Gafisa S.A.

Andre Bergstein – CFO

Enrico Trotta – Itaú BBA Nicole Hirakawa – Credit Suisse Marcello Milman - BTG Pactual Marcelo Motta - JP Morgan Luiz Mauricio - Banco Bradesco Eduardo Silveira – Banco Espírito Santo

Good morning, and thank you for being with us today. Second quarter results have tested [ph] to be ongoing recovery of Gafisa and Tenda’s profitability which is a result of the restructuring initiatives that we implemented in recent years.

With a strong balance sheet and comfortable level of leverage, we are well positioned to meet the challenges and opportunities present in the sector. Industry conditions typically improved in the second quarter.

However this was not the case of deteriorated [ph] world cup dampened activity in the sector, especially at Tenda, leading to a reduction in in-store traffic. Despite challenging market conditions, operational and financial results improved in the second quarter.

For example, the adjusted gross margin increased 760 basis points to 35.7% in comparison to the previous year. Gafisa’s profitability continues to improve.

In the quarter, margins were in line with our expectations and are consistent with the business plan for the year. Adjusted gross margin reached 38.1% and adjusted EBITDA margin was 20.9% as a result of our strategy of consolidating operations in the more profitable markets of São Paulo and Rio de Janeiro.

In response to the consumer spending environment in Brazil, we are taking a selective approach to product development and closely monitoring the execution process. In the second quarter, Gafisa’s segment launched three projects in São Paulo and [indiscernible], with the potential sales volume of 314.7 million.

Pre-sales during the period totalled 251.3 million, reflecting a continued sale of inventory. In the second quarter, the number of deliveries increased almost three-fold to 1504 units in comparison with 524 in the first quarter of 2014.

The high level of deliveries underpinned the volume of transfers which reached 442.8 million in the first half. With the sequential increase in quarterly unit deliveries led to an associated rising cancellations, as expected, the result was lower on a year-over-year basis.

Gafisa’s segment generated net income of 70.1 million in the second quarter of 2014 ending the first quarter with accumulated income of 14.8 million. The Tenda segment also performed well, reporting the best quarterly result since the fourth quarter of 2011 which marked the early stage of the turnaround process.

Net sales were 181.7 million. The volume of sales cancellations declined 25.5% on a year-over-year basis, reflecting the immediate transfer of sales and the gradual reduction in legacy projects in the portfolio.

The performance of projects launched under the new model was in line with expectations due to good sales velocity and fast transfer to financial institutions and tight control over construction costs. Credit remains widely available in the segments and we continue to refine the mortgage transfer process.

In the second quarter of 2014, Tenda transferred 1708 units, representing 223.7 million of sales. The solid operating performance resulted in a significant improvement in financial results.

Adjusted gross income reached 69.4 million in the first half with a margin of 24.5%. Due to the reduction in legacy projects, the profitability of projects launched under the new business model is becoming more evident.

For example, Tenda’s adjusted gross margin was 30.4 in the quarter compared to 13.3% in the second quarter of 2013. Given this result, we are very confident in Tenda’s operations and the next steps as we look to achieve appropriate operational scale.

Consolidated launch volumes for the quarter reached 413.7 million and 949.1 million in the first half, while pre-sales were 433 million and 672.3 million respectively. Adjusted gross profit was 205.2 million with a margin of 35.7% in the quarter, reflecting the improved operating and financial performance achieved by the two segments in the second quarter of 2014.

During the first half, adjusted gross profit was 337.4 million with a margin of 33.5%. Adjusted EBITDA was 89.8 million in the second quarter of 2014 and 116.3 million in the first quarter with an EBITDA margin of 15.6% and 11.5% respectively.

The company has been working to reduce its capital structure to reflect the appropriate size of our operations. In the second quarter, selling, general and administrative expenses decreased by 9.5% or 10.5 million in comparison with last year.

The company reported a loss of 851,000 in the second quarter as the profit 17.1 million in the Gafisa segment was offset by a loss of 18 million in Tenda segment. In the first quarter net loss was 40.6 million.

We would also like to highlight the company's operating cash generation in the first half of the year. We ended the first quarter with an operating cash flow of 146.1 million as a result of the company’s success in transferring units sold to financing institutions with nearly 851 million transferred in the period and greater control over our business cycle.

While free cash flow generation in the second quarter was negative at 1.3 million, we ended the first half with a positive free cash flow of approximately 19.2 million. Leverage in the second quarter was stable at 44.9% in line with the previous quarter and significantly lower than 96.2% reported last year.

During the second quarter, we made further progress in separating the Gafisa and Tenda business units into two independent companies. During the quarter, a number of administrative functions, including services, personnel and people management and legal among others were split and are currently operating independently from an administrative standpoint.

We continue to advance in our studies analyzing the alternatives for splitting the two companies. Looking ahead, we’re confident in our business prospects and we believe that the measures implemented to date mean we are well-positioned to face future challenges.

Thank you very much and now we would like to begin the Q&A session.

Quick questions. The first is the gross margin did improve in Gafisa and Tenda in comparison with the first quarter.

Do you have any impact for the NCC, what was the impact on the gross margin in the second quarter, we have a better idea of the recurring profit margin from now? The second question, looking at the land bank of Tenda in São Paulo in the south, we see that there was a drop of R$334 million.

I'd like to understand the reason in the drop in the land bank in Tenda in São Paulo and in the south?

Good morning. Enrico, thank you for the questions.

Well, within the current model, with Sandro, myself, Rodrigo and Philippe, I will talk about the gross margin of Gafisa and Philippe [ph] will talk about the gross margin for Tenda and the landbank. Concerning the gross margin of Gafisa it has been fluctuating on this level, after quarter after quarter, we may have a difference and also the NCC, this quarter we didn't have anything special.

We see that the margin is more stable as we have a higher concentration in Rio and São Paulo, the earnings of Rio and São Paulo are 98% of the total revenue and this is what we had noticed, no special effects. Obviously we can see a fluctuation quarter after quarter due to some other effect, and this quarter a little less cost of warranty guarantee that's not very relevant.

So we should see the margin fluctuating in Gafisa. Now I would like to pass to Philippe, he will talk about the profit margin in Tenda and the land bank, the drop in the land bank.

Answering your question concerning gross margin of Tenda, yes truly we had a margin that is -- that was a little above our expectation in the second quarter. We hope that the gross margin level will oscillate -- fluctuate between 20% and 30%.

This is the level we obtained especially in this quarter with an increase in the participation of the new model, the projects with the new business model of the company. Concerning the second quarter, we have some effects that we would like to stress.

First, concentration of projects in São Paulo which has a higher profit margin when compared to the average of the company. Also participation of projects with old plots of land, old projects and the issue of the legacy, we had a gain in – rise in price, we can expect some volatility in the legacy projects.

From now on the margin will be 28% to 30%. Now concerning the land bank, the plots of land we have for building, we had some adjustments that were made in the second quarter and as a result of plots of land that we reviewed and -- we consider that they are not ideal for projects, so we’re selling them.

It’s part of our routine to evaluate our land bank, the land bank of the company and as projects are ideal, we build or we sell – making these adjustments.

Good morning. The first is on cash flow.

The estimate was a neutral cash generation in the first semester stronger, in your comments, on the trends you see the first semester being stronger, did it change expectations for the year? We noticed that the accrual for labor costs - expenses is higher, you have therefore accruals, so we see that the accruals are higher than expenses.

Can we use the accruals in the short-term?

Nicole, good morning. Okay, cash flow -- at the end of last year we said we expected a neutral operational cash flow of the year.

Consequently we would have to spend – what we saw in the first two quarters we had a better component in terms of accounts receivable in Gafisa and Tenda – Gafisa little stronger, we're being able to transfer the units to financial institutions very well, the projects delivered in the first 60 days, Tenda also very well in transferring to financial institutions. So with the sales we had in the first semester, this was higher than what we expected, the sales were higher.

And in terms of expenses we have seen the following. With the market being more challenging in some aspects, we have been more cautious in that, with the expenses.

You have noticed that we decreased the sales expense of these two components together with the land bank we spent in the first semester, the disbursements were lower than what we forecasted, at Gafisa, more due to the plots of land that had different disbursements than we expected. We have some exchanges more long-term in Tenda lower than we expected.

So these two things together really made our cash flow better-than-expected in the first semester. Now looking into the future second semester, I believe that the trend is like I said operational cash flow should be more neutral.

Now concerning your second question, accruals in this quarter – Gafisa operational expense a little lower than the first increase in contingencies, we have some lawsuits, especially labor lawsuits in Tenda. In our normal process we look to see if it's on a good level.

We saw some labor lawsuits where we have to increase accruals as a result of what we saw. So basically this is it.

What we see in general, we imagine – what we imagined is coming through the number of new lawsuits, so we can see that we have more labor suits concluded than new ones. So we believe we will continue this way.

And as we leave behind these projects that have been deliberately content in Gafisa we will have a better situation. And the lawsuits -- new lawsuits are in line with what you had accrued above, below – they are in line, Nicole, with what we had estimated.

Sometimes even a little lower, we have certain criteria to analyze this. We have an idea, for example, when we lose in the first instance in court, we make these accruals.

We know that the real value is higher in the case of labor lawsuits. So we have a historical idea -- this gives us a good idea of the outcome .So there have been no surprises in terms of having something different than what was foreseeing.

Good morning. A few questions.

The first going back to the gross margin, the amount of revenue that came from new projects and legacy projects and how this affects if you have [indiscernible] new projects or whether legacy projects have been sold at a favourable price, could you give us an idea of the pipeline for the third semester in Gafisa, we saw the markets, with the markets lose momentum due to the World Cup, so once the World Cup is over, how is the market – how are the projects for the rest of the year? Thank you.

Hello Marcello [indiscernible] about Gafisa, then Philippe can talk about the margins for legacy projects. Marcello, in the third quarter, we have projects approved, we’re doing – we’re monitoring the market to understand the volume we will have, I believe that the level of volume should be similar to the volume we had in the second quarter, Marcello.

So we are working with 350 million in new launches in this semester, and we're monitoring the markets and project by project. So Gafisa this year will be a very light year in comparison to the previous year.

Yes we’re maintaining the guidance. We’re not making any changes in the guidance.

We will monitor the demand in the market. Concerning approval, they may change we have a volume for the guidance, we will use as a priority liquidity.

Now I will pass the floor to Philippe.

Hello Marcello, discussing this issue of legacy new projects, please comment about the second quarter -- 60% of the revenue came from legacy and 40% from the new model, new project. When we analyze in an isolated way each of these groups of project, the legacy is presenting a margin of 15% considering the average in the first semester.

It’s important to say that it suffers more volatility because of the larger volume of cancellations. Now when we analyze the rest of margins have percentages that are above our expectations as I said before between 20% and 30%.

Today in the first semester we had margins fluctuating between 35% and 40% because of the new business model we’re using. Because of that issue of concentration of projects in São Paulo where profitability is higher.

So we should converge to this model, this level of 28%, 30% in the next quarters as the new business model has more projects going from 40% and going to – from 405 to 100% of the new business model projects in the next quarters. While we have the effect of the legacy projects we may have some volatility in the consolidated gross margin.

Okay, last points, this 40% of the new business model and 60% of the legacy, is it continuing? In the past, was it higher, in the first quarter was it 605 or 80%?

We can say that it was little higher. Last year, we had -- this new business model was 10%, legacy 90% last year.

So now we have 45% legacy and the rest new model.

Good morning. Two questions.

The first is about the expenses. We saw peak in the second quarter.

Please explain and will it continue high to next quarters and concerning the separation between the two companies Gafisa and Tenda, we saw the stock market allowing the conversion of shares, how clos can we be of the separation of the two companies, can this happen in the middle of next year? Can you give details about the model whether it's going to be swapped, something difficult, something different sorry?

Okay hello Marcelo. Concerning the reduction in this quarter we had a nonrecurring event concerning the employees in the city of Alphaville and this happened in the past, R$14 million and this was included in our operational expenses.

Apart from that we have nothing. We had an anticipation when you have an option plan, the way you record this is different in accounting.

And when you have executives leaving you compensate, this happens with executives that left the company, and we had these effects not only in this area. So you will see it going back to the level of the first quarter and the next semester.

Concerning the separation of the two companies, in terms of administration we’re making progress. By the end of the year we should have the analysis of the areas and having independent operations, independent administration and another area of legal, everything for each company.

There are expectations for 2015, for the time being we don’t have great changes. We’re studying, we’re mapping all the factors involved.

When you asked me what is the mechanism that will be used, we’re analyzing the possible mechanisms the pros and cons to identify the best way of separating two companies. And we’re having conversations to see the effect, the impact.

So we have done the mapping, we’re talking to different entities involved in our day-to-day activities, the contract to see the effects, to be able to have the necessary alignments. Yes we have the desire to do this, the council is favorable and we want to submit this to the general assembly and we’re working on this.

For the time being we don't have great changes.

Good morning. Two questions, the first on cancellations.

We saw that the delivery volume is a little higher, not very different from the previous quarter and hence we see cancellations – can you detail it, were any other reasons And do you see higher cancellations of sales, does this have to do with credits, or because of the macro situation, do we have more cancellations, please comment on the reasons behind these cancellations of sales? Second question, in relation to January we see accruals maintained -- what are the main metrics in each company that can result also in the increase of bonuses and – in this scenario, is it more difficult, are you foreseeing new reductions, what can we expect in the future?

Good morning. Well, cancellations in sales.

Gafisa and Tenda around the same level 100, 120 million -- 119 million, taking up Gafisa in comparison with last year we had a drop in cancellations. We look every week the number of cancellations of sales.

The credit criteria we established three years ago at the time of purchase, I have no doubt that have an effect, this has helped us and this is what we can see. We may have a greater higher trend for cancellations, for example, people who bought more than one units or depending on the time when they buy.

Now we see in Gafisa more stability. This can increase, this can rise if there is less trusted personnel, there is more challenging.

So we see some characteristics of this in cancellations, not that relevant especially in Gafisa. Right now we have our process in really analyzing, the client has helped, so I see Gafisa in a stable situation.

We will have cancellations 10%, 12% of the total sales, we have a volume of deliveries that influences number of cancellations. Part of the cancellations in each project happens at the time of delivery.

But comparing with last year in the first semester our volume was higher in the – sorry, the volume was higher in the first semester. Economic scenario may affect this and we’re seeing some signs of this.

In Tenda, what we saw in the first quarter a reduction due to the new model, we had the impact of the change in eligibility, and we have cancellations in relation to the legacy. And so you have the clients that are not able to obtain financing and cancel the purchase.

In the medium and long-term we see a lower number of cancellations. We’re delivering the legacy projects, we have 4400 to be delivered, as this goes down, the bottom of cancellations will drop.

Now forecast for bonus, Tenda and Gafisa, we made – we forecasted bonuses based on results, that’s why in the first quarter we didn't have that, it depends on the results – it follows the results. That's why we didn't have in the first and the second as we expected results, we make the accruals.

And could you talk about the main metrics?

It is not very different, we talked about the market, we have inadequate capital structure, good liquidity, good greatest focus is on profitability, that's the important metric, have also results – EBITDA, deliveries, sales, mapping, as we do here. The main metrics and the end of the year, during the year, you measure at the end of the year you will see the final results in comparison with the goals.

There's also the issue that we mentioned the market considering more, not only the year but two years we must make plans for the medium and long term in our markets. So these are the metrics, we have a few more and with the great focus on profitability and return on investments this is what we established, that’s what the guidance at the end of last year for the next three years.

And in terms of G&A, we have made an effort – we’re separating the two companies, we have a guidance of 7.5% on launches and our objective is to make this – do this in line with the rest, the G&A you cannot increase or decrease every quarter. We’re studying, I believe it's an important aspect within the profitability planning of the company.

So we have perspectives in terms of launches in – we’re working with G&A to be compatible with our peers and eventually, if the market goes in a different direction we will be analyzing. This is important, we can improve a bit in profitability, we have DNA , we’re separating the two structures, we’re separating the two companies.

Initially we believe there could be a rise but it's not happening. We should get to add balance in G&A in some cases, having to duplicate and others we’re gaining efficiency to avoid having this impact the administrative expenses, general expenses.

So you we believe we will have stability in the future. Yes, during the year, yes.

Good morning. I have a question concerning other operational expenses we saw higher number, please explain, R$39 million and also concerning the guidance for expenses.

In Gafisa, the number is far from the guidance. Please talk about this – the aim was to get to 10% of launches.

Since the market is more selective, is there possibility of reducing SG&A?

Eduardo, good morning. These are operational expenses, one is Alphaville -- the options plan of Alphaville and obligation of Gafisa, this costs 14 million and we had to review some Tenda processes, especially labor lawsuits where we increased the accruals.

With these two expenses, these represent the difference in comparison with the last semester. In Gafisa with the effect of Alphaville we had R$11 million of operating expenses in Tenda.

Removing the adjustments we should have had R$10 million to R$15 million. so these two things that had an influence as I said Alphaville is non-recurring.

In terms of guidance, we used 7.5 for Gafisa considering the launch of the G&A 7.5%, we rented 41% of the guidance, the averages of the two companies were the same and this is what they were able to launch. Once again we’re looking at the market, we’re evaluating how the market will behave these two months, August, September after that vacation period, the holiday period, we have projects approved, so we have a structure ready for this.

Of course we will monitor the performance of the markets. If we have to reduce and if this happens we will tell this to the markets .We may have a higher G&A, higher relationship depending on the number of launches.

We’re concerned with this and we understand that in the medium term we are adjusting our volume. Sometimes the market is better, sometimes worse.

So we have a vision, we know that in terms of G&A, that is compatible, nothing different from forecast and we will be reaching this. So we have an adequate structure, we will evaluate the performance of the market to see the volume we will launch till the end of year, these two variables are important for us to get to the G&A in Gafisa this year and Tenda next year.

Thank you.

Well, I'd like to thank you all for your presence and the questions. We hope we were able to clarify.

If you have more questions we’re here available. So the message is what said the companies are doing well.

We’re looking at the market, the potential as well as the challenges and making adjustments in profitability. Thank you for your presence once again and we wish you a good day.