May 15, 2020 / 5:02 PM / 17 days ago

UPDATE 1-Brazil homebuilder Cyrela sees 'minimum' 2020 dividends, shares down 6%

(Adds analysts' comments, share performance)

By Gabriela Mello

SAO PAULO, May 15 (Reuters) - Brazilian homebuilder Cyrela Brazil Realty SA is bracing for lower cash generation in the second-quarter, as the coronavirus outbreak hurts home sales, particularly projects targeting mid and high-income customers, executives said on Friday.

Shares in Cyrela were trading almost 6% down on Friday afternoon at 12.83 reais, among the worst performers of Brazil's benchmark index Ibovespa.

"Cash generation can still be positive, but we'll keep dividends payment to the minimum ratio this year," Chief Financial Officer Miguel Mickelberg told analysts and investors in a call on quarterly results.

Cyrela, one of Brazil's largest homebuilders, posted an almost 42% drop in first-quarter net income, as cash generation tumbled to 13 million reais from 150 million a year before.

Analysts at Brazilian investment bank BTG Pactual said results were weak, but reaffirmed a "buy" recommendation based on Cyrela's good management team and the company's sizable exposure to the government's subsidized housing project Minha Casa Minha Vida, which according to them tends to perform better.

"Although first-quarter was soft and we expect an even weaker second-quarter due to the lockdown, we think that valuation looks very attractive at this point," BTG analysts Gustavo Cambauva and Elvis Credendio wrote in a report.

Cyrela's Co-Chief Executive Raphael Horn said low-income segment has been suffering less than upscale projects during the coronavirus pandemic.

However, uncertainties as to how the crisis will play out led the company to adopt a more conservative approach and suspend launches of new housing projects.

"We have a lot of new projects on the shelf, but we made no effort to launch any while headwinds are strong," Co-Chief Executive Raphael Horn said, adding the company will only resume launches if there is demand.

Despite the economic fallout from the coronavirus crisis, including rising unemployment, Mickelberg noted that Cyrela has not seen a rise in home sales cancellations in the past few months.

"Around 8% of our customers asked for (contract term) renegotiations and most were accepted," he said.

$1 = 5.8182 reais Reporting by Gabriela Mello Editing by Chris Reese and David Gregorio

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