Direcional Engenharia S A : 2Q22 Operating Preview

OPERATING PREVIEW

2Q22

Belo Horizonte, July 11th, 2022 - Direcional Engenharia S.A., one of the largest homebuilders and real estate development companies in Brazil, focused on the development of low-income and medium-income projects and operating in several regions of the Brazilian Territory, discloses here its operating statements for the second quarter of 2022 (2Q22). Unless otherwise stated, the information in this document is expressed in national currency (Brazilian Reais - R$ or BRL) and the Potential Sales Value ("PSV") demonstrates the consolidated amount (100%).

NOTICE TO THE MARKET

2Q22 OPERATING PREVIEW

• NET SALES RECORD IN 2Q22 (BRL 836 MILLION), A 34% GROWTH VERSUS 1Q22 AND 36% VERSUS 2Q21.
• CASH GENERATION OF BRL 18 MILLION IN THE QUARTER.
• SUBSEQUENT EVENT: PAYMENT OF DIVIDENDS OF BRL 0.47 PER SHARE, APPROXIMATE TOTAL AMOUNT OF BRL 70 MILLION.

HIGHLIGHTS

• Contracted net sales totaled BRL 1.5 billionin the first semester of 2022 (1H22), a growth rate of 29%when compared to 1H21.
• In 2Q22, net sales of Direcional projects reached BRL 601 million, exceeding by 34%the volume sold in 1Q22 and by 39%the volume sold in 2Q21.
• Net sales speed index (VSO) reached 20%in the quarter and 23%in Direcional segment.

RIVA

• 2Q22 net sales totaled BRL 236 million, a 38%growth versus 2Q21.
• In 1H22, net sales grew 35%over 1H21, totaling BRL 407 million.
• Riva's VSO reached 17%in the quarter, 3 p.p.above 1Q22.

1

OPERATING PREVIEW

2Q22

LAUNCHES

During 2Q22, Direcional launched 10 new projects, totaling a PSV of BRL 790 million (BRL 704 million % Company), 32% above the amount launched in 1Q22 and in line with launched PSV in 2Q21. The representativeness of Direcional's products in the mix of launches reached 62% in the quarter, while Riva's represented 38% of launched PSV.

Considering the the first semester of 2022 (1H22), the volume of launches grew 2% compared to the first semester of 2021 (1H21).

		Launches
		(PSV 100% - BRL million)
					+2%
Riva				1,364	1,389
Direcional
				314	503
	0%
787		790
188	599	301	+32%
			1,050
	203			886
599	396	490
2Q21	1Q22	2Q22		1H21	1H22

Table below provides further information on projects launched in 2Q22 and in 1H22:

	Launches			2Q22			1Q22			2Q21			%			%			1H22			1H21			%
			(a)			(b)			(c)			(a/b)			(a/c)			(d)			(e)			(d/e)
	PSV Launched - 100% (BRL '000)			790,369			599,069			786,923			31.9%			0.4%			1,389,438			1,363,983			1.9%
	Direcional	489,581	396,445		599,155		23.5%		-18.3%		886,026	1,050,017		-15.6%
	Riva	300,788	202,623		187,768		48.4%		60.2%		503,412	313,965		60.3%
	PSV Launched - % Company (BRL '000)			703,651			557,281			662,361			26.3%			6.2%			1,260,933			1,116,590			12.9%
	Direcional	467,161	354,658		474,593		31.7%		-1.6%		821,819	802,625		2.4%
	Riva	236,490	202,623		187,768		16.7%		25.9%		439,113	313,965		39.9%
	Launched Units			3,261			2,831			4,153			15.2%			-21.5%			6,092			6,624			-8.0%
	Direcional	2,436	2,136		3,385		14.0%		-28.0%		4,572	5,394		-15.2%
	Riva	825	695		768		18.7%		7.4%		1,520	1,230		23.6%
	Average % Company			89.0%			93.0%			84.2%			-4 p.p.			5 p.p.			90.8%			81.9%			9 p.p.
	Average Price (BRL/unit)			242,370			211,610			189,483			14.5%			27.9%			228,076			205,915			10.8%
	Direcional	200,977	185,602		177,003		8.3%		13.5%		193,794	194,664		-0.4%
	Riva	364,592	291,544		244,490		25.1%		49.1%		331,192	255,256		29.7%

2

OPERATING PREVIEW

2Q22

CONTRACTED SALES

Contracted Net Sales reached a PSV of BRL 863 million in 2Q22 (BRL 674 million % Company), a growth rate of 34% in comparison with 1Q22 and 36% when compared to 2Q21. This performance marked 2Q22 as the best quarter in terms of net sales in Direcional's history, surpassing by 25% the previous record, which had been reached in 4Q21.

Considering the sales mix in 2Q22, in the Direcional segment, net sales reached BRL 601 million (BRL 494 million % Company), growing 34% over 1Q22 and 39% over 2Q21. In the Riva segment, net sales reached a PSV of BRL 236 million (BRL 181 million % Company), 38% above the previous quarter and 32% above the same quarter of 2021.

In 1H22, net sales totaled BRL 1.5 billion (BRL 1.2 billion % Company), a 29% increase in comparison with 1H21. As a result, Direcional products represented about 72% of the volume sold in the period, while Riva products accounted for 28%. In both segments, there was an increase in net contracted PSV.

			Net Sales						Net Sales Track Record
			(PSV 100% - BRL million)						(PSV 100% - BRL million)
	Old Harvest			+29%
	Riva					1,458								2,768
						2
	Direcional										2,440
					1,129	407
									+33%
		+36%			10
			836		301					1,451		1,680
614	622	236	+34%						1,320
178 3	171 3			818	1,048			914
			601			494
433	448
			0
						2016	2017	2018	2019	2020	2021	2Q22
2Q21	1Q22	2Q22		1H21	1H22
								LTM

The table below presents information about Net Sales in 2Q22 and in 1H22:

	Contracted Net Sales			2Q22			1Q22			2Q21			%			%			1H22			1H21			%
			(a)			(b)			(c)			(a/b)			(a/c)			(d)			(e)			(d/e)
	Net Contracted Sales - PSV 100% (BRL '000)			835,691			621,942			614,496			34.4%			36.0%			1,457,633			1,129,460			29.1%
	Direcional	600,542		447,912		433,406		34.1%		38.6%	1,048,454		818,474	28.1%
	Riva	235,603		171,226		178,387		37.6%		32.1%	406,829	300,537	35.4%
	Old Harvest1	-454		2,803		2,703		-116.2%		-116.8%	2,349	10,449	-77.5%
	Net Contracted Sales - PSV % Company (BRL '000)			674,215			507,991			515,665			32.7%			30.7%			1,182,205			954,609			23.8%
	Direcional	493,738		371,973		364,201		32.7%		35.6%	865,711	687,669	25.9%
	Riva	180,563		134,559		149,183		34.2%		21.0%	315,123	259,201	21.6%
	Old Harvest	-86		1,458		2,281		-105.9%		-103.8%	1,372	7,740	-82.3%
	Contracted Units			3,920			2,945			3,168			33.1%			23.7%			6,865			5,870			17.0%
	Direcional	3,118		2,347		2,491		32.9%		25.2%	5,465	4,741	15.3%
	Riva	804		592		668		35.8%		20.4%	1,396	1,098	27.1%
	Old Harvest	-2		6		9		-133.3%		-122.2%	4	31	-87.1%
	Net Sales Speed (VSO) in PSV			20%			16%			18%			4 p.p.			2 p.p.			31%			29%			2 p.p.
	Direcional	23%		18%		17%			5 p.p.		6 p.p.	35%	28%		7 p.p.
	Riva	17%		14%		26%			3 p.p.		-9 p.p.	26%	37%		-11 p.p.
	Old Harvest	0%		3%		2%			-3 p.p.		-2 p.p.	2%	7%		-5 p.p.

1 Old Harvest: Comprises projects of the middle income, upper-middle income and commercial segments, developed in the former model.

3

OPERATING PREVIEW

2Q22

NET SALES SPEED (VSO)

In 2Q22, net sales speed, measured by the VSO index (Sales-Over-Supply ratio), reached 20%, establishing an increase of 4 p.p. versus 1Q22. The VSO of projects at Direcional, excluding Old Harvest segment, reached 23% in the quarter (+ 5 p.p. over 1Q22). Riva's VSO reached 17% in the period (+ 3 p.p. over 1Q22).

		Net Sales and VSO
		(PSV 100% - BRL million)
26%	21%				23%
	19%	18%
18%	17%		20%
17%
16%	17%
17%		17%
16%
		14%
	3%	4%	3%
2%
				0%	Old Harvest Sales
					836	Riva Sales
614	643	668	622	236	Direcional Sales
5
3	3		3		Direcional VSO
239	171
178	236			Consolidated VSO
433	403	423	448	601	Riva VSO
	Old Harvest VSO
					0
2Q21	3Q21	4Q21	1Q22	2Q22

INVENTORY

Direcional ended 2Q22 with 13,678 units in inventory, totaling a PSV of BRL 3.3 billion (BRL 2.8 billion % Company).

Table below shows the inventory at market value, detailed by stage of construction and by type of product. It is worth mentioning that about 2% of the total PSV refers to completed units, with 1% related to Direcional projects (ex-OldHarvest products), and less than 1% related to Riva products.

							PSV Total									PSV % Company
	Breakdown of Inventory at			Direcional			Riva			Old Harvest			Total				Direcional			Riva			Old Harvest			Total
	Market Value
	In progress (BRL million)			2,034			1,157			0			3,191				1,793			938			0			2,731
	% Total	62%	35%	0%	98%	64%		34%	0%	98%
	Completed (BRL million)			22			8			46			76				19			7			30			56
	% Total	1%	0%	1%	2%	1%		0%	1%	2%
	Total (BRL million)			2,057			1,164			46			3,267				1,812			946			30			2,788
	% Total	63%	36%	1%	100%			65%		34%	1%	100%
	Total Units			9,881			3,672			125			13,678			9,881			3,672			125			13,678
	% Total Units	72%	27%	1%	100%			72%		27%	1%	100%

4

OPERATING PREVIEW

2Q22

LANDBANK

Direcional's landbank ended 2Q22 with a development potential of 154,547 units and PSV of BRL 28 billion (BRL 25 billion % Company).

The average cost of acquisition was equivalent to 11% of the PSV, and 80% of the payment shall be made through swaps, which causes a reduced impact on the Company's cash position before the beginning of the development stage of the projects.

During 2Q22, 8 plots of lands were acquired, with a construction potential of more than 4,500 units and a PSV of BRL 1.2 billion (BRL 1.0 billion % Company).

The average cost of acquisition in the quarter was equivalent to 11% of PSV, and 70% of the payment shall be made via swaps.

Evolution of Landbank

2021

1H22

1H22

Adjustments 1

1H22

1H22

Units

(BRL million)

Landbank

Acquisitions

Launches

Landbank

PSV % Co.

Total PSV

26,807

2,619

(790)

(783)

27,852

25,292

154,547

1 Adjustments: update of sales price, canceled sales and swaps.

CASH GENERATION (CASH BURN) ¹

Direcional reported cash generation of BRL 18 million in 2Q22. Thus, in the first semestre of 2022, there was a cash consumption of BRL 16 million. As published in the previous quarter, this consumption is due to the significant expansion of launches and sales volumes in recent periods, in addition to the active management of supply inventories, aiming to mitigate the effects of inflation on construction materials.

1 Cash Generation (Cash Burn): variation in net debt adjusted by payment of dividends, repurchase of shares and the variation in the balance of interest swap operation agreements. Prior unaudited information.

SHARE BUYBACK PROGRAM

In effect since December 27th, 2021, Direcional's share buyback program aims to manage the Company's available resources to enhance value generation for its shareholders, especially through an efficient management of the capital structure. During 2Q22, 549,000 shares were repurchased, for a total amount of around BRL 5.5 million.

5