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Gafisa Plunges as Writedowns Lead to 2011 Loss: Sao Paulo Mover

Gafisa SA (GFSA3), Brazil’s fifth-biggest homebuilder by revenue, plunged to the lowest in more than three years after posting an annual loss last year amid cost overruns and canceled sales.

Shares fell 4.9 percent to 4.09 reais at 11:25 a.m. in Sao Paulo. A close at that level would be the lowest since December 2008. The company is the worst performer on the BM&F Bovespa Real Estate index, which dropped 0.5 percent today. The benchmark Bovespa advanced 0.9 percent.

Gafisa posted a loss of 1.05 billion reais ($572 million) in 2011, compared with a profit of 440 million reais in 2010, according to preliminary results released yesterday. That included total adjustments of 889.5 million reais related to cost overruns, scaling back its Tenda unit and canceled contracts with potential homeowners who no longer qualify for mortgages, the company said.

The figures “reflect the continuous deterioration” of the company’s results as “a great part of the necessary adjustments were left for the end of the year,” Credit Suisse Group AG analysts Guilherme Rocha, Daniel Gasparete and Vanessa Quiroga wrote in a note dated yesterday. “Dealing with a record high leverage and an unclear outlook, we continue to recommend investors to be cautious on the stock.”

Credit Suisse has the equivalent of a hold recommendation on Gafisa’s shares.

The average estimate of 14 analysts in a Bloomberg survey was for Gafisa to report adjusted net income of 104 million reais for 2011.

Gafisa forecasts new projects in 2012 ranging from 2.7 billion reais to 3.3 billion reais, deliveries of 22,000 to 26,000 units and operating cash flow of 500 million reais and 700 million reais, according to the statement.

To contact the reporter on this story: Helder Marinho in Sao Paulo at;

To contact the editors responsible for this story: David Papadopoulos at

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