Centex Corp. is reporting a $172 million operating loss in home building for its fiscal first quarter ending June 30. The announcement came on Tuesday afternoon shortly after the New York Stock Exchange closed. According to the Dallas-based public builder, home building revenue for the quarter is $1.80 billion, 32 percent lower than this time last year.
On Wednesday morning, Centex held a teleconference to address the quarterly results. Tim Eller, Centex Chairman and CEO described current and first quarter sales as "choppy."
"Most markets will remain challenged," Eller predicts. "Sales are choppy. We are focused to sell our inventory - we are focused on the fundamentals. The market is difficult. We have a chronic over-inventory issue."
"We know that challenges will persist for awhile," Eller adds. "Most markets continue to be hampered by oversupply, and we expect widespread affordability issues to be a problem for some time to come."
The CEO says the market currently is "very dynamic" but the company has yet to see any predictable strength anywhere. Market stabilization, according to Eller, is one of the first steps needed to create any sort of market recovery.
"The markets need to adjust to be more balanced to our buyers capabilities," Eller explains.
The company also addressed cancellation rates, which are currently at 31 percent. Eller says stricter lending standards, particularly over the past four months, have resulted in more buyers canceling their orders.
Eller acknowledged that Centex is pulling out of two markets, Columbus, Ohio and the Triad region (Greensboro, Winston-Salem and High Point) of North Carolina. The reasoning behind the pullouts, he says, is "positioning for the future."
Also during Wednesday's teleconference, company CFO Cathy Smith identified sales strength in parts of Texas, the Northwest region of the country, the Washington D.C. metropolitan area, and southern Virginia; sales are slow in most of the Southeast, Florida, the Midwest, and southern California.
In addition, the CFO says Centex has "work to do to extend their growth margin." Smith characterized the quarter as starting soft but finishing strong.
Moving forward, Eller says the company's focus is on home sales, generating cash, and lowering costs. He added that the company would continue to scale back its land positions.
"We are making solid progress on all fronts," Eller says. "Most markets will remain challenged. Some are closer to the bottom of the cycle; several are fairly healthy."
In a company statement released Tuesday, Eller said, "In the quarter, we reduced overhead expenses and unsold inventory, and we saw an improving cancellation rate in a difficult market. We remain focused on the fundamentals: selling homes, minimizing inventory, generating cash and attacking costs."
Other highlights of the report include:
- Loss from continuing operations was $1.08 per diluted share
- Sales (orders) decreased 22 percent to 6,474
- Reduced homebuilding SG&A expenses by 20 percent, or $80 million
- Reduced inventory of unsold homes by 17 percent to 4,815
- Homebuilding cancellation rate improved 150 bps to 31.2 percent
Centex was ranked No. 4 in the 2006 BUILDER 100.