EZTEC - Investor Relations Mobile

EZTEC announces Preliminary 3Q17 Operating Results



Net Sales reach R$ 715 million in the quarter with the sale of

EZ Towers’ Tower B
Net Sales, ex-Tower B, presente best results in 7 quarters

São Paulo, October 17th, 2017 - EZTEC SA (BOVESPA: EZTC3; Bloomberg: EZTC3: BZ), announces its preliminary operating results for the third quarter of 2017 (3Q17). Note that the results presented here are managerial results and are subject to revision following the external audit. The complete and audited results for 3Q17 are scheduled to be disclosed on November 9th, 2017, after market closure.

Sale of Tower B from the EZ TOWERS Corporate Project

On September the 21st, 2017, EZTEC and Brookfield announced a commitment to alienate and acquire the Tower B from the EZ Towers project, for the value of R$ 650 million. Together with Tower A’s sale, in 2013, it represents the largest operation in the Company’s history. The payment of the adjusted price, as per the contract, happened on September 27th, thus contributing to the cash generation still on 3Q17.

Tower B from the EZ Towers was fully constructed on October 2017, consisting of 26 corporate floors, for a total BOMA area of 47,000m2. Since then, simultaneously to the sales negotiations, initiated in 2016, EZTEC made efforts to lease the tower, reaching 68,5% of leased area, albeit with no cash effects prior to the sale.

In the third quarter EZTEC carried out the year’s second launch, the In Desgin Liberdade project: a residential
project directed towards the mid-high income segment, located in Liberdade, South Zone of São Paulo, with
114 units and PSV of R$ 67,8 million.

In Design Liberdade fits the profile of the projects that EZTEC has been launching since 2015: [i] projects directed towards the mid-high and high income segments, as these are the ones with the most resilience in a period marked by restricted income and access to credit; [ii] projects that are well located within the City of São Paulo, aiming at each neighborhood’s organic, regional demand, as opposed to stimulating migratory fluxes; and [iii] projects with fewer units, such that the risk associated to the launches gets diluted. The In Design Liberdade project, which fits those criteria, was launched in Augusto and has demonstrated adequate sales speed, being 32% sold by the end of the quarter.

Apart from the project launched in 3Q17, EZTEC acquired, via increased quotas, additional 13,75% participation in the Jardins do Brasil project, in Osasco - composed of 4 residential phases (out of which, 3 have been delivered), one ready commercial phase, and an additional residential phase to be launched in the future - reaching 41,25% in total participation. It has also acquired 15% shares in Ares da Praça (containing the Parque and Bosque Ventura projects), in Guarulhos, reaching a total of 85% of participation. Through the latter acquisition, EZTEC detains control over the projects, such that Ares da Praça starts to have the consolidated status - its results, therefore, will no longer go through the equity income line. It is worthwhile mentioning that, on the moment of the acquisition, Jardins do Brasil and Ares da Praça had been 71% and 80% sold, respectively. Considering the incremental revenue to be recognized, receivables originated from sold units, as well the value of units yet to be sold, the aggregate impact of such acquisitions contribute with R$ 75 million the quarter’s launches. Lastly, considering the R$ 650 million regarding Tower B from the EZ Towers project, the Compan has launched R$ 793 million in the third quarter of 2017.

Sales and Cancellations

Disregarding the sale of Tower B from the EZ Towers, EZTEC still presented in 3Q17 an acceleration in net sales, reaching the highest mark in seven quarters, ending it with R$ 65 million (or R$ 715 million including Tower B).

Such results, composed of R$ 815 million in gross sales and R$ 100 million in cancellations, are reached through a scenario in which gross sales (ex-EZ Towers) presented a slight improvement relative to the previous quarter, representing a sensible improvement in the country’s economic scenario. Sales highlights include the Jardins do Brasil project, in Osasco, which had already been presenting good sales speed in 2Q17, accelerating even more in 3Q17 (98 units sold, against 66 in 2Q17). In the commercial segment, apart from Tower B, there were sales in the EZ Mark project, located in the South Zone of São Paulo, after going through a long period void of sales. Lastly, the previously mentioned shares acquisition’s impact must be mentioned: as though as the acquisition was signed in September, EZTEC detains the right over the cash flows not yet received for the units sold throughout 3Q17 - in effect, allowing the adoption of EZTEC’s current participation for the quarter’s sales. By retroactively applying such increment in shares, thus, R$ 5,5 million should be added to net sales (already
included in the abovementioned sales figures).

Regarding cancellations, despite the substantial volume of deliveries in the past quarters, there has been a reduction in dissolutions: one way to quantify cancellations’ relative frequency is through the ratio between the value cancelled for a given quarter over the PSV delivered (and already sold) for the previous quarter: such ratio has dropped from 49% in 2Q17 to 36% in 3Q17. Part of this reduction can be attributed to the lower interest rates clients have been allowed to get when transferring their outstanding debt to private banks - such amelioration in mortgage rates have come just in time to encompass the deliveries in the third and fourth phases of Cidade Maia (a megaproject worth R$1 billion in PSV). One must also mention the role of direct financing through EZTEC, offered at rates as low as 10% plus inflation (IGP-DI), lasting for as long as 20 years.

Deliveries

In the third quarter of 2017, EZTEC delivered 4 projects in the City of São Paulo: the Magnífico Mooca, the phases Giardino and Palazzo from the San Felipe project, and Legittimo Santana. They consist, respectively, of 162, 104, 48, and 70 units (with launch PSV of R$ 47.9 million, R$ 90.3 million, R$45.6 million, and R$ 49.8 million, in EZTEC’s part). Considering a weighted average for the projects’ PSV, they are 59% sold. There are three additional projects whose delivery is forecasted to happen in the last quarter of the year.

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Contact IR

Telephone: +55 11 5056 8313
E-mail: ri@eztec.com.br