MRV Engenharia e Participações (MRVE3) Q2 2024 earnings summary

Executive summary

• Achieved record net pre-sales of R$2.5 billion in 2Q24 and strong gross margins, surpassing pre-pandemic levels, with over R$1 billion pre-sold in June alone.

• Net operating revenue for H1 2024 reached R$4.19 billion, up from R$3.52 billion in H1 2023, but the period ended with a consolidated net loss of R$236.7 million.

• Subsidiaries Luggo and Urba are transitioning to asset-light models, with Luggo showing strong rental demand and Urba returning to profitability.

• U.S. subsidiary Resia is focusing on operational discipline and asset recycling, but continues to generate losses and has high leverage.

• Liquidity remains strong, with cash and marketable securities totaling R$2.18 billion as of June 30, 2024.

Financial highlights

• Net pre-sales reached a record BRL 5 billion; net operating revenue and net margin improved to 26%.

• EBITDA doubled to BRL 286 million, up 19% sequentially; adjusted profit attributable to shareholders was R$76 million, 41% higher than Q1 2024.

• Net income for the quarter was BRL 130 million, but H1 2024 closed with a net loss of R$236.7 million due to higher financial expenses and derivative losses.

• Cash generation was BRL 32 million in H1 2024, with expectations of BRL 300–400 million in H2.

• Net debt to equity improved to 41% in Brazil, but group net debt/equity rose to 80.5% at June 2024.

Outlook and guidance

• Confident in meeting or exceeding full-year guidance for revenue, margin, and cash generation; 2024 guidance reaffirmed at net revenue R$8–8.5 billion, gross margin 26–27%, and cash generation R$300–400 million.

• Gross margin expected to continue rising as legacy projects are replaced by higher-margin new projects.

• Management expects continued focus on liquidity and debt management, with no material changes in accounting policies or guidance for the remainder of 2024.

• Anticipates further reduction in pro soluto, targeting close to 11% by year-end.

• Positive impact expected from upcoming adjustments to MCMV income brackets, expanding customer base.