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2008 Full Year and Fourth Quarter ResultsEarnings Conference Call
Investor Relations Contact
Julia Freitas Forbes
Overview of 2008 and 4Q08 results - Wilson Amaral, CEO
Financial and Operational Performance
2
Highlights of the Year
Consolidated Launches including Tenda (12 months) increased 88% over 2007
Launches increased to R$4,196 million in 2008 from R$2,236 million in 2007
Pre-sales increased 58% y-o-y including Tenda (12 months)
Pre-sales increased to R$2,578 million in 2008 from 1,627 million in 2007
Net Operating Revenues rose 45% y-o-y
Net operating revenues increased to R$1,740 million in 2008 from R$1,204 million in 2007
2008 EBITDA reached R$221 million (12.7% EBITDA margin) a 61% increase y-o-y
Net Income reached R$110 million, an increase of 20% from 2007
Backlog of results reached R$1,015 million in 4Q08, a 92% increase compared to the R$528 million in
4Q07
Land bank totaled R$17.8 billion, 75% growth over 2007
Gafisa completed 90 developments totaling R$1.2 billion during 2008
Gafisa consolidated presence in low income segment through Tenda, its 60% owned subsidiary
3
Highlights of the Quarter
Consolidated launches decreased 28% over 4Q07
Launches decreased to R$747 million in 4Q08 from R$1,036 million in 4Q07
Pre-sales decreased 8% q-o-q
Pre-sales decreased to R$607 million in 4Q08 from 662 million in 4Q07
Net Operating Revenues rose 64% q-o-q
Net operating revenues increased to R$624 million in 4Q08 from R$381 million in 4Q07
4Q08 EBITDA reached R$34 million (5.4% EBITDA margin) a 6% decrease q-o-q
Net loss was R$13 million in 4Q08 compared to a net profit of R$50 million in 4Q07
Gafisa completed 29 projects totaling 2,815 units and a sales value of R$440 million during 4Q08
4
Recent Developments
Tenda consolidation completed: Gafisa’s financial statements consolidate 100% of
Tenda results from October 21.
Accounting changes bringing Brazilian GAAP closer to IFRS
accounts receivable and accounts payable discounted at present value
expensing of sales stand costs in up to one year
Expensing of stock option plan
establishment of a provision for warranty (technical assistance).
Cancellations of Gafisa, Fit and Tenda launches
Non-recurring items impacted fourth quarter
Bairro Novo partnership with Odebrecht ended
Moody's affirmed Gafisa's Ba2 local currency rating, but changed the outlook to
negative from stable. Gafisa's national rating went to A1.br from Aa3.br. Gafisa’s local
rating from Fitch went from A (bra) to A-(bra).
5
1,036747
931
1,437
742
1,893
562
865
4T07 4T08 2007 2008
New Markets
Rio de Janeiro
São Paulo
2008 Launches Increased 88% to R$4.2 billion over 2007
Launches (R$ million)Including 12 months of Tenda
46%
7%
47%
1%
Gafisa
AlphaVille
Tenda
Bairro Novo
1,036747
2,236
4,195
88%
-28%
Total
6
662 607 686 720
542
399
1,316
541
4Q07 4Q08 2007 2008
New Markets
Rio de Janeiro
São Paulo
4Q08 Sales Increased 58% to R$ 2.6 billion over 2007
Pre-sales (R$ million)Including 12 months of Tenda
-8%
607662
1,627
2,578
58%
45%
15%
1%
39%Gafisa
AlphaVille
Tenda
Bairro NovoTotal
7
199 projects under construction in 20 different states
One of the Most Geographically Diverse Homebuilders already present in 21
states
*States where Gafisa or its subsidiaries already launched projects.
8
51% of our inventory consists of developments launched but not started
Our inventory totals R$4 billion at market value and R$1.3 billion at book value
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Not Started Up to 30%
Completed
30% to 70%
Completed
Over 70%
Completed Completed Total
Gafisa 728,091 655,298 201,338 101,965 90,185 1,776,878
AlphaVille 8,548 78,578 34,716 46,725 46,453 215,020
Tenda Residencial 1,315,627 402,688 131,775 120,591 40,660 2,011,342
Bairro Novo 0 104 8,231 5,906 8,534 22,774
Total 2,052,266 1,136,668 376,060 275,187 185,832 4,026,014
Gafisa has a Diversified, High-Quality Land Bank, 72% Acquired through Swaps
247 different sites, all over the country. 115,000 potential units.
CompanyPotential Units
100%
Potential Units
% Gafisa
Future Sales
%Gafisa
(R$ MM)
Swap
Agreements %
Gafisa 22,412 19,050 7,685 40%
AlphaVille 32,122 16,432 3,031 97%
Tenda 70,116 67,578 6,342 20%
Bairro Novo 24,326 12,163 802 82%
Total 148,976 115,224 17,843 72%
10
Gafisa completed 20 developments valued at R$704 million, AlphaVille 3 developments valued
at R$150 million and Tenda 67 developments or phases valued at R$324 million.
Projects worth R$1.2 billion completed in 2008
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Financial and Operational Performance – Duilio Calciolari, CFO
Overview of 2008 and 4Q08 results
12
4Q08 Results were Impacted by Non-Recurring Items
- cancellation of projects with a weak sales performance
- restructuring costs to adjust the company to the new economic scenario
- SAP implementation caused some disturbance in operations, impacting results in the last quarter – in
addition SAP-related costs should have been diluted during the year
13
2008 Gross Profit Margin EBITDA Margin Net Income Margin
Result Before Law 11638 533.2 30.7% 231.3 13.3% 141.6 8.2%
Launches Cancellations 11.0 15.7 15.7
Restructuring 14.0 14.0
Result Before Law and Excluding 4Q
Extraordinary Items 544.2 31.3% 261.0 15.0% 171.3 9.9%
4Q08 Gross Profit Margin EBITDA Margin Net Income Margin
Result Before Law 11638 145.6 24.8% 35.9 6.1% 1.6 0.3%
Launches Cancellations 11.0 15.7 15.7
Restructuring 14.0 14.0
SAP Implementation 25.6 25.6 25.6
Result Before Law and Excluding 4Q
Extraordinary Items 182.2 31.0% 91.2 15.5% 56.9 9.7%
Law 11,638 included changes to accounting standards for all companies in Brazil, bringing them closer to IFRS.There was a negative impact of R$ 31.7 million in 2008 net income, R$14.4 million refers to 4Q08:
Stock Option Plans
Fair value of the stock option is calculated at the grant date and allocated to results over the vesting period of the options, and
does not reflect changes in fair value after the grant date. On December 31, 2008 the strike prices of the 2008 and 2007 plans
were R$33.93 and R$39.95, respectively, while the stock’s market price was R$10.49.14
2008 Before Law Reported
NPVLand
Swaps
Stock
Options
Warranty
Provision
Stand
AmortizationOther Total
Net Revenues 1,737.3 6.5 (3.3) - - - (0.1) 3.1 1,740.4
Total Cost of Goods Sold (1,204.1) (1.6) 5.8 - (5.1) - (9.4) (10.3) (1,214.4)
Gross Profit 533.2 4.9 2.5 - (5.1) - (9.5) (7.2) 526.0
Gross Margin 30.7% 30.2%
Selling Expenses (166.1) - - - - 13.1 (1.4) 11.7 (154.4)
General & Administrative (155.3) - - (26.1) - - 0.8 (25.3) (180.6)
Other Operating Result 19.5 - - - - - 10.4 10.4 29.8
EBITDA 231.3 4.9 2.5 (26.1) (5.1) 13.1 0.2 (10.4) 220.8
EBITDA Margin 13.3% 12.7%Depreciation and Amortization (19.6) - - - - (32.0) (1.0) (33.0) (52.6)
Net Financial Results 39.8 - - - - - 2.1 2.1 41.8
Minority Interest (63.3) - - - - - 6.6 6.6 (56.7)
Income Taxes (46.5) - 2.7 - - - 0.5 3.2 (43.4)
Adjusted Net Income 141.6 4.9 5.2 (26.1) (5.1) (18.9) 8.3 (31.7) 109.9
Net Margin 8.2% 6.3%
EPS 1.09 0.85
Law 11638
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56
FY2008 and 4Q08: Operating Highlights
336
1491250
526
33%
24%
28%30%
4Q07 4Q08 2007 2008
Gross Profit Gross Margin
34
137
221
50
5%
13%13%11%
4Q07 4Q08 2007 2008
EBITDA EBITDA Margin
Net Revenues (R$ million) Gross Profit (R$ million)
EBITDA (R$ million)
1,204
1,740
381624
4Q07 4Q08 2007 2008
Net Revenues
64%
45%
19%
56%
61%
Adjusted Net Income (R$ million)
-13
50 0
92 110
13%
-2%
6%
8%
4Q07 4Q08 2007 2008
Adjusted Net Income Adjusted Net Margin
20%
15
-32%
40
57
62
34
544
182
171261
56
91
171
Strong Pre-Sales Positively Impact Backlog
R$ 1,015 million of results to be recognized (92% growth compared to 2007)
92%
99%
96%
96%
96%
4Q08 x 4Q07
47%1,471.31,970.52,887.5Net Sales
47%(56)(75)(109)Sales Tax – 3,65%
4Q08 3Q08 4Q07 4Q08 x 3Q08
Sales to be recognized—end of period 2,997 2,045.1 1,527.0 47%
Cost of units sold to be recognized - end of period (1,873) (1,259.9) (943.0) 49%
Backlog of Results to be recognized 1,014.6 710.6 528.3 43%
Backlog Margin - yet to be recognized 33.9% 34.7% 34.6%
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Gafisa’s Operation
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4T08 4T07 2008 2007
Selling Expenses (R$ MM) 63.6 28.7 154.4 69.8
G&A Expenses (R$ MM) 76.3 44.0 180.6 130.9
SG&A Expenses (R$ MM) 139.9 72.7 335.0 200.7
Selling Expenses / Revenues 10.2% 7.5% 8.9% 5.8%
G&A Expenses / Revenues 12.2% 11.6% 10.4% 10.9%
SG&A / Revenues 22.4% 19.1% 19.2% 16.7%
Revenues R$MM 624.2 380.8 1,740.4 1,204.3
0300300Obligation to Investors
52.5%
3,066
1,689
887
790
1,377
3Q08 4Q08 4Q07
Total Debt 1,552 695
Cash and Cash Equivalents 606 517
Net Debt & Obligation to Investors 1,246 178
Shareholder’s Equity 1,612 1,485
Total Capitalization 3,164 2,180
Net Debt & Obligation to Investors /
Equity77.3% 12.0%
R$ MM
Gafisa’s Solid Financial Position
R$606 million cash in addition to R$300 million in securitizable receivables.
R$3.4 billion in construction finance lines of credit provided by all of the major banks:
R$1,699 million signed contracts
R$751 million contracts in process
R$951 million additional availability
73% of our debt is long term
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Share Liquidity
0
20
40
60
80
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Avg. daily volume from Feb 01 of 2008 - Feb 28 of 2009 (R$ MM) Market Cap (R$ MM )
0100200300400500600
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NYSE Listing: Gafisa is the only Brazilian real estate company listed in the United States.
HIGHEST TRADING VOLUME IN REAL ESTATE SECTOR
19
Outlook
Given the current economic situation and the continued disruption in the credit
markets, visibility on overall growth in the industry is limited.
Despite these factors, we are optimistic that government actions including the
additional R$3 billion in FGTS funds designated for financing within the construction
industry, the stimulus program aimed at building one million houses by 2010, and the
lowering of the Selic interest rate by the Central Bank will result in the increased
availability of funds to support the growth of homebuilding.
However, without all of the elements currently in place, we are not providing guidance
in the short term.
In 2009, we will continue to be very selective with our launches, conserve cash and
increase our sales efforts towards our inventory.
20
Statement
We make forward-looking statements that are subject to risks and uncertainties. These statements are
based on the beliefs and assumptions of our management, and on information currently available to us.
Forward-looking statements include statements regarding our intent, belief or current expectations or that
of our directors or executive officers.
Forward-looking statements also include information concerning our possible or assumed future results of
operations, as well as statements preceded by, followed by, or that include the words ''believes,'' ''may,''
''will,'' ''continues,'' ''expects,'‘ ''anticipates,'' ''intends,'' ''plans,'' ''estimates'' or similar expressions.
Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and
assumptions because they relate to future events and therefore depend on circumstances that may or may
not occur. Our future results and shareholder values may differ materially from those expressed in or
suggested by these forward-looking statements. Many of the factors that will determine these results and
values are beyond our ability to control or predict.
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