Hovnanian to Exit Some Markets as Loss Widens

Hovnanian Enterprises Inc. posted a wider quarterly loss on charges related to the home builder's exit from the Minneapolis market.

Shares of the Red Bank, N.J., company fell 8% to $1.62 in recent trading.

"Rather than focusing on additional revenue growth beyond 2016, we now plan to focus on deleveraging our balance sheet and maximizing our profitability," Chairman and Chief Executive Ara Hovnanian said in prepared remarks Wednesday.

Mr. Hovnanian said that as part of the strategy, in addition to pulling out of the Minneapolis market, the company also decided to exit the Raleigh, N.C., market and plans to wind down operations in Tampa, Fla., and the San Francisco Bay Area after delivering homes in its existing communities.

"We are confident these decisions will lead to continued efficiencies and ultimately improved financial performance, " Mr. Hovnanian stated.

For the fiscal first quarter ended Jan. 31, Hovnanian reported a loss of $16.2 million, or 11 cents a share, compared with a year-earlier loss of $14.4 million, or 10 cents a share. The latest period included charges of $11.7 million, or 11 cents a share, related to land held for sale in Minnesota. Revenue climbed 29% to $575.6 million.

Analysts polled by Thomson Reuters expected per-share loss of three cents and revenue of $580 million.

Hovnanian delivered 1,422 homes in the quarter, compared with 1,149 homes a year earlier. The number of consolidated net contracts rose 16% to 1,531 homes, while the dollar value of the contracts increased 25% to $628.6 million.

The quarterly cancellation rate was 21%, compared with 18% a year earlier. Home-building gross margin, excluding certain items, fell to 16.6% from 18.2%.

During February, the number of net contracts improved 11% to 600 homes and the dollar value grew 28% to $262.4 million, the company said.

Hovnanian also affirmed its guidance for the fiscal year ending in October.

Write to Tess Stynes at [e-mail]

(END) Dow Jones Newswires

March 09, 2016 10:35 ET (15:35 GMT)

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