Earnings call transcript: Consorcio Ara Q2 2025 revenue beats forecast

Consorcio Ara, a leading player in the Mexican housing market, reported robust financial results for the second quarter of 2025, surpassing revenue forecasts. The company posted revenues of 2.08 billion pesos, slightly above the anticipated 2.02 billion pesos, marking a revenue surprise of 2.97%. According to InvestingPro data, the company trades at attractive valuations with a low P/E ratio relative to near-term earnings growth. Despite this positive financial performance, Consorcio Ara’s stock price fell by 1.21% to close at 3.26 pesos, reflecting investor caution amid broader market volatility.

Key Takeaways

• Revenue for Q2 2025 was 2.08 billion pesos, exceeding forecasts.
• Stock price fell by 1.21% post-earnings announcement.
• Housing revenues grew by 10.6% year-over-year.
• The company registered 3,687 homes for sustainability certification.

Company Performance

Consorcio Ara’s Q2 2025 performance was strong, with revenues reaching their highest level since Q4 2019. The company benefited from a 10.6% year-over-year increase in housing revenues, driven by strategic focus on affordable and middle-income housing segments. Despite challenges in the broader housing market, including a decline in mortgage lending, Consorcio Ara maintained a competitive edge with its diversified revenue streams and strong liquidity position.

Financial Highlights

• Revenue: 2.08 billion pesos, a 10.6% increase year-over-year.
• Free Cash Flow: 218.1 million pesos.
• Average Home Price: 1,235,800 pesos, a 3.3% increase.
• Operating Income: 197.2 million pesos, representing a 9.5% margin.
• Net Income: 172 million pesos, with an 8.3% margin.
• EBITDA: 288.2 million pesos, achieving a 13.9% margin.

Earnings vs. Forecast

Consorcio Ara exceeded revenue expectations by 2.97%, reporting actual revenues of 2.08 billion pesos against the forecast of 2.02 billion pesos. This marks a positive deviation from the forecast, highlighting the company’s ability to outperform market expectations despite economic uncertainties.

Market Reaction

Following the earnings announcement, Consorcio Ara’s stock experienced a decline of 1.21%, closing at 3.26 pesos. This movement reflects a cautious investor sentiment, possibly influenced by broader market trends and ongoing volatility in the construction industry. InvestingPro data shows the stock maintains remarkably low volatility with a beta of 0.06, suggesting stable price movements relative to the market. The stock remains within its 52-week range of 2.84 to 3.83 pesos, currently trading 33% below its 52-week high.

Outlook & Guidance

Looking ahead, Consorcio Ara maintains a cautious outlook due to market volatility but targets growth similar to the previous year. The company plans to continue its focus on affordable housing segments, with expected average home prices ranging between 1.2 million and 1.3 million pesos.

Executive Commentary

Alicia Enriquez, Administrative and Financial Director, emphasized the company’s commitment to its core mission, stating, "We remain focused on our strengths and fundamental purpose to allow more families to have their own home." She acknowledged the uncertain environment, noting, "In an environment of uncertainty, we believe that some customers are postponing their home purchase."

Risks and Challenges

• Market Volatility: Continued economic uncertainties could impact consumer confidence and housing demand.
• Mortgage Lending Decline: Reduced lending from Infonavy and commercial banks may affect home purchases.
• Competitive Pressure: Maintaining market share amidst growing competition in the housing sector.
• Regulatory Changes: Potential changes in housing regulations could impact operations.
• Cost Management: Rising expenses from sales promotions and salary adjustments may pressure margins.

Q&A

During the Q&A session, analysts inquired about potential collaboration projects with Infonavy and the impact of increased expenses on profitability. The management addressed these concerns, highlighting strategic investments in team strengthening and sales promotions as essential for long-term growth.

Full transcript - Consorcio Ara, S.A.B. De C.V. (ARA) Q2 2025:

Leslie, Event Specialist: Hello, and welcome to today’s Second Quarter twenty twenty five Results Conference Call and Webcast. My name is Leslie, and I will be your event specialist today. All lines have been placed on mute to prevent any background noise. Please note that today’s conference call and webcast are being recorded. During the presentation, we will have a question and answer session.

To follow the conference online, please visit https:consorcioara.transmission.com.mx. The word transmission is with one s only. If you would like to view the presentation in a full screen view, please click the full screen button in the upper left hand corner of your screen. Press the same button to return to your original view. It is now my pleasure to turn today’s program over to Alicia Enriquez, Administrative and Financial Director.

Please go ahead.

Alicia Enriquez, Administrative and Financial Director, Panforcio R: Thank you, Leslie. Good morning, and a warm welcome to our conference call on the Second Quarter twenty twenty five Results of Panforcio R. This call will be also transmitted via webcast accompanied by a slideshow for visual support. With me on the call to discuss the results are Ms. Felito Mabarosse, Vice Chairman of the Board Miguel Lozano, Chief Executive Officer and Felipe Loera, Chief Financial Officer.

I want to alert everyone that certain statements and comments made during the course of this call, mostly considered forward looking statements are defined by the Securities Litigation Reform Act of 1995. ConsulciOara believes that such statements are based on reasonable assumptions, but there are no assurances that current outcomes will not be substantially different from those discussed today. All forward looking statements are based on information available to the company on the date of this call. The company is under no obligation to publicly update or revise any forward looking statements as a result of new information that may become available in the future. As usual, at the end of our prepared remarks, there will be time for Q and A.

We wait until then to open the queue for questions. Results for the 2025 compared to the second quarter of twenty twenty four. Operating and financial results in the 2025 set up the positive momentum we have seen over the past year. Revenues totaled 2,070,000,000.00, the highest level since the fourth quarter of twenty nineteen, alongside positive generation of free cash flow to the field totaling 218,100,000.0, and came to MXN 129,800,000.0 after interest payments. In the second quarter of twenty twenty five, housing revenues came to 1,990,000,000.00, a 10.6% growth compared to the same quarter of last year.

These revenues correspond to sixteen thirteen title homes, which results in an average price of 1,235,800, a 3.3% increase over the average price reported for the second quarter of twenty twenty four. The revenue growth was totaled mainly by the affordable entry level and middle income segments. In the former category, sales in the 2025 came to MXN 700,200,000.0, rising 13.6% over the same period of 2024. While in the latter, revenues totaled 8 and 82,200,000.0, 13.3% higher. Residential category sales reached MXN 410,800,000.0, a growth of 1.1%.

Looking at the revenues from homes delivered under the deal with Infonavy’s loan or Line three program between April and June, the total came to 368,400,000.0. The vast majority of these homes were in the affordable entry level state. Revenues from other real estate projects, mainly from the sale of land and shopping center leases, totaled 81,600,000.0 and dropped 4.1% from the second quarter of twenty twenty four, primarily due to lower revenues from the sale of commercial land. Looking at the revenue mix in the second quarter of twenty twenty five, affordable entry level homes contributed 33.8%, middle income homes 42.5%, residential 19.8% and the other real estate projects 3.9%. In the second quarter of twenty twenty five, operating income came to 197,200,000.0 with a margin of 9.5%.

Net income was MXN 172 with a margin of 8.3%, and EBITDA was MXN 2 and 88,200,000.0 with a margin of 13.9%. Results for the 2025 compared to the first half of twenty twenty four. In the first six months of twenty twenty five, total revenues, meaning the sum of housing revenues and revenues from other real estate projects, last year. Altium revenues totaled 3,780,000,000.00, an increase of 13.3% and corresponding to the sale of 3,055 homes with an average price of 1,000,002 and 35,700, 6% higher. Breaking down our sales by housing segment, in January 2025, affordable entry level homes totaled 1,250,000,000.00, a 3.2% growth compared to the same period of last year.

Middle income home sales totaled 1,750,000,000.00, 23.8% higher, and residential home sales reached 777,700,000.0, 9.6% increase. Revenues from other real estate projects, mainly from the sale of land and from shopping center releases, totaled 146,900,000.0 and were basically stable in year to year terms. Looking at the sales mix for the first half of the year, affordable entry level homes contributed 32%, middle income homes 44.5%, and residential 19.8%, while other real estate projects accounted for the remaining 3.7%. In the first six months of this year, operating income totaled MXN 379,200,000.0 with a margin of 9.7%. Net income was MXN 3 and 51,500,000.0 and a margin of 9% and EBITDA totaled 542,100,000.0 with a margin of 13.8%.

Between January and June 2025, we generated positive free cash flow to the team, following 159,000,000. Financial position as of 06/30/2025, net debt and cash equivalents totaled MXN 2,190,000,000.00, 6.3% lower than at the close of 2024 due primarily to the payment of debt. Accounts receivable ended the second quarter of the year at ARS 605,000,000, 8.7% higher than on 12/31/2024. Accounts receivable turnover was twenty nine days. Total inventories as of 06/30/2025, amounted to CLP 18,800,000,000.0, a 3.8% increase over the sales of the previous year.

As of 06/30/2025, cost bearing debt came to 2,530,000,000 and declined by 5.2% from the balance reported as of 12/31/2024, attributable primarily to the payment of straight unsecured loan. Short term maturities, meaning that coming due in the next fifteen months, made up 13.8% of cost bearing debt and long term debt, 86.2%. As of 06/30/2025, 66.8% of our cost bearing debt was in the front of the ARA twenty one two x and ARA 23 x notes. 13.3 percent were simple unsecured loans for our shopping centers. 10.8% were simple unsecured bank loans with a real estate collateral, and the remaining 9.1% were lease liabilities.

Net debt at the close of the second quarter of this year was positive by 343,900,000. Leverage ratios remain at optimum levels. Operating debt to EBITDA was two point 2.39x. The net debt to EBITDA ratio was just 0.32x. And the net and interest coverage ratio was 3.32x.

And if we take this ratio on coverage of net interest, meaning interest expense less interest income, it would be 10.73 times. We are proud to share that on April 30, Standard and Poor’s ratified our average for this rating of NXAA minus with a stable, the highest of any publicly traded housing company in Mexico. In its report, the agency said that it expects Aratom remain committed to its strategy of medium term growth and compensation to shareholders, along with its proven financial policy regarding the use of debt, while remaining while maintaining a robust liquidity position. Your report can be viewed on our corporate website. Housing industry performance.

According to Mexico’s National Institute for Statistics and Geography, INEJI, As of May 2025, in annual terms, industrial activity in general declined 0.4% compared to the previous year. The construction industry as a whole grew 1%, while building subsector, which includes housing and industrial base, grew 3.3%. According to data from the Unified Housing Registry Group, in the first half of the year, 91,581 homes were registered, a 3.9% decrease compared to the same period of last year, and 62,070 homes were produced, 2.7% higher than in the first half of twenty twenty four. Regarding mortgage lending between January and April 2025, which is the latest information available based on data from the Ministry of Agrarian Territorial and Urban Development or SEDAPU. In front of this granted 48,964 loans for the purchase of new homes and decreased by 5.7% compared to the same period last year.

This loan represented an investment of 38,000,000,000, 8% higher. The average size of a new home loan between January 2025 was 775,000, a 14.6% increase compared to the same period of the previous year. For Mr. Porizpak granted 4,087 loans for new pumps in the first four months of the year, down 19% from the second quarter of twenty twenty four. The investment in this totaled 4,100,000,000.0, 6.6% less.

The average size of a new home loan granted between January 2025 was ARS 1,010,000, a 15.3% increase compared to the same period of the previous year. As for commercial bank home financing in the first four months of twenty twenty five, 28,129 mortgages were granted for the acquisition of new and used homes, a 9.2% reduction compared to the same period of last year. And the investment in this totaled 67,800,000,000.0, 4% lower. The average size of our loan granted between January 2025 was ARS 2,410,000.00, a 5.6% growth compared to the same period of the previous year. In the first half of twenty twenty five, 66.2% of our revenues came from homes financed by Infonavy, 10.1% from Fobista and the remaining 23.7 from commercial banks and homes purchased without financing.

Shopping centers. Hearing the positive strength in the housing division performance, revenues in the shopping center division in the 2025 totaled 131,400,000.0, an 11.1% growth over the same period of 2024. While net operating income came to MXN 91,900,000.0, 7.3% higher. Revenues in the first half of the year rose to 2 and 57,300,000.0, up 9% over the first half of last year, and net operating income totaled 179,000,000, a 5.4% year to year increase. Fuel results correspond to shopping centers that are 100% owned by us and are consolidated into our financial statements, Central San Miguel, Plaza Centella, Central San Buenos Ventura and Plaza Cray, the unit and mini centers as well as 50% of Central Las Americas and Paso Ventura.

According to our stake in those properties, which are entered under the equity net. Total growth in this area in our six shopping centers, I mean, Union Mini shopping centers is 212,003 square meters. The occupancy rate as of 06/30/2025, was 94.3%, a very competitive level. Consortio Ara is known for its capacity to generate a cash flow, which has allowed to maintain a policy of dividend payment, which is commendable given the investment intensive nature of our industry. In this regard, on July 3, the Digital declaring the April General Ordinary Shareholders’ Meeting was paid out, totaling 200,000,000, equivalent to 29.1% of ’24 net earnings.

The per share dividend was MXN 0.1642304144, a deal of ARS 5.13 on the stock price at the close of 2024, which was ARS 3.2. This dividend was paid out off from the net fiscal earnings account as of 12/31/2023, means it was not subject to tax withholdings. Renewal of Market Maker contract. On July 2, we renewed our market maker service contract, which we signed in June 2019 with BTG Factor. This contract, we help continue supporting the market liquidity of our shares.

Sustainability. Our sustainability commitment is clear and comprehensive. As a sign of this, we recently registered 3,687 homes for certification by S. H, which stands for excellence in design for greater efficiency, located in the state of Mexico, Puella, and Quintana Roo. You may recall that each certification requires on to be designed in such a way that it saves a minimum of 20% of energy, 20% of water and 20% of energy in boil, in materials compared to the local baseline.

These homes up to the 5,864 homes already certified, which have shown savings well above the required minimum. We also invite you to consult our our 2024 Annual and Sustainability Report, which is available on our corporate website. In addition to discussing Aral’s financial performance, the report covers our corporate governance, sustainability, ethics and transparency, the quality of our products and services, the ARA foundation and our commitment to the environment. It should be noted that our report confirms to Global Reporting Initiative 2021 guidelines and the in accordance with Y. We also incorporate the sustainability accounting standards and more SAFI indicators provided by the IFRS foundation applicable to the real estate and real estate services industry.

Conclusion. Looking ahead to the second half of the year, we remain cautious given the volatility that has arisen in the markets and the macroeconomic effects that could affect demand in our industry. At the same time, we remain focused on our strengths and fundamental purpose to allow more families to have their own home. We maintain the target we set at the beginning of the year, which is to achieve growth similar to that of the previous year. Thank you, and we will now move on to the question and

Leslie, Event Specialist: We will now start the Q and A session. We would like to take any questions you might have for us today. In case your question has been answered, you may cancel it by pressing star eight again. If you have been listening to the webcast and would like to ask a question, you may type your question using the chat area located on the right hand side of your screen and click Submit. To We will begin by answering questions from the audio lines followed by those we receive from the webcast.

The first question from the audio lines is from Mr. Anton Morton Carter from GBM. Please go ahead.

Analyst/Questioner: Can you hear there?

Alicia Enriquez, Administrative and Financial Director, Panforcio R: Not not really. I’m so sorry.

Analyst/Questioner: Can you hear me there?

Alicia Enriquez, Administrative and Financial Director, Panforcio R: A little better.

Analyst/Questioner: Okay. Yeah. Sorry. Thank you very much for the call. Just one quick question.

Understanding on the on the plans that the current administration has with the with Infinavit, we’ve seen that there were many schemes that were being discussed with housing developers. I was just wondering how those conversations are going. Is there any clarity on what is going to happen and how is it going to play out?

Alicia Enriquez, Administrative and Financial Director, Panforcio R: Yes. As we mentioned at the beginning of the year, we are very excited about the possibility of contributing to the government and those. We have land reserves, very good business of land reserves and financial solidity, everything to make it happen. We have put over some projects on the table, some proposals, but they are proposals. We haven’t signed any contract, but but as soon as we sign something, we hope it will be soon.

We are going to about it.

Leslie, Event Specialist: Our next question is from Mr. Jorge Vargas from GBM. Go ahead.

Analyst/Questioner: Good morning, Alicia, and thank you for the call. Just a few questions on my side. SG and A has grown at a double digit pace during the last two quarters, pressuring EBITDA margins below the 14.5% historical average. Should we expect a recovery ahead? Or will these cost pressures persist?

And then Ara generated strong free cash flow of $200,000,000 in the quarter aided by better collections. Was this improvement mainly one off? Or are there ongoing initiatives to structurally improve cash conversion going forward? Thank you,

Alicia Enriquez, Administrative and Financial Director, Panforcio R: Jorge. Those are very interesting questions. Well, talking about expenses, selling expenses increased the most. In an environment of uncertainty, we believe that some customers are postponing their home purchase. So just to help to accelerate their decision, we incur a higher selling expenses through promotions and more frequent advertising.

Payroll expenses also increased. Well, honestly, in previous year, we have been holding back inflation based salary adjustment, and we apply those increases this year. Additionally, if and yesterday, we mentioned in the in the board meeting, In terms of accounting, it’s an expense, but we are investing in strengthening our director team. Now we have a new commercial director, also an also other technical director because it is very important for position get the strategy that the new president of the board has settled. So yes, we know this quarter is an expense.

Also, as you know, we have a new CFO. So it looks like an expense, but I’m pretty sure that it’s a very good investment in order to improve our results and in order to get the strategy for the next coming five years. That is related with the expenses. And talking about a generation free cash flow, well, we hope to have a better second half in terms of revenues. So margins will improve.

It depends on that. Talking about the generation of free cash flow, we expect both. It’s going to be modest because we are planning to open new projects, mainly that are necessary to continue our operations in the for the following year. So yes, we expect that to have a positive free cash flow generation, but it would be more. More.

Leslie, Event Specialist: Our next question is from Mr. Alex Baez Saccasa from Neon Liberty Capital Management. Please go ahead.

Analyst/Questioner: Alicia, thank you for the call. Just a quick question on your expectations for the second half of the year. What is your expectation for the average price? Is it to be flat or down substantially? Or what sort of direction should we be thinking about that?

Alicia Enriquez, Administrative and Financial Director, Panforcio R: Hi, Alex. Thank you very much for your question. It would be MXN 1,200,000.0, 1,300,000.0. So it will be an increase of 2%, 3% compared to the previous year.

Leslie, Event Specialist: Thank you very much for your question. We have finished with the conference call questions and we’ll now continue with the webcast questions. If you have been listening to the webcast and would like to ask a question, you may type your question in the chat located on the right hand side of your screen and click Submit.

Alicia Enriquez, Administrative and Financial Director, Panforcio R: You. Let me well, we have one question from Carlos Alimera from Appalachia Research. He says, thank you very much for the call and for taking my questions. First, we noticed that general expenses increased by 2.1 times compared to revenue growth. What explained this increase?

Also, did you attribute the decline in the average price of residential housing group? Well, I think, Carlos, that I already explained the performance of our expenses. And regarding your second question, the price of our payment depends of the kind of projects that we have. So it doesn’t mean that we have declined the the prices of our products. No?

In in in in this second quarter, it is related to the kind of projects, you know, the amenities, size of the house, etcetera. So it depends more on the on the size of houses that we are. So there are no more questions in the webcast, Levy. So I really thank you for your interest in in.

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