| Listening in on Big Builders’ Strategies |
| Written by Jonathan Smoke | |
| 07.09.2007 | |
Discuss this article on the forums. (0 posts) In our Builder News section, there are always multiple transcripts of investor conference calls and presentations to analysts by the public builders. These transcripts are great for staying abreast of what’s going on with the big builders. It’s also a great way to understand their business strategies.The transcript from KB Home’s Q2 Earnings Call from the end of June was published last week and it reveals a clear, smart strategy that the builder is following in this market, and it also shows that the company is making opportunistic investments. Jeff Metzger, President & CEO of KB Home outlined several well-defined operating strategies that the company initiated in 2006 and according to Metzger are now “sound and paying dividends.” “Being much more selective in land investments; a focus on reducing the cycle time to build a home; lowering the direct costs of construction; aligning our overhead cost to projected revenues going forward; and generating free cash flow with a strong and liquid balance sheet.”
My favorite quote from Mr. Metzger was a description of their selectiveness in land investments that clearly revealed that KB Home is seizing investment opportunities as they appear: “We are well positioned for reinvesting in our business as attractive land transactions become available. For example, earlier this month, we approved a land purchase from a bank for 139 finished lots in foreclosure adjacent to an open KB Home community. We will sell from our existing models. The lots were purchased on a take-down schedule tied to current market absorptions with a small deposit at 34% lower lot costs and homes that can be priced to the income level of the buyers. We expect more of these type of opportunities to come our way over the next several quarters.”
Other parts of the call, especially in the Q&A, revealed an aggressive approach to “retool” their products to enable lower costs and prices so that target customers can afford their communities and homes. This is another clear sign that the company understands it must change in order to meet the challenges of the current and future markets, where affordability and tighter credit standards stand as significant obstacles. KB Home is revealing through their actions and strategies that they are a company that understands the value of intelligence. 
We're always looking for feedback from our readers.
|
| < Prev | Next > |
|---|
