INVESTOR PRESENTATION Santiago, March 2010
1. EMPRESAS SOCOVESA
HISTORY 1965 Real Estate & Construction Company founded by Eduardo Gras Díaz First housing development 16 houses in Temuco 1967 New partners join the business Socovesa is born 1979 First proyect outside Temuco in the city of Valdivia 1983 The Company starts activities in Santiago New projects for higher segment customers 1996 Internationalisation of the Company Socovesa purchased participation in a project in Buenos Aires 2003 Enters the Engineering and Construction business to third parties Socoicsa 2007 Takeover of Almagro S.A. (Apartments construction company) Socovesa is listed on the Chilean Stock Market 2008 Inmobiliaria Pilares is born 2009 Socoicsa Capital Raise
SOCOVESA: LARGEST CONSTRUCTION COMPANY IN CHILE LARGEST REAL ESTATE GROUP IN THE COUNTRY 43 years of continuous growth and company development. Over 55.000 houses built. Successful business model and financial strength: Positive results even in poor economic cycles. Over 6.000 workers. 92 developments in 16 cities Economies of scale, greater efficiency and flexibility. Housing sales US$ 363 million and total sales US$ 409 million (2009), with a 12.8% compound growth in the last 5 years. EXPERIENCED MANAGEMENT WITH GREAT BUSINESS KNOWLEDGE 23 years of experience in the industry Clear vision and execution of the business model. Ability to handle multiple projects simultaneously. SIZE, PRESTIGE AND BRAND RECOGNITION AS COMPETITIVE ADVANTAGES Good brand positioning: trustworthy, quality and exceptional post-sale services. GREAT GROWTH POTENTIAL. Land stock is unique, base of future growth of the real estate business. Growth potential through new products, segments, and markets.
ORGANIZATIONAL STRUCTURE Socovesa Santiago Socovesa Temuco Socovesa Valdivia Real Estate & Housing Business Engineering& Construction Business
SALES DISTRIBUTION PER BUSINESS AREA 100% 90% 15% 23% 20% 11% 80% 70% 60% 50% 40% 75% 85% 77% 85% 30% 20% 10% 0% 2006 2007 2008 Dic-09 Other Income Engineering & Construction Business Real Estate Business
450.000 400.000 350.000 300.000 250.000 200.000 40.000 35.000 30.000 25.000 Sales (US$ Th) Profit (US$ Th) SALES & PROFIT EVOLUTION 150.000 100.000 50.000 0 CAGR: 12.8% 20.000 15.000 10.000 5.000 0 1983 1984 1985 1986 1987 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 CAGR: 86.2% Note: US Dolar at december 2009 value CAGR: 14.0% Sales Prof it
2. HOUSING AND CONSTRUCTION INDUSTRY
MIXED ECONOMIC CONDITIONS Correlation GDP / Construction GDP 15,0% 10,0% Unemployment Rate 12,0% 10,0% GDP Variation (%) 5,0% 0,0% -5,0% 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009* Unemployment Rate (%) 8,0% 6,0% 4,0% -10,0% 2,0% -15,0% Chilean GDP Source: Chilean Central Bank Mortgage Loans as % of GDP 100% 90% 80% 70% 60% 50% 40% 30% 20% 10% 0% Construction GDP 0,0% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Source: Chilean Central Bank Interest Rate Evolution (BCU-5 y BCU-10) Interest Rate (%) 4,5 4 3,5 3 2,5 2 1,5 2002 2003 2004 2005 2006 2007 2008 2009 Source: International Finance Corporation Source: Chilean Central Bank BCU-5 BCU-10
MARKET TRENDS Sales have decreased due to the current economic cycle, specially during the last quarter of 2008. Nevertheless, the mobile average of the last semester remains on the positive side. The sales decrease has had less effect on the apartment segment. Housing Sales in Gran Santiago (Units) Months to deplete Stock (Semi anual mobile average) 3500 3000 35 30 Units (semestral mobile average) 2500 2000 1500 1000 Months to Deplete Stock (semestral mobile average) 25 20 15 10 500 5 0 0 Houses Apartments Total Houses Apartments Total Source: Chilean Construction Chamber Source: Chilean Construction Chamber
MARKET TRENDS Professionalization and specialization of the supply Demand for goods with higher added value Positive correlation between the income level and the housing density Strong demographic base According to INE (Chilean Statistics Institute) data, the housing demand should become stronger due to the demographic tendency of Chilean population. Towards 2012, there will be an important growth in the population base of 1st house home buyers. Average size of Chilean home Population Distribution 2000-2006-2012 80+ 70-74 2000 2006 2012 Polinómica (2012) Polinómica (2000) Polinómica (2006) 4,60 60-64 3,90 3,60 2,90 2,57 50-54 40-44 30-34 20-24 1982 1992 2002 España USA Sources: INE Chile, INE (Spain), US Bureau of Concensus (2005) 10-14 0-4 0,20 0,40 0,60 0,80 1,00 1,20 1,40 1,60 Million Inhabitants
3. REAL ESTATE BUSINESS
PRO FORMA REAL ESTATE SALES EVOLUTION Sales (US$ Th) 450.000 400.000 350.000 300.000 250.000 200.000 150.000 100.000 50.000 0 CAGR: 8.9% 132.752 106.481 128.148 91.562 94.163 76.280 71.209 69.204 147.429 158.063 55.991 56.165 71.071 63.094 87.497 50.326 57.761 73.846 41.647 51.682 27.757 48.153 41.890 49.704 123.694 74.198 92.306 118.570 114.059 75.910 83.571 74.934 2002 2003 2004 2005 2006 2007 2008 2009 Socovesa Santiago Socovesa Temuco Socovesa Valdivia Almagro Pilares Notes: US Dolar at december 2009 value Includes income from sales of new and used homes, land and others.
PROJECTS UNDER DEVELOPMENT DECEMBER 2009 - SOCOVESA BUSINESS UNIT NUMBER OF PROJECTS UNITS ON SALE AVERAGE PRICE (Th) US$ ON SALE (Th) Santiago 16 1.320 US$ 84 US$ 111.172 Temuco 18 890 US$ 79 US$ 70.205 Valdivia 17 801 US$ 51 US$ 40.626 TOTAL 51 3.011 US$ 74 US$ 139.292 Altos del Sol Larapinta Ciudad Satélite Alcalá Los Bravos ThUS$ 31 ThUS$ 41 to ThUS$94 ThUS$ 90 to ThUS$ 139 ThUS$ 190 to ThUS$ 315 ThUS$ 830 to ThUS$ 873 ThUS$ 31 ThUS$ 930
PROJECTS UNDER DEVELOPMENT DECEMBER 2009 - ALMAGRO BUSINESS UNIT NUMBER OF PROJECTS UNITS ON SALE AVERAGE PRICE (Th) US$ ON SALE (Th) Almagro 37 1.465 US$ 175 US$ 255.795 Blanco Encalada ThUS$ 52 to ThUS$ 124 Campanario ThUS$ 118 to ThUS$ 176 El Comendador ThUS$ 195 to ThUS$ 262 Kennedy ThUS$ 330 to ThUS$ 865 ThUS$ 52 ThUS$ 865
PROJECTS UNDER DEVELOPMENT DECEMBER 2009 - PILARES BUSINESS UNIT NUMBER OF PROJECTS UNITS ON SALE AVERAGE PRICE (Th) US$ ON SALE (Th) Pilares 4 227 US$ 41 US$ 9.267 Vista Cordillera Vista Los Andes Parque Balmaceda Mirador de Ossa ThUS$ 40 ThUS$ 40 ThUS$ 36 to ThUS$ 48 ThUS$ 35 to ThUS$ 58 ThUS$ 35 ThUS$ 58
REAL ESTATE SALES DISTRIBUTION DECEMBER 2009 GEOGRAPHIC ZONE PRICE RANGE PRODUCT TYPE Patagonia 1% North 10% More than 420.000 13% Less than 42.000 9% South 25% Between 250.000 and 420.000 10% Between 42.000 and 84.000 18% Houses 42% Centre 64% Between 167.000 and 250.000 15% Between 84.000 and 167.000 35% Apartments 58% Note: Distribution presented considers the income of the sale of units from the projects currently on execution.
MARKET SHARE SEPTEMBER 2009 SOCOVESA SANTIAGO -- Houses ALMAGRO -- Apartments 5,4% 5,8% Source: CBR Real Data 3Q 2009 Data : Includes information of houses in the Metropolitan Region, La Serena and Rancagua SOCOVESA TEMUCO -- Houses Source: CBR Real Data 3Q 2009 Data : Includes information of apartments in the Metropolitan Region and Antofagasta SOCOVESA VALDIVIA -- Houses 21,9% 29,0% Source: CBR Real Data 3Q 2009 Data: Includes information from Los Ángeles, San Pedro, Concepción, Chillán and Temuco Source: CBR Real Data 3Q 2009 Data: Includes information from Puerto Montt, Puerto Varas, Osorno and Valdivia
LAND BANK Book Value from Land Bank as December 31st of each year (US$ Th) 390 US$ (Millions) 380 370 360 350 340 330 Number of Sites Area (m2) Book Value ( US$ Th) Soc. Santiago 18 8.619.439 237.809 Soc. Temuco 35 2.516.333 46.463 Soc. Valdivia 26 5.055.322 38.556 Almagro 18 112.371 57.387 Total 97 16.303.465 380.215 320 310 300 2008 2009
4. ENGINEERING AND CONSTRUCTION BUSINESS (SOCOICSA)
SOCOICSA S SALES EVOLUTION Sales (US$ Th) 90.000 80.000 70.000 60.000 50.000 40.000 30.000 20.000 10.000 0 CAGR: 18,8% 72.419 56.330 57.916 19.447 85.450 46.079 2004 2005 2006 2007 2008 2009 Notes: US Dolar at december 2009 value Considers only third parties sales
PROJECTS UNDER DEVELOPMENT DECEMBER 2009 - SOCOICSA BUSINESS UNIT PROJECTS UNDER DEVELOPMENT TOTAL M2 CONTRACT AMOUNT (Th) Socoicsa 10 61.250 US$ 102.792 Some of Socoicsa s new projects: Copiapó Stadium Santa Cruz Hospital Lautaro Thermoelectric Cañete Hospital ThUS$ 7.694 ThUS$ 19.264 ThUS$ 35.000 ThUS$ 31.184
PROJECTS UNDER DEVELOPMENT PROJECT CLIENT ADVANCE (%) Hospital Cañete S. Salud Arauco 27,2% Hospital Santa Cruz S. Salud O'Higgins 90,0% Hospital Lota-Coronel S. Salud Concepción 93,2% Ribera Rio Las Minas MOP - DOH 100,0% Costanera Estrecho Serviu XII 46,8% Estero D"Agostini MOP - DOH 100,0% Pavimentos Participativos Serviu XII 31,4% Cesfam San Felipe S.Salud Aconcagua 1,1% Estadio de Copiapo Instituto Nacional del Deporte 10,2% Enjoy de Castro Inmobiliaria Proyecto Integral Castro S.A. 2,5% Construcción Aceras Natales Gobierno Regional de Magallanes y Antartica Chilena 13,5% Central Lautaro* Comasa S.A. 0,0% *: Contract in tw o stages, engeneering and construction by delegate administration
4. FINANCIAL HIGHLIGHTS
FINANCIAL HIGLIGHTS SALES EVOLUTION PRO FORMA INCOME BREAKDOWN Sales (US$ Th) 450.000 400.000 350.000 300.000 250.000 200.000 150.000 100.000 50.000 0 2005 2006 2007 2008 2009 25% 20% 15% 10% 5% 0% Gross Margin (%) 100% 80% 60% 40% 20% 0% 2002 2003 2004 2005 2006 2007 2008 2009 Sales Gross Margin Socovesa Santiago Socovesa Temuco Socovesa Valdivia Almagro Pilares PROFIT EVOLUTION EBITDA EVOLUTION Profits US$ Th) 40.000 35.000 30.000 25.000 20.000 15.000 10.000 5.000 0 10% 9% 8% 7% 6% 5% 4% 3% 2% 1% 0% Net Margin (%) EBITDA ( US$ Th) 60.000 50.000 40.000 30.000 20.000 10.000 0 16% 14% 12% 10% 8% 6% 4% 2% 0% EBITDA Margin (%) 2005 2006 2007 2008 2009 2005 2006 2007 2008 2009 Profits Net Margin EBITDA EBITDA Margin
FINANCIAL HIGHLIGHTS TOTAL LEVERAGE 2,0 1,9 1,8 1,7 1,8 1,6 1,5 1,4 1,2 1,1 1,0 0,8 0,6 0,4 0,2 0,0 2005 2006 2007 2008 2009 Total Leverage = Liabilities / Capital Total Leverage (x times) FINANCIAL EXPENSES COVERAGE FINANCIAL LEVERAGE Financial Leverage (x times) 1,60 1,40 1,20 1,00 0,80 0,60 0,40 0,20 0,00 0,84 FINANCIAL DEBT / EBITDA 1,37 Financial Leverage = Financial Obligations (ST+LT) + Documents and accounts payable to related companies / Capital 1,18 1,31 1,41 2005 2006 2007 2008 2009 EBITDA / Finacnial Expenses 4,50 4,00 3,50 3,00 2,50 2,00 1,50 1,00 0,50 0,00 3,98 1,88 1,87 1,16 1,41 2005 2006 2007 2008 2009 Financial Debt / EBITDA (x times) 16,0 14,0 12,0 10,0 8,0 6,0 4,0 2,0 0,0 15,2 12,7 9,6 8,4 4,0 2005 2006 2007 2008 2009 Financial Expenses Coverage = EBITDA / Financial Expenses
FINANCIAL HIGHLIGHTS DEBT BREAKDOWN (December 2009, US$ Th) 180 to 360 days 10% 1 to 3 years 10% 3 to 5 years 7% More than 5 years 8% 30 to 180 days 7% 0 to 30 days 58% Total Debt: US$ 623.179.840
REAL ESTATE BUSINESS FINANCING LAND Socovesa finances most of its land acquisition primarily with its own capital or debt. In some cases, they are financed with different structures such as insurance companies, association with third parties or through purchasing options. WORKING CAPITAL Socovesa uses short and medium term revolving lines of credits. This financing structure allows the Company to have more operational flexibility and optimization of the financial cost. MACHINERY AND EQUIPMENTS Socovesa rents the majority of the necessary equipment for the development of its activities. Although purchases exist and minor investments are made, most are financed with own resources.
ENGINEERING AND CONSTRUCION BUSINESS (SOCOICSA) FINANCING WORKING CAPITAL Socoicsa finances its activities through anticipated payments of its clients. Progress reports and costs of the works are generated as work develops, and payments are made depending on progress, which permits the Company to self-finance its operations. MACHINERY AND EQUIPMENT Socoicsa rents all the necessary equipment for the development of its activities.
5. PROPERTY STRUCTURE
PROPERTY STRUCTURE The Company is controlled by Mr. Eduardo Gras, founder of Socovesa, and his family through 13 corporations. The second largest shareholder in the Company is Mr. Justino Negrón. Today, apart from being a Director of the Company, he actively participates in the administration of Socovesa Temuco. Up to December 31st, 2009, the executives and employees of the Company maintained 8.8% of the participation. 1% 9% 2% 10% Pension Funds 13% Insurance Companies Stock Broker Gras Family Negrón Family 13% Investment Funds Other 52% Retail Employees TOTAL SHARES: 1.223.935.691
SHARE EVOLUTION 2009 300 250 200 150 100 50 0 ene-09 feb-09 mar-09 abr-09 may-09 jun-09 jul-09 ago-09 sep-09 oct-09 nov-09 dic-09 IPSA Empresas Socovesa Real Estate Index Market Cap. up to March 19 th : US$ 558,50 MM
INVESTOR PRESENTATION Santiago, March 2010