(Adds information from a conference call, final share performance)
SAO PAULO, Nov 11 (Reuters) - Cyrela Brazil Realty , Brazil’s largest listed homebuilder, said on Friday it will focus on trying to sell off finished units from its inventory in a bid to generate positive cash flow and shore up results next year.
Record cancellations of about 35 percent of units sold continued to impact third-quarter revenue and reduce net income as a result of Brazil’s prolonged recession, Paulo Gonçalves, investor relations and structured finance director, said on a call with investors.
In the third quarter, Cyrela ran through as much as 225 million reais ($66 million) in cash compared with positive operating cash generation of roughly the same amount a year earlier. Cyrela is not expected to generate free cash flow in the fourth quarter, management said on a conference call.
More than two thirds of the cash use stemmed from sales cancellations, while 73 million reais were related to Cyrela’s acquisition of a stake in rival Tecnisa, according to a securities filing on Thursday.
Cyrela’s shares fell 8.2 percent Friday as investors saw bleak prospects for the company in the coming quarters. The São Paulo-based homebuilder, controlled by billionaire tycoon Elie Horn, generated about 900 million reais in cash last year, with almost half of it coming in the final quarter.
“Resuming net sales, especially sales of finished units, will be a key driver to generate positive cash flow in 2017,” Gonçalves said.
Still, the company ruled out aggressive discounts, which analysts say could erode operating margins. Cyrela sees interest rates falling in 2017 as inflation wanes, which should cut borrowing costs and help its commercial efforts.
“We may offer discounts, but only on a case-by-base basis,” Gonçalves said.
Cyrela’s inventory totaled 6.4 billion reais at the end of the third quarter, of which about one-third was finished units. Net revenues slumped 27.5 percent to 825 million reais.
Net income was 14 million reais, down 90 percent compared with the third quarter last year.
$1 = 3.4012 Brazilian reais Reporting by Gabriela Mello; Writing by Ana Mano; Editing by Tom Brown and Leslie Adler