Gafisa S.A.

Alceu Duilio Calciolari - Chief Executive Officer, Member of Executive Board, Coordinator of Finance Executive Committee and Coordinator of Investment Executive Committee Fernando Cesar Calamita - Operational Executive Officer, Member of Ethics Executive Committee and Member of Finance Executive Committee Rodrigo Ferreira Coimbra Pádua - Operational Executive Officer and Member of Ethics Executive Committee Andre Bergstein - Chief Financial Officer, Investor Relations Officer, Chairman of Ethics Executive Committee, Member of Finance Executive Committee and Member of Investment Executive Committee

Paola Mello - Citigroup Inc, Research Division Jason B. Mollin - Goldman Sachs Group Inc., Research Division David Lawant - Itaú Corretora de Valores S.A., Research Division Nicole Hirakawa - Crédit Suisse AG, Research Division Luiz Mauricio Garcia - Bradesco S.A.

Corretora de Títulos e Valores Mobiliários, Research Division Eduardo Silveira - Espirito Santo Investment Bank, Research Division Marcelo Garaldi Motta - JP Morgan Chase & Co, Research Division

Thank you. Thank you for joining us.

Before we start, I would like to inform you that we have changed the format of our conference call a little this quarter. I will briefly comment on our operating and financial performance without following the sequence of the slides made available to you.

We chose this format to allow more interaction and to give us more time for the Q&A so that we can better address any questions and concerns that investors and analysts and shareholders might have while keeping the overall call length unchanged. So let's start with the second quarter highlights.

June 2013 was the month that concluded our review of strategic options for the Alphaville brand, which began on September 2012 with the signing of an agreement to sell the majority stakes to private equity funds, Blackstone and Pátria. We also completed the purchase of the remaining 20% stake in Alphaville that we did not already own, for which we paid BRL 367 million, ending the arbitration process.

During Gafisa's stewardship of Alphaville, the brand achieved returns well above the industry average. In June, we were able to unlock this value by selling 70% stake in the brand for BRL 1.4 billion, valuing it at BRL 2.1 billion -- BRL 2.01 billion, excuse me.

We will maintain a 30% ownership of Alphaville, which will allow Gafisa to keep participating in the company's growth and results in future years. The proceeds from this transaction will result in a material improvement in Gafisa's capital structure and increase management's focus on the operations of Gafisa and Tenda brands.

In addition, our debt-net-to-equity ratio is expected to decline from 96% at the end of the second quarter to approximately 54% based on unaudited pro forma data. In terms of quarterly highlights, our net sales were BRL 554 million, exceeding launches of BRL 461 million, and ought to increase on a sequential basis.

Higher gross sales and less contract dissolutions resulted in a sequential improvement in sales over supply, 13%. Second quarter launches were up 50%.

On a sequential basis, and first half deliveries reached 30% in the midpoint of full year guidance. We keep looking for ways to make our processes more efficient, with the aim of reducing costs and improving profitability.

Here, I would like to highlight that our shared services area has moved from the Berrini region in São Paulo to Barueri, decreasing our leasing costs by 45%, with an annual savings of BRL 2 million. Regarding the turnaround process, we are progressing as expected, focusing operations of Gafisa on São Paulo and Rio de Janeiro, delivering Tenda's legacy projects and relaunching Tenda under a new business model.

The delivery of Gafisa's projects outside core markets is on track, and we expect to substantially conclude this progress by -- process by the end of 2013. Despite the strong performance of newer projects in strategic markets, the segment's gross margin continues to be impacted by the projects developed outside these core markets.

Upon delivery of these projects next year and the decrease in inventory levels, we will return to normalized profitability levels in 2014. In the second quarter, we have already demonstrated a reduction in the volume of contract dissolutions compared to the first quarter of 2013, and we are able to see a stable level as from the second quarter.

At the same time, we attained a good resale speed, reaching an average of 33% within the quarter or 40% in São Paulo, 56% in Rio and 21% in other markets. At Tenda, we now have a good handle on the operations and have broadly reduced the company's complexity compared to 2011.

Legacy projects currently hold 18 construction sites versus 84 at the end of 2011, and we should complete all of them by the first half of next year. Out of the 31,000 units we had to deliver in December 2011, we have today 11,500.

By operating the business under the right fundamentals and understanding what we can transfer, we are reducing contract dissolutions and concluding Tenda's legacy projects. In this semester, we have resold 61% of the canceled units.

In the financial cycle, the average turn between sale, transfer and registration fell from 14 months in the second quarter of 2012 to 7 months now. For the new Tenda projects under the proper fundamentals, this period has already reached 4 months.

Also, regarding the new Tenda launches occurring in the first semester, performance was positive, with a good pace of sales, transfer and construction. The consolidation of the group in these 2 business units will broaden management's focus even more, driving us to superior efficiency level in our remaining operations as we seek future profitability for our shareholders.

On the financial side, we ended the quarter with a comfortable cash position of BRL 1.1 billion, a net debt of BRL 2.5 billion and a net-debt-to-EBITDA ratio of 96%. Cash burn in the quarter was BRL 28 million and BRL 113 million in the semester.

I would like to remind you that the Alphaville sale has not changed the operational goals established in 2013 in the beginning of the year. Finally, I would like to reinforce the sale of the majority stake in Alphaville represented an important moment in Gafisa, and we are confident that the improvement in our capital structure, combined with the ongoing successful implementation of our strategy, will lead to clear improvements in results over time.

Thank you for your attention, and now we will take your questions.

Duilio, you talked about net profitability and that in 2014, we should have a good profitability of Gafisa's performance in new markets and the Tenda legacy. So what profitability level will this be?

And also, could you tell us about the profitability of Tenda new projects? What can we imagine to see what this improvement will be on the operations level and how will it reflect on a consolidated level terms?

Paola, this is Duilio. Starting by Gafisa, Paola.

In São Paulo, our profitability is 35%. We hope that this will improve, as the projects in São Paulo and Rio are finished and delivered.

This profitability will be better as Gafisa is more concentrated in São Paulo. Our expectation is not different from what we had, had before.

Let's see if we can operate on this level, concentrate more on São Paulo and Rio. From Tenda's point of view, we have 3 projects -- well, we have in fact, more.

We have 4. Our gross margin will be about 28% to 29% for Tenda.

You have more turnover than margin. So the question is the time between the sale and the transfer of this.

1 year ago, it was 7 months. This period was 7 months, and now we are down to 4.

And the projects which we have that we have launched now, we don't have any indication that they won't be in this range of 18% (sic) [28%] to 29%. It's early to say yet.

So this is what we are hoping.

My question also has to do with profitability, but I'd like some information about the evolution of the prices in which Gafisa is working. Are the prices going up with inflation or stable?

Jason, not talking only about Gafisa, but in the market. The market in the metropolitan area of São Paulo in the first semester compared to the first -- same period last year in terms of launches is 28% higher.

In this semester, we launched BRL 11.5 billion compared to BRL 9 billion last year -- the same period last year. The prices increased about 8%.

The SOS was less than 3 -- by 3%. It went from 60% to 56%.

It's nothing to worry about. And the price per square meter -- or rather the size of the units per square meter decreased 8%.

So summarizing, we sold more, 28%. Prices increased 8%.

The SOS dropped 3%, and the size of the units is smaller. So the market is healthy.

That's all I can tell you at the moment.

And is all of this in line with the market, your prices, too?

Yes. We have had other, obviously, positive results and others not so positive.

But in this semester, talking about Gafisa, we've had a very important highlight, a project of more than BRL 150 million in sales. We sold 70% in 2 months.

We had a smaller project where the sales were less than 30%. It wasn't -- it's not to worry about.

But in Tenda, we have 3 projects in the first half of the year. The group's largest today is 80% of sales level.

And there is also distortion in the more -- the lower income bracket, but it's still healthy. So I don't think there's any new development to say about that at this moment that would worry us significantly.

I have 2 questions. The first about contract dissolutions.

Could you talk a little bit about the difference -- the price difference between the canceled units which are being resold both in Gafisa and in Tenda segment into the different markets? Are you managing to gain price?

Or are the units being sold at the same price level? That's my first question.

The second question, I'd like to ask a little bit about land purchases. You say here that you have already spent BRL 1 billion in Tier 3 in the buying of land.

So I'd like to know about that. What are you doing about land purchase in these markets, which are more competitive?

What are the payment terms, et cetera?

Well, let's start talk a little bit about the contract dissolutions, which we observed in São Paulo and Rio de Janeiro. The difficulty of selling these units increased with an increase of price, especially in Rio.

We see the price -- project price increase is not good. So the demand is here, but you have a certain difficulty of the plant in obtaining financing.

He bought with one view 3 years ago, and now the situation is not what he imagined. So he cannot get the money.

The units are coming back, and we are selling them first. And Rio de Janeirom we've had good price hikes, 15%, 20%; São Paulo, not quite much as much, 10%.

And these Gafisa projects outside São Paulo, we see practically flat prices; in some states, a bit better, in some regions, like Belém, where we have the high inventories. São Luis, Salvador, we see excess supply.

So in this case, we see there is some discount on the original price, but updated by the index, the civil construction Index. Because of excess supply in these regions, you cannot maintain the price updated and the same as when it was launched.

Looking at the Tenda projects, which have a good number of contract dissolutions, you can bring it up to current prices. The reason for this updating of the prices is because of the payment capacity of our clients, much more than a significant demand.

I think what fits in your wallet is what determines the price of the Tenda projects, which had a rise of 6% or 7%, but less than 10% regarding the -- these units. It pays the transition costs, but what is important is how much the client can pay.

Regarding land, we bought BRL 1 billion of Tier 3, and this has an outlay, a disbursement of BRL 100 million for this year -- or BRL 100 million this year, and we have an interesting position. Every interesting plot of land or big enough or value -- relevant value comes into our hands, we analyze.

This semester, we have analyzed 900 plots of land, and we selected 12 or 13 to buy. We do not see any different performance.

The price of land is stable. There'll be no movement, neither up nor down.

Competition for land continues, perhaps today even more competition with some smaller developers, who are beginning to grow. Now when you mentioned significantly high pieces of priced land, then these are always among with 6 or 7 highest developers into them.

Obviously, the smaller ones are not going to compete. I'm talking about pieces of land which costs more than BRL 100 million, BRL 150 million.

I'm not talking about the smaller ones of BRL 20 million, for example.

I'd like you to talk about whether there is a disposition about the sale of Alphaville. Are you going to invest in the operation?

Or are the -- part of the results that's going to be given back to the shareholders? Second, the provision of bonus for Tenda.

It was BRL 17 million in the second semester of the last year. Could you break down the year's objective in quantitative terms?

And how does provisioning work? Is it closer to the cap?

Or is it adjusted to what the company has already delivered this year?

Well, Nicole, regarding the use of Alphaville proceeds, it's important to remember that the sale of Alphaville, the monetization of this has 2 objectives. The first was to deleverage the company.

This was the first objective. And the second objective was to reveal the value that we sold Alphaville.

And the market did not realize this value, they did not understand it. So we did this.

And the fact that these proceeds come in bring the company to a level of deleverage similar to the competitors who have a credit evaluation awaiting the company -- of companies with a low risk -- low solvency risk. So in practice, the use of these proceeds have already occurred.

What you can discuss is what is the size that we -- of cash that we're going to have and what size of debt will we have. So obviously, part of these proceeds will come into cash.

If they came into cash today, our cash will be higher than BRL 2 billion. We would probably have an oversupply.

So what would be the natural movement? Part of this cash would be used to pay the debt, maintaining a conservative leverage to have this good credit rating.

And what do we see among the competitors that we think is reasonable? About 60%.

If you see the net debt to equity level, it's healthy. So this is our vision for the use of the proceeds.

The other issue, the question of the bonus provision, we use, as a practice, to provision the bonus vis-à-vis objectives achieved monthly. And this is done as long -- this has been done ever since the company opened in 2006.

So the bonus, the variable compensation of our team is calculated monthly and adjusted monthly. So this means that when you look at the bonus provision in the first half of this year, this means that we are provisioning the bonus, yes, and we are aligned with the objectives established for this year.

We have a provision. So the provision there refers to the targets that were achieved.

So you have a bonus for these: for Alphaville, Tenda and Gafisa, for the 3 brands. And if you take last year, this process was similar.

What are the targets -- the main targets for this year, which guide the bonus provisioning? There are several.

The main ones have to do with the leverage value that we established, I know there's a guidance for this, and the results. And there is also guidance for this.

I don't have net income, but there is a guidance regarding the -- our target and also, tied to these 2 targets. Leverage and results, they have 50% weight each.

But in the sub -- under targets -- sub-targets, we have the results for -- we look at the results for 2014. We have a long cycle.

It's no use looking just annually, so the whole organization has a target and a concern also for 2014. So we are looking at 2 years of -- targets for 2 years, biannual.

This is what we mean when we talk about targets. There was a third question I think.

No, those were the main points.

Nicole, could you repeat your third question, please? I've forgotten it.

Did you have a third question, Nicole? I think I missed your third question.

I had no other.

I have 3 questions. The first, we have seen possible contingencies, those that are not provisioned for, there has been have increase, in the semester, regarding the closing of the year, of 30%, BRL 930 million.

I think a lot of these contingencies will not come through, but we should have strong financing for the -- financing. So there is a strong pressure here.

So I'd like to hear from you what has happened with the strong growth of non-provisioned contingencies. And can processes be converted into provisions, additional provisions, besides those which already exist?

And another point, regarding the transfer to Tenda, the new model. As this has been done right after the sale, I'd like to know what is the remaining balance.

The transfer is being done right after the sale, so perhaps the buyer can't pay everything at once, so he'll have to have some time to pay off the rest. So I'd like to understand if there is any remaining balance of the unit which will be financed by the company.

And the third point is a question of contract dissolutions. We saw on Table 31 that BRL 2.1 billion contracts have been dissolved in Tenda.

So I'd like to know, if we may, say, how much this accounts for. And how much more is there to come further on until the legacy and the inventory runs out?

I will ask Fernando to answer this.

Luiz, let me talk a little bit about the contingencies. As you know, our policy is to recognize all those contingencies, recognize and that -- maintain.

And you don't see an increase regarding the probable ones. And also, we also recognize all the contingencies that are possible in explanatory notes.

What has happened -- what happened at the end of last year to now in 6 months? We had 1 significant unit in Manaus, where the public prosecutor questioned, a project which has been ready for more than 2 years, where all commissions' authorizations, the project, we had all the necessary approvals and licenses.

And this is a very new suit, which we just received, and the lawyers are still studying it. The policy which they have received, Allied Invest [ph] , is wishing to not develop.

The contingency is considered sold. So unless this develops, there will be a substantial reduction of the growth of this period.

And also, there are some suits regarding deliveries, as we are delivering a very significant amount of units. And still some of those that were late, there is a still a growth of suits because of the delay of deliveries.

And the company has been doing this as they come in and agreements are proposed, so decreasing this. Our expectation is that, in the next quarters, we will see also a decrease of these contingencies.

And this one in Manaus, will this involve a reimbursement of the buyers or the state or the municipality?

No. All the licenses were given.

They were granted by the municipal authorities. What the prosecutor is questioning is the distance of the project from the river.

But as all the licenses were given by all the pertinent agencies, what we think is that the prosecutor's office, the suit was seeking some kind of agreement. But there is actually no solid base to it.

I have 2 questions. The first, is there more room for reducing -- I think, it's a general expenses or recurrent expenses and equity.

[I'm sorry the sound is really bad.] Are there any non-recurrent effects?

Eduardo, this is Rodrigo speaking. I still have to ask -- Luiz Mauricio, so I will answer his first, and then I will answer you.

Luiz, you were asking about Tenda's transfer and what is the remaining balance. So how does this work?

We pay between 3% and 5% cash. We finance 85 [ph] and 26.5 [ph] with the keys and then the rest after.

So the remaining balance after the keys, we have about 4%. After the financing, it's not 10 -- it doesn't reach 10%.

So the risk of the company is 2% to 4% after the keys are given. Regarding contract termination, the indicator which we like to follow is what we call non-solved priorities, a unit which is not yet been transferred.

It can either be in the portfolio or in inventory. In January of 2012, we have in Tenda 30,000 units, and today, we have 6,000.

And we should finish the year with 4,000. Of these 4,000 at the end of the year, less than half will be in the portfolio.

The contract dissolution curve will be dropping. And by the beginning of next year, hopefully, it will be an irrelevant number.

The number of contract dissolutions will no longer be a concern by the first quarter of next year.

This is Eduardo again. My first question, the general and administrative expenses, there has been an increase.

Will there be a reduction? What do you expect for G&A expenses?

And the second has to do with the equity.

Well, regarding your first question and... [I'm sorry, the sound is very bad.

I'm sorry, I can't hear it.] The second question, which is on equity income, what happened was a lack of information and impacted this quarter.

So we can hope to receive more information and contemplate a reduction of this, so it is something which just happened once. This will not be repeated.

Could you give us an idea of the amount of this quarter, please, to know what will be recurrent for equity income?

About BRL 8 million, Eduardo. But it's, as I said, it happened once and because of the impact of those other markets.

A quick question. With the Alphaville proceeds coming in to pay your debt, will there be a reduction of the cost of the current debt?

With a better rating, you might be able to reduce the cost of all debts. Can you perhaps roll the debt over?

I just like to understand what you're thinking about. And may there be a rate reduction in 2014, 2015?

This is Andre. Yes, it could be.

[I'm sorry, he's practically inaudible.] It's important to say that the nominal debt is about BRL 950 million.

So we're back -- perhaps [ph] try and roll over the debt. It will be a question of talking and coming to more concrete solutions.

[Sorry, I could not hear him.]

Could you confirm the guidances, please, particularly regarding launches? Will there be less launches over the third -- there were less in third and more in the fourth, so what will be the distribution in the next quarter?

And also, the rebuilding of your Land Bank, will the company reach a normalized launch level in 2014?

Regarding the launches, we imagine the guidance on the second half of the year, there will be a concentration -- a balanced concentration in the semester. I'm not referring to concentration as we had last year at the end of the year.

We hope that we'll make the launches at the right moment according to the market demands. So we will have launches concentrated -- not concentrated but well distributed and appropriated -- at the appropriate moment.

My question about the reconstruction of your Land Bank. You report some land now.

And I'd like to know with this new greater Land Bank, would you be able to normalize your building and launches? So what is possible with the structure that you have now?

Well, we believe so. We are building and we have done so right from the beginning of the year.

Our fulfilling has not changed. We're still planning there, acquiring land to buy -- build up our Land Bank in Gafisa so that we will have adequate launch level for 2014 and 2015, according to what we have already said.

So G&A will drop, as I have already mentioned. Because of the better control of Tenda in new markets, as such we will be aligned to the cost structure and a good -- we will have a good launch level.

Tenda continues and we will have new launches and certainly, more compatible with our structure.

Regarding contract dissolution, there are many cases where there have been problems with the documentation or terms, which have an impact and allow the -- do not allow the business to be completed. There are many small problems that could -- and this business could be improved.

So answering the webcast question, the impact that the company has because of delays has to do with the degree and the quality of our service. We have suffered in the past years because of this, and we're going to make [ph] that the company has had.

And now the change of strategy has allowed us to alter our level of quality of delivery and serving our clients better and seeking to eliminate this kind of situation, which we did experience. We have invested, just this year alone, about BRL 8 million in client relationships and taken initiative to solve these issues, which have always been raised.

Next year, I think that this will improve greatly. This is our expectation, and we have invested greatly in this so that things will improve.

I would very much like to thank you, all, for your questions. If you have any additional questions, we are at your disposal.

The company will continue with its same management strategy, which we started about 1.5 years ago. And thank you, all, and see you next time.