PDG Realty Profit Beats Analyst Estimates After Brazil Interest-Rate Cuts

PDG Realty SA Empreendimentos & Participacoes, Brazil’s biggest homebuilder by revenue, posted a higher-than-expected third-quarter profit as interest-rate cuts helped boost company’s sales.

Net income excluding minority shareholder rose 2 percent to 261.7 million reais ($150.1 million) in the quarter from 255.4 million reais a year earlier, according to a statement published on the company’s website yesterday. Adjusted net income rose 1 percent to 265.2 million reais. The result beat the mean estimate for the company’s profit excluding some items of 253.8 million reais, according to a Bloomberg survey with six analysts.

“Once again, PDG’s management has proved to be highly financial focused by turning PDG into one of the first cash generating homebuilders in a consistent way,” Credit Suisse Group AG analyst Guilherme Rocha said in a report to clients yesterday. “We expect this cash positive trend to continue on the short term.”

Net revenue grew 19 percent in the quarter to 1.84 billion reais, according to the statement.

Brazil’s central bank unexpectedly cut its benchmark Selic rate to 12 percent from 12.5 percent on Aug. 31, saying this would protect Brazil from a more “restrictive” global economy without compromising the inflation target. The bank made another 0.5 percentage point cut on Oct. 19 to 11.5 percent. Total outstanding housing loans were 184.7 billion reais in September, up 47 percent from a year earlier.

Trends

Housing prices in Latin America’s biggest economy have risen 10 percent since May to $3,466 per square meter in October, according to Fipe, a Sao Paulo-based economic research institute. The annual inflation rate, as measured by the IPCA index, fell to 6.97 percent in October from a six-year high of 7.31 percent the previous month.

“While cash flow will rise, revenue growth will slow, in part due to a depletion of savings deposits which are a key funding source for mortgage lending,” Moody’s Investors Service analyst Marcos Schmidt said in a report on Nov. 3. “Brazil’s moderating GDP growth will also contain apartment demand and some homebuilders will reach capacity limits for new projects.”

Brazil’s GDP will expand 3.16 percent this year and 3.5 percent in 2012, according to a central bank survey with 100 economists published today. PDG forecasts new projects in 2012 will be 9 billion reais to 11 billion reais.

PDG fell 0.8 percent to 7.47 reais at 11:58 a.m. in Sao Paulo trading, while the benchmark Bovespa index was little changed at 58,537.08. The shares have lost 27 percent this year, compared with a drop of 16 percent for the Bovespa index.

To contact the reporter on this story: Katerina Petroff in Sao Paulo at kpetroff@bloomberg.net

To contact the editor responsible for this story: Helder Marinho at hmarinho@bloomberg.net

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.