PDG Drops in Sao Paulo on Deeper-Than-Forecast Quarter Loss

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

The shares dropped 1.1 percent to 1.76 reais at 4:27 p.m. in Sao Paulo, extending the loss this week to 2.8 percent. It led declines today on the BM&FBovespa Real Estate Index, which rose 1.5 percent.

PDG posted an adjusted net loss of 104.9 million reais ($46.2 million) in the second quarter, according to data compiled by Bloomberg. That was almost triple the average forecast of nine analysts surveyed by Bloomberg.

“It was a disappointing report,” Javier Gayol, an analyst at Corporativo GBM SAB in Mexico City, said in a telephone interview. “We were expecting the company to contain its capital needs and start to deleverage. However, this didn’t happen, and they continued to increase debt. It’s become a red flag.”

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

Canceled sales totaled 373 million reais in the second quarter, 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 research note to clients.

PDG has dropped 47 percent this year, the worst performance after Brookfield Incorporacoes SA on the real-estate index, which has declined 22 percent.

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