Brazilian Homebuilder MRV Seeks Growth despite Recession

03/17/2017 - 13h25

MRV Engenharia, the Brazilian homebuilder, is aiming to grow up to 50 per cent over the next few years in spite of a severe recession in Latin America's largest economy that has ravaged much of the housing sector.

MRV, which is launching its largest project to date this month with a 7,300-unit housing complex in Pirituba, São Paulo, said that demand from the country's lower middle classes for housing remained strong in spite of rising unemployment in Brazil.

"We are living through a very bad moment with extremely high unemployment that is affecting the layer of the population that comprises my customers - the person with R$1800- R$3000 of household income," said Eduardo Fischer Teixeira de Souza, co-chief executive of MRV. "Yet demand is so strong that I am able to see growth."

Brazil's recession, the worst in more than a century with gross domestic product down 3.6 per cent last year, has undermined its once fast-growing residential construction market. Though the economy is expected to recover in 2017, unemployment is still rising, hitting 12.6 per cent in January. But MRV's stock has risen about 39 per cent this year, outperforming a 7.4 per cent rise in the benchmark Ibovespa index.

MRV - which is one of the biggest builders in the Americas, delivering 38,000 housing units last year - works with the government's subsidised mass homebuilding programme, Minha Casa Minha Vida, which has partly shielded the group from the worst of the downturn, analysts say.

The programme allows workers to use part of their compulsory contributions to an unemployment fund, FGTS, as a deposit for low-income housing, qualifying them for cheap loans from state-owned bank Caixa Econômica Federal.

"It's one of the few segments on the residential side that is doing well," said Marcelo da Costa Santos, chief executive of Engebanc Real Estate, a consultancy. "It's a politically charged sector so you get support from... all over the country. I don't think any government is going to mess with that."

MRV listed on the Brazilian stock market in 2007, and then increased average annual volume of units sold by 10 times, from 4,000 to 40,000, during Brazil's economic boom years running up to 2011. Volumes have since remained relatively flat, but Mr Teixeira de Souza said MRV had been increasing its land bank since 2015 to enable annual delivery of up to 70,000 units.

The group, which operates in 140 cities, says Brazil has an annual average housing deficit of 777,000 units. MRV reported net profit of R$557m (US$ 179m) last year, up 1.7 per cent on a year earlier. Net sales rose 4.2 per cent last year compared with a year earlier to R$4bn (US$ 1.3bn)