Hovnanian Sees Wider-Than-Expected Loss As Demand Remains Weak
Hovnanian Enterprises said on Friday its second-quarter loss would be bigger than it had previously expected, as the subprime mortgage crisis exacerbated weakness in the moribund home-building sector.
The luxury home builder said it expected to post a loss of about 30 cents per share before certain land-related charges.
It had earlier forecast the loss at 5 cents to 20 cents.
After the charges, the company expects to report a loss of 45 cents to 50 cents per share.
The company expects to incur about $15 million to $20 million of pretax charges for land impairment and write-offs of predevelopment costs and land deposits in the second quarter.
Analysts expect a loss of 16 cents per share.
"The adverse publicity surrounding the subprime market has further damaged home buyers' psychology, resulting in decreased demand and leading to continued use of sales incentives," Hovnanian said in a statement.
The company said net contracts for the quarter fell 21%, and home deliveries sank 30%.
In March and April, consolidated net contracts fell about 30%, compared with a 3% increase in February.
Cancellations were 32% of gross contracts, down from a rate of 36% reported in the first quarter.