Javer Reports Solid Double Digit Growth in Revenues, EBITDA and FCF Generation for 2Q16 and 6M16

MONTERREY, Mexico--()--Servicios Corporativos Javer S.A.B. de C.V., (BMV:JAVER) (“Javer” or “the Company”), one of the largest housing development companies in Mexico, today announced financial results for the second quarter (“2Q16”) and first six month (“6M16”) periods ended June 30, 2016. All figures presented in this report are expressed in nominal Mexican pesos (Ps.), unless otherwise specified.

2Q16 Highlights:

  • Units sold totaled 4,599 units in 2Q16 compared to 4,465 units in 2Q15, an increase of 3.0%, due to sales from new developments that came on line this quarter. In 6M16, 9,212 homes were titled, a small increase of 0.3% compared to 9,184 units in 6M15, as the volume contraction experienced during 1Q16 given the lack of subsidies offset the volume growth in 2Q16.
  • Net Revenues increased 20.0% to Ps. 1,745.6 million in 2Q16 from Ps. 1,455.1 million in 2Q15; in 6M16 revenues increased 15.4% to Ps. 3,482.7 million from Ps. 3,017.6 million in 6M15. The growth in both periods is explained by the improvement in the sales mix toward middle income segment, a higher proportion of residential revenues and enhanced greater average sales price.
  • EBITDA grew 29.7% to Ps. 224.1 million in 2Q16 from Ps. 172.8 million in 2Q15 and increased 15.1% in 6M16 to Ps. 431.1 million from Ps. 374.6 million in 6M15, as a result of higher margins derived from the effects mentioned above.
  • Net Result decreased to Ps. (165.0) million in 2Q16 from Ps. (33.5) million in 2Q15, mainly due to Ps. 179.8 million in FX losses related to our US dollar denominated debt. Net result also declined to Ps. (329.1) million in 6M16 from Ps. (132.8) million in 6M15 primarily affected by the Ps. 376.8 in costs incurred from the tender offer for the Company’s 2021 Notes executed in 1Q16 along with Ps. 107.5 million in FX losses. Net income (loss) per share was Ps. (2.15) as of June 30, 2016 and Ps. (1.59) as of June 30, 2015.
  • Positive FCF of Ps. 248.6 million was generated in 2Q16 compared to Ps. 113.5 million in 2Q15, primarily by efficient inventory management and lower interest expenses due to the reduction of debt. For 6M16, the Company ended with Ps. 321.4 million compared to Ps. 463.6 million, due to lower construction expenditures during the first quarter of last year due to unusual rainstorms in Nuevo Leon.
  • Dividends: The General Shareholders’ Meeting approved a dividend payment of Ps. 1.7053 per share, in accordance with the parameters of the Company’s dividend policy. The dividend will be paid in 4 installments. The first two installments of Ps. 0.2600 per share were done on May 18, 2016 and July 19, 2016. The following payment of Ps. 0.2600 per share will be done in October 2016 and a payment of Ps. 0.9253 per share will take place in January 2017.


Mr. Eugenio Garza, Javer’s Chief Executive Officer commented, “Once again we are extremely proud of the solid operational performance that our team was able to deliver under the continuously changing environment in our business. The positive results shown on all fronts: absolute operating profit levels, returns on capital, and free cash flow are the result of the proactive strategic decisions taken over the last few years with our land purchases and our inventory position. We are operating with 34 active developments today (up from 20 in 2012) which has allowed for an unprecedented level of geographic and segment diversification. This diversification permitted us to quickly adapt to the new subsidy disbursement policies in 2016 by shifting our mix, average price and margins upwards without abandoning our core business in the AEL space.

On the subsidy front, as of June 30th, $4.9 billion out of the $9.3 billion budget has been administered under the “queue” system which replaced the “continuous titling” mechanism that was used in 2015 as we discussed last quarter. During the quarter, monthly queue displacement rates remained at the guided levels nationwide, with the exception of May when roughly twice the regular disbursements were granted. On a state by state level and within certain segments there have been some disparities with regards to the advance of the program. Given the current remaining budget on a state by state basis, we expect that the budget will be exhausted by the end of the 3rd quarter in most of our markets, with a chance for an additional month if there are reallocations from other underspent portions of the national budget.

We believe that the “stop-and-go” nature of the queue system in subsidy disbursement affects both the demand and supply sides of our market in important ways. Customers who are not guaranteed certainty of a subsidy defray their purchase decision and developers attenuate inventory investments given this availability uncertainty. Total new homes sold in the Infonavit system are down 6.9% in the first half of 2016, with a particularly concerning drop of 16.4% in the less than 2.6 minimum wage segment where the subsidy effect accounts for a substantial majority of the market. As of now, we still have little visibility of what the subsidy availability environment and disbursement policy will be during 4Q16 or in 2017; nonetheless, given our diversification and business model we will be able to adapt to any scenario that eventually plays out.

On another front, Infonavit is currently discussing a number of changes to its “Hipoteca Verde” program, specifically as it relates to the reduction in the credit awarded for certain water and heating related elements. If approved, it would force developers to switch to alternative elements to meet the minimum underwriting standards for all Infonavit loans. We are unclear as to how the changes will play out and whether or not they will have an impact on costs akin to last year’s elimination of energy efficient light bulbs. Nonetheless, we feel confident that we will once again be able to navigate through these continual changes through our flexible operating model.

On the new development front, we began titling at 4 new developments during the first half of 2016. We continue to experience permitting delays on 3 developments we were expecting to have already titelable units, but continue to offset the impact through a better mix and expense controls. During 2H16 we still expect to open 7 new developments.

Notwithstanding all these powerful headwinds, we were able to deliver a very strong quarter by exercising the flexibility that our land portfolio provides and continuing to be nimble with regards to our working capital management. Although permitting delays will likely lead us to be towards the lower end of our volume guidance, we remain confident that we will be able to deliver on our EBITDA and FCF guidance for the year.

On the financing front, unfortunately we have still not been able to complete the refinancing exercise of the remaining portion of our 2021 Notes. The key issue continues to be balancing the interest savings that would come from this exercise with the operating flexibility of the covenant and security package, especially as it relates to our ability to translate our strong FCF into dividends. We continue to explore both, the bank market option as well as other alternatives and hope to have more concrete advances over the next few months.

On a final note, we recently paid the second installment of our 2016 dividend. As we had planned, we have been able to fund more than 100% of the dividend with FCF generated during the period which also experienced profitability growth and high ROIC without overly exhausting our land bank. The 2016 dividend makes Javer the highest dividend yielding non-Fibra Company listed on the Mexican Stock exchange, and even when compared to Fibras (which contrary to us pay dividends on a pre-tax basis) we are amongst the top 3 highest dividend-yielding public companies in the country. Had we done the IPO in prior years, with the operating performance we generated, we would have been able to achieve this financial feat with a high level of dividends under what was an equally or more challenging market environment. This makes us feel extremely comfortable that the resiliency of our business model will allow us to continue to deliver value to our shareholders going forward.

For a full version of this earnings release with financial statements, go to: http://www.javer.com.mx/investors.php

Servicios Corporativos Javer S.A.B. de C.V.

cordially invites you to its

Second Quarter 2016

Conference Call & Webcast Presentation

Friday, July 22, 2016

11:00 a.m. New York Time

10:00 a.m. Mexico City/Monterrey Time

Presenting for Javer:

Mr. Eugenio Garza, Chief Executive Officer

Mr. Felipe Loera Reyna, Chief Financial Officer

To access the call, please dial:

1(800) 311-9401 from within the U.S.

1(334) 323-7224 from outside the U.S.

Passcode: 2366

To access the live and archived webcast presentation, visit:


A replay of this call will be available for 30 days. To obtain the replay, please call:

1(877) 919-4059 from within the U.S.

1(334) 323-0140 from outside the U.S.

Passcode: 62850786

About Javer:

Servicios Corporativos Javer S.A.B. de C.V. is the largest housing development companies in Mexico, specializing in the construction of low-income, middle income and residential housing. The Company began operations in 1973, and it is headquartered in the city of Monterrey, Nuevo Leon. The Company operates in the states of Nuevo Leon, Aguascalientes, Tamaulipas, Jalisco, Queretaro, State of Mexico, Quintana Roo and recently in Mexico City with a residential project. Javer is the largest supplier of the Infonavit system in the country, holding a 4.5% market share in 2015; in addition, it is the largest supplier of Infonavit loans in the state of Nuevo Leon and Aguascalientes with a 17.8% and 11.0% market share in 2015, respectively. Javer is the second largest supplier of Infonavit loans in the State of Jalisco and Queretaro with a 10.1% and 9.1% market share, respectively; and the third largest in the State of Mexico with 5.0% market share in 2015. During 2015, the Company reported revenues of Ps. 6,458.9 million and sold a total of 18,565 units.


This press release may include forward-looking statements. These forward-looking statements include, without limitation, those regarding Javer’s future financial position and results of operations, the Company’s strategy, plans, objectives, goals and targets, future developments in the markets in which Javer participates or are seeking to participate or anticipated regulatory changes in the markets in which Javer operates or intends to operate.

Javer cautions potential investors that forward looking statements are not guarantees of future performance and are based on numerous assumptions and that Javer’s actual results of operations, including the Company’s financial condition and liquidity and the development of the Mexican mortgage finance industry, may differ materially from the forward-looking statements contained in this press release. In addition, even if Javer’s results of operations are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods.

Important factors that could cause these differences include, but are not limited to: risks related to Javer’s competitive position; risks related to Javer’s business and Company’s strategy, Javer’s expectations about growth in demand for its products and services and to the Company’s business operations, financial condition and results of operations; access to funding sources, and the cost of the funding; changes in regulatory, administrative, political, fiscal or economic conditions, including fluctuations in interest rates and growth or diminution of the Mexican real estate and/or home mortgage market; increases in customer default rates; risks associated with market demand for and liquidity of the notes; foreign currency exchange fluctuations relative to the U.S. Dollar against the Mexican Peso; and risks related to Mexico’s social, political or economic environment.

This document is not an offer of securities for sale in Mexico or in the United States. Securities may not be offered or sold (i) in Mexico absent authorization by the CNBV in accordance with the Ley del Mercado de Valores (Mexican Securities Market Law) and all applicable regulations and the due registration of the securities in the National Registry of Securities maintained by the CNBV; or (ii) in the United States absent registration under the Securities Act of 1933, as amended, or an exemption from registration therefrom. Any public offering of securities in Mexico or in the United States must be made by means of a prospectus containing detailed information about the terms of the offering, the issuer and matters relating to its financial, administrative, and legal condition, as well as financial statements.


Investor Relations:
In Monterrey:
Servicios Corporativos Javer S.A.B. de C.V.
Felipe Loera, +52 81 1133-6468
Chief Financial Officer
Veronica Lozano, +52 (81) 1133-6699 Ext. 6515
Investor Relations
For more information, visit:
In New York:
I-advize Corporate Communications
Melanie Carpenter, +212-406-3692

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