Arquivos Construction companies

Trade groups, analysts and developers included in Green Yellow House have been calling for a new update of the housing program subsidies — Foto: Tomaz Silva/Agência Brasil

The Brazilian Chamber of the Construction Industry (CBIC) unveiled this week the sector’s data for the quarter, which shows stability compared to the beginning of 2021. Sales are up 1.4%, while new launches fell 2.6%. But the results hide the most complicated situation of properties in Green Yellow House. New launches included in the federal housing program dropped 25.6% year over year, to 22,300 new units.

Trade groups, analysts and developers included in Green Yellow House have been calling for a new update of the housing program subsidies. The idea is to increase prices of units without seeing customers lose purchasing power, as their income is already pressured by high inflation in Brazil. Building projects aimed at this public are unattractive or even unviable without such update, they say.

This change will come, the new minister of Regional Development, Daniel Ferreira, told Valor. The value of the subsidies will be increased by 12.5% to 21.4%, depending on the location of the project, household income and other criteria. The cap of the amount borrowed remains at R$47,500. The measure will be put in place in June and last by the end of the year. The ministry wants to include 400,000 contracts in the program this year, compared with 91,000 so far.

Now, it remains to be seen if the update will be enough to speed up the segment, which accounts for 42% of the launchings now, compared with a 57% slice in the beginning of 2020.

So far, the rise in launches and sales of units not included in the program offset the drop of projects in the Green Yellow House, but high interest rates hinder new sales.

Besides developers, companies that provide services to the home construction industry also expect the housing program to recover. Versátil, a company that rents scaffolds and props for buildings in Paraná and Santa Catarina, reports an 85% occupation rate, a level above the historical average of 60%. The company plans to keep up the pace at least until mid-2023, when the projects launched in recent years will be ready. After that, Versátil expects changes in the Green Yellow House to keep demand for construction work heated.

Since 2020, the company has already increased by 50% the amount charged to lease its products, due to higher steel prices. This increase is another obstacle for real estate developers, who have reported thinner profit margins due to higher costs.

Considering the combined first-quarter results of public developers, gross margin fell 3.2% year over year, while net profit dropped 14.3%. In a report released on Wednesday, XP cited real estate as one of the sectors in which companies that delivered lower-than-expected results for the first three months of the year.

The Brazilian Association of the Construction Materials Industry (Abramat) blames the prices of raw materials and freight, in addition to taxes – which also hit producers – for the increases. In the year through April, revenues fell 9.3% year over year in the industry, according to the Abramat index. In 12 months, they declined 2.3%.

The members of the Brazilian Association of Manufacturers of Ceramic Tile (Anfacer) also reported bad results in the quarter. The output dropped 2.6%, while ceramic tiles sales fell 11.4%.

Amid the bad news of falling sales, at least the pace of new price increases is also likely to slow down. Celso Petrucci, vice president of CBIC, said that the phenomenon of rising costs is expected to lose steam throughout the year. The National Index of Construction Cost (INCC) is up 11.54% in 12 months, compared with the country’s official inflation of 12.13%.

In the business buildings segment, two deals closed last week suggest a recovery in occupancy and rental value, at least among high-end units, analysts say. BR Properties sold more than half of its portfolio to Brookfield for R$5.9 billion, which included 12 business towers and two plots of land for industrial warehouses. The following day, GTIS Partners sold its 62% stake in Infinity Tower, a high-end building near Faria Lima Avenue, for R$850 million. The buyer was a group formed by companies Lucio, AMY and Omar Maksoud Engenharia, which already owned the rest of the building.

Source: Valor International

https://valorinternational.globo.com

Engineering companies — which used to dominate highway concessions in Brazil — have regained strength, but now with a new profile: by the association of medium-sized construction companies. This type of consortium has become usual in auctions in the sector, especially in state ones.

Of eight state tenders since 2019, five were won by consortiums constituted by medium-sized construction companies — alone or in association with a larger group.

This is the case of the Way 306 Consortium, which won a highway auction in Mato Grosso do Sul at the end of 2019. The group is led by GLP (a Singapore-based logistics company), with participation from engineering companies Bandeirantes, TCL, and Senpar.

The most recent example is last Wednesday’s bid for Rio Grande do Sul’s highways, won by the Integrasul Consortium, comprised of Silva e Bertoli (of Neovia Engenharia) and Gregor (of Greca Asfaltos).

In the federal auctions held since 2019, the pattern that predominates is the relay between CCR and Ecorodovias. Of the five projects in the period, only one was left with a consortium led by Conasa, in partnership with engineering firms Zeta, Rocha Cavalcante, and M4.

On the one hand, the movement of the construction companies brings new players to the market and increases competition. On the other, there is concern about the financial and operational capacity of the companies, according to analysts and companies.

One of the biggest challenges is financial, says Danniel Zveiter, president of the National Association of Highway Construction Companies (Aneor). “The concessions market is very different and involves a complex financial component, both to obtain credit and for the day-to-day financial operation,” he says.

For Igino Zucchi de Mattos, head of Infrastructure at Integral Investimentos, it is important that the groups gather all the necessary skills, which go far beyond the execution of the work. “It is necessary to know how to implement billing, organize the cash flow, and take care of the environmental issues,” he says.

The medium-sized construction company consortiums have been gaining ground, but they are not new. The biggest reference is the concessionaire MGO, composed of nine medium-sized companies, which, in 2013, won the operation of BR-050, between Minas Gerais and Goiás.

At the time, there were doubts about the group’s capacity. In the end, the concessionaire became known for being one of the few to be successful among the contracts bid during president Dilma Rousseff’s administration. In 2018, the construction companies sold the asset to Ecorodovias. Since then, members of the consortium have appeared in different road auctions.

For example, Gregor (part of the group that won last week’s auction) was a shareholder in MGO, as were the three construction companies that partnered with GLP in the Way 306 Consortium. Vale do Rio Novo, another former member, led a consortium that won a lot of highways in Mato Grosso at the end of 2020.

In the past, large construction firms reigned in infrastructure concessions. After the revelation of corruption cases and the economic crisis in the country, most of them withdrew from the contracts and stopped participating in the auctions. The main survivor of this era is CCR, controlled by Mover (formerly Camargo Corrêa), Soares Penido and Andrade Gutierrez — the latter is in the process of selling its stake to Votorantim and Itaúsa.

The exit of the contractors left a void, which was gradually filled by the entry of financial groups and other segments, such as Pátria and GLP. However, with the recent multiplication of road auctions, the perception that it is necessary to attract more groups has gained strength.

“Today, it is necessary to form new highway concessionaires. This can happen by attracting foreigners, but also by developing national players,” says Mr. Mattos. For analysts, there is a risk that not all the construction consortiums will be successful. However, the movement is seen as a great opportunity to form new platforms in the country.

Source: Valor International

https://valorinternational.globo.com

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