Industry News
Lennar Posts Second Quarter Profit, But New Orders Fall
07/01/2010
MIAMI -- Lennar Corporation, one of the nation's largest homebuilders, reported a $39.7 million profit during the second quarter, compared with a $125 million loss for the same period a year earlier. The company said revenues, however, fell 12% to $694.8 million. New orders also declined.
Stuart Miller, President and Chief Executive Officer of Lennar Corporation, said, "During the second quarter, we continued to see a housing market that was trying to stabilize. As expected, this stabilization process was impacted by the expiration of the Federal homebuyer tax credit at the end of April. As a result, our new sales orders for the quarter were down 10% from the prior year, with the entire decline coming in the month of May. While we were disappointed with the slow down in new orders in May, we believe that this will be temporary and that the market will improve in the second half of 2010. The tax credit expiration accelerated sales activity to the pre-May period and it may take a couple of months for demand to rebuild, driven by tremendous home price affordability and historically low interest rates."
Mr. Miller continued, "We have remained focused on improving our core business and returning our company to profitability in 2010, and are very pleased to report earnings per share of $0.21 for our second quarter. Over the past several years, we have made great strides in lowering our construction costs and repositioning our product offering to target first-time and value-focused homebuyers. We narrowed our focus to concentrate on generating strong operating margins and became less focused on driving volume. We have made significant progress on right-sizing our business and have aggressively reduced our overhead structure. As a result of implementing these strategies, our operating margin improved to 6.7%, the highest margin since the third quarter of 2006."
"Along with the improvement in our core business, our Rialto Investments segment has already started to contribute to our bottom line results. During the second quarter, our Rialto Investments segment generated $5 million of operating earnings primarily from the FDIC loan portfolios acquired in the first quarter. We expect this segment to be a growing component of our operating earnings in the future."
Mr. Miller concluded, "We have achieved year-to-date profitability through our second quarter. Although challenges still remain in the housing market, we believe that our core businesses are on the right track to achieving sustainable profitability. With our strong, liquid balance sheet, we are in excellent position to capitalize on future high-return investment opportunities."