EZTEC Empreendimentos e Participações S A : Transcrição Q&A 2T22 (eng)

Having made this presentation and said all this before opening the question and answer session, I will now open the floor for our controllers to make their comments. I would also like to mention our Commercial Director, Marcos Ernesto Zarzur, who is present in the Company. Mr. Flávio and Mr. Silvio.

Flávio Ernesto Zarzur:

I wanted to convey to everyone our peace of mind due to the structure of our company and my personal satisfaction for the launching of the second phase of Unique Green. It was a land that we bought many years ago and it was a very long approval process due to the very strong demand for that product.

So, this brings me a lot of confidence. As Emílio said, we are feeling much more control and awareness over the costs and execution work. So I am very confident in the future.

This was the first thing I wanted to transmit, and I will pass it on to Silvio and Marcos as well. We are very calm and with no doubts that we will achieve the goals we have.

Silvio Ernesto Zarzur:

Good morning everyone, I would like to thank you for the audience and say that with this whole scenario that we are encountering today, the characteristics of the business have changed. We are very aware of this.

The company is moving in a very active way to adapt to this new system of the market with all these rapid price changes, etc. I want to say that we are very attentive and strongly operating these improvements.

The scenario is challenging, but I understand that we are doing well in this situation in a very positive way. I want to remind you that we have a very good landbank, which was bought at the right prices.

The projects are very well chosen, they are being very well executed. When I look at our inventory, it is not inventory, it is merchandise in the store. It is very good, we have no disposition to hand them over in any way.

I don't have merchandise that I have to liquidate, I have merchandise to sell well. It was the fruit of a lot of work and we don't believe that it is worthwhile to get rid of it for very low margins. So, we will continue to operate with liquidity.

I think that until the end of the year with more speed than we operated in the first semester, but preserving the price and the margin as much as possible, of course. It is within this scenario that we find ourselves. We will operate with responsibility and care, which we have always done very well and will continue to do.

The Company since it went public and was founded has never had a loss quarter. We will continue to make profits and the profits will be growing, because I believe that the worst of the adaptation we have passed through and from now on it is growing profits that we are expecting.

And I say again that we are very well grounded in our landbank. Emílio spoke about the VGV of R$11 billion and we have three more. I don't know, it is more or less that, because we have 220 thousand meters of private area in "Extra" landbank at least

R$15 thousand a meter.

So, this will give us at least R$3.3 billion more PSV. It is super well located, I think it has a high liquidity and it is a product that will make a differential for the Company. I believe this is what I had to say and I would like to mention that the launching, as Flavio said about Unique Green, was a success.

This brought more confidence to us and to the Company. We sold R$120 million in the first weekend. We opened the sales stand and did it in three weeks of warm-up.

It was not a long or classic warm-up, as was done in up to 70 days. It was a 15-daywarm-up, all of which is very positive. That's what I had to say, and now I'll pass the word on to Marcos.

Marcos Ernesto Zarzur:

Good morning everyone. After my brothers have posted many positive things, what I see in the commercial part of the client we are serving and looking at the macro situation, is that the biggest difficulties have passed and we see a more positive scenario ahead.

It was really challenging, but the mood change in our market is fast and the clients at this moment of just seeing this interest rate that may come down along with inflation and that things tend to get better in the first half of next year, already have a general mood both in the sales team and in the clients we are serving.

I am feeling that we will have a good improvement and we are full of products not only on the shelf, but products approved and ready to be launched when the market responds. I believe it will happen.

Pedro Lourenço:

Thank you, gentlemen. We will now open the question and answer session. For those of you who wish to speak, please use the "Raise Hand" feature. As time permits, we will also answer questions that come in via chat.

If it is not possible to answer within the allotted time, we ask that you forward the question with an e-mail contact to EZTEC's IR. This way, our team will be able to contact you after our conference call.

Lobato:

The first question is more to understand if you are having some difficulty in accelerating the launches and we wanted to know if this difficulty is more margin or demand related.

In other words, if it weren't for the higher costs, would these launches be viable with a satisfactory SoS? The idea of the question is to understand whether it is an issue of insecurity only with the customer's ability to absorb more price or whether it is a broader, structural issue.

And the second question is that we see a certain dampening in launches. Now Unique Green has had the second phase launched and we wanted to understand what the expectation is for price increases over the first phases with these launches. Thank you.

Silvio Ernesto Zarzur:

Lobato, how are you? Thanks for the question, this is Silvio speaking. We are within our operational capacity, we have already launched R$1 billion in this first semester. We are now entering the second phase of Unique Green and we have more launches to come this year.

The scenario was not exactly sheltering when we went through the pandemic and the beginning of the war in Ukraine that brought a lot of price increase for us. We were careful. I will speak looking at the overall macro scenario.

We have the elections, the World Cup and a series of things that will happen this year. So, all this leads us to be cautious on the one hand, but if you analyze this PSV that we are going to perform, it is very bold for the scenario we are facing.

Therefore, we have no insecurity in one aspect or the other. We have a little bit of our operational capacity left, that is true, but within a scenario that is coming up with elections, the World Cup and this problem of the war that is not over.

This problem of lack of material brings a price increase, the oil price variation, all this makes us understand that the volume and the ideal speed for us is the one we are doing. We should accelerate a little.

It is one thing for you to carry a little bit of merchandise with interest at two, it is another thing for you to carry the merchandise with interest at 13. So now you will see us speed up a little bit. Let's talk about selling inventory, because it has made more sense to sell it now.

I think that is it. In the case of Unique Green, our expectation is to give more liquidity as I said. It is not so much a price increase, because the margin is already conveniently adjusted.

When we had all this INCC price increase, we incorporated it. When I talk about not earning above the INCC, this already brings a big increase in profitability in the project.

The idea there is that we make more liquidity, sell faster, and practically maintain the prices that we had adjusted by INCC at the previous launch prices. I think that is it, thank you.

Pedro Lourenço:

Lobato, was your question answered? Would you like to ask another one?

Lobato:

No, it was very clear. Thanks, guys. Good morning.

Gustavo Cambauva, BTG Pactual:

Good morning everyone. I wanted to ask two questions. The first is in relation to gross margin, I understand the effect of the INCC in the quarter and that part of this should come back now in Q3. My question is in relation to the gross margin of new projects.

You even put in the presentation some projects that you intend to launch in the second half of the year and my question is if looking ahead in this scenario of cost being a little more stabilized, if you already see the margin of these new launches that you have in the pipeline returning to above 40%, which is your historical.

And my second question is in relation to the low-income projects that in this more challenging cost scenario, you had run away and avoided these projects a little bit. With the changes in the CVA program and also with this cost stabilization, does it make sense to look again at the low-income as well, or are you still preferring to stay in the upper- medium? That's it, thank you.

Marcos Ernesto Zarzur:

Thank you for the question, and if you look at the developments this year, as we have some very high standard projects within this mix, you will see the gross margin going up. However, when we look at the scenario as a whole within the market that we observe going forward, there is a slight decrease in the gross margin.

So, when the research is done and we understand the price that would sell today to pay this adjustment next year, you have a small decrease in margin. It is that in a year's time, if things are better, the sales price will recover and this margin will return to what it was before, so it is simple. If things stay as they are now, we should have a small decrease. If things improve, we should have an increase in margins.

If things get worse, we should have a decrease and that's it. If things get better, we earn a little more. If they are worse, we earn less. I think that's the way it is, I don't know if Flavio wants to talk about low-income.

Flávio Ernesto Zarzur:

I was just going to tell you that Emilio made an explanation of the return of the margin in the next quarter.

Emílio Fugazza:

Cambauva knows this effect and we report it here. Marcos only comments on the issue that in the next quarter we will have the rebound upwards due to the insertion of the 5.5% INCC. As for this, yes, and we are back to the 40% level in the average for the year. Silvio made a mention of the medium to long term.

Marcos Ernesto Zarzur:

I made a mention in the short term that has one more effect, which is the launching of high-end buildings like these in the República do Líbano Avenue. So you should see our margin go up substantially in the second half. As a whole, it comes in substantially higher. What I said about stability and variation according to the scenario is for next year. That is it.

Emílio Fugazza:

And now a low-income option.

Flávio Ernesto Zarzur:

Now just to put it here, I'm going to raise something regarding low-income. Just to be clear to you, Cambauva. Is it a strategy of EZTEC? Yes, to continue launching in the city of São Paulo the low-income ones.

At this moment we are re-studying our products and readjusting them to the reality we are living. Certainly, at the beginning of next year we will be launching these low-income products.

As you well know, we already have several lands bought with this destination, so yes, we will come back strongly representing something like 20% to 25% of our PSV for the future. That is it.

Silvio Ernesto Zarzur:

Also, to make it clear to everyone, a company the size of ours that only wants to operate in São Paulo should operate in all markets. So, we are going to operate in CVA, in the lower-middle, in the upper-middle, in the high, in the very high, in the corporate. We will have to operate in everything, in commercial, like hotels.

We will have to work all these segments so that they are part of the CVA menu, as all the segments of the São Paulo real estate market are part of it. And to be clear, we have explored the low-income like our partner BP8 a little more in the periphery of São Paulo.

And to be clear, we have explored the low income segment with our partner BP8 a little more in the outskirts of São Paulo.

Pedro Lourenço:

Has the question been answered or are there any other questions left?

Gustavo Cambauva:

No, it didn't. It was clear, folks. Thank you very much, good day.

Emílio Fugazza:

Thank you, Gustavo. Good morning.

Ygor Altero, XP:

Hi guys. Good morning and thanks for selecting my question and for the presentation. Two quick questions here. Still on the question of the high-income segment that we were discussing now, could you give an update on how it was?