2023-11-23 15:13:59
Empresas Socovesa, the construction and real estate holding company controlled by the Gras family, today reported losses of $23,972 million for the third quarter of the year (US$26.7 million at the exchange rate at the end of September), following last year the same date showed profits of $6,841 million, due to a strong increase in its financial expenses and in the midst of an adverse economic context, which has especially hit its sector.
The group’s current financial debt increased by 27% in one year, going from $550,385 million (US$614 million) to $698,610 million (US$780 million or around 19 million UF) at the end of the ninth month of 2023. Compared to December 2022, the increase is 19%.
“Total financial expenses, that is, financial expenses in profit plus financial expenses activated in the period, increased 72.2% between the period January-September 2022 and 2023, as a result of the increase in average net financial debt (+21.2 %) and the high interest rates in force during the period (nominal interest rate of 14.2%),” the company commented in the reasoned analysis of its financial statements as of September.
“The company expects that, to the extent that there is a recovery in real estate demand and the macroeconomic scenario improves, these indicators will return to their historical levels,” he added.
Socovesa’s operating income increased 16.7% to $167,999 million (US$188 million) in the first nine months of the year, but its sales costs grew 18.7% to $127,837 million and its administrative expenses rose 14.3 % to $35,727 million. The increase in income “responds to higher sales of real estate, particularly houses and apartments, which more than compensated for the drop in sales of partially paid homes and land,” the firm explained.
The company has a budget of 9.7 million UF in revenue and still aims to meet that forecast. Until September, it had an effective billing of 4.5 million UF and reported another balance to be billed in 2023 of 5.7 million UF, which should materialize in the last quarter of the year, to exceed the budget and complete 10.25 million UF.
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Operating cash flow (Ebitda) grew 30.1% year-on-year to $14,634 million (US$16 million), as a result of the higher gross profit of the period (which rose 10.8%) and the higher financial expenses discharged that offset the increase of administration expenses. The Ebitda/Revenue ratio (Ebitda margin) increased by 0.9 percentage points to 8.7%.
Total gross margin (gross profit as a percentage of sales) decreased 1.3 percentage points to 23.9%. In its analysis by subsidiary, it said that the construction company Socovesa, known especially for its houses for the middle class and with subsidies, registered a margin of 21.5%, 1.8 points less than in the January-September 2022 period, due “both due to the lower deed of the period, which generates a greater impact on post-sale costs, and a different billing mix, with a greater participation of subsidy projects that have lower margins than a private project.” For its part, the Almagro unit, known for its residential buildings, increased its gross margin by 1.6 percentage points, returning to its historical margins, mainly due to higher deeds in the period. And Pilares, the middle-class buildings unit, recorded a margin of 15% in the period (following a negative margin of -18.8% as of September of last year), thanks to higher billed revenues.
Losses, financial debts of US$ 780 million and two lines of credit: the complex moment of the Socovesa group
In order to strengthen its liquidity, the company has two parallel loans for 1 million UF each (regarding US$45 million each) with BancoEstado and BCI on the one hand, and with an investment fund related to LarrainVial on the other. In its report as of June, Socovesa reported that it had obtained these two new financings, which allowed it to “ensure the availability of funds to continue with its investment plan,” it reported then. So, none of those lines had been busy. In the third quarter he already did it. Socovesa reported this morning that as of September 30 it had raised 340 thousand UF of the first financing (regarding US$15 million) and 329 thousand UF of the one operated by Larrain Cial.
“The company has maintained its focus on financial risk management, with the updated objective that the net debt be at levels between 14 to 15 million UF at the end of 2024. The internal estimate is that the debt should begin to decrease in as the projects that are in completion are completed and the level of billing increases. It is projected that as of the end of March 2024, debt levels will be reported lower than the current ones, moving in the direction of the stated objective,” the firm stated.
The company’s situation led Feller Rate to lower its solvency classification of Socovesa from BBB+ to BBB a month ago and maintain the outlook for the classification at “negative.” Among other things, Feller Rate cited for this “the deterioration evident in its financial position in recent quarters, particularly in the coverage and profitability indicators, which is associated, in part, with the delay in the title deed in some projects, added to the lower dynamism and the relevant stock of projects in development, which have led to higher levels of debt and adjusted financial expenses.”
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