Gafisa Surges in Sao Paulo on Surprise Second-Quarter Profit

Gafisa SA, the worst-performing Brazilian homebuilder in the past 12 months, rose the most on the benchmark Bovespa index after reporting a surprise profit in the second quarter following two consecutive losses.

Shares surged 15 percent to 3.59 reais at the close of trading in Sao Paulo, pushing the five-day gain to 25 percent, the steepest weekly advance since November 2008. The Bovespa rose 0.8 percent.

Adjusted net income fell 9.6 percent to 22.7 million reais ($11.3 million) in the three months through June, Gafisa said in a regulatory filing. Analysts had expected an adjusted net loss of 21.2 million reais, according to the average of eight estimates compiled by Bloomberg.

“Gafisa sent an important sign to the market with this cash generation, withdrawing the possibility of lack of liquidity,” Rodolfo Amstalden, an analyst at equity consulting firm Empiricus Research, wrote in a note to clients dated today.

The homebuilder’s shares have lost 51 percent in the past 12 months while the BM&FBovespa Real Estate index advanced 7.9 percent during that period. In addition to the slowdown in Brazil’s economy, Gafisa’s profits have been hurt by rising costs and delays in deliveries in its low-income segment, Tenda.

“Now Gafisa is reducing expenses, managing its inventories better and has focused its new projects in medium and upper-class segments, which are more profitable,” Felipe Silveira, an analyst at brokerage Coinvalores, said by phone from Sao Paulo. “This strategy seems to be working.”

Gafisa, the country’s sixth-largest homebuilder by sales, didn’t start any new low-income projects in the second quarter, compared with 349.4 million reais a year ago, according to the earnings statement. It reduced the amount of higher-income buildings to 546.6 million reais from 1 billion reais during the same period in 2011.