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MRV ENGENHARIA E PARTICIPAÇÕES S.A.
Corporate Presentation
Disclaimer
The material that follows is a presentation of general background information about MRV Engenharia e Participações S.A. and its subsidiaries (collectively, “MRV” or the “Company”) as of
the date of the presentation. It is information in summary form and does not purport to be complete. No representation or warranty, express or implied, is made concerning, and no
reliance should be placed on, the accuracy, fairness, or completeness of this information.
This presentation may contain certain forward-looking statements and information relating to MRV that reflect the current views and/or expectations of the Company and its
management with respect to its performance, business and future events. Forward looking statements include, without limitation, any statement that may predict, forecast, indicate or
imply future results, performance or achievements, and may contain words like “believe,” “anticipate,” “expect,” “envisages,” “will likely result,” or any other words or phrases of similar
meaning. Such statements are subject to a number of risks, uncertainties and assumptions. We caution you that a number of important factors could cause actual results to differ
materially from the plans, objectives, expectations, estimates and intentions expressed in this presentation. In no event, neither the Company nor any of its affiliates, directors, officers,
agents or employees shall be liable before any third party (including investors) for any investment or business decision made or action taken in reliance on the information and statements
contained in this presentation or for any consequential, special or similar damages.
This presentation does not constitute an offer, or invitation, or solicitation of an offer to purchase any securities. Neither this presentation nor anything contained herein shall form the
basis of any contract or commitment whatsoever.
The market and competitive position data, including market forecasts, used throughout this presentation was obtained from internal surveys, market research, publicly available
information and industry publications. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, we have not
independently verified the competitive position, market share, market size, market growth or other data provided by third parties or by industry or other publications. MRV does not
make any representation as to the accuracy of such information.
This presentation and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part without MRV’s prior written consent.
2
3
MRV at a glance
 Leading homebuilder in Latin America with over 354,000 units sold
 38 years of history with presence in all Brazilian key markets
 National footprint: presence in 148 cities and 22 states in Brazil
 MRV is listed under “Novo Mercado”, the highest corporate governance level
 MRVE3 is part of 15 Brazilian stock indexes (B3)
 Market cap of R$ 6,5 billion (US$ 2.1 billon*)
 MRVE3 average trading volume at B3: R$ 49 million (2Q17)
 The most liquid ADTV among Brazilian homebuilders
 Standardized operation aiming high efficient and productivity
 5 years of recurrent cash generation
 Continuous innovation to support sustainable and profitable growth
 Over 22 thousand employees across the country
* (09/15/2017: US$ 1 = R$ 3.1252)
Strong Corporate Governance
• Risk and Compliance
• Governance, Ethics and Sustainability
• Human Resources
• Commercial and Credit
• Real Estate Financing
• Production
• Communication
• Legal
• Founder and controlling shareholder with a long term vision
• Growth and sustainability interests are aligned with minority shareholders
 MRV is listed under “Novo Mercado”, the highest corporate governance level
 Benchmark in Sustainability: only homebuilder included in B3 Sustainability Index (ISE)
 Board of Directors composed by 7 members (4 independents)
 Executives interests in line with our shareholders through long term Stock Option Plan
 Free float represents 64% of shareholder’s equity
Communication Chanel:
• Shareholders' recommendations:
assembleia@mrv.com.br
• Confidential Channel:
https://canalconfidencial.com.br/mrv/
58.6%
• Other
Shareholders
33.6%
• Rubens
Menin T. de
Souza
5.1%
• Prudential
Plc.
2.1%
• Executives
and Board
Members
0.6%
• Treasury
shares
EXECUTIVE COMMITTEES
Shareholders Structure
4
NET SALES
CAGR 2008 - 2016
NET REVENUE
CAGR 2008 - 2016
Source: Companies' Financial reports.
Brazilian peers: Gafisa, Tenda, Rossi, Tecnisa, Cyrela, Even, Ezetc, Direcional, Helbor, Rodobens
Expressive sales and net revenue growth
5
Leadership in the low income segment
Market share
Geographic diversification provide us a
unique position compared to our peers
 MRV is the main low income homebuilder in Brazil
 1 out of 200 Brazilians is a MRV client
 National footprint provide us more capillarity and
protection from local economy activity downside
6
Launches - LTM
(R$ million)
Sales – LTM
(R$ million)
Total: R$ 7,186 milion Total: R$ 6,272 million
Source: ER from companies
NET REVENUE (R$ million)
* Analysts’ average consensus.
CAGR 2007-2016:
30.6%
NET INCOME (R$ million)
With significant progress year over year
7
CAGR 2007-2016:
33.0%
Market consensus: growth in mid term and 16%
stock price potential upside
Recommendation: Buy (8 banks), Neutral (2 banks)
MRVE3 Average Target Price: R$ 16.89
MRVE3 as of 09/15/2017: R$ 14.54
Potential
upside
16%
Best ROE in the sector, with greater potential to increase
shareholders return.
ROE x P/BV
 MRVE3 is the most valuable stock in the low income segment
 Shareholders return through dividends and stock repurchase
 R$ 1,345 million in dividends pay out since the IPO (2007)
 R$ 365 million in shares buyback program (11% of existing shares)
Quality execution – most attractive and well priced product
8
Our structure is ready to absorb 50k units/year
Quality in execution and cost efficiency
G&A / Net Revenue
Enhancement of productivity indexes and faster asset turnover
+ Asset turnover
+ Standardization
+ Productivity
– Overhead structure
– Cost discrepancy
PI x PS Evolution
Brickworks + Molds
Aluminum
molds
Construction Methods Evolution (# units)
2014 2015 2016 2017
56%33%6%2%
9
Since 2015, the Company
began to adjust its
overhead structure to
absorb greater volume of
launches, which will dilute
even more the expenses.
PI Benchmark
3.2
PS Benchmark
8%
enhancement
Gross margin %
Improvement in execution
capacity, productivity and
reducing cost discrepancy.
10
5th year of recurrent Cash Generation totaling R$ 2.6 billion MRV keep investing in landbank in order to sustain its
organic growth
Lanbank (R$ billion)
 The Company's growth has been based on financial efficiency and profitability.
 MRV is capable to continuous generate cash, invest in landbank and provide return to the shareholders,
maintaining the company’s healthy capital structure – low leverage and high cash position.
 Highest credit corporate rating in the sector (brAA-) by Fitch and Standard & Poor´s.
Solid cash position & low leverage
Cash position x Leverage
(R$ billion)
Solid demand in the long term and fund availability
Brazilian housing demand supply
Brazilian housing demand (accumulated)
(in million units)
Source: Preliminary data from “Estudo Demanda Futura, UFF, 2016”, “Secretaria Nacional de Habitação” and “Ministério das Cidades” 11
In the next 20 years the
market needs to delivery
~30 million houses to
meet the total demand.
The Company
sustainable growth will
significantly contribute to
it.
FGTS Budget from 2017 to 2020:
R$ 100 billion to finance low income housing or 800,000
units
FGTS Net collection
(R$ billion)
Positive view from macroeconomic recovery
Source: FGTS Multiannual budget, Bacen
 With the economy recovery (jobs creation and GDP growth)
the FGTS fund is going to improve even more its capacity to
provide mortgages.
 FGTS balance sheet remains robust (AUM R$ 505 bi),
reaffirming its sustainability on financing the housing
market.
Supported by FGTS (Severance Pay Fund for workers)
The main source of funding for low income housing
Housing Program: FGTS + MCMV (Minha Casa Minha Vida)
12
HOUSING PROGRAM BENEFITS
 Political dividends
 GPD formation
 Jobs creation
 Positive Fiscal Balance = 3.3%
4.0%
Real Estate
Income
Taxes
0.7%
Subsidies
MCMV
Fiscal
Balance is
positive
3.3%
Housing Program
in Brazil
FGTS
(contribution from
companies)
MCMV
(Subsidies from
government)
SBPE
(savings deposits)
Low income Mid/high income
The main source
of loans
AUM R$ 505 bi
R$ 246 billion in
mortgages
The main source of
subsidies to clients
Budget = R$ 2billions
Up to R$ 47,500/unit
• The main source of
loans
• AUM R$ 626 bi
• Units above R$ 240
thousand
Typical MRV Client has 7% subsidy
MRV
0.7% from treasury
6.3% from FGTS
The expansion plan aims to increase market share in
larger cities where is concentrated the high demand
for affordable houses in Brazil.
Landbank is ready to support the company growth.
From 2014 landbank in larger cities has increased by
80%
Geographic diversification
Expansion plan
# of cities
From 2007 to 2013
Strategy to increase
diversification
13
From 2014 to 1H17
Strategy to increase
market share in
larger cities
Landbank position ('000 units)
CAGR: 5.0%
Market deterioration contributed to buy
well located plot of lands with better prices
Land
acquisition
with 31%
discount
More dispersion
among the “stores”
More launches
More units
available
More sales volume
Potential for Growth: inventory level and location
14
SãoJosédoRioPreto
Population:446,649
Average sales/month: 126
Average inventory: 1,334
Average sales/month : 99
Average inventory : 1,256
Average sales/month : 110
Average inventory : 1,457
2015 2016 2017
Goiânia
(metropolitanregion)
Population:2,458,504
The inventory level and location impacts directly in sales volume
Average sales/month : 27
Average inventory : 572
Average sales/month : 45
Average inventory : 1,219
Average sales/month : 128
Average inventory : 1,652
15
Unified
management of
landbank
MRV LANDBANKS
Simulation of
viability for landbank
acquisition
MRV Landbank Software
Visual register of landbank
Monitoring of efficiency of the
buyers
$ 90.000,00
Edit Landbank SAVE
MAP GENERAL DATA SELLER DATA
Landbank Simulations
BOUGHT
Name of the Landbank 1
5,000 sq.m.
APPROVING
Technical Viability 1
Gross Margin MRV Cost
$ 140,000,000 $90,000,000
Average selling price Average Selling Price
$ 140,000,000 $ 140,000,000
João da Silva 09/06/2016
REJECTED
Technical Vianility 1
+
Leonardo Corrêa
Chief Financial and Investor Relations Officer
Ricardo Paixão
Investor Relations and Financial Planning Officer
Matheus Torga
Investor Relations Manager
Phone: (+55 31) 3615-8153
E-mail: ri@mrv.com.br
This presentation is also available on our website:
ri.mrv.com.br
Contacts
16
Corporate Presentation 09 2017
38 years of history
3,000 units per year 25,000 units per year 40,000 units per year
ADRs Level1
MRV
Foundation
Beginning of
relationship
Start of
Geographic
Diversification
Enactment of
Foreclosure /
Deed of Trust
by Financial
Institucions
Banks Resume
Mortgage
Lending
Private Equity
IPO
1st Negotiation
Correspondant
Equity Follow-On
MCMV 1
MCMV 2
MCMV 3
18
Segment of Operation
20
Business Model – Focus on low income
Real Estate –Low Income
Real Estate - Medium/ High
Income
Purchasing Rational Instalments lower than rent -
Purchasing Reason Necessity (1st real estate) Upgrade
Funding Abundant and unchanged rates
(FGTS)
Scarce and recent increase of
rates (Saving Accounts)
Product Standardized Exclusive
Financing Transference During construction phase After key-delivery
Cash Flow Receiving in accordance with the
construction evolution
Financing Provision at the end
of construction period
Price In line with the inflation ~4x bigger than inflation
Source : BO MRV –Mortgage Lending 06/09/2016.
1) Minimum Wage 2017: R$ 937.00
 Search of the first real estate for family formation
 77% of the clients are single/ engaged
 Income range: 61% have an income of up to R$ 2,700
 Young clients: 50% are up to 30 years old
 LTV of 75%
21
Client Profile
Low Income
What our clients are looking for?
Medium/High Income
 Couples
 56% are single and 52% have children
 The monthly medium income is R$ 8,390, being that 41% earn
more than R$ 10 thousand
 Medium LTV of 62%
Source: Inteligência de Mercado Lopes 2015, ACEBIP and BACEN.
What the clients are looking for?
Purchase Motivation
Location
Playground area
Marriage
* Data from March 2015
22Source: Low income Real Estate: MRV Medium Price, in 2017 price was adjusted with inflation
Real Estate Medium/ High Income: Variation FIPE Zap (in 2017, decrease of real price of the units)
Economic Segment: focus on the acquisition of the 1st real estate, where there is no speculation and exists huge housing deficit.
Appreciation in line with the inflation and low cost financing produces a significant reduction of LTV’s (inflation higher than TR).
Evolution of Real Estate Prices
The evolution of low income real estate prices has less volatility and more consistency than the medium/high income, preventing
the creation of a housing bubble.
 Low offer and high demand of low income real estate
 MCMV Conditions:
Limited income and sales price
Sales of 1 real estate per Individual Taxpayer Registration Number
Impossibility of resale a unit under the MCMV
Market Opportunities
Funding – FGTS and SBPE
Housing in Brazil: 70 years of investment in housing programs
Source: Biblioteca Digital da FGV, EESC –USP, FGTS
• 1930: Real Estate credit
offer by the Caixas
Econômicas
• 1946: Creation of Casa
Popular Fundation – First
national housing policy
• 1964: Creation of SFH and
BNH – with compulsory
collection of 1% of
monthly payment
• 1967: Creation of FGTS –
collection of 8% of
monthly payment
• 1986: Extinction of BNH
due to financial
difficulties in the
inflationary period and
increasing FGTS’
withdrawals
• 1990: Collor creates the
Plano de Ação Imediata
para a Habitação (PAIH),
which antecipated the
construction, in an
emergencial manner, of
245 thousand houses
• 2000: FHC establishes the Carta de
Crédito Individual e Associativa in
FGTS and the continuity of projects
such as Pró-Moradia and Habitar
Brasil.
• 2004: Política Nacional de Habitação
(Lei 10.931) - Social Subsidy Interest
Housing Program
• 2009: Creation of MCMV – The
biggest housing program in the
country
• Investment: R$ 294 billion
• 10 million brazilians benefited
• Maximum income of R$ 6,500
Funding – governamental
contributions
• 92% OF THE RESOURCES INTENDED FOR THE POPULATION WITH INCOME ABOVE 5
MINIMUM WAGES - 80% OF POPULATION RECEIVE BELOW THIS
• ONLY 33.5% OF THE FINANCED UNITS WERE INTENDED FOR POPULAR SECTORS
Financed units
24
R$ 7.76 BI
FGTS DISCOUNT
R$ 52.8 BI
FGTS DISCOUNT
R$ 10.11 BI
OGU DISCOUNT
120,000
1,263,500
2,864,500
857,000
1,355,000
454,000
3,318,508
4,914,288
1930 - 1946 1964 - 1975 1976 - 1982 1983 - 1986 1987 - 1992 1993 - 1997 1998 - 2008 2009 - 2017
Data 2017 up to 05/31/2017
SFH - Brazilian Housing Finance System
The source cames from
employers depositing 8%
of the monthly salary of
all workers
(Nov/16)
Source: Caixa
Total
Balance of
R$ 502
billion
Borrowers can use the account
balance in few cases:
Mortgage
Termination of work
Retirement
Others
12%
66%
14%
8%
Mortgage Interest
Rate from 5% to
9.16% a.a + TR
Units up to:
R$ 300,000
SBPE
Deposits made on the
savings of commercial banks
Real Estate Credit
Legal Reserves
Free Resources
65%
30%
5%
SBPE Resources
Market Rate
Interest Rate from
9.2% 1 to 11% +TR
Units of R$300,000 to
R$950,000*
Borrowers can go to any bank and
apply for a real estate loan
according to their credit rating
Interest Rate from 12.25 2 % +TR
Units above:
R$950,000Notes:
1) If the client has a salary account in CEF the interest rate can reach 9.75%. In BB it can reach 9.65%+TR.
2) If the client has a salary account in the bank, the interest rate can reach 10.7%+TR.
3) 20% for compulsory deposit (remunerated by SELIC) and 10% for additional compulsory (corrected by TR)
* States of DF, MG, RJ, SP: R$ 950,000; other states: R$ 750,000.
Workers are
remunerated 3%
per year+TR
25
FGTS (Severance Pay Fund) - The main source of fund for MRV
FGTS
¹ Source up to 2011: PME Unemployment rate and source from 2012: PNAD due to its better sensibility and comprehensiveness.
From 2017 to 2020 the FGTS budget is R$ 100 billion to be invested in Housing.
Obs: In 2007, retirement withdrawals increased significantly due to the spontaneous
retirement approval by Federal Supreme Court, reducing the net collection in the period.
Source: IBGE, CAGED e FGTS – April/17
Withdrawals (R$ billion)
Budget (R$ billion)
26
Net Collection (billion)
R$ 29 R$ 38 R$ 42 R$ 47 R$ 49 R$ 57 R$ 65 R$ 76 R$86 R$ 99 R$ 108 R$ 63
Breakdown 2017 2018 2019 2020
Housing 71.7 63.5 63.5 63.5
Basic Sanitation 7.0 9.5 9.75 9.75
Infrastructure 9.0 8.0 8.0 7.0
Others 0.5 0.5 0.5 0.5
TOTAL 88.2 81.5 81.75 80.75
Minha Casa Minha Vida – Housing Program
84% das vendas MRV são
realizadas pelo sistema
PRICE*
2
APRIL/09 TO DEC/10 JAN/11 TO DEC/14
¹ Included 350,000 units added on September 2014.
² Amounts refers to the units to be built in 2016
³ MCMV 1 and 2: Amounts referring to each program.
⁴ Details not yet released
2017-2018JAN/15 TO JAN/17
27
Program Resources (R$ billion)
Units to be built
Monthly Income Income Units Income Interest Rate Units Income Interest rate Units² Income Interest rate Units²
Group 1 Up to R$ 1,325 482,741 Up to R$ 1,600 4% + TR 1,226,605 Up to R$ 1,800 TR 53,748 Up to R$ 1,800 TR 170,000
Group 1.5 - - - - - Up to R$ 2,350 5% + TR Up to R$ 2,600 5% + TR 80,000
Up to R$ 2,455 5% + TR Up to R$ 2,350 5.5% + TR Up to R$ 2,600 5.5% + TR
Up to R$ 2,790 Up to R$ 3,275 6% + TR Up to R$ 2,700 6% + TR Up to R$ 3,000 6% + TR
Up to R$ 3,600 7% + TR Up to R$ 4,000 7% + TR
Group 3 Up to R$ 4,650 146,623 Up to R$ 5,000 7.16% + TR 307,054 Up to R$ 6,500 8.16% + TR 113,930 Up to R$ 7,000 8.16% + TR 200,000
Group 3 Plus Up to R$ 9,000 9.16% + TR Not available
Target (Term)
2 years 5 years 2 years
R$ 34 R$ 72.6 R$ 41,2
1,000,000 3,100,000 ¹
R$ 41,2
1 year
2,000,000
Group 2 375,764 1,216,341 800,000
dec-2010 dec-2015 dec-2018
645,692
jan/17
Minha Casa Minha Vida: Subsidies and Units Price
SUBSIDIES
28
The Group 1 subsidy is financed with treasury resources.
2
GROUP1.5GROUPS2AND3GROUP3PLUS
UNITS PRICE
Down payment
3% Mortgage
with MRV
15%
Subsidies
7%
Mortgage with Banks
(CEF and BB)
75%
Payment Breakdown: Typical MRV Client
MCMV Group 2
Unit Price: R$ 150,000
• FGTS balance
• Savings Account
10% before keys delivery
5% after keys delivery
WHERE DOES THE SUBSIDIES COME FROM?
0.7% from OGU (National General Budget)
6.3% from FGTS
Revenue Taxes per unit sold is 4%
4.0%
Real Estate
Income
Taxes
0.7%
Subsidies
MCMV
Fiscal
Balance is
positive
3.3%
Typical MRV Client: Payment Breakdown
The above tax does not include other indirect taxes
such as VAT, Social securities and others.
29
MRV on MCMV – Potential for expansion in the next years
0%
0%
0%
0%
0%
5.4%
18.9%
34.7%
0%
13.6%
5.3%
4.4%24.1%
28.2%
32.6%
10.1%
24.3%
15.7%
66.9%
25.8%
43.1%
62.8%
43.1%
37.4%
37.5%
20%
49%
43.3%
Capitals Secondary Cities
Average
11.6%
Average
38.7%
30
MRV
MCMV
Share MRV Contracted Units- January 2015 to March 2017
142,873
249,636
96,654
289,648 259,779
56,573 19,759
-
91,362
248,568
267,044
267,04
250,607
260,443
249,306
212,567
72,015
22,889
57,072
45,328
36,705
29,028
26,023
24,951
56,236
21,131
2009 2010 2011 2012 2013 2014 2015 2016 2Q17
Group 1 Group 1,5 Group 2 Group 3
143,894
275,075
104,311
389,073
557,961
175,260
16,890 36.858
12.077
23.849
98,593
277,171
325,953
311,965
288,708
289,715
344,729
282.083
134.131
43,818
102,805
77,935
97,711
93,799
37,609
40,526 68.235
29.084
2009 2010 2011 2012 2013 2014 2015 2016 2Q17
Group 1 Group 1,5 Group 2 Group 3
Contracted and Delivered Units
Source: Ministério das Cidades – Datas 2017 up to 05/31/2017
257,124
555,276
409,026
593,393
539,405
286,305
655,051
508,199
798,749
940,948
502,584
402,145
399,253
31
189,473
Contracted Units MCMV
Delivered Units MCMV
343,049
277.777
288.562
110,466
Resources invested in the program
2
 Group I – According to Ministry of Planning Budget (PAC)
 Group II – According to FGTS
• Until 2015: In Group II, subsidy has contribution of 17.5% from National Treasury and 82.5% from FGTS.
• After 2015: In Group II, National Treasury contribution is of 10% and of FGTS is 90%.
**MCMV3: investments estimated for 2015 to 2018
- FGTS has complementary subsidies (up to R$ 27,500 per unit) + Interest Rates subsidy.
- OGU: National General Budget
* The number of units to be contracted remains the same as that proposed at the beginning of the MCMV 3.
Source: http://www.cgu.gov.br/
32
Program Groups Family Income
Contracted
Units
Resources (R$ million) Family Income
Units up to
Ago./2015
Resources (R$
million)
Family Income
Units up to
Jan/2017
Resources (R$
million)
Family Income
Estimated
Units
Resources (R$
million)
Group 1 Up to R$1,395 482,741 R$ 17,999 (OGU) Up to R$ 1,600 1,226,605 R$ 63,724 (OGU) Up to R$ 1,800 53,748 R$ 1,409 (OGU) Up to R$ 1,800 170,000 R$ 203 (OGU)
Group 1.5
From R$ 1,800 to
R$ 2,350
From R$ 1,800 to R$
2,600 80,000
Group 2
From R$ 1,395 to
R$ 2,790
375,764
R$ 1,068 (OGU) +
R$ 3,187 (FGTS)
From R$ 1,600 to
R$ 3,275
1,213,341
R$ 4,369 (OGU) +
R$ 17,104 (FGTS)
From R$ 2,350 to
R$ 3,600
645,692
R$ 805 (OGU) +
R$ 3,689 (FGTS)
From R$ 2,600 to R$
4,000
800,000
R$ 322 (OGU) +
R$ 1,475 (FGTS)
Group 3
From R$ 2,790 to
R$ 4,650
146,623 -
From R$ 3,275 to
R$ 5,000
307,054 R$ 110 (FGTS)
From R$ 3,600 to
R$ 6,500
113,930 R$ 105 (FGTS)
From R$ 4,000 to R$
7,000
200,000 R$ 46 (FGTS)
Group 3 Plus
-
From R$ 7,000 to R$
9,000
Not Available -
TOTAL 1,005,128 R$ 22,254 2,750,000 R$ 85,307 813,370 R$ 6,008 2,000,000* R$ 2,046
MCMV 1 (Apr/2009 - Dec/2010) MCMV 2 (Jan/2011 - Ago/2015) MCMV 3 (Jan/2016 - Jan/2017)** MCMV 3 (Jan/2017 - Dec/2018)**
Market Highlights
# of Cities x Gross Margin
Competitive Advantages and Market Potential
Note: *Information from Statistics and Information Center, from João Pinheiro Foundation.
MRV inhabitants x Landbank in PSV
1.5 million
(R$ 2.8 bi)
2.4 million
(R$ 4.8 bi)
11.5 million
(R$ 28.6 bi)
3.5 million
(R$ 6.8 bi)
Southeast
South
Middle-west
Northeast
Potential market penetration per month
13,719
MRV Actual
Performance
Additional
Potential
Total
Potential
Sales increment (0.72/1000 habitants)
Average sales / month (2016)
Nationwide Footprint
- Present in 22 States and Federal District
- 148 cities attended by the Company
10,704
3,015
34
35
Business Strategy – Dispersion
Landbank 2016Landbank 2013
Fortaleza Fortaleza
Fortaleza
DISPERSION: STORES AND LAND DISPERSION: STORES AND LAND
The strategy consists in having the right amount of land well balanced in each region of the
cities, to supply the demand.
In 2Q17, MRV achieved important marks among
the listed companies:
 63% of launches market share in group II and
III of MCMV Program;
 49% of total launches in the quarter.
Competitive Advantages – Market Leader in Brazil
Launches Eligible to MCMV
Nominal Value (R$ billion) (Groups II and III)
Note: The data are estimated and based on the listed Companies’ earnings releases.
% of launches in MCMV Program (Groups II and III) – in PSV
% of total launches – in PSV
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
1Q16 2Q16 3Q16 4Q16 1Q17 2Q17
Other listed companies
36
Sales channels:
 We have over 4,500 internal brokers, 100% focused in MRV products.
 We invest in training and sales techniques to enhance the productivity and quality of our sale process.
 Management of commissioning policies of the internal team and definition of sales strategy.
Competitive Advantages – Sales Structure
37
Marketing Investment:
2 REACHING
1 ANNUAL INVESTIMENT
3 MAIN CHANNELS
140 Million Brazilians (70% of population)
R$ 120 Million
Data base: December 2016
R$ 2,5 Billion in virtual sales per year.
180 virtual attendant focused in high quality
attendance located in Belo Horizonte.
 140 virtual bases all over Brazil with 1,500 brokers
Investments Results:
Competitive Advantages – Effective Marketing Campaigns
Television 30%, Internet 26%, Trade MKT 19%, Newspaper 3%,
Other medias: 22%
38
Sources: Google Analytics, MRV website, Blog, AppFacebook, App Android, App IOS and hotsites.
Competitive Advantages – Online and Social Midia leadership
39
3,978,053
3,175,017
MRV Engenharia DEMAIS CONSTRUTORASOther Companies
478,078
180,095
71.517.848
33.948.286
MRV Engenharia DEMAIS CONSTRUTORAS
33,948,286
71,517,848
93,200
53,069
MRV Engenharia DEMAIS CONSTRUTORAS
Resolved demands on 1st contact
93.55%
2017
Relationship Portal
General Accesses:
1,144,581
2017
47,319
Number of
Answered
Calls
Monthly Average- 2017
Costumer Service
“Conexão MRV”
+200,000
Views of the videos
“Conexão MRV”
#MeuMundoMelhor
+5,000,000
Views of the videos
#MeuMundoMelhor
Complaints:
0.49%*
Year 2017
MRV in Midias
483,484 followers in Twitter
608,165 followers in Google +
3,978,053 Facebook fans
*Number of complaints over total clients (5 years) – Annual view
Client Relationship
Client Access:
74,293
Monthly Average of Single
Calls
40
Pre – Sales (% MRV – R$ million)
Pre-sales per launching period
Sales over Supply
Sales over Supply = Pre-sales / (Beginning Inventory + Launches)
Pre-sales per launching period
Inventory Duration
41
Market leader in the main commercial indicators
Launches (R$ million)
In 2Q17, MRV launched twice as much the second peer
42
R$million
2Q16
1Q17
2Q17
Market leader in the main commercial indicators
Net Sales (R$ million)
43
R$million
2Q16
1Q17
2Q17
In 2Q17, MRV sold twice as much the second peer
Operational Advantages
Production Team
 Approximately 18 thousand people dedicated to Production
 Employees on a leadership position (directors, managers and
coordinators) have been working in the company for an average of 9 years.
 At this time, we have 198 sites under construction, located in the following
areas:
Northeast 27 (13.6%)
Middle-west
10 (5.1%)
South 37 (18.7%)
Southeast 124 (62.6%)
11
Director
25 Managers
47 Coordinators
369 Engineers
509 Engineering Auxiliary and
Building Technicians
539 interns
18,267 in other positions, being 9,874 MRV
employees and 8,393 third part employees.
Data-base: May/2017 45
Operational Advantages – Mechanization and New Technologies
Hydraulic Kit
Reduced workforce
Less generated waste
Greater production rationalization
Better site organization
Standardized projects
Higher speed of production
Strategic equipment team
Simplification of projects
Economically viable
Greater environmental sustainability
Increased work security
Standardization, Mechanization
and Intelligent Processes
Concrete
Prefabricated and
standardized door
Aluminum Forms Hoisted Slab
46
Years Sample Average Stand.Deviation Coef.of Variation (%)
2012 107 30.36 4.977 16.39%
2013 152 29.69 4.270 14.38%
2014 135 29.73 4.581 15.41%
2015 99 28.70 4.093 14.26%
2016 108 27.33 4.794 17.54%
2Q17 40 25.65 2.810 10.96%
Operational Advantages - Cost Improvement
It is possible to identify a decrease in average cost, reaching the
lowest level in 5 years.
Which means that our projects are with a better operational
efficiency.
Boxplot of the Sum of the projection cost
Sumofthevalueofprojectioncost
Histogram of the Sum of the projected cost
Frequency
Year
Sum of projection cost value
Increase of efficiency results in:
 Less discrepancy in costs and quality;
 Lower execution cost 47
2012 2013 2014 2015 2016 1Q17
Year End
Note: Units presented in (‘000) units.
Operational Advantages – Delivered Units
48
• R$ 4.5 Billion in payments in 2016
• 55,819 Invoices received in
December 2016
• 20,520 Employees paid per month
• 260 Employees
SSC – Shared Service
Center
• + 5 million views of
#MeuMundoMelhor videos.
• + 1.4 million acesses to the
Relationship Portal in 2016
• 54 thousand: average of calls
answered in 2016
• 166 thousand active clients
• R$ 400 million collected per month
• + 3,000 current accounts reconciled per month
• + 3,000 new registered contracts per month
• 218 employees
• R$ 80 million of investment in IT
(5 years)
• More than 5,500 work station
• 33 million of scanned documents
since 2010
• More than 300 tablets in the
building site
Operational Advantage - Administrative Structure
Client Relationship
and Internal
Communication
Information
Technology
Specialized Services
49
Financial Advantages
Typical MRV accumulated Cash Flow
Since simultaneous sales process started, MRV has
considerably decreased its collection period, contributing to
less working capital need per project launched.
Working Capital Need = Payables – Receivables (inventory not included)
51
Average Colection Period (in days)
Working Capital Need (in days)
2010 2011 2012 2013 2014 2015 2016 1H17
2010 2011 2012 2013 2014 2015 2016 1H17
51
Consistency and stability of the Company’s yields
Note: ROE excluding Equity income.
52
52
Financial Indicators
Net Revenue (R$ million)
Gross Margin %
53
2Q16
1Q17
2Q17
2Q16
1Q17
2Q17
R$million
Financial Indicators
Net Income (R$ million)
54
R$million
2Q16
1Q17
2Q17
Gafisa 4Q16: ex Tenda’s impairment (R$ 683mm)
2Q16
1Q17
2Q17
Net Margin - %
Subsidiaries
Subsidiaries
MRV share: 40%
Present in 25 cities and 9 estates
Extended experience in creating business
and developing assets.
Controls complete cycle of development,
construction and administration of its assets.
Logistics Complex
100% Greenfield
Full control of the cycle, since
the landbank acquisition until the
delivery of the project
Multi-tenant
Projects in modules
Flexible architecture
Lease term of 2 to 10 years
Shopping Centers
100% Greenfield
Complete Shoppings
Operated by specialized
Companies
Strip Malls
100% Greenfield
Regional Commercial Centers
Loteamentos Industriais
100% Greenfield
Full control of the cycle, since the
landbank acquisition until the delivery
of the project
56
45,.92%
Executives
60%
40%
Development and commercialization of urban lots in residential and commercial segments, all sustainably
developed.
Subsidiaries
 Urbamais operates (i) researching and identifying distinguished areas,
aiming to boost the success of its allotments, and (ii) planning and
executing the infrastructure and urbanism with high quality and
environmental awareness.
 The company’s advantages are based on the following pillars: strategic
location of its allotments, operational excellence, cost-benefit of the
projects, quality of infrastructure and urbanism, relationship with its clients
and professional management.
57
 Landbank with PSV of R$2.5 billion;
 362 commercialized units in 2Q17, equivalents to a PSV of R$
18.4 million;
 SOS of 21% in 2Q17
 Net Revenue: R$ 25.2 million in 1H17
 EBITDA margin 1H17: 10.4%
 Net margin 1H17: 5.3%
 MRV share: 60%
 Portfolio %LOG (in GLA) – 1,554,241 sq. meters of GLA
 Permitted GLA – 1,052,199 sq. meters (%LOG)
 Delivered GLA – 681,616 sq. meters (%LOG)
 Net Revenue: R$ 25 million
 Adjusted Ebitda: R$ 19.8 million
 Equity: R$1.8 Billion
 MRV share: 45.92%
2Q17 Highlights 2Q17 Highlights
Results from Subsidiaries
58

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Corporate Presentation 09 2017

  • 1. MRV ENGENHARIA E PARTICIPAÇÕES S.A. Corporate Presentation
  • 2. Disclaimer The material that follows is a presentation of general background information about MRV Engenharia e Participações S.A. and its subsidiaries (collectively, “MRV” or the “Company”) as of the date of the presentation. It is information in summary form and does not purport to be complete. No representation or warranty, express or implied, is made concerning, and no reliance should be placed on, the accuracy, fairness, or completeness of this information. This presentation may contain certain forward-looking statements and information relating to MRV that reflect the current views and/or expectations of the Company and its management with respect to its performance, business and future events. Forward looking statements include, without limitation, any statement that may predict, forecast, indicate or imply future results, performance or achievements, and may contain words like “believe,” “anticipate,” “expect,” “envisages,” “will likely result,” or any other words or phrases of similar meaning. Such statements are subject to a number of risks, uncertainties and assumptions. We caution you that a number of important factors could cause actual results to differ materially from the plans, objectives, expectations, estimates and intentions expressed in this presentation. In no event, neither the Company nor any of its affiliates, directors, officers, agents or employees shall be liable before any third party (including investors) for any investment or business decision made or action taken in reliance on the information and statements contained in this presentation or for any consequential, special or similar damages. This presentation does not constitute an offer, or invitation, or solicitation of an offer to purchase any securities. Neither this presentation nor anything contained herein shall form the basis of any contract or commitment whatsoever. The market and competitive position data, including market forecasts, used throughout this presentation was obtained from internal surveys, market research, publicly available information and industry publications. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, we have not independently verified the competitive position, market share, market size, market growth or other data provided by third parties or by industry or other publications. MRV does not make any representation as to the accuracy of such information. This presentation and its contents are proprietary information and may not be reproduced or otherwise disseminated in whole or in part without MRV’s prior written consent. 2
  • 3. 3 MRV at a glance  Leading homebuilder in Latin America with over 354,000 units sold  38 years of history with presence in all Brazilian key markets  National footprint: presence in 148 cities and 22 states in Brazil  MRV is listed under “Novo Mercado”, the highest corporate governance level  MRVE3 is part of 15 Brazilian stock indexes (B3)  Market cap of R$ 6,5 billion (US$ 2.1 billon*)  MRVE3 average trading volume at B3: R$ 49 million (2Q17)  The most liquid ADTV among Brazilian homebuilders  Standardized operation aiming high efficient and productivity  5 years of recurrent cash generation  Continuous innovation to support sustainable and profitable growth  Over 22 thousand employees across the country * (09/15/2017: US$ 1 = R$ 3.1252)
  • 4. Strong Corporate Governance • Risk and Compliance • Governance, Ethics and Sustainability • Human Resources • Commercial and Credit • Real Estate Financing • Production • Communication • Legal • Founder and controlling shareholder with a long term vision • Growth and sustainability interests are aligned with minority shareholders  MRV is listed under “Novo Mercado”, the highest corporate governance level  Benchmark in Sustainability: only homebuilder included in B3 Sustainability Index (ISE)  Board of Directors composed by 7 members (4 independents)  Executives interests in line with our shareholders through long term Stock Option Plan  Free float represents 64% of shareholder’s equity Communication Chanel: • Shareholders' recommendations: assembleia@mrv.com.br • Confidential Channel: https://canalconfidencial.com.br/mrv/ 58.6% • Other Shareholders 33.6% • Rubens Menin T. de Souza 5.1% • Prudential Plc. 2.1% • Executives and Board Members 0.6% • Treasury shares EXECUTIVE COMMITTEES Shareholders Structure 4
  • 5. NET SALES CAGR 2008 - 2016 NET REVENUE CAGR 2008 - 2016 Source: Companies' Financial reports. Brazilian peers: Gafisa, Tenda, Rossi, Tecnisa, Cyrela, Even, Ezetc, Direcional, Helbor, Rodobens Expressive sales and net revenue growth 5
  • 6. Leadership in the low income segment Market share Geographic diversification provide us a unique position compared to our peers  MRV is the main low income homebuilder in Brazil  1 out of 200 Brazilians is a MRV client  National footprint provide us more capillarity and protection from local economy activity downside 6 Launches - LTM (R$ million) Sales – LTM (R$ million) Total: R$ 7,186 milion Total: R$ 6,272 million Source: ER from companies
  • 7. NET REVENUE (R$ million) * Analysts’ average consensus. CAGR 2007-2016: 30.6% NET INCOME (R$ million) With significant progress year over year 7 CAGR 2007-2016: 33.0% Market consensus: growth in mid term and 16% stock price potential upside Recommendation: Buy (8 banks), Neutral (2 banks) MRVE3 Average Target Price: R$ 16.89 MRVE3 as of 09/15/2017: R$ 14.54 Potential upside 16% Best ROE in the sector, with greater potential to increase shareholders return. ROE x P/BV  MRVE3 is the most valuable stock in the low income segment  Shareholders return through dividends and stock repurchase  R$ 1,345 million in dividends pay out since the IPO (2007)  R$ 365 million in shares buyback program (11% of existing shares)
  • 8. Quality execution – most attractive and well priced product 8
  • 9. Our structure is ready to absorb 50k units/year Quality in execution and cost efficiency G&A / Net Revenue Enhancement of productivity indexes and faster asset turnover + Asset turnover + Standardization + Productivity – Overhead structure – Cost discrepancy PI x PS Evolution Brickworks + Molds Aluminum molds Construction Methods Evolution (# units) 2014 2015 2016 2017 56%33%6%2% 9 Since 2015, the Company began to adjust its overhead structure to absorb greater volume of launches, which will dilute even more the expenses. PI Benchmark 3.2 PS Benchmark 8% enhancement Gross margin % Improvement in execution capacity, productivity and reducing cost discrepancy.
  • 10. 10 5th year of recurrent Cash Generation totaling R$ 2.6 billion MRV keep investing in landbank in order to sustain its organic growth Lanbank (R$ billion)  The Company's growth has been based on financial efficiency and profitability.  MRV is capable to continuous generate cash, invest in landbank and provide return to the shareholders, maintaining the company’s healthy capital structure – low leverage and high cash position.  Highest credit corporate rating in the sector (brAA-) by Fitch and Standard & Poor´s. Solid cash position & low leverage Cash position x Leverage (R$ billion)
  • 11. Solid demand in the long term and fund availability Brazilian housing demand supply Brazilian housing demand (accumulated) (in million units) Source: Preliminary data from “Estudo Demanda Futura, UFF, 2016”, “Secretaria Nacional de Habitação” and “Ministério das Cidades” 11 In the next 20 years the market needs to delivery ~30 million houses to meet the total demand. The Company sustainable growth will significantly contribute to it. FGTS Budget from 2017 to 2020: R$ 100 billion to finance low income housing or 800,000 units FGTS Net collection (R$ billion) Positive view from macroeconomic recovery Source: FGTS Multiannual budget, Bacen  With the economy recovery (jobs creation and GDP growth) the FGTS fund is going to improve even more its capacity to provide mortgages.  FGTS balance sheet remains robust (AUM R$ 505 bi), reaffirming its sustainability on financing the housing market. Supported by FGTS (Severance Pay Fund for workers) The main source of funding for low income housing
  • 12. Housing Program: FGTS + MCMV (Minha Casa Minha Vida) 12 HOUSING PROGRAM BENEFITS  Political dividends  GPD formation  Jobs creation  Positive Fiscal Balance = 3.3% 4.0% Real Estate Income Taxes 0.7% Subsidies MCMV Fiscal Balance is positive 3.3% Housing Program in Brazil FGTS (contribution from companies) MCMV (Subsidies from government) SBPE (savings deposits) Low income Mid/high income The main source of loans AUM R$ 505 bi R$ 246 billion in mortgages The main source of subsidies to clients Budget = R$ 2billions Up to R$ 47,500/unit • The main source of loans • AUM R$ 626 bi • Units above R$ 240 thousand Typical MRV Client has 7% subsidy MRV 0.7% from treasury 6.3% from FGTS
  • 13. The expansion plan aims to increase market share in larger cities where is concentrated the high demand for affordable houses in Brazil. Landbank is ready to support the company growth. From 2014 landbank in larger cities has increased by 80% Geographic diversification Expansion plan # of cities From 2007 to 2013 Strategy to increase diversification 13 From 2014 to 1H17 Strategy to increase market share in larger cities Landbank position ('000 units) CAGR: 5.0% Market deterioration contributed to buy well located plot of lands with better prices Land acquisition with 31% discount
  • 14. More dispersion among the “stores” More launches More units available More sales volume Potential for Growth: inventory level and location 14 SãoJosédoRioPreto Population:446,649 Average sales/month: 126 Average inventory: 1,334 Average sales/month : 99 Average inventory : 1,256 Average sales/month : 110 Average inventory : 1,457 2015 2016 2017 Goiânia (metropolitanregion) Population:2,458,504 The inventory level and location impacts directly in sales volume Average sales/month : 27 Average inventory : 572 Average sales/month : 45 Average inventory : 1,219 Average sales/month : 128 Average inventory : 1,652
  • 15. 15 Unified management of landbank MRV LANDBANKS Simulation of viability for landbank acquisition MRV Landbank Software Visual register of landbank Monitoring of efficiency of the buyers $ 90.000,00 Edit Landbank SAVE MAP GENERAL DATA SELLER DATA Landbank Simulations BOUGHT Name of the Landbank 1 5,000 sq.m. APPROVING Technical Viability 1 Gross Margin MRV Cost $ 140,000,000 $90,000,000 Average selling price Average Selling Price $ 140,000,000 $ 140,000,000 João da Silva 09/06/2016 REJECTED Technical Vianility 1 +
  • 16. Leonardo Corrêa Chief Financial and Investor Relations Officer Ricardo Paixão Investor Relations and Financial Planning Officer Matheus Torga Investor Relations Manager Phone: (+55 31) 3615-8153 E-mail: ri@mrv.com.br This presentation is also available on our website: ri.mrv.com.br Contacts 16
  • 18. 38 years of history 3,000 units per year 25,000 units per year 40,000 units per year ADRs Level1 MRV Foundation Beginning of relationship Start of Geographic Diversification Enactment of Foreclosure / Deed of Trust by Financial Institucions Banks Resume Mortgage Lending Private Equity IPO 1st Negotiation Correspondant Equity Follow-On MCMV 1 MCMV 2 MCMV 3 18
  • 20. 20 Business Model – Focus on low income Real Estate –Low Income Real Estate - Medium/ High Income Purchasing Rational Instalments lower than rent - Purchasing Reason Necessity (1st real estate) Upgrade Funding Abundant and unchanged rates (FGTS) Scarce and recent increase of rates (Saving Accounts) Product Standardized Exclusive Financing Transference During construction phase After key-delivery Cash Flow Receiving in accordance with the construction evolution Financing Provision at the end of construction period Price In line with the inflation ~4x bigger than inflation
  • 21. Source : BO MRV –Mortgage Lending 06/09/2016. 1) Minimum Wage 2017: R$ 937.00  Search of the first real estate for family formation  77% of the clients are single/ engaged  Income range: 61% have an income of up to R$ 2,700  Young clients: 50% are up to 30 years old  LTV of 75% 21 Client Profile Low Income What our clients are looking for? Medium/High Income  Couples  56% are single and 52% have children  The monthly medium income is R$ 8,390, being that 41% earn more than R$ 10 thousand  Medium LTV of 62% Source: Inteligência de Mercado Lopes 2015, ACEBIP and BACEN. What the clients are looking for? Purchase Motivation Location Playground area Marriage * Data from March 2015
  • 22. 22Source: Low income Real Estate: MRV Medium Price, in 2017 price was adjusted with inflation Real Estate Medium/ High Income: Variation FIPE Zap (in 2017, decrease of real price of the units) Economic Segment: focus on the acquisition of the 1st real estate, where there is no speculation and exists huge housing deficit. Appreciation in line with the inflation and low cost financing produces a significant reduction of LTV’s (inflation higher than TR). Evolution of Real Estate Prices The evolution of low income real estate prices has less volatility and more consistency than the medium/high income, preventing the creation of a housing bubble.  Low offer and high demand of low income real estate  MCMV Conditions: Limited income and sales price Sales of 1 real estate per Individual Taxpayer Registration Number Impossibility of resale a unit under the MCMV
  • 24. Funding – FGTS and SBPE Housing in Brazil: 70 years of investment in housing programs Source: Biblioteca Digital da FGV, EESC –USP, FGTS • 1930: Real Estate credit offer by the Caixas Econômicas • 1946: Creation of Casa Popular Fundation – First national housing policy • 1964: Creation of SFH and BNH – with compulsory collection of 1% of monthly payment • 1967: Creation of FGTS – collection of 8% of monthly payment • 1986: Extinction of BNH due to financial difficulties in the inflationary period and increasing FGTS’ withdrawals • 1990: Collor creates the Plano de Ação Imediata para a Habitação (PAIH), which antecipated the construction, in an emergencial manner, of 245 thousand houses • 2000: FHC establishes the Carta de Crédito Individual e Associativa in FGTS and the continuity of projects such as Pró-Moradia and Habitar Brasil. • 2004: Política Nacional de Habitação (Lei 10.931) - Social Subsidy Interest Housing Program • 2009: Creation of MCMV – The biggest housing program in the country • Investment: R$ 294 billion • 10 million brazilians benefited • Maximum income of R$ 6,500 Funding – governamental contributions • 92% OF THE RESOURCES INTENDED FOR THE POPULATION WITH INCOME ABOVE 5 MINIMUM WAGES - 80% OF POPULATION RECEIVE BELOW THIS • ONLY 33.5% OF THE FINANCED UNITS WERE INTENDED FOR POPULAR SECTORS Financed units 24 R$ 7.76 BI FGTS DISCOUNT R$ 52.8 BI FGTS DISCOUNT R$ 10.11 BI OGU DISCOUNT 120,000 1,263,500 2,864,500 857,000 1,355,000 454,000 3,318,508 4,914,288 1930 - 1946 1964 - 1975 1976 - 1982 1983 - 1986 1987 - 1992 1993 - 1997 1998 - 2008 2009 - 2017 Data 2017 up to 05/31/2017
  • 25. SFH - Brazilian Housing Finance System The source cames from employers depositing 8% of the monthly salary of all workers (Nov/16) Source: Caixa Total Balance of R$ 502 billion Borrowers can use the account balance in few cases: Mortgage Termination of work Retirement Others 12% 66% 14% 8% Mortgage Interest Rate from 5% to 9.16% a.a + TR Units up to: R$ 300,000 SBPE Deposits made on the savings of commercial banks Real Estate Credit Legal Reserves Free Resources 65% 30% 5% SBPE Resources Market Rate Interest Rate from 9.2% 1 to 11% +TR Units of R$300,000 to R$950,000* Borrowers can go to any bank and apply for a real estate loan according to their credit rating Interest Rate from 12.25 2 % +TR Units above: R$950,000Notes: 1) If the client has a salary account in CEF the interest rate can reach 9.75%. In BB it can reach 9.65%+TR. 2) If the client has a salary account in the bank, the interest rate can reach 10.7%+TR. 3) 20% for compulsory deposit (remunerated by SELIC) and 10% for additional compulsory (corrected by TR) * States of DF, MG, RJ, SP: R$ 950,000; other states: R$ 750,000. Workers are remunerated 3% per year+TR 25 FGTS (Severance Pay Fund) - The main source of fund for MRV
  • 26. FGTS ¹ Source up to 2011: PME Unemployment rate and source from 2012: PNAD due to its better sensibility and comprehensiveness. From 2017 to 2020 the FGTS budget is R$ 100 billion to be invested in Housing. Obs: In 2007, retirement withdrawals increased significantly due to the spontaneous retirement approval by Federal Supreme Court, reducing the net collection in the period. Source: IBGE, CAGED e FGTS – April/17 Withdrawals (R$ billion) Budget (R$ billion) 26 Net Collection (billion) R$ 29 R$ 38 R$ 42 R$ 47 R$ 49 R$ 57 R$ 65 R$ 76 R$86 R$ 99 R$ 108 R$ 63 Breakdown 2017 2018 2019 2020 Housing 71.7 63.5 63.5 63.5 Basic Sanitation 7.0 9.5 9.75 9.75 Infrastructure 9.0 8.0 8.0 7.0 Others 0.5 0.5 0.5 0.5 TOTAL 88.2 81.5 81.75 80.75
  • 27. Minha Casa Minha Vida – Housing Program 84% das vendas MRV são realizadas pelo sistema PRICE* 2 APRIL/09 TO DEC/10 JAN/11 TO DEC/14 ¹ Included 350,000 units added on September 2014. ² Amounts refers to the units to be built in 2016 ³ MCMV 1 and 2: Amounts referring to each program. ⁴ Details not yet released 2017-2018JAN/15 TO JAN/17 27 Program Resources (R$ billion) Units to be built Monthly Income Income Units Income Interest Rate Units Income Interest rate Units² Income Interest rate Units² Group 1 Up to R$ 1,325 482,741 Up to R$ 1,600 4% + TR 1,226,605 Up to R$ 1,800 TR 53,748 Up to R$ 1,800 TR 170,000 Group 1.5 - - - - - Up to R$ 2,350 5% + TR Up to R$ 2,600 5% + TR 80,000 Up to R$ 2,455 5% + TR Up to R$ 2,350 5.5% + TR Up to R$ 2,600 5.5% + TR Up to R$ 2,790 Up to R$ 3,275 6% + TR Up to R$ 2,700 6% + TR Up to R$ 3,000 6% + TR Up to R$ 3,600 7% + TR Up to R$ 4,000 7% + TR Group 3 Up to R$ 4,650 146,623 Up to R$ 5,000 7.16% + TR 307,054 Up to R$ 6,500 8.16% + TR 113,930 Up to R$ 7,000 8.16% + TR 200,000 Group 3 Plus Up to R$ 9,000 9.16% + TR Not available Target (Term) 2 years 5 years 2 years R$ 34 R$ 72.6 R$ 41,2 1,000,000 3,100,000 ¹ R$ 41,2 1 year 2,000,000 Group 2 375,764 1,216,341 800,000 dec-2010 dec-2015 dec-2018 645,692 jan/17
  • 28. Minha Casa Minha Vida: Subsidies and Units Price SUBSIDIES 28 The Group 1 subsidy is financed with treasury resources. 2 GROUP1.5GROUPS2AND3GROUP3PLUS UNITS PRICE
  • 29. Down payment 3% Mortgage with MRV 15% Subsidies 7% Mortgage with Banks (CEF and BB) 75% Payment Breakdown: Typical MRV Client MCMV Group 2 Unit Price: R$ 150,000 • FGTS balance • Savings Account 10% before keys delivery 5% after keys delivery WHERE DOES THE SUBSIDIES COME FROM? 0.7% from OGU (National General Budget) 6.3% from FGTS Revenue Taxes per unit sold is 4% 4.0% Real Estate Income Taxes 0.7% Subsidies MCMV Fiscal Balance is positive 3.3% Typical MRV Client: Payment Breakdown The above tax does not include other indirect taxes such as VAT, Social securities and others. 29
  • 30. MRV on MCMV – Potential for expansion in the next years 0% 0% 0% 0% 0% 5.4% 18.9% 34.7% 0% 13.6% 5.3% 4.4%24.1% 28.2% 32.6% 10.1% 24.3% 15.7% 66.9% 25.8% 43.1% 62.8% 43.1% 37.4% 37.5% 20% 49% 43.3% Capitals Secondary Cities Average 11.6% Average 38.7% 30 MRV MCMV Share MRV Contracted Units- January 2015 to March 2017
  • 31. 142,873 249,636 96,654 289,648 259,779 56,573 19,759 - 91,362 248,568 267,044 267,04 250,607 260,443 249,306 212,567 72,015 22,889 57,072 45,328 36,705 29,028 26,023 24,951 56,236 21,131 2009 2010 2011 2012 2013 2014 2015 2016 2Q17 Group 1 Group 1,5 Group 2 Group 3 143,894 275,075 104,311 389,073 557,961 175,260 16,890 36.858 12.077 23.849 98,593 277,171 325,953 311,965 288,708 289,715 344,729 282.083 134.131 43,818 102,805 77,935 97,711 93,799 37,609 40,526 68.235 29.084 2009 2010 2011 2012 2013 2014 2015 2016 2Q17 Group 1 Group 1,5 Group 2 Group 3 Contracted and Delivered Units Source: Ministério das Cidades – Datas 2017 up to 05/31/2017 257,124 555,276 409,026 593,393 539,405 286,305 655,051 508,199 798,749 940,948 502,584 402,145 399,253 31 189,473 Contracted Units MCMV Delivered Units MCMV 343,049 277.777 288.562 110,466
  • 32. Resources invested in the program 2  Group I – According to Ministry of Planning Budget (PAC)  Group II – According to FGTS • Until 2015: In Group II, subsidy has contribution of 17.5% from National Treasury and 82.5% from FGTS. • After 2015: In Group II, National Treasury contribution is of 10% and of FGTS is 90%. **MCMV3: investments estimated for 2015 to 2018 - FGTS has complementary subsidies (up to R$ 27,500 per unit) + Interest Rates subsidy. - OGU: National General Budget * The number of units to be contracted remains the same as that proposed at the beginning of the MCMV 3. Source: http://www.cgu.gov.br/ 32 Program Groups Family Income Contracted Units Resources (R$ million) Family Income Units up to Ago./2015 Resources (R$ million) Family Income Units up to Jan/2017 Resources (R$ million) Family Income Estimated Units Resources (R$ million) Group 1 Up to R$1,395 482,741 R$ 17,999 (OGU) Up to R$ 1,600 1,226,605 R$ 63,724 (OGU) Up to R$ 1,800 53,748 R$ 1,409 (OGU) Up to R$ 1,800 170,000 R$ 203 (OGU) Group 1.5 From R$ 1,800 to R$ 2,350 From R$ 1,800 to R$ 2,600 80,000 Group 2 From R$ 1,395 to R$ 2,790 375,764 R$ 1,068 (OGU) + R$ 3,187 (FGTS) From R$ 1,600 to R$ 3,275 1,213,341 R$ 4,369 (OGU) + R$ 17,104 (FGTS) From R$ 2,350 to R$ 3,600 645,692 R$ 805 (OGU) + R$ 3,689 (FGTS) From R$ 2,600 to R$ 4,000 800,000 R$ 322 (OGU) + R$ 1,475 (FGTS) Group 3 From R$ 2,790 to R$ 4,650 146,623 - From R$ 3,275 to R$ 5,000 307,054 R$ 110 (FGTS) From R$ 3,600 to R$ 6,500 113,930 R$ 105 (FGTS) From R$ 4,000 to R$ 7,000 200,000 R$ 46 (FGTS) Group 3 Plus - From R$ 7,000 to R$ 9,000 Not Available - TOTAL 1,005,128 R$ 22,254 2,750,000 R$ 85,307 813,370 R$ 6,008 2,000,000* R$ 2,046 MCMV 1 (Apr/2009 - Dec/2010) MCMV 2 (Jan/2011 - Ago/2015) MCMV 3 (Jan/2016 - Jan/2017)** MCMV 3 (Jan/2017 - Dec/2018)**
  • 34. # of Cities x Gross Margin Competitive Advantages and Market Potential Note: *Information from Statistics and Information Center, from João Pinheiro Foundation. MRV inhabitants x Landbank in PSV 1.5 million (R$ 2.8 bi) 2.4 million (R$ 4.8 bi) 11.5 million (R$ 28.6 bi) 3.5 million (R$ 6.8 bi) Southeast South Middle-west Northeast Potential market penetration per month 13,719 MRV Actual Performance Additional Potential Total Potential Sales increment (0.72/1000 habitants) Average sales / month (2016) Nationwide Footprint - Present in 22 States and Federal District - 148 cities attended by the Company 10,704 3,015 34
  • 35. 35 Business Strategy – Dispersion Landbank 2016Landbank 2013 Fortaleza Fortaleza Fortaleza DISPERSION: STORES AND LAND DISPERSION: STORES AND LAND The strategy consists in having the right amount of land well balanced in each region of the cities, to supply the demand.
  • 36. In 2Q17, MRV achieved important marks among the listed companies:  63% of launches market share in group II and III of MCMV Program;  49% of total launches in the quarter. Competitive Advantages – Market Leader in Brazil Launches Eligible to MCMV Nominal Value (R$ billion) (Groups II and III) Note: The data are estimated and based on the listed Companies’ earnings releases. % of launches in MCMV Program (Groups II and III) – in PSV % of total launches – in PSV 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Other listed companies 36
  • 37. Sales channels:  We have over 4,500 internal brokers, 100% focused in MRV products.  We invest in training and sales techniques to enhance the productivity and quality of our sale process.  Management of commissioning policies of the internal team and definition of sales strategy. Competitive Advantages – Sales Structure 37
  • 38. Marketing Investment: 2 REACHING 1 ANNUAL INVESTIMENT 3 MAIN CHANNELS 140 Million Brazilians (70% of population) R$ 120 Million Data base: December 2016 R$ 2,5 Billion in virtual sales per year. 180 virtual attendant focused in high quality attendance located in Belo Horizonte.  140 virtual bases all over Brazil with 1,500 brokers Investments Results: Competitive Advantages – Effective Marketing Campaigns Television 30%, Internet 26%, Trade MKT 19%, Newspaper 3%, Other medias: 22% 38
  • 39. Sources: Google Analytics, MRV website, Blog, AppFacebook, App Android, App IOS and hotsites. Competitive Advantages – Online and Social Midia leadership 39 3,978,053 3,175,017 MRV Engenharia DEMAIS CONSTRUTORASOther Companies 478,078 180,095 71.517.848 33.948.286 MRV Engenharia DEMAIS CONSTRUTORAS 33,948,286 71,517,848 93,200 53,069 MRV Engenharia DEMAIS CONSTRUTORAS
  • 40. Resolved demands on 1st contact 93.55% 2017 Relationship Portal General Accesses: 1,144,581 2017 47,319 Number of Answered Calls Monthly Average- 2017 Costumer Service “Conexão MRV” +200,000 Views of the videos “Conexão MRV” #MeuMundoMelhor +5,000,000 Views of the videos #MeuMundoMelhor Complaints: 0.49%* Year 2017 MRV in Midias 483,484 followers in Twitter 608,165 followers in Google + 3,978,053 Facebook fans *Number of complaints over total clients (5 years) – Annual view Client Relationship Client Access: 74,293 Monthly Average of Single Calls 40
  • 41. Pre – Sales (% MRV – R$ million) Pre-sales per launching period Sales over Supply Sales over Supply = Pre-sales / (Beginning Inventory + Launches) Pre-sales per launching period Inventory Duration 41
  • 42. Market leader in the main commercial indicators Launches (R$ million) In 2Q17, MRV launched twice as much the second peer 42 R$million 2Q16 1Q17 2Q17
  • 43. Market leader in the main commercial indicators Net Sales (R$ million) 43 R$million 2Q16 1Q17 2Q17 In 2Q17, MRV sold twice as much the second peer
  • 45. Production Team  Approximately 18 thousand people dedicated to Production  Employees on a leadership position (directors, managers and coordinators) have been working in the company for an average of 9 years.  At this time, we have 198 sites under construction, located in the following areas: Northeast 27 (13.6%) Middle-west 10 (5.1%) South 37 (18.7%) Southeast 124 (62.6%) 11 Director 25 Managers 47 Coordinators 369 Engineers 509 Engineering Auxiliary and Building Technicians 539 interns 18,267 in other positions, being 9,874 MRV employees and 8,393 third part employees. Data-base: May/2017 45
  • 46. Operational Advantages – Mechanization and New Technologies Hydraulic Kit Reduced workforce Less generated waste Greater production rationalization Better site organization Standardized projects Higher speed of production Strategic equipment team Simplification of projects Economically viable Greater environmental sustainability Increased work security Standardization, Mechanization and Intelligent Processes Concrete Prefabricated and standardized door Aluminum Forms Hoisted Slab 46
  • 47. Years Sample Average Stand.Deviation Coef.of Variation (%) 2012 107 30.36 4.977 16.39% 2013 152 29.69 4.270 14.38% 2014 135 29.73 4.581 15.41% 2015 99 28.70 4.093 14.26% 2016 108 27.33 4.794 17.54% 2Q17 40 25.65 2.810 10.96% Operational Advantages - Cost Improvement It is possible to identify a decrease in average cost, reaching the lowest level in 5 years. Which means that our projects are with a better operational efficiency. Boxplot of the Sum of the projection cost Sumofthevalueofprojectioncost Histogram of the Sum of the projected cost Frequency Year Sum of projection cost value Increase of efficiency results in:  Less discrepancy in costs and quality;  Lower execution cost 47 2012 2013 2014 2015 2016 1Q17 Year End
  • 48. Note: Units presented in (‘000) units. Operational Advantages – Delivered Units 48
  • 49. • R$ 4.5 Billion in payments in 2016 • 55,819 Invoices received in December 2016 • 20,520 Employees paid per month • 260 Employees SSC – Shared Service Center • + 5 million views of #MeuMundoMelhor videos. • + 1.4 million acesses to the Relationship Portal in 2016 • 54 thousand: average of calls answered in 2016 • 166 thousand active clients • R$ 400 million collected per month • + 3,000 current accounts reconciled per month • + 3,000 new registered contracts per month • 218 employees • R$ 80 million of investment in IT (5 years) • More than 5,500 work station • 33 million of scanned documents since 2010 • More than 300 tablets in the building site Operational Advantage - Administrative Structure Client Relationship and Internal Communication Information Technology Specialized Services 49
  • 51. Typical MRV accumulated Cash Flow Since simultaneous sales process started, MRV has considerably decreased its collection period, contributing to less working capital need per project launched. Working Capital Need = Payables – Receivables (inventory not included) 51 Average Colection Period (in days) Working Capital Need (in days) 2010 2011 2012 2013 2014 2015 2016 1H17 2010 2011 2012 2013 2014 2015 2016 1H17 51
  • 52. Consistency and stability of the Company’s yields Note: ROE excluding Equity income. 52 52
  • 53. Financial Indicators Net Revenue (R$ million) Gross Margin % 53 2Q16 1Q17 2Q17 2Q16 1Q17 2Q17 R$million
  • 54. Financial Indicators Net Income (R$ million) 54 R$million 2Q16 1Q17 2Q17 Gafisa 4Q16: ex Tenda’s impairment (R$ 683mm) 2Q16 1Q17 2Q17 Net Margin - %
  • 56. Subsidiaries MRV share: 40% Present in 25 cities and 9 estates Extended experience in creating business and developing assets. Controls complete cycle of development, construction and administration of its assets. Logistics Complex 100% Greenfield Full control of the cycle, since the landbank acquisition until the delivery of the project Multi-tenant Projects in modules Flexible architecture Lease term of 2 to 10 years Shopping Centers 100% Greenfield Complete Shoppings Operated by specialized Companies Strip Malls 100% Greenfield Regional Commercial Centers Loteamentos Industriais 100% Greenfield Full control of the cycle, since the landbank acquisition until the delivery of the project 56 45,.92%
  • 57. Executives 60% 40% Development and commercialization of urban lots in residential and commercial segments, all sustainably developed. Subsidiaries  Urbamais operates (i) researching and identifying distinguished areas, aiming to boost the success of its allotments, and (ii) planning and executing the infrastructure and urbanism with high quality and environmental awareness.  The company’s advantages are based on the following pillars: strategic location of its allotments, operational excellence, cost-benefit of the projects, quality of infrastructure and urbanism, relationship with its clients and professional management. 57
  • 58.  Landbank with PSV of R$2.5 billion;  362 commercialized units in 2Q17, equivalents to a PSV of R$ 18.4 million;  SOS of 21% in 2Q17  Net Revenue: R$ 25.2 million in 1H17  EBITDA margin 1H17: 10.4%  Net margin 1H17: 5.3%  MRV share: 60%  Portfolio %LOG (in GLA) – 1,554,241 sq. meters of GLA  Permitted GLA – 1,052,199 sq. meters (%LOG)  Delivered GLA – 681,616 sq. meters (%LOG)  Net Revenue: R$ 25 million  Adjusted Ebitda: R$ 19.8 million  Equity: R$1.8 Billion  MRV share: 45.92% 2Q17 Highlights 2Q17 Highlights Results from Subsidiaries 58