News Column

Fitch Publishes Brazilian Homebuilding Peer Study

July 29, 2014



RIO DE JANEIRO--(BUSINESS WIRE)-- Fitch Ratings has published its Brazilian Homebuilding Peer Study. The report explores the various factors used to determine the relative credit quality of companies in the homebuilding sector and explains the reasons for differences in the ratings of key players.

Risk is considered above average for the sector due to the long construction cycle and direct exposure to macroeconomic conditions. The disparity between the financial and operating performance of Brazilian homebuilders has resulted in a wide disparity of ratings within the sector.

Brazil's 5.2 million-unit housing deficit does not support a resulting pattern of stable growth, due to the limited access to credit for a significant portion of the population. Industry growth depends on a healthy business environment, rather than a housing deficit, and remains strongly correlated with critical variables such as inflation, unemployment and interest rates and, in general, household indebtedness capacity and income availability. Most of these variables are either weak or trending negative, which bodes poorly for strong operating cash flow during 2014.

The report also includes a review of financial factors. Cash burn, measured as net debt variation, is an important gauge of credit trends, as it often reflects free cash flow generation. Positively, the net debt of those Brazilian homebuilders rated by Fitch declined by BRL600 million in 2012 and by BRL1.2 billion in 2013, as companies completed projects.

The continued growing level of sales contract cancellations is one of the main concerns for Brazilian homebuilders and remains a key component of credit analysis, as the high cancellation levels have hurt cash flow generation against expectations and have driven up the cost of carrying inventory.

This report is available at www.fitchratings.com or by clicking the link above.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research: Brazilian Homebuilding Peer Study (Operating Efficiency, Liquidity and Cash Flow Generation Critical)

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=752987

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.



Fitch Ratings

Fernanda Rezende, +55-21-4503-2619

Director

Fitch Ratings Brasil Ltda.

Praca XV de Novembro, 20 - Sala 401 B - Centro - Rio de Janeiro - RJ - CEP: 20010-010

or

Jose Roberto Romero, +55-11-4504-2603

Director

or

Natalia Brandao, +55-21-4503-2631

Research Assistant

or

Media Relations:

Elizabeth Fogerty, +1 212-908-0526

elizabeth.fogerty@fitchratings.com

Source: Fitch Ratings


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