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Brazil’s Gafisa net income rises 68 pct in Q2 on revenue

SAO PAULO, Aug 3 (Reuters) – Brazilian real estate developer Gafisa (GFSA3.SA) said on Tuesday second-quarter net income soared 68 percent, beating analysts’ expectations, after revenue from existing and new projects rose at a faster pace than costs and expenses.

Sao Paulo-based Gafisa reported a profit of 97.3 million reais ($55 million) in the quarter ended on June 30, compared with earnings of 57.8 million reais a year earlier, according to a securities filing. In the first quarter, net income was 64.8 million reais.

Gafisa was forecast to post a 91 million real profit in the quarter, according to the average forecast of six analysts in a Reuters poll.

Sales rose for a third quarter as demand for middle- and high-end homes soared. Contracted sales rose to 890 million reais, compared with 835 million reais a year earlier, while launches of new projects almost doubled to 1 billion reais from 626 million reais in the same period.

The numbers “demonstrate our ability to not only capitalize on the power and recognition of our strong brands in the market, but also leverage our operating scale,” said Chief Executive Wilson Amaral in the filing.

Net revenue rose to 927.4 million reais in the period, higher than the 910 million real estimate in the poll.

The results underscore the favorable moment for Brazilian homebuilders, who are taking advantage of record mortgage lending, pent-up demand for low income housing and the strongest labor market in more than three decades. A recent increase in borrowing costs might slow activity in the industry but fall short of discouraging sales and demand, analysts said.

Gains of scale stemming form the merger of several of its units, including low-income homebuilder Tenda allowed Gafisa to keep expenses and costs on a lid.

The pace at which the company got rid of inventory and translate them into revenue, the so-called sales velocity, climbed to 24.6 percent in the quarter from 23.8 percent a year earlier. Sales velocity also rose form the first quarter of 2010.

Sales, general and administrative expenses rose 5 percent to 116.1 million reais from the year-ago period, and 7 percent from the first quarter, reflecting Gafisa’s higher launches and sales volume.

Earnings before interest, tax, depreciation and amortization, or EBITDA, a measure of cash generation and operational profitability, totaled 184 million reais, 65 percent higher than 111.3 million reais a year earlier.

EBITDA rose to 19.8 percent of revenue, compared with 15.8 percent a year earlier.

The improvement in the so-called EBITDA margin reflects “robust market fundamentals and strong demand that permitted higher pricing in markets such as Sao Paulo, mainly in the mid and upper middle segments,” the filing said.

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