PDG Slumps on Wider-Than-Forecast Loss as Cancellations Surge

PDG Realty SA, Brazil’s second-biggest homebuilder by revenue, dropped the most in 16 months after reporting a wider-than-forecast quarterly loss amid a surge in order cancellations.

Shares slumped 8.9 percent to 1.85 reais at the close in Sao Paulo, the biggest one-day drop since July 2012. Trading volume was twice the daily average of the past three months. The homebuilder’s slide contributed the most to the Ibovespa benchmark’s 0.8 percent decline.

PDG took the initiative in June and July to cancel orders from customers who couldn’t pay or qualify for financing, according to Marco Kheirallah, the homebuilder’s chief financial officer. “That’s why cancellations peaked in the third quarter,” Kheirallah said in a phone interview. “This number will fall in the fourth quarter.”

The company’s third-quarter cancellations rose to 50 percent of contracted sales from 26 percent in the first half of this year, according to a regulatory filing after the market closed yesterday.

The company posted an adjusted net loss of 84.8 million reais ($37.1 million) in the three months through September, according to data compiled by Bloomberg. The average estimate of six analysts surveyed by Bloomberg was for a loss of 53.8 million reais.

PDG will reverse losses and post profit next year, Kheirallah said. “The company will deliver more projects in 2014 than in 2013,” he said. “And we’ll only start new projects that are profitable. We’re not focused on growth but on profitability now.”

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