SAO PAULO, May 12 (Reuters) - MRV Engenharia e Participações SA, Brazil's largest low-income homebuilder, beat profit estimates for the first-quarter as margins improved in newer projects.
The builder, controlled by billionaire Rubens Menin and his family, earned 106 million reais ($35 million) in the quarter according to a Tuesday securities filing. The result surpassed the 98 million real profit estimate in a Reuters poll of six analysts.
Meanwhile, the Belo Horizonte, Brazil-based company's gross margin rose to 29.5 percent from 26.4 percent a year earlier, mostly on better cost controls as the impact of older, less-profitable projects diminished.
Analysts have been optimistic on MRV's prospects as Brazil's economy heads into a likely recession, as the firm focuses on low-earning Brazilians who have access to a government housing subsidy program.
"Our market continues to have space to grow," said co-Chief Executive Officer Rafael Menin. "When we look at outlook for the (government housing program), the market is still strong."
Contracted sales, a measure of first home purchases, totaled 1.37 billion reais in the first quarter, down 11.1 percent from the same period a year ago, the company said in an April securities filing. The value of project launches fell 19.1 percent to 937 million reais in the same period.
Contract cancellations rose to 32 percent of total sales in the quarter, up from 21.3 percent a year earlier. MRV said most cancellations were in older projects and that most of the units were able to be resold quickly. Menin cautioned, however, that cancellation rates should remain at current levels throughout the year.
Free cash flow totaled 147 million reais in the quarter, up from 56 million reais a year earlier.
$1 = 3.03 Brazilian reais Reporting by Juliana Schincariol and Asher Levine; Editing by Diane Craft