Bad Week for Gafisa (GFA) - CEO Resigns Just Ahead of Paltry Earnings Report

As highlighted last week, it has been a tough year for Brazilian stocks.  That said, it's been an especially tough year for Brazilian homebuilder Gafisa (GFA) - tougher still if you go back to the November high in the $17s.   One thing you never want to see is the CEO resign.  Even worse when it happens within 24 hours of your earnings report.  But that's what happened here.   One wonders if the stock is close to washing out as I cannot imagine the news cycle getting much worse.  And this is a notoriously volatile stock that trades in large ranges - last time it bottomed out was near $10 in May 2010.

On a side note, the Brazilians have not yet learned to obfuscate manage information efficiently like Americans - when a CEO resigns, the reason is the always happy go lucky "to pursue new opportunities" or the lovable "to spend more time with family".  Strangely, he will remain on the board.

First the CEO resignation:

• The board of Brazilian homebuilder Gafisa  recognized the resignation of Chief Executive Wilson Amaral de Oliveira on Monday and named Alceu Duilio Calciolari as his substitute.
• The board gave no explanation for Oliveira's resignation in a market filing but said he would remain as a board member. He was expected to retire at the end of 2011 after serving the past five years as head of the company. 
• Calciolari has been appointed to step into the top company post until Dec. 31, 2011. He will also take on the responsibilities of chief financial and investor relations officer.

That's going to be one busy man - CEO, CFO, and investor relations officer? 


Next earnings:

• Net income at Brazilian homebuilder Gafisa tumbled 79 percent in the first quarter, hurt by delays in construction and licensing.  Sao Paulo-based Gafisaearned 13.7 million reais ($8.5 million), down from 64.8 million reais a year earlier, the company said in a regulatory filing. 
• The latest results also suffered in comparison with a strong year-earlier period.  Net income in the 2010 fourth quarter was 137 million reais. 
• "While we project our second quarter to be impacted by some of the same factors that we experienced in the first, looking ahead we expect to see improvement in our financial performance throughout the second half of the year," Chief Executive Wilson Amaral said in the filing.
• The company stood by its estimate for the value of new projects at sale, known in the industry as launches, to a range of 5.0 billion to 5.6 billion reais.  First-quarter adjusted earnings before interest, tax, depreciation and amortization, or EBITDA, a measure of cash generation and operational profitability, totaled 106.5 million reais, down 37 percent from a year earlier.
• The value of sales contracted slid to 822 million reais in the quarter, down 4.1 percent.

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