Luxury homebuilder Toll Brothers Inc. warned Thursday that revenue in fiscal 2009 will be significantly lower than in 2008, despite ending the year with a slightly narrower quarterly loss.
The Horsham, Pa.-based company managed to stem its red ink by taking fewer write-downs on land holdings. Early in the quarter, company executives were optimistic the housing market might be stabilizing, but that soon faded as the U.S. financial crisis worsened in September.
The ensuing fallout, including a sharp stock market plunge, scared off many well-to-do buyers of high-end homes.
Faced with some risky economic decisions, consumers need a compelling reason to jump back into the housing market at a time of uncertainty and falling home values, said Chief Executive Robert Toll.
He praised a proposed initiative for the Treasury Department to lower the rate on 30-year mortgages to 4.5 percent.
"A program like that would go a long way to soaking up excess (unsold home) inventories, assuming buyers had the equity to meet program parameters," Toll said. "Low interest rates clearly help price affordability."
Investors betting on hopes of more government housing aid helped push up Toll Bros. shares by $1.32, or 7 percent, to $20.55 on Thursday.
There were few bright spots in Toll's year-end results to inspire such a boost in the company's stock. For the quarter ended Oct. 31, Toll lost $78.8 million, or 49 cents a share, including $175.9 million in before-tax write-downs. That's slightly better than the loss of $81.8 million, or 52 cents, on $314.9 million write-downs in the fourth quarter last year.
Revenue fell to $698.9 million from $1.17 billion a year ago.
Analysts surveyed by Thomson Reuters expected a loss of 46 cents per share on revenue of $681.4 million.
Toll ended the fiscal year with more than $1.63 billion in cash and over $1.32 billion available on its multi-bank credit facility, which matures in March 2011. Toll said it has no public debt due until its 2011 second quarter.
Completed sales contracts for the quarter slid 27 percent to $266.7 million, while backlog dropped 54 percent to $1.33 billion. The cancellation rate dipped to 30 percent from 39 percent last year, but rose from 19 percent in the third quarter.
Looking ahead, the builder said it expects revenue next year will be well below fiscal 2008's $3.16 billion, but declined to give investors any forecasts, citing the uncertain economy.
In a research note, Soleil Securities analyst Anna Torma said she expects Toll will continue to face write downs in coming quarters, but "we believe the annual magnitude will be less than in 2008, unless we see an extended severe recession."
Toll estimates it will deliver between 2,000 and 3,000 homes in 2009 at an average price between $600,000 and $625,000 each. It expects costs to rise, due to continuing incentives and slower sales.
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AP Business Writer Jennifer Malloy Zonnas contributed to this report.
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