1. Third Quarter 2006
Earnings Conference Call
Third Quarter 2006 Launches
ForestVille – Salvador Olimpic – São Paulo Espacio Laguna – Rio de Janeiro
Investor Relations Contact:
Gustavo Felizzola
ir@gafisa.com.br
3Q06 Earnings Conference Call
São Paulo November 13th, 2006
13PM (Brasilia Time), 10AM (US-ET) 1
Phone: +1(973) 935-8893
Code: 8013391
Webcast: http://www.gafisa.com.br/ir
2. Overview of the 3Q06
Wilson Amaral – Chief Executive Officer
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3. Highlights of The Quarter
Launches increased 76% y-o-y
Launches increased to R$ 194.0 million in 3Q06 from R$ 110.3 million in 3Q05
Pre-Sales grew 199% y-o-y
Pre-sales increased to R$235.3 million in 3Q06 from R$78.6 million in 3Q05
The backlog margin for 3Q06 was stable at 43% compared to previous quarter and 10.5p.p.
higher when compared to the 3Q05
In 3Q06, Backlog of Revenues rose to R$293.7 million from R$115.2 million in 3Q05
Revenues Increase 21% to R$ 161,5 million and EPS up 109% to 0.27
YTD Mortgages provided by commercial banks and CEF increased 105% and 96%,
respectively
Gafisa Vendas, our internal sales division, was created
New partnership with Espirito Santo-based developer Proeng
Entrance in three new markets: Salvador (Bahia), Curitiba (Paraná) and Niteroi (Rio de
Janeiro)
With a record number of candidates (18,000), in September 30th was ended the application
period for Gafisa’s 2007 Trainees Program
More recently, the Acquisition of AlphaVille Urbanismo
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4. Gafisa Reports 76% Growth in Launches and 199% in Pre-Sales
Launches (R$ mm) Pre-Sales (R$ mm)
New Markets 235
Rio de Janeiro
New Markets 194 59
Rio de Janeiro São Paulo
Sao Paulo 26
%
% 9%
%
76
76 99
19
1 64
110 67
25 79
31 113
86 101
19
28
3Q05 3Q06 3Q05 3Q06
Pre-sales mix breakdown – 3Q06
2% 6% 0%
6% HIG
MHI
86%
MID
30% AEL
56% LOT
COM
Segmentation (Prices in R$/sq.m)
HIG – High Income: > 3,600 MHI – Middle High: 2,800 < > 3,600
MID – Middle Income: 2,000 < > 2,800 AEL – Affordable entry level: 1,800 < > 2,000 4
COM – Commercial LOT – Urbanized lots
6. Rapidly Expanding Mortgage Supply
Increasing credit availability and new regulation supports the potential of the sector
Timeline – Recent Developments in the Mortgage Market (R$ billion)
2006 – Bradesco, Santander and Itaú offer up to
2005 - Individuals get tax
20-yr fixed rate at 14%p.a.
exempted on MBS
Investments CEF re-enters to middle income market
(10.9%p.a.)
ABN Amro, Santander
and HSBC reduce HSBC offers 10-yr fixed mortgage at 12.7%p.a.
Mortgage Rates to
Gafisa, HSBC and Santander offer pre-approved
8%p.y from 12%p.a.
mortgages
Itaú, Bradesco, Unibanco
24.0 BCB allows paycheck discount for mortgage
follow suit
lending to public employess
Santander launches 10-
Banks allowed to offer fixed rate mortgage with
yr fixed mortgage rate
funds from SFH (limited to 14.2% p.a.)
(21%p.a.)
2004 - Resolution 18.1
10.931 Improves
2003 - Central Foreclosure ³
Bank increases
14,0
regulation 54%
bank requirement 13.9
to invest in the
sector
11,4
9.0 9.1
9,1
6.7 96%
6,0 5,8
4,5 109% 10,0
105% 6,7
4,8
2,2 3,0 3,3
2003 2004 2005 2006E² 9M05 9M06
Mortgage by Commercial Banks¹ CEF Mortgage Loans
Sources: ABECIP, Central Bank
¹ Total mortgage lending using savings deposits funding (channeled-lending requirement).
² Of the R$ 14 billion estimated for 2006, R$ 9,4 billion will be entailed to FGTS
³ The required monthly household income for 75% of CEF resources is limited to 5 minimum wages. It represents 86% of the total resources from FGTS. 6
7. Gafisa Vendas
Gafisa Vendas articulates Gafisa's unique features and effectively present the product
Gafisa is establishing a strategic channel to access its clients and reduce its dependence on outside brokers
Gafisa Vendas operates in the State of Sao Paulo. We might extend it countrywide over next years
Gafisa Vendas, more than any outside sales company, knows that price is not the only reason left for a customer
to buy from Gafisa
Gafisa Vendas focus on:
i) Launches – Gafisa Vendas shares the Sales Stands creating a healthy competition between our own sales
force and outside brokers
ii) Inventory – Gafisa Vendas has a team focused on inventory with an additional reward depending on the
performance of such products
iii) Web-Sales – Gafisa Vendas has an internet-dedicated sales team as it represents an alternative source of
sales with lower cost
Gafisa’s recent experience in 2005 with a dedicated sales force in Rio de Janeiro was very successful.
Breakdown of Gafisa’s Pre-sales by Brokerage Company for 1H06
Sao Paulo Rio de Janeiro
12% 11%
11% Lopes 33% Americas
14%
42% Fernandez Mera Patrimóvel
Exclusiva/Del forte Nova Marca 500
14% Abyara Júlio Bogoricin
Others 16%
Others
21% 26%
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8. We’ve enhanced our National Footprint
Gafisa is currently present in 13 states and 21 markets
Gafisa’s National Footprint A. Salvador (Bahia)
3rd largest City of Brazil
First projects launched under partnership with
OAS
Located at AlphaVille Salvador
B. Vitoria (Espirito Santo)
One of the highest GDP per Capita of Brazil
Oil Industry expected to drive strong demand
Opportunities for Second-home Projects
C. Niteroi (Rio de Janeiro)
Very attractive and under-explored market
A Second most important city of Rio de Janeiro
State
B Part of diversification strategy in Rio de
Janeiro
C
D D. Curitiba (Parana)
Gafisa 7th largest City of Brazil
Lowest unemployment rate of the country
Construction Begins along with Launches
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¹ 9M06
9. Acquisition of AlphaVille Urbanismo
AlphaVille Urbanismo is the largest and only nationwide community development company in Brazil, with no
major competitors to date.
The Company transforms large rural acreage into urbanized lots, developing all required infrastructure
(water, sewage, electricity, roads), as well as facilities such as sports club, high-rise monitored fences, for
subsequent sale
AlphaVille’s residential communities (lots) are targeted at upper and upper-middle class families in the
outskirts of metropolitan regions throughout Brazil
AlphaVille does not get involved in the construction of the houses, which is done by the buyers
Segment characterized by high entry barrier; higher margins and lower cash exposure than that of residential
buildings
Characteristics of an AlphaVille Community1
Residential Area Parks
Residential Area
Business Area AlphaVille Club Business Area Residential Area
Multi-family Area Golf Course
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Note (1): Based on AlphaVille Graciosa (located in Curitiba, Paraná)
10. AlphaVille Strengthened Gafisa’s Position as Market Leader
Industry Leadership and
Strong Brand
Recognition
Professional Management
Robust Housing Growth and
Established Organization
World-class Shareholders
Geographic and the Highest
Diversification Standards of Corporate
Governance
Efficient Business Model
and Strategic Land Bank
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11. Land Bank: High growth with relatively low risk
Combination of AlphaVille’s sizable Land Bank with Gafisa’s strategic reserves
Usable Area Future Sales % acquired
Potential Units
(sq.m) (R$000) by swap
Gafisa
Sao Paulo 305,034 2,513 926 59%
Rio de Janeiro 345,906 2,985 764 91%
New Markets 817,290 4,607 929 85%
Gafisa Total 1,468,230 10,105 2,618 82%
AlphaVille
Southeast 4,926,325 9,213 1,138 93%
Northeast 2,626.057 3,461 567 100%
South 746,533 1,430 155 100%
Mid-West 502,757 926 105 27%
North 162,121 438 32 100%
AlphaVille Total 8,963,794 15,467 1,997 92%
Gafisa + AlphaVille 10,432,024 25,572 4,615 84%
¹ As of 09/30/06 11
12. Strong Brand Also attracts the Best People
Gafisa’s 2007 Trainee Program had 18,000 applications throughout Brazil
20,000
15,000 %%
2
25..4
54
8..4%
8 4%
17,972
10,000 14,329
13,215
5,000
2005 2006 2007
# of Applications
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16. Revenues Reflect Previous Years Pre-Sales
9M06 Pre-sales x Recognized Revenues (R$000)
Developments Pre-Sales % of Pre-Sales Revenues % of Revenues
Launched in 2006 341,664 55% 83% 48,751 11%
Launched in 2005 174,369 28% 107,626 25%
Launched in 2004 40,894 7% 99,052 23%
Launched in 2003 34,728 6% 123,195 29% 63%
Launched in 2002 24,887 4% 37,112 9%
Others NA NA 9,823 2%
Total 616,542 100% 425,560 100%
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17. Changes in Accounting for Selling Expenses
Matching BRGAAP Practices with USGAAP
Differences between Previous and New Practices
BR GAAP (old BR GAAP (new
USGAAP
policy) policy)
Expensed as Expensed as Expensed as
Institutional Advertising
Incurred Incurred Incurred
Deferred and Deferred and Deferred and
recognized as the recognized as the recognized as the
Sales Stand / Showroom / Model Apartment
development development development
progresses progresses progresses
Deferred and
recognized as the Expensed as Expensed as
Project Specific Advertising
development Incurred Incurred
progresses
Expensed as Expensed as Expensed as
Sales Commissions
Incurred Incurred Incurred
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18. Reconciliation for Changes in Accounting for Selling Expenses
Matching BRGAAP Practices with USGAAP
3Q06 Pro-forma Results Effect of New 3Q06 Results under
Income Statement (R$000) under Previous Policy Accounting Practice New Policy
Net Revenues 161,542 - 161,542
Gross Profits 56,646 - 56,646
Gross Margin 35.1% 0.0p.p. 35.1%
Selling Expenses (9,985) (5,889) (15,874)
EBITDA 34,691 (5,889) 28,802
EBITDA Margin 21.5% (3.7p.p) 17.8%
Net Income 31,359 (3,692) 27,667
Net Margin 19.4% (2.3p.p) 17.1%
EPS(R$) 0.30 0.03 0.27
Balance Sheet Items (R$000)
Deferred Selling Expenses 57,219 (41,713) 15,505
Deferred Taxes 33,085 (12,106) 20,979
Shareholders’ Equity 839,408 (29,607) 809,802
Total Assets 1,389,824 (41,713) 1,348,111
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19. Strong Pre-sales performance is Positively Impacted Backlogs
Currently, Gafisa has approximately R$294 million of results to be recognized (a 155% growth
compared to 3Q05)…
Revenues and Results be Recognized (R$ mm) Backlog Margin (%)
43.3% 43.2%
3Q06 2Q06 3Q05 (c)/(a) (c)/(b)
(a) (b) (c) % %
Sales to be Recognized 679,8 560,7 352,7 93% 21% 32.7%
Costs of Units Sold
(386,1) (317,8) (237,5) 63% 22%
to be Recognized 1
Results to be 155%
293,7 242,9 115,2 21%
Recognized
Margin to be
43.2% 43.3% 32.7%
Recognized
Note:
1 Includes only land and construction costs 3Q05 2Q06 3Q06
… with margins of 43.2%
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20. Strong Financial Position…
…coupled with focus on working capital management
(R$ million) 3Q06 2Q06 3Q05
Short Term Debt 225 85 54
Long Term Debt 27 191 93
Total Debt 251 276 146
Cash and Cash Equivalents 330 423 65
Net Debt (Net Cash) (79) (147) 81
Shareholder’s Equity 810 784 312
Total Capitalization 1,061 1,060 458
Net Debt/ Equity -10% -19% 26%
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21. Working Capital Management is One of Gafisa’s Priorities
Recent Financial Initiatives
Gafisa is Demanding New Products from Commercial Banks in order to Boost its Sales
Gafisa and HSBC announced the launch of a new real estate development with an
innovative credit system - the “Pre-approved” mortgage
Then, Santander Offered the No-Paperwork mortgage financing to Gafisa’s clients
Issuance of New Debt in order to optimize Capital Structure
Issuance of R$ 240 million in Debentures to recall higher cost debt
Lower cost of debt is expected to generate savings of more than R$ 4 million
Generates flexibility as it frees up more than R$150 million in collateralized
receivables
Securitization
Increase demand for alternative sources of funding
Sale of up to R$ 60 million of post-completion receivables
The proceeds from the sale of the securitized credits will be reinvested in Gafisa’s
regular operations
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22. “Safe-Harbor” Statement
We make forward-looking statements that are subject to risks and uncertainties. These statements are based on
the beliefs and assumptions of our management, and on information currently available to us. Forward-looking
statements include statements regarding our intent, belief or current expectations or that of our directors or
executive officers.
Forward-looking statements also include information concerning our possible or assumed future results of
operations, as well as statements preceded by, followed by, or that include the words ''believes,'' ''may,'' ''will,''
''continues,'' ''expects,'‘ ''anticipates,'' ''intends,'' ''plans,'' ''estimates'' or similar expressions. Forward-looking
statements are not guarantees of performance. They involve risks, uncertainties and assumptions because they
relate to future events and therefore depend on circumstances that may or may not occur. Our future results
and shareholder values may differ materially from those expressed in or suggested by these forward-looking
statements. Many of the factors that will determine these results and values are beyond our ability to control or
predict.
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