Urbi Said to Extend Streak of Negative Free Cash Flow in Quarter

Urbi Desarrollos Urbanos SAB, the Mexican homebuilder that lost three-fourths of its market value in the past year, will report negative free cash flow to equity for the fourth quarter of 2012, according to a company official with direct knowledge of the matter.

The amount of cash generated in the fourth quarter that can be paid to the company’s owners after expenses, reinvestments and debt repayments will be similar to the third quarter, when the homebuilder had negative 152.3 million pesos ($12 million) in free cash flow to equity, according to the official. Sales will be in the lower end of the company’s 3 billion peso to 4 billion peso projection, said the person, who asked not to be identified because the information is private.

Alma Beltran, a press official with Mexicali, Mexico-based Urbi, said the fourth-quarter results will be published Feb. 27 and declined to comment further.

The report would mark Urbi’s third straight quarter of cash bleed. The company has struggled to adapt to a changing market for government-subsidized housing as authorities increasingly prioritize apartment-building construction that requires more up-front capital than building single-family homes.

Urbi had promised investors it would start turning around a streak of cash outflows by the second half of 2012, saying in a July 30 statement that free cash flow to equity, known as FCFE, would be “neutral” in the second half of the year.

Urbi shares have plummeted 75 percent in the 12 months through the end of last week to a record-low 4.14 pesos at the close of trading Feb. 22.

Fitch Ratings placed Urbi and three other Mexican homebuilders on rating-watch negative on Feb. 22, citing in part pressure on cash flows and a lack of clarity on government support for the industry. Fitch assigns Urbi a credit rating of B, five levels below investment grade.

Urbi said in a stock exchange filing that Fitch’s report helped prompt the 17 percent drop in its shares that day.

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