Bloomberg News

Hovnanian Fourth-Quarter Loss Narrows on Lower Costs, Writedowns

December 15, 2011

Dec. 15 (Bloomberg) -- Hovnanian Enterprises Inc., the largest homebuilder in New Jersey, reported a narrower fourth- quarter loss as the company cut costs and reduced writedowns amid slumping demand for new homes.

Hovnanian’s net loss for the three months ended Oct. 31 was $98.3 million, or 90 cents a share, compared with $132.1 million, or $1.68, a year earlier, the Red Bank-based company said today in a statement.

Hovnanian, the worst-performing homebuilder stock this year, has depleted cash as it tries to boost margins by buying land at distressed prices. Sales of new U.S. homes are being limited by competition from lower-priced foreclosures and an unemployment rate of 8.6 percent.

“Regardless of what the earnings are, the key metric is how many homes have they sold,” Steve Blitz, senior economist at ITG Investment Research Inc. in New York, said yesterday by telephone. “Their long-term survival is much more dependent on a turnaround in the U.S. housing market than their competitors because they’re much more highly leveraged.”

The company’s debt-to-capital ratio was 130 percent in the previous quarter, compared with 61 percent for the 13 companies in Bloomberg’s homebuilder index, according to data compiled by Bloomberg Industries.

Hovnanian’s fourth-quarter revenue declined to $341 million from $353 million a year earlier. Net contracts increased 3 percent to 1,175 homes from a year earlier.

The results included $63.2 million in land-related impairments, down from $80.6 million a year earlier.

Hovnanian reported earnings before the open of regular U.S. trading. The shares fell 4.9 percent yesterday to $1.36. They have dropped 67 percent this year, compared with a 28 percent decrease in the Bloomberg homebuilder index.

(Hovnanian Enterprises will hold a conference call today at 11 a.m. New York time. See HOV US <EQUITY> EVT <GO>.)

--Editors: Kara Wetzel, Daniel Taub.

To contact the reporter on this story: Prashant Gopal in New York at pgopal2@bloomberg.net.

To contact the editor responsible for this story: Kara Wetzel at kwetzel@bloomberg.net.


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