SAO PAULO, Aug 11 (Reuters) - MRV Engenharia e Participações SA, Brazil’s largest low-income housing builder, said on Thursday that its quarterly profit fell 13.6 percent to 138 million reais ($43.94 million), squeezed by the country’s severest recession since the 1930s.
Total sales dropped 5.5 percent in the second quarter to 1.3 billion reais, according to a securities filing.
Still, a drop in sales cancellations helped the company weather the storm, Co-chief executive officer Rafael Menin said in an interview. He added the low-income segment is less affected by the recession because its buyers can take out government-subsidized loans unavailable to buyers of more expensive houses, a segment where the company does not operate.
“In some cases, rents are more expensive than the installments of a loan,” Menin said.
Cancellations dropped to 23 percent of gross sales from nearly 30 percent a year ago, the lowest level since the third quarter of 2014, the company said. As a result, MRV generated 324 million reais of free cash flow, a record for the first half in any year of operation.
Earnings before interest, tax, debt and amortization, a measure of operating profitability, fell 15 percent to 163 million reais.
MRV will buy up more land in 29 of the 142 cities where it operates, focusing on population centers like Sao Paulo and Belo Horizonte, Menin said. The company’s 1.76 billion reais in cash on hand and lack of foreign currency risk on its 2.2 billion reais of debt give the company flexibility to invest and expand, the CEO said.
In Brazil, residential construction typically starts around 30 months after the acquisition of land mainly due to the bureaucracy associated with getting construction permits, Menin said.
MRV invested approximately 550 million reais starting in 2014 to expand its land reserves. Menin declined to say how much the company will spend on land in the coming quarters. ($1 = 3.1408 Brazilian reais) (Reporting by Ana Mano; Editing by Christian Plumb, Bernard Orr)