Januario Jesus Atencio III
Leading mass housing developer 8990 Holdings posted a 29-percent year-on-year decline in first quarter net profit to P736 million on lower-than-expected housing sales and delays in the processing of new project permits.
Gross revenues slipped by 26 percent year-on-year to P1.6 billion for the quarter. However, higher sales from Metro Manila are expected when the sales force and construction teams have normalized.
8990 Holdings also expects the launching of new projects that were delayed in 2016 to finally come onstream and contribute to revenues in the next quarters.
As an indicator of future revenue growth, sales reservations in the first three months rose by 6 percent year-on-year to P1.98 billion. These consisted of 1,978 housing units, with North Luzon ramping up its performance by 335 percent.
“Our strong sales performance reflects the robust demand for the DECA Homes brand which not only continues to be well-received in the provinces, but is fast gaining acceptance within Metro Manila,” 8990 Holdings president and chief executive officer Januario Jesus Atencio said in a press statement on Tuesday.
For the rest of 2017, 8990 Holdings expects better performance in terms of increased revenues and higher levels of cash flow.
8990’s profit margins remained generally unchanged in the first quarter, posting a net profit margin of 46 percent and a gross profit margin of 58 percent for the same period.
Atencio also highlighted the record-breaking performance with regards to generating cash flows through Pag-IBIG or Home Development Mutual Fund (HDMF) take-outs.
“We are happy to report a 105 percent increase in HDMF take-out value amounting to P917 million for the first quarter. This performance already represents 38 percent of our annual take-outs last year.” In addition to first quarter’s HDMF cash flow performance, 8990 booked 534 contract-to-sell (CTS) purchases worth P507 Million.
Some 448 other units valued at P446 million have also been delivered to Pag-IBIG, awaiting loan takeout.
Sales which have yet to be recognized as revenues in the first quarter amounted to P2.08 billion covering 1,478 units, 60 percent of which are scheduled for take-outs in the second quarter. Likewise, the number of the ready for occupancy (RFO) inventory decreased by 7 percent to 351 units in the first quarter from 378 last year, attributed to the efficient management of construction and sales in North Luzon.
The company likewise reported improved liquidity in the first quarter, with cash flow reaching P711 million in the first quarter, driven by receivables liquidation activities such as HDMF take- out and CTS receivables purchased by banks.
The value of the company’s CTS receivables went up 7 percent to P20.9 billion in the first three months of the year from P19.5 billion compared to the same period last year.
8990 has a current land bank of about 639 hectares after launching three projects. It is set to launch eight more this year on top of 14 ongoing projects nationwide.
In line with the company’s strategy of increasing cash generation, 8990 Holdings aims to generate P5.2 billion from HDMF take-out and CTS purchase from banks in the second quarter. “Our emphasis on cashflow over growth for 2017 is proving to be the correct direction for 8990. While we expect some growth, we need to balance that with adequate cashflows to ensure that expansion in the years to come will be adequately funded through internally generate income,” Atencio said.