Home builder Lennar Corp. lost nearly $200 million in the fourth quarter of 2006, but said it will boost earnings this year by cutting expenses and slowing the pace of home building by 20 percent.
Lennar’s fourth-quarter losses of $195.6 million, or $1.24 per share, compares with $581.2 million in profits in the same quarter of 2005. Earnings for the year ending Nov. 30 totaled $593.9 million, or $3.69 per share, down 56 percent from $1.34 billion in 2005.
President and Chief Executive Officer Stuart Miller said uncertain market conditions “make it difficult to provide a 2007 earnings goal” but that if unemployment and interest rates stay low — and the market for new homes “demonstrates traditional, seasonal improvement” — Lennar will meet or exceed last year’s earnings.
Revenue from home sales was down 14 percent in the fourth quarter of 2006 to $4 billion, the company said, largely due to a 4 percent decrease in the number of homes sold and an 11 percent decrease in the average sales price. For the year ending Nov. 30, 2006, Lennar’s revenue from home sales was up 17 percent from the year before, to $14.9 billion.
New-home deliveries decreased to 13,285 homes in the fourth quarter, from 13,851 homes last year, with an average sales price of $302,000, down from $338,000 in 2005. Sales price declined as Lennar offered greater incentives to home buyers — $47,300 per home delivered in the fourth quarter of 2006, compared with $10,600 per home delivered during the same period in 2005.
New-home deliveries for the year totaled 47,032 — a 15 percent increase from the 40,882 homes delivered in 2005. The average sales price in 2006 was $315,000, with an average sales incentive of $32,000, compared with $311,000 in 2005 when the average incentive was $9,000 per home.
Gross margins on home sales excluding inventory valuation adjustments were $576.6 million, or 14.4 percent, in the fourth quarter of 2006, compared with $1.3 billion, or 27 percent, in the same quarter of 2005. Gross margins for the year were $3 billion, or 20.3 percent, compared with $3.3 billion, or 26 percent, in 2005.
Selling, general and administrative expenses as a percentage of revenues from home sales increased to 12.1 percent in the fourth quarter of 2006, up 230 basis points from 9.8 percent in 2005. The increase was attributed to lower revenues and increases in broker commissions and advertising expenses, partially offset by lower incentive compensation expenses.
Loss on land sales in 2006 totaled $30 million, after $152.2 million in write-offs related to 24,235 home sites under option the company does not intend to purchase and $69.1 million of inventory valuation adjustments.