SAO PAULO, Nov 12 (Reuters) - Brazilian homebuilder MRV Engenharia e Participacoes SA beat profit expectations for the third quarter as strong demand for low-income housing helped offset a rise in cancellations.
Belo Horizonte, Brazil-based MRV said on Wednesday that net income rose 3.3 percent to 135 million reais ($52.7 million) in the quarter from a year earlier, beating estimates of a 116 million-real profit in a Reuters poll of seven analysts.
MRV, like other Brazilian homebuilders, has struggled with cancellations and cost overruns in recent years after a period of aggressive and poorly managed expansion. It has recently made strides in its turnaround, lowering its debt levels, improving margins and boosting sales.
While a slowing economy has weighed on the outlook for the sector as a whole, the company has said low competition in the low-income segment should buffer against economic headwinds.
“The company is very well-prepared for whatever the situation turns out to be in 2015,” Co-Chief Executive Officer Rafael Menin told Reuters on Thursday, adding that new project launches and sales should remain near current levels in coming quarters.
Contracted sales totaled 1.47 billion reais, up 5.7 percent from the same period a year ago.
Sales cancellations rose to 21.3 percent of total sales in the quarter, however, up from 19.1 percent a year earlier.
Weak consumer confidence has contributed to cancellations, becoming a major drag on the performance of most Brazilian homebuilders, including MRV.
MRV’s gross margin rose to 28.2 percent in the quarter from 27.8 percent in the previous three months.
The company generated 136 million reais in free cash flow in the third quarter, slightly below the 138 million reais it produced in the previous three months.
Net debt fell to the equivalent of 28.0 percent of shareholder equity from 30.8 percent in the previous three months.
Earnings before interest, taxes, depreciation and amortization, a gauge of operating profit known as EBITDA, fell to an adjusted 160 million reais from 190 million reais a year earlier, slightly higher than analyst estimates. ($1 = 2.56 Brazilian reais) (Reporting by Asher Levine and Juliana Schincarioll; Editing by Cynthia Osterman)