RIO DE JANEIRO: Net income at Brazil's Gafisa SA slid nearly 100 percent in the fourth quarter as sales fell, costs rose and the middle and low-income homebuilder had to do without a one-time, year-earlier gain, the company said in a statement late Friday.
Gafisa reported a consolidated net profit of 8.05 million reais ($2.84 million) in the three months ending Dec 31, 99 percent less than the 921.3 million reais reported a year earlier.
Six analysts surveyed by Reuters were divided on whether the company would show a loss or a gain, but the four who expected a gain forecast an average profit of 7.9 million reais, an estimate in line with the result.
The average of the two other estimates was for a loss of 14.7 million reais.
Gafisa only launched projects within its low-income Tenda division in the quarter as it struggled to reduce a backlog of unsold residences. The company's middle-income division, also named Gafisa, reported a 36.8-million-real profit the quarter. The low-income Tenda division posted a 28.8-million-real loss.
Contract cancellations in the Tenda unit fell 12 percent to 66.3 million reais from a year earlier and 55 percent from the third quarter.
Gafisa acquired Tenda in 2008, but a series of budget overruns and cancelled contracts in the unit have weighed on Gafisa's bottom line. The fourth-quarter cancellations were the lowest since at least 2012.
Gafisa has been working to rein in expenses and boost margins in recent quarters after a rapid expansion into untried regions outside its base in Sao Paulo, Brazil's most populous, industrialized and wealthy region.
The gross margin, or the percentage of net sales left over after deducting operating costs, fell by nearly a third, to 150.6 million reais, or 23.2 percent of net sales. A year ago, the gross margin was 36 percent.
The gross margin was 11 percent lower in the fourth quarter than in the third quarter.
Last month the company said the value of new projects launched in the fourth quarter fell 69 percent to 241.5 million reais, while the value of contracts to buy residential units rose 32 percent to 303.9 million reais.
Adjusted earnings before interest, taxes, depreciation and amortization (EBITDA), a measure of Gafisa's ability to generate cash from operations, fell 48 percent to 71.7 million reais.
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