Mexico City (October 21st, 1999) – Consorcio ARA S.A. de C.V. (BMV: ARA*) today announced
results for the third quarter 1999 and the trailing twelve months ended September 30th, 1999.
(All figures in Mexican Pesos)
PERFORMANCE HIGHLIGHTS
Third quarter 1999 compared to the Third quarter 1998
• 42.6% increase in unit sales.
• 45.4% increase in revenues.
• 48.8% gross profit increase resulting in a gross margin of 29.1%.
• 45.5% increase in operating profit with a margin of 21.9%.
• EBITDA growth of 44.0% with a margin of 23.2 % of revenues.
• Net profit grew 73.9% with a net margin of 19.3%.
Trailing Twelve Months ended September 1999 vs. September 1998
• Increase in unit sales of 34.0%.
• Increase in revenues of 32.2%.
• 31.5% increase in gross profit with a gross margin of 29.1%.
• Increase in operating profit of 28.9% with an operating margin of 21.9%.
• EBITDA growth of 29.6% with a margin of 23.1% of revenues.
• Net profit grew 38.1% with a 17.5% margin.
• The 30th of Augusts of 1999 there was a Split of 3 to 1 shares of the company. The profit of
each share was of $1.14, which represents a growth of 38.3% comparing in similar bases to
to last year.
September 30 ,1999 Balance Sheet Highlights.
• Cash remained higher than debt.
• Leverage was maintained at a healthy level of 14.0% of total liabilities to total assets.
• Consorcio ARA’s fully owned Land Bank was enough to build and sell 66,180 units,
equivalent to 84,941 affordable entry level units.
• Backlog of 17,254 units, which guarantees more than 1.5 years of future sales.
2
DIRECTOR’S REPORT
THIRD QUARTER 1999
UNIT SALES:
During the third quarter of 1999, Consorcio ARA’s total unit sales increased 42.6%. Total sales
grew from 2,252 units during the third quarter of 1998 to 3,215 units during the third quarter of
1999. The breakdown is as follows:
3° Quarter 1999
Units
Pesos
(millions)
Prosavi
Infonavit
Fovi-Fovissste
Affordable Entry Level
Middle Income
Residential
Total as Developer
Contractor
Total in J/V (middle
income)
TOTAL
214
1,591
1,088
2,679
234
22
3,149
0
3° Quarter 1998
Units
Pesos
Units
(millions)
22.8
287.9
215.5
503.4
75.8
28.5
630.5
29.9
66
3,215
234
1,012
864
1,876
60
31
2,201
0
23.8
179.4
168.8
348.2
23.7
38.7
434.4
19.7
53
660.4
2,254
454.0
Variation
%
Pesos
-20
579
224
803
174
-9
948
0
-8.5
57.2
25.9
42.8
290
-29.0
43.1
0
13
24.5
961
42.6
%
-1.1
108.5
46.7
155.2
52.2
-10.2
196.1
10.3
-4.5
60.4
27.7
44.6
220.5
26.3
45.1
52.2
206.3
45.4
3° Quarter 1999
3° Quarter 1998
Variation
Units
Mix
Units
Mix
Units
%
Total Prosavi
214
6.7%
234
10.4%
-20
-8.5
Total Infonavit
1,591
49.5%
1,012
44.9%
579
57.2
Total Fovi-Fovissste
1,088
33.8%
864
38.3%
224
25.9
Total Affordable Entry
2,679
83.3%
1,876
83.2%
803
42.8
Total Middle Income
300
9.3%
113
5.0%
187
165.5
Total Residential
22
0.7%
31
1.4%
-9
-29.0
TOTAL
3,215
100.0%
2,254
100.0%
961
42.6
Consorcio ARA’s Prosavi operations generated revenues of Ps.22.8 million derived from the
construction and sale of 214 units during the quarter.The decrease of 4.5% is due to the fact that
we finished the development Villas del Caribe in Cancun, Q.R.
INFONAVIT financed sales increased both in unit and revenue terms. Sales grew from 1,012
homes in the third quarter of 1998 to 1,591 homes in the third quarter of 1999, representing a
57.2% increase in unit sales and a 60.4% increase in revenues. This growth is higher that the
one expected due to the success in new developments and the INFONAVIT financing new
developments.
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3
The volume of FOVI-FOVISSSTE sales grew 25.9% when compared to the same quarter a year
ago by posting 1,088 units. This generated a 27.7% increase in revenues to Ps.215.5 million in
the quarter.
The company’s Affordable Entry Level housing operations during the third quarter were very
positive. Sales derived from this market segment grew 42.8% from 1.876 units during the third
quarter of 1998 to 2,679 during the third quarter of 1999 with a corresponding increase in
revenues of 44.6%.
Middle Income grew in terms of overall sales volume by 165.5%, with a 290.0% increase as a
developer and a 220.5% in revenues. It is worth mentioning that during the quarter out of the
300 homes we recognized as revenue, 216 units were financed by FOVI’s B-3 mortgage.
The Residential housing segment posted a volume decrease of 9 units which represents a
26.3% decrease in revenues. This segment represents 0.7% of total sales. Currently, residential
sales are realized either as a cash sale or financed by Consorcio ARA. As previously mentioned,
Bital’s mortgages can be used as an alternative by ARA’s clientele. Operations in this segment
had good performance during 1999 and are expected to perform even better as the new
developments start contributing to volume, revenues and earnings.
AVERAGE PRICES
Average selling prices in the third quarter experienced a mixed performance. The average
selling price for Affordable Entry Level homes increased 1.2%. The average price for Middle
Income units decreased 17.8% due to the fact that the average price of the third quarter of 99
includes a higher number of B3 units, compared to the 7 units of last year. A breakdown of
prices follows:
Average Selling Price
Prosavi
Infonavit
Fovi-Fovissste
Affordable Entry Level
Middle Income
Residential
Third quarter
1999
(Thousands $)
106.4
180.9
198.1
187.9
324.0
1,295.3
Third quarter
1998
(Thousands $)
101.9
177.3
195.4
185.6
394.2
1,247.5
Variation %
4.4
2.1
1.4
1.2
-17.8
3.8
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4
EARNINGS STATEMENT, 3° Quarter 1999 VS 3° Quarter 1998.
3° Quarter 1999
Millions of Pesos
%
Revenues
Cost of Goods Sold
Gross Profit
G&A Costs
Operating Profit
ICF
Other Income
Joint Ventures
PreTax Profit
Taxes
Net Profit
Depreciation
EBITDA
660.4
468.2
192.1
47.6
144.6
12.2
-0.1
0.3
132.6
5.3
127.3
9.0
153.5
100.0
70.9
29.1
7.2
21.9
1.9
0.0
0.0
20.1
0.8
19.3
1.4
23.2
3° Quarter 1998
Millions of Pesos
%
454.0
324.9
129.1
29.8
99.3
22.0
-1.4
0.9
76.9
3.7
73.2
7.3
106.6
Variation
%
100.0
71.6
28.4
6.6
21.9
4.8
-0.3
0.2
16.9
0.8
16.1
1.6
23.5
45.4
44.1
48.8
59.9
45.5
-44.4
94.7
-66.7
72.4
43.2
73.9
22.9
44.0
REVENUES
Revenues increased 45.4% in real terms from Ps.454.0 million in the third quarter of 1998 to
Ps.660.4 million in the third quarter of 1999.
COST OF GOODS SOLD
Cost of goods sold grew 44.1% from Ps.324.9 million during the third quarter of 1998 to
Ps.468.2 million during the third quarter of 1999. This increase is in line with the increase in
revenues.
GROSS PROFIT
Gross profit for the third quarter of 1999 was greater than the same period in 1998 by 48.8% at
Ps.192.1 million. This increase generated a pooled gross margin of 29.1% of revenues. Gross
margin in each segment is as follows:
Prosavi
Affordable
Middle Income
Residential
Contractor
TOTAL
Gross Margin
Gross Margin
3° Quarter 1999 3° Quarter 1998
22.7%
22.7%
29.0%
28.6%
30.9%
29.6%
31.9%
30.6%
28.7%
27.5%
29.1%
28.4%
Increase
%
0.0
0.4
1.4
1.4
1.2
0.7
Consorcio ARA sells a higher priced affordable entry level home compared to its competitors,
and as a result, the company’s margins are the highest in the industry.
GENERAL AND ADMINISTRATIVE COSTS
G&A as a percentage of revenues was 7.2 or Ps.47.6 million, that includes Ps.1.3 million spent
in implementing measures to minimize any Y2K effect
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5
OPERATING PROFIT
Operating profit totaled Ps.144.6 million, a 45.5% increase in real terms compared to the third
quarter of 1998. The margin was 21.9%.
EBITDA
During the third quarter of 1999, Consorcio ARA reported EBITDA of Ps.153.5 million of which
Ps.9.0 million came from depreciation. The resulting margin was 23.2%.
INTEGRAL COST OF FINANCING
Integral cost of financing contracted 44.4% from Ps.22.0 million during the third quarter of 1998
to Ps.12.2 million during the third quarter of 1999. A breakdown follows:
3° Quarter 1999 3° Quarter 1998
Million Pesos
Million Pesos
Interest Paid
11.2
12.1
Interest Earned
15.5
9.2
Foreign Exchange Variations
(4.2)
(2.7)
Monetary Position Gains/Losses
12.4
16.4
INTEGRAL COST OF FINANCING
12.2
22.0
Variation
%
-7.2
69.0
53.0
-24.4
-44.4
The interest paid and bridge loan expenses on bridge loans of Ps.93.9 caused interest expense
to contract 7.2%. The increase in cash from the third quarter of 1998 to 1999 along with high real
interest rates resulted in an increase of 69.0% on interest earned posting $15.5 million pesos. A
stronger peso caused a foreign exchange impact of Ps.4.2 million. The combined effect is a total
financing cost of Ps.12.2 million. It is worth noting that EBITDA is 12.5 times larger than this
amount and can cover interest paid almost 13.6 times.
EQUITY IN JOINT VENTURES
Joint venture volume increased 24.5%. This is due to the growth in middle income. Equity in joint
ventures went from Ps.0.9 million to Ps.0.1million.
TAXES
During the third quarter of 1999, the company paid Ps.4.6 million in various taxes, representing
0.7% of revenues.
NET PROFIT
Net profit for the third quarter was Ps.127.5 million, a 74.2% increase in real terms compared to
the third quarter of 1998. Net margin was 19.3% of sales.
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6
Trailing twelve months ended September 30, 1999
LTM September 1999
Units
Prosavi
Infonavit
Fovi-Fovissste
Affordable Entry
Level
Middle Income
Residential
Total as Developer
Contractor
Affordable Entry
Level
Middle Income
Total in Joint
Ventures
TOTAL
Millions of
Pesos
LTM September
1998
Units
Millions of Units
Pesos
Variation
%
Millions
of Pesos
%
1,082
4,621
4,293
8,914
114.2
820.1
821.1
1,641.2
792
2,238
3,866
6,104
80.5
397.5
700.7
1,098.2
290
2,383
427
2,810
36.6
106.5
11.0
46.0
33.7
422.6
120.5
543.0
41.9
106.3
17.2
49.5
521
114
10,631
-
164.3
150.8
2,070.5
57.9
365
107
7,368
360
149.8
146.1
1,474.5
134.9
156
7
3,263
-360
42.7
6.5
44.3
-100.0
14.5
4.7
596.0
-77.0
9.7
3.2
40.4
-57.1
519.0
32.2
-
5
-5
-100.0
168
168
326
331
-158
-163
-48.5
-49.2
2,740
34.0
10,799
2,128.4
8,059
1,609.4
LTM September 1999
LTM September
Variation
1998
Units
Mix
Units
Mix
Units
Total Prosavi
1,082
10.0%
792
9.8%
290
Total Infonavit
4,621
42.8%
2,243
27.8%
2,378
Total Fovi-Fovissste
4,293
39.8%
3,866
47.9%
427
Total Affordable Entry
8,914
82.5%
6,109
75.7%
2,805
Total Middle Income
689
6.4%
691
8.6%
-2
Total Residential
114
1.1%
107
1.3%
7
Contractor
360
4.5%
-360
TOTAL
10,799
100.0%
8,059
100.0%
2,740
%
36.6
106.0
11.0
45.9
-0.3
6.5
-100.0
34.0
Pág. 6
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EARNINGS STATEMENT, trailing twelve months September 1999
LTM September 1999
LTM September 1998 Variation
Millions of
%
Millions of
%
%
Pesos
Pesos
Revenues
2,128.4
100.0
1,609.4
100.0
32.2
Cost of Goods Sold
1,508.6
70.9
1,138.1
70.7
32.6
Gross Profit
619.8
29.1
471.3
29.3
31.5
G&A Costs
153.7
7.2
109.7
6.8
40.1
Operating Profit
466.2
21.9
361.6
22.5
28.9
ICF
74.6
3.5
90.6
5.6
-17.7
Other Income
0.6
0.0
5.0
0.3
-87.2
Joint Ventures
1.9
0.1
5.8
0.4
-66.7
PreTax Profit
394.1
18.5
281.8
17.5
39.9
Taxes
20.9
1.0
11.6
0.7
80.0
Net Profit
373.2
17.5
270.2
16.8
38.1
Depreciation
25.4
1.2
17.8
1.1
42.3
EBITDA
491.5
23.1
379.4
23.6
29.6
INTEGRAL COST OF FINANCING
Interest Paid
Interest Earned
Foreign Exchange Variations
Monetary Position Gains/Losses
INTEGRAL COST OF FINANCING
LTM September LTM September
1999
1998
Millions of Pesos Millions of Pesos
55.7
33.9
62.0
32.6
1.2
-6.4
82.1
82.9
74.6
90.6
Variation
%
64.4
90.4
118.3
-1.0
-17.7
NET PROFIT
Net Profit (Thousands)
Shares (Thousands)
EPS (pesos)
LTM September LTM September
1999
1998
Ps. 371,701.1
Ps.269,101.8
327,377
109,264
1.14
2.47
Pág. 7
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BALANCE SHEET as of SEPTEMBER 30, 1999.
September 1999 September 1998 Variation
Millions of Pesos Millions of Pesos
%
Total Assets
2,805.9
2,568.3
9.3
Short Term Assets
2,597.3
2,398.1
8.3
Cash
250.3
78.8
217.8
Accounts Receivable
484.0
627.8
-22.9
Other Accounts Receivable
31.1
12.2
155.1
Inventory
1,790.7
1,645.4
8.8
Other Short Term Assets
41.2
33.4
21.2
Long Term Assets
208.6
170.2
22.7
Equity in Joint Ventures
14.2
22.1
-35.8
Buildings and Equipment
194.5
148.2
31.2
Total Liabilities
Short Term Liabilities
Suppliers
Bank Loans
Taxes Payable
Other Short Term Liabilities
Short Term Note
Long Term Liabilities
Bank Loans
Other Liabilities
Stockholder's Equity
391.7
354.1
113.2
56.5
0.9
158.4
25.0
37.4
37.4
0.3
326.6
235.5
128.9
47.7
0.9
58.0
-91.0
91.0
0.1
19.9
50.4
-12.2
18.5
1.4
173.2
--58.9
-58.9
151.8
2,414.3
2,241.8
7.7
ASSETS
Total assets increased 9.3% compared to September 30, 1998. Inventory which represents
ARA’s largest asset, increased 8.8%.
INSTALLED CAPACITY
In order to continue growing steadily, the company invested Ps.71.2 million in machinery and
equipment. The amount invested the previous period was Ps.60.3 million
ACCOUNTS RECEIVABLE
Accounts receivable decreased as a result of increasing collection activity in the recent months
and the culmination of some developments. Nevertheless it is worth noting that these levels are
not sustainable since they are the result of a sui generis situation in the housing industry in
Mexico. At the end of September 1999, accounts receivable was equivalent to 3.0 months of
sales, a 2.1 month decrease compared to the previous September.
Pág. 8
9
LIABILITIES
Leverage as a percentage of total liabilities to total assets was 14.0%. Interest bearing debt is
47.5% of cash. For operating reasons Consorcio ARA maintains bridge loans with the Sofoles,
the same as other liabilities. It is the company’s conviction that a low leverage level is the proper
formula for the business and environment in which it operates.
At the end of the quarter Consorcio ARA issued a Ps.25.0 million in a short term note with the
sole intent of keeping its Ps.250.0 million credit line open.
STOCKHOLDER’S EQUITY
Stockholder’s equity increased 7.7%. The number of shares outstanding on September 30, 1999
was 326,763,874. It is worth mentioning that there was a 3 to 1 split in the stock in August 1999.
LAND BANK
Consorcio ARA continues to hold the optimal land reserve for its operations from a strategic,
operational and financial point of view. This land bank is 9.8 million square meters, which
provide the company with the capacity to sell more than 66,180 homes, the equivalent of 84,941
affordable entry level homes. The breakdown is as follows:
Prosavi
Affordable Entry
Middle Income
Residential
TOTAL
September 99 Affordable Units Revenue
Units
Equivalent
Equivalent
Million Pesos
2,821
1,597
300
53,624
53,624
10,076
7,233
12,472
2,344
2,502
17,248
3,241
66,180
84,941
15,961
The land bank breakdown by state is as follows:
Units
%
Mexico City Metro area
36,641
55.4
Quintana Roo
8,972
13.6
State of Mexico
4,712
7.1
Baja California
3,467
5.2
Puebla
3,355
5.1
Sonora
2,822
4.3
Nuevo Leon
2,450
3.7
Chihuahua
1,904
2.9
Querétaro
998
1.5
Veracruz
381
0.6
Guerrero
280
0.4
Sinaloa
158
0.2
Tabasco
40
0.1
TOTAL
66,180 100.0
A clear preference for regions with strong economies and demographics is evident.
Pág. 9
10
MORTGAGE COMMITMENT BACKLOG
As of September 30, 1999 Consorcio ARA’s mortgage commitment backlog was as follows:
September 1999
Units
Prosavi
926
Affordable
14,901
Infonavit
6,660
Fovi-Fovissste
8,241
Middle Income
1,080
Residential
347
TOTAL
17,254
%
5.4%
86.4%
38.6%
47.8%
6.2%
2.0%
100.0%
September 1998
Units
2,008
10,196
3,366
6,830
1,631
180
14,015
%
% Change
14.3%
72.8%
24.0%
48.7%
11.6%
1.3%
100.0%
-53.9%
46.2%
97.9%
20.7%
-33.8%
92.8%
23.1%
Current backlog levels are sufficient for more than 1.5 years of sales. The company believes that
optimal levels are within the 1 to 1.5 year range since it is not a construction backlog but rather a
mortgage commitment pool.
NEW PROJECTS
Throughout the year the sale of new developments in the various markets in which Consorcio
ARA participates will be launched. A list follows:
DEVELOPMENT
Affordable Entry Level
El Campanario
Region Norte
Residential
Herrerias
Sta Monica
LOCATION
Mexicalli, Baja California
Cancun, Quintana Roo
Mexico City
Tlalnepantla, State of Mexico
The following developments have been opened:
On Abril 15th the development known as Cofradía de San Miguel in the municipality of Cuautitlan
Izcalli in the State of México with 3,332 affordable entry level units.
On Abril 22nd the development known as Paseos del Valle in the State of México with 457
affordable entry level units.
On May 13th the development known as Porto Alegre in the Manzana 500 in Cancún Quintana
Roo with 772 middle income units.
On June 25th the first stone of our Playa Diamante residential development in Acapulco Guerrero
was set. This development includes 159 Villas and 36 apartments.
On June 26th the development known as Real del Bosque (La Mariscala) in Tultitlan, State of
México, was inaugurated. Once terminated this development will hold 4,919 affordable entry
level units
On July 3rd the development known as Vistas del Valle in Puebla with 777 affordable entry level
units.
On August 13th the development known as Villas del Mar with 133 B3 middle income units.
On September 15th the development known as San Miguel Iztapalapa with 160 affordable entry
level apartments.
For Additional Information Please Contact
Pág. 10
11
Donald Forseck Orive
Director of Finance
Consorcio ARA
(525) 2512970
Gerardo Alvarez
Investor Relations
Consorcio Ara
(525) 5968803
[email protected]
[email protected]
Pág. 11