Bloomberg News

Urbi Posts Biggest Two-Day Drop Since 2008 on Cash Flow Concerns

October 26, 2011

Oct. 26 (Bloomberg) -- Urbi Desarrollos Urbanos SAB, Mexico’s third-largest homebuilder, posted the biggest two-day drop in three years after its third-quarter report fueled concerns about cash flow.

The stock fell 6.5 percent to 18.15 pesos at the close of trading in Mexico City, pushing the loss to 16 percent since it reported earnings yesterday before the market opened.

While net income jumped 72 percent in the third-quarter, investment in housing projects and land acquisitions pushed free cash flow to equity -- a measure of profit available to shareholders after expenses -- to negative 1.1 billion pesos ($82 million) in the period, from negative 460.5 million pesos a year earlier.

“It’s worrisome, and that’s what has been hitting the stock hard,” said Gerardo Copca, a Mexico City-based analyst with Metanalisis SA.

As a result, the company cut its 2011 forecast for the cash flow measure, known as FCFE, to negative 800 million pesos, from an expected range of positive 500-800 million pesos a quarter earlier, Chief Executive Cuauhtemoc Perez said yesterday, according to a transcript from the conference call with analysts.

The revised projection was a “a big disappointment” after a year of investments, Banco Santander SA analyst Rogelio Urrutia wrote in a report dated today.

The Habita index of six Mexican homebuilders dropped 3.6 percent to 281.68, while the benchmark IPC index of 35 Mexican stocks jumped 1.5 percent to 35,818.58. Urbi was the biggest loser on both indexes today.

--Editor: Glenn J. Kalinoski

To contact the reporter on this story: Jonathan J. Levin in Mexico City at jlevin20@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net


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