Direcional Engenharia S A : 4Q21 Operating Preview

OPERATING PREVIEW

4Q21

Belo Horizonte, January 19, 2022 - A Direcional Engenharia S.A., one of the largest homebuilders and real estate development companies in Brazil, focused on the development of low-income and medium-income projects and operating in several regions of the Brazilian Territory, discloses here its operating statements for the fourth quarter of 2021 (4Q21). Unless otherwise expressed, the information in this document is expressed in the national currency (Brazilian Reais - R$ or BRL) and the Potential Sales Value ("PSV") demonstrates the value consolidated (100%).

NOTICE TO THE MARKET

4Q21 AND 2021 OPERATING PREVIEW

• RECORD-HIGHLAUNCHES IN 2021 (BRL 3.1 BILLION), GROWING 78% VERSUS 2020;
• NET SALES RECORD IN 2021 (BRL 2.4 BILLION), A 45% INCREASE OVER 2020;
• RIVA'S BEST QUARTER IN NET SALES (BRL 239 MILLION), GROWING 152% VERSUS 4Q20.

HIGHLIGHTS

• Launches reached BRL 693 millionin the quarter and BRL 3.1 billionin the year: the highest annual level ever achieved in Company's history.
• Net Sales of BRL 668 millionin 4Q21, setting new all-time high: the 6th record in the last 7 quarters.
• In 2021, Net Sales reached BRL 2.4 billion, a growth rate of 45%versus 2020.
• Net Sales Speed ratio (VSO) of 17%in the quarter.

RIVA

• Riva's Launches reached BRL 358 millionin 4Q21, a 54%growth relative to 4Q20.
• In 2021, Launches totaled BRL 1.3 billion, growing 368%versus 2020.
• Net Sales of BRL 776 millionin 2021, up 178%on an annual basis.
• Riva's VSO reached 19%in the quarter.

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OPERATING PREVIEW

4Q21

LAUNCHES

In 4Q21, Direcional launched 10 new projects, totaling a PSV of BRL 693 million (BRL 634 million % Company), in line with the figures of 4Q20 and 36% below 3Q21 levels. The mix of launches came in well-balanced in the quarter, with Riva representing a little more than half of the launched PSV.

The total volume launched in 2021 reached the unparalleled level of BRL 3.1 billion, establishing a 78% growth related to 2020. Thus, the Company recorded the highest level in its history in this key metric, reporting important growth on an annual basis both in Direcional products (+24%) and in Riva products (+368%).

		Launches					Launches Track Record
	(PSV 100% - BRL million)				(PSV 100% - BRL million)
				+78%							3,138
					3,138
					1,293				1,905	1,946	1,763
	-1%			1,763
			276
							1,109
	1,081
						832
697		693	-36%		1,845
621	1,487	502
231	358
466	459
336
4Q20	3Q21	4Q21		2020	2021	2015	2016	2017	2018	2019	2020	2021
		Riva	Direcional

Table below provides further information on projects launched in 4Q21 and 2021:

Launches	4Q21	3Q21	4Q20	%	%	2021	2020	%
(a)	(b)	(c)	(a/b)	(a/c)	(d)	(e)	(d/e)
PSV Launched - 100% (BRL '000)	693,381	1,080,620	697,307	-35.8%	-0.6%	3,137,984	1,762,850	78.0%
Direcional	335,827	459,356	465,813	-26.9%	-27.9%	1,845,200	1,486,620	24.1%
Riva	357,554	621,265	231,494	-42.4%	54.5%	1,292,784	276,231	368.0%
PSV Launched - % Company (BRL '000)	633,817	927,228	650,259	-31.6%	-2.5%	2,677,635	1,526,597	75.4%
Direcional	335,827	459,356	418,765	-26.9%	-19.8%	1,597,807	1,272,734	25.5%
Riva	297,990	467,872	231,494	-36.3%	28.7%	1,079,827	253,862	325.4%
Launched Units	3,146	3,764	3,701	-16.4%	-15.0%	13,534	10,043	34.8%
Direcional	1,909	1,800	2,749	6.1%	-30.6%	9,103	8,875	2.6%
Riva	1,237	1,964	952	-37.0%	29.9%	4,431	1,168	279.4%
Average % Company	91.4%	85.8%	93.3%	6 p.p.	-2 p.p.	85.3%	86.6%	-1 p.p.
Average Price (BRL/unit)	220,401	287,094	188,410	-23.2%	17.0%	231,859	175,530	32.1%
Direcional	175,918	255,198	169,448	-31.1%	3.8%	202,702	167,506	21.0%
Riva	289,049	316,326	243,166	-8.6%	18.9%	291,759	236,499	23.4%

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OPERATING PREVIEW

4Q21

CONTRACTED NET SALES

Contracted Net Sales totaled a PSV of BRL 668 million (BRL 538 million % Company) in 4Q21, up 28% from the year-ago quarter, and up 4% when compared to 3Q21. Once again, Direcional set its best quarter in terms of Net Sales - the 6th record in the last 7 quarters.

In 2021, Net Sales reached BRL 2.4 billion, a 45% growth relative to the contracted PSV of 2020. This level marks 2021 as the Company's best year in terms of Net Sales.

It is worth mentioning the role played by Riva in the sales mix, reporting an increase of 178% year-over-year and contributing significantly to the numbers achieved.

				Net Sales							Net Sales Track Record
			(PSV 100% - BRL million)						(PSV 100% - BRL million)
							+45%
								2,440							643	668
								19
													614
							1,680	776					523	515
							23						458
							279						401
												371
		+28%							336	326
											298
									287
		643	668			1,645
523		1,378
	3	239	5	+4%
95	16	236
412	403	423
4Q20	3Q21	4Q21		2020	2021	1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21 4Q21
		Old Harvest		Riva	Direcional

Table below consolidates the information on contracted Net Sales in 4Q21 and 2021:

Contracted Net Sales	4Q21	3Q21	4Q20	%	%	2021	2020	%
(a)	(b)	(c)	(a/b)	(a/c)	(d)	(e)	(d/e)
PSV Contracted Net Sales - 100% (BRL '000)	667,758	642,716	522,749	3.9%	27.7%	2,439,934	1,680,302	45.2%
Direcional	423,415	402,842	412,117	5.1%	2.7%	1,644,732	1,378,312	19.3%
Riva	239,152	236,459	94,723	1.1%	152.5%	776,149	278,829	178.4%
Old Harvest1	5,190	3,414	15,909	52.0%	-67.4%	19,054	23,161	-17.7%
PSV Contracted Net Sales - % Company (BRL '000)	537,662	525,002	446,741	2.4%	20.4%	2,017,273	1,407,756	43.3%
Direcional	358,639	342,509	352,909	4.7%	1.6%	1,388,816	1,144,424	21.4%
Riva	175,889	180,159	83,158	-2.4%	111.5%	615,248	249,078	147.0%
Old Harvest	3,135	2,334	10,675	34.3%	-70.6%	13,209	14,254	-7.3%
Contracted Units	3,146	3,211	2,749	-2.0%	14.4%	12,227	9,061	34.9%
Direcional	2,318	2,370	2,401	-2.2%	-3.5%	9,429	7,969	18.3%
Riva	813	831	303	-2.2%	168.3%	2,742	1,022	168.3%
Old Harvest	15	10	45	50.0%	-66.7%	56	70	-20.0%
VSO in PSV	17%	17%	17%	0 p.p.	0 p.p.	43%	40%	3 p.p.
Direcional	17%	16%	18%	1 p.p.	-1 p.p.	44%	43%	2 p.p.
Riva	19%	21%	16%	-2 p.p.	3 p.p.	43%	36%	8 p.p.
Old Harvest	4%	3%	9%	1 p.p.	-4 p.p.	12%	12%	0 p.p.

1 Old Harvest: Comprises projects of the middle income, upper-middle income and commercial segments, developed in the former model.

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OPERATING PREVIEW

4Q21

NET SALES SPEED (VSO)

In 4Q21, Net Sales Speed, measured by the VSO index (sales-over-supply ratio), reached 17%. The VSO of projects at Direcional, excluding Old Harvest segment, also reached 17% in the quarter. The VSO of Riva segment reached 19% in the same period.

		Net Sales and VSO
		(PSV 100% - BRL million)
		26%
18%	20%	18%	21%	19%
17%	17%
17%		17%
17%	17%
16%	16%	17%
			Old Harvest Sales
9%					Riva Sales
	5%	2%	3%	4%	Direcional Sales
				Direcional VSO
		614	643	668	Consolidated VSO
		5
		3
523	515	3	Riva VSO
	239
178	236
16	8	Old Harvest VSO
95	122
412	385	433	403	423
4Q20	1Q21	2Q21	3Q21	4Q21

INVENTORY

Direcional ended 4Q21 with 14,627 units in Inventory, totaling a PSV of BRL 3.3 billion (BRL 2.7 billion % Company).

Table below shows the Inventory at market value, detailed by stage of construction and by type of product. It is worth mentioning that only 5% of the total PSV refers to completed units, with 2% related to Direcional projects (ex-OldHarvest), and less than 1% related to Riva products.

							PSV Total									PSV % Company
	Breakdown of Inventory at			Direcional			Riva			Old Harvest			Total				Direcional			Riva			Old Harvest			Total
	Market Value
	In progress (BRL million)			2,063			1,031			0			3,094				1,737			787			0			2,523
	% Total		63%	32%	0%	95%			65%		30%	0%	95%
	Completed (BRL million)			49			3			110			163				43			3			93			139
	% Total	2%	0%	3%	5%	2%		0%	4%	5%
	Total (BRL million)			2,113			1,034			110			3,257				1,779			790			93			2,662
	% Total	65%	32%	3%	100%			67%		30%	4%	100%
	Total Units			10,772			3,548			307			14,627			10,772			3,548			307			14,627
	% Total Units		74%	24%	2%	100%			74%		24%	2%	100%

4

OPERATING PREVIEW

4Q21

LANDBANK

During 4Q21, 18 plots of lands were acquired, with a construction potential of 8,115 units and a PSV of BRL 1.9 billion (BRL 1.7 billion % Company).

The average cost of acquisition in the quarter was equivalent to 12% of PSV, and 83% of the payment shall be made via swaps, which causes a reduced impact on the Company's cash position in the short term.

In 2021, land acquisitions totaled a PSV of BRL 6.8 billion (BRL 6.3 billion % Company), with an average cost of 13% of the PSV, and with 75% of the payment to be made through swaps.

Direcional's landbank ended 4Q21 with a development potential of 152 thousand units and a PSV of BRL 27 billion (BRL 25 billion % Company).

CASH GENERATION (CASH BURN) ¹

In 4Q21, there was a cash generation in the amount of BRL 18 million. As a result, in 2021, the Company reported a cash burn of BRL 19 million.

As discussed in previous releases, the cash burn observed is due to the significant operational growth that the Company has been reporting throughout the year, which allowed an important expansion in the volume of launches, and whose growth rate reached expressive 78% in the comparison between 2021 and 2020.

In addition, the strategy of anticipating the purchase of inputs before price increases, adopted by the Company in the first quarters of the year, aiming the reduction of most of the inflationary effects, as well as the maintenance of solid levels of gross margin, also contributed to this result.

It is worth noting that Direcional reduced its leverage by BRL 69 million in 4Q21, of which BRL 18 million in cash generation and another BRL 51 million through the sale of treasury shares and the subsequent contracting of a swap indexed to shares issued by the Company, in an equivalent position, within the scope of the share buyback program, approved in December 2021 and valid for 18 months, according to the Material Fact disclosed on the date.

Cash Generation by Quarter						Cash Generation by Year
	(BRL million)							(BRL million)
			69
			51
										362
15			18			158					167	146
					76
		-23				53	38
	-29
							-71				-19
1Q21	2Q21	3Q21	4Q21	2013	2014	2015	2016	2017	2018	2019	2020	2021

Treasury Shares Operation / Swap

Cash Generation

1 Cash Generation (Cash Burn): variation in net debt adjusted by payment of dividends, repurchase of shares and the variation in the balance of interest swap operation agreements. Prior unaudited information.

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