantly from the Contracted Sales value, since the amount of Units effectively sold may be different from the amount of Units Launched and/or the actual selling price of each Unit may differ from the launch price.

PSV Launched: Potential Sales Value (PSV) of Units Launched over a given period.

5

Disclaimer

Direcional Engenharia SA published this content on 09 April 2018 and is solely responsible for the information contained herein. Distributed by Public, unedited and unaltered, on 09 April 2018 23:00:05 UTC

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