We are pleased to report that as the second quarter came to a close we saw improved market conditions resulting in considerable demand for products from each segment of our business. Sales velocity for the quarter demonstrates the return of all buyers to the market with consolidated sales speed at 24%, and impressive rates of 28% for our higher-end products offered by Alphaville and for our affordable entry-level products offered by Tenda. We have spent the last few years building a solid platform to serve the diverse housing needs of Brazil’s families and are convinced that we have chosen the right vehicles. Tenda captures the enormous opportunity at the lower end of the market, and Alphaville and Gafisa serve the immensely important segments on the mid and upper end which represent a market potential of R$100 billion per year. We enter the second half of 2009 with a strong balance sheet that gives us increased financial flexibility, along with the internal capacity and relationships that will allow us to meet the continued growth in demand for all segments of our business.
While much attention has been paid over recent periods to the promise of the affordable homebuilding segment, particularly in light of the recently announced federal housing program, “Minha Casa, Minha Vida”, which targets precisely the population served by Tenda, it is the Gafisa and Alphaville brands that are strong current contributors to operating profitability and equally represent a significant market opportunity. During the second quarter, the success of three high-ticket launches in the state of São Paulo underscored the popularity of these brands and showed Gafisa’s ability to selectively develop its large land bank in accordance with local market demand, thereby maximizing profitability. We saw impressive sales velocity at each of the launched projects, highlighted by more than 80% of lots selling in the first weekend at Alphaville’s Granja Viana. Our second quarter results illustrate this point -- customers from the higher income segments returned to the market and again made a substantial contribution to our overall results with adjusted EBITDA from these two segments representing a total of R$103.5 million, with an adjusted EBITDA margin of 23.3%. Given the different business models as well as the timing of recent investments associated with the affordable entry-level segments, we will be providing operating profitability by business unit going forward. As the top line continues to grow at Tenda and additional synergies are achieved, it too will soon show stronger levels of operating profitability.
A number of recent government measures, including the R$34 billion package to foster growth in the housing industry, a federal incentive program aimed at building one million houses by 2010 and the Central Bank’s recent cutting of the Selic rate to 8.75%, the lowest rate in Brazil since 1999, have resulted in stimulating demand and increasing the availability of funds to support growth of the housing industry. Stability has prevailed and positive macroeconomic trends are emerging. The seasonally-adjusted unemployment rate fell to 8% in June, the lowest level since November 2008, and in July, consumer confidence reached its highest level since September 2008. Importantly, we have seen signs of strengthened demand for housing in the mid/mid-high segment that is traditionally more sensitive to economic uncertainty and this bolsters our confidence in the opportunity in all housing segments.
With $1.1 billion in cash on a consolidated basis and a net debt to equity and minority shareholders position of 66%, we are in a very strong position to continue to fund future growth. In fact, our financial flexibility was recently enhanced as we were able to successfully remove an outdated debt covenant that was negotiated in 2006, when the Company’s equity was less than half its current amount. And while we will be paying additional interest in line with current market rates, the removal of the debt covenant along with a few other concessions will permit the Company, should we choose, to take advantage of improved credit market conditions and consider an array of financing alternatives to fund potential opportunities in the market beyond our current plan.
We believe we have the resources and expertise in place to execute our strategy and meet the increased demand expected during the remainder of 2009. Gafisa’s geographic and segment diversification strategies give it flexibility in execution, as does our investment in human talent which includes over 450 engineers in training and 250 in charge, and our ability to simultaneously manage over 300 projects throughout the country as Brazil’s largest real estate construction company. This combination of agility and scale, backed by financial strength, large land reserves, and a commitment to development of human talent will ensure the Company’s ability to deliver high returns and extend its track record of capitalizing on market growth.
Wilson Amaral
Chief Executive Officer-Director