Direcional Engenharia S A : 3Q21 Operating Preview

OPERATING PREVIEW

3Q21

Belo Horizonte, October 14, 2021 - A 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 third quarter of 2021 (3Q21). Unless otherwise expressed, the information in this document is expressed in the national currency (Brazilian Reais - R$ or BRL) and the Potential Sales Value ("PSV") demonstrates the value consolidated (100%).

NOTICE TO THE MARKET

3Q21 OPERATING PREVIEW

• • RECORD-BREAKINGIN LAUNCHES IN 3Q21 (BRL 1.1 BILLION), GROWING 88% OVER 3Q20;
  • • NET SALES RECORD IN 3Q21 (BRL 643 MILLION), A 40% INCREASE VERSUS 3Q20;
• RIVA GREW 281% YoY IN NET SALES IN 3Q20, ACCOUNTING FOR 37% OF GRUPO DIRECIONAL.

HIGHLIGHTS

• Record-highin Launches for the second quarter in a row, +37%over 2Q21.
• Volume launched in the year to September period (9M21) grew 129%in comparison with 9M20, totaling BRL 2.4 billion.
• Net Sales again at the highest level in Direcional's history: 5th record in the last 6 quarters, totaling BRL 643 million.
• In 9M21, Net Sales reached BRL 1.8 billion, a growth rate of 53%versus 9M20.
• Net Sales Speed ratio (VSO) of 17%in the quarter.

RIVA

• Riva's Launches reached BRL 621 millionin 3Q21, the highest level in segment's history.
• 281%growth in Net Sales in comparison with 3Q20 and 33%growth versus 2Q21.
• In 3Q21, Riva's Net Sales accounted for 37%of the total sales by Grupo Direcional.
• Riva's VSO reached 21%in the quarter.

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OPERATING PREVIEW

3Q21

LAUNCHES

In 3Q21, Direcional launched 10 new projects/phases, totaling a PSV of BRL 1.1 billion (BRL 927 million % Company), an 88% increase versus 3Q20 and a 37% increase over 2Q21, which had been the highest level ever recorded by the Company. Thus,

Direcional hits another record in terms of Launches in a single quarter.

In 9M21, there was a 3-digit growth in comparison with 9M20. The 129% growth in the period contributed to the achievement of a PSV of BRL 2.4 billion in the year to date.

Considering the last twelve months (3T21 LTM), Launches totaled BRL 3.1 billion.

		Launches					Launches Track Record
	(PSV 100% - BRL million)				(PSV 100% - BRL million)
				+129%							3,142
					2,445
	+88%				935				1,905	1,946	1,763
		1,081		1,066				1,109
	787			45
574		+37%			832
621		1,509
188			502
45		1,021
599
530	459
3Q20	2Q21	3Q21		9M20	9M21	2015	2016	2017	2018	2019	2020	3Q21
												LTM
		Riva	Direcional

Table below provides further information on projects launched in 3Q21 and 9M21:

	3Q21	2Q21	Q3T20	%	%
Launches
(a)	(b)	(c)	(a/b)	(a/c)
PSV Launched - 100% (BRL '000)	1,080,620	786,923	574,480	37.3%	88.1%
Direcional	459,356	599,155	529,743	-23.3%	-13.3%
Riva	621,265	187,768	44,737	230.9%	1288.7%
PSV Launched - % Company (BRL '000)	927,228	662,361	458,127	40.0%	102.4%
Direcional	459,356	474,593	435,758	-3.2%	5.4%
Riva	467,872	187,768	22,368	149.2%	1991.7%
Launched Units	3,764	4,153	3,358	-9.4%	12.1%
Direcional	1,800	3,385	3,142	-46.8%	-42.7%
Riva	1,964	768	216	155.7%	809.3%

Average % Company	85.8%	84.2%	79.7%	2 p.p.	6 p.p.
Average Price (BRL/unit)	287,094	189,483	171,078	51.5%	67.8%
Direcional	255,198	177,003	168,601	44.2%	51.4%
Riva	316,326	244,490	207,115	29.4%	52.7%

9M21	9M20	%
(d)	(e)	(d/e)
2,444,603	1,065,543	129.4%
1,509,373	1,020,807	47.9%
935,230	44,737	1990.5%
2,043,818	876,337	133.2%
1,261,981	853,969	47.8%
781,837	22,368	3395.3%
10,388	6,342	63.8%
7,194	6,126	17.4%
3,194	216	1378.7%
83.6%	82.2%	1 p.p.
235,330	168,014	40.1%
209,810	166,635	25.9%
292,808	207,115	41.4%

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OPERATING PREVIEW

3Q21

CONTRACTED NET SALES

Contracted Net Sales reached a PSV of BRL 643 million (BRL 525 million % Company) in 3Q21, a growth rate of 40% when compared to 3Q20, and 5% when compared to 2Q21. Once again, Direcional set its best quarter in terms of Net Sales - the 5th record in the last 6 quarters.

As has been happening in recent quarters, Riva's relevant role in sales volume stands out. In 3Q21, it accounted for 37% of the total sold by Grupo Direcional.

In 9M21, Net Sales totaled BRL 1.8 billion, a 53% growth in comparison with the total amount of 9M20.

			Net Sales						Net Sales Track Record
		(PSV 100% - BRL million)					(PSV 100% - BRL million)
					+53%
						1,772						614	643
						14
						537					523	515
					1,158						458
					184 7
		+40%						386		401
									336		371
		614	643						326	298
					271	287
		3	+5%
458	178 3		1,221
236	966
62	3
393	433	403
3Q20	2Q21	3Q21		9M20	9M21		3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20 3Q20 4Q20 1Q21 2Q21 3Q21
		Old Harvest	Riva	Direcional

Table below consolidates the information on contracted Net Sales in 3Q21 and 9M21:

Contracted Net Sales

PSV Contracted Net Sales - 100% (BRL '000)

3Q21	2Q21	3Q20	%
(a)	(b)	(c)	(a/b)

642,716

614,496

458,407

4.6%

%	9M21	9M20	%
(a/c)	(d)	(e)	(d/e)

40.2%

1,772,176

1,157,552

53.1%

Direcional	402,842	433,406	393,027	-7.1%	2.5%	1,221,317	966,195	26.4%
Riva	236,459	178,387	62,133	32.6%	280.6%	536,996	184,105	191.7%
Old Harvest1	3,414	2,703	3,247	26.3%	5.2%	13,864	7,252	91.2%
PSV Contracted Net Sales - % Company (BRL '000)	525,002	515,665	368,944	1.8%	42.3%	1,479,611	961,015	54.0%
Direcional	342,509	364,201	312,154	-6.0%	9.7%	1,030,178	791,516	30.2%
Riva	180,159	149,183	55,234	20.8%	226.2%	439,359	165,920	164.8%
Old Harvest	2,334	2,281	1,556	2.3%	50.1%	10,074	3,579	181.5%
Contracted Units	3,211	3,168	2,457	1.4%	30.7%	9,081	6,312	43.9%
Direcional	2,370	2,491	2,224	-4.9%	6.6%	7,111	5,568	27.7%
Riva	831	668	215	24.4%	286.5%	1,929	719	168.3%
Old Harvest	10	9	18	11.1%	-44.4%	41	25	64.0%
VSO in PSV	17%	18%	16%	-1 p.p.	1 p.p.	36%	33%	3 p.p.
Direcional	16%	17%	18%	-1 p.p.	-2 p.p.	36%	35%	1 p.p.
Riva	21%	26%	15%	-5 p.p.	6 p.p.	38%	33%	4 p.p.
Old Harvest	3%	2%	2%	1 p.p.	1 p.p.	9%	4%	5 p.p.

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

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OPERATING PREVIEW

3Q21

NET SALES SPEED (VSO)

Net Sales Speed, measured by the VSO index (sales-over-supply ratio), reached 17% in 3Q21. The VSO of projects at Direcional, excluding Old Harvest segment, reached 17% in the quarter. The VSO of Riva segment reached 21% in the same period.

			Net Sales and VSO
			(PSV 100% - BRL million)
				26%
		18%	20%	18%	21%
18%	17%
17%
		17%
16%
	17%	17%
		16%	16%
15%
		9%
			5%		3%
2%				2%
					643	Old Harvest Sales
				614	Riva Sales
				3
		523		3
		515
458		Direcional Sales
178	236
16	8
62	3	95	122			Direcional VSO
						Consolidated VSO
393	412	385	433	403	Riva VSO
						Old Harvest VSO
3Q20	4Q20	1Q21	2Q21	3Q21

INVENTORY

Direcional ended 3Q21 with 14,573 units in Inventory, totaling a PSV of BRL 3.2 billion (BRL 2.7 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 there are only BRL 9 million in PSV of Direcional (ex-Old Harvest) completed units, representing less than 1% of total Inventory.

							PSV Total									PSV % Company
	Breakdown of Inventory at			Direcional			Riva			Old Harvest			Total				Direcional			Riva			Old Harvest			Total
	Market Value
	In progress (BRL million)			2,157			891			1			3,049				1,890			694			1			2,585
	% Total		68%	28%	0%	96%			70%		26%	0%	96%
	Completed (BRL million)			9			5			116			129				8			4			89			102
	% Total	0%	0%	4%	4%	0%		0%	3%	4%
	Total (BRL million)			2,166			896			116			3,178				1,898			698			90			2,686
	% Total	68%	28%	4%	100%			71%		26%	3%	100%
	Total Units			11,128			3,124			321			14,573			11,128			3,124			321			14,573
	% Total Units		76%	21%	2%	100%			76%		21%	2%	100%

4

OPERATING PREVIEW

3Q21

LANDBANK

In 3Q21, 13 plots of lands were acquired, with a construction potential of 7,831 units and a PSV of BRL 1.7 billion (BRL 1.7 billion % Company).

The average cost of acquisition was equivalent to 13% of PSV, and 69% of the payment shall be made via swaps, which causes a reduced impact on the Company's cash position in the short term. It is important to mention that approximately BRL 627 million of the landbank acquired in 3Q21 is intended to Riva projects.

In 9M21, land acquisitions totaled a PSV of BRL 4.8 billion (BRL 4.6 billion % Company), with an average cost of 13% of the PSV, and with 72% of the payment to be made through swaps.

Direcional landbank ended 3Q21 with a development potential of 151 thousand units and a PSV of BRL 27 billion (BRL 25 billion % Company).

CASH GENERATION (CASH BURN) ¹

In 3Q21, there was a cash burn in the amount of BRL 23 million. In the last twelve months ended in 3Q21, there was a total cash generation of BRL 26 million.

It should be noted that the cash burn observed is due to the significant operational growth that the Company has been reporting, leading to a considerable expansion in the volume of launches, which more than doubled in 9M21 in comparison with 9M20.

In addition, we also highlight the importance of the strategy of anticipating the purchase of inputs before price increases, with the objective of mitigating most of the effects of the inflationary pressure that has been occurring in the country in recent quarters. This decision was crucial for maintaining the resilience of the Gross Margin that the Company has reported in the period.

Cash Generation by Quarter	Cash Generation by Year
(R$ million)	(R$ million)

63
									362
	15
				76	158					167	146
		-29	-23		53	38					26
								-71
4Q20	1Q21	2Q21	3Q21	2013	2014	2015	2016	2017	2018	2019	2020	3Q21
												LTM

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.

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