PDG Drops in Sao Paulo After Wider-Than-Forecast Quarterly Loss

PDG Realty SA, Brazil’s second-biggest homebuilder by sales, tumbled after reporting a wider quarterly loss than analysts forecast as customers canceled purchases and the company burned through cash.

The shares dropped 3.9 percent to 1.71 reais at 11:50 a.m. in Sao Paulo, extending the loss this week to 5.5 percent. It led declines today on the BM&FBovespa Real Estate Index, which fell 0.3 percent.

PDG, based in Rio de Janeiro, posted an adjusted net loss of 104.9 million reais ($46.2 million) in the second quarter, according to data compiled by Bloomberg, more than double the average forecast of nine analysts surveyed by Bloomberg for a loss of 37.4 million reais. Canceled sales totaled 373 million reais during the period, about 44 percent of gross sales, and the company burned through 412 million reais of cash, according to Eduardo Silveira, an analyst at BES Securities in Brazil.

“We remain concerned with PDG’s sales cancellations, cash burning and leverage,” Silveira, who rates the shares sell, wrote in a note to clients.

PDG and other Brazilian homebuilders have been switching to more expensive and profitable projects and away from a government-subsided low-income housing program.

While the most recent results indicate that “the worst might be behind the company” as it makes that shift, “we do not rule out further adjustments (sales cancellations) and lower gross margins coming from old legacy projects,” Silveira wrote.

PDG has dropped 48 percent this year, the second-worst performance on the real-estate index, which declined 23 percent.

To contact the reporter on this story: Richard Richtmyer in New York at rrichtmyer@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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