Brookfield Incorporacoes SA (BISA3), the worst-performing homebuilder on the Ibovespa this year, sank to a record as Fitch Ratings cut its credit ranking, citing cost overruns and contract cancellations that have eroded profit.
The shares dropped 1.4 percent to 1.38 reais at 12:43 p.m. in Sao Paulo. A close at that level would be the lowest since the stock started trading in October 2006. The Ibovespa advanced 0.9 percent.
Fitch lowered Brookfield’s classification by one level to B+, four levels below investment grade, after its net-debt ratio rose to 29.3 times earnings before before interest, taxes, depreciation and amortization in the 12 months through March, the ratings company said in a statement. The cut comes after the homebuilder, which posted earnings that trailed analysts’ estimates in eight of the past nine quarters, added debt to fund expansion while profit slumped, Fitch said.
“The company’s credit metrics deteriorated considerably in 2012 and Fitch does not expect they will return to parameters compatible with the previous rating in the medium term,” analysts including Jose Roberto Romero wrote in the report. “Operating results continue to be strongly affected by costs above budget and by high cancellations of sales contracts.”
In the 12 months ended in March, Brookfield’s adjusted Ebitda was 102 million reais ($45 million), compared with 667 million reais two years ago, according to Fitch. Over the same period, net debt increased to 3 billion reais from 2.3 billion reais, reflecting a high volume of projects and working capital needs, the ratings company said.
Brookfield’s adjusted net loss was 47.7 million reais in the first quarter of this year, according to data compiled by Bloomberg. The average estimate of six analysts was for a profit of 27.5 million reais. The company said in a May 8 regulatory filing that the quarterly results were hurt by “problems in the construction of some projects, which caused an extra cost of 10.4 million reais.”
Shares in the Rio de Janeiro-based company have fallen 60 percent this year in the biggest decline in the BM&FBovespa Real Estate index, which lost 26 percent during the same period.
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