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Lennar Results Suffer in Housing Slump

Reuters
Thursday, 26 Jun 2008 | 7:12 AM ET

Lennar, the second-largest U.S. home builder, Thursday reported a smaller quarterly net loss on lower expenses, but the results were worse than expected as deliveries and new orders tumbled.

The net loss narrowed to $120.9 million, or 76 cents per share, in the second quarter ended on May 31 from $244.2 million, or $1.55 per share, a year earlier.

Analysts had forecast a net loss of 59 cents per share, according to Reuters Estimates.

Revenue fell 61 percent to $1.05 billion, in line with analysts' estimates.

Selling, general and administrative expenses fell by $238.9 million.

Deliveries of homes fell 60 percent to 3,830, new orders slipped 45 percent to 4,396 and the cancellation rate was 22 percent.

The value of Lennar's backlog sank 56 percent to $1.3 billion.

Lennar Chief Executive Stuart Miller, citing rising foreclosures and unemployment along with sagging consumer confidence, said the industry needed government help.

"With the U.S. housing inventory growing in excess of absorption and limited credit availability, the prospect of further deterioration in the home building industry will likely become reality absent federal government action," he said.

"We are hopeful that the federal government will acknowledge the need for further reform and will institute programs designed to stabilize and facilitate the recovery of the housing market," he added.

The U.S. Senate was expected this week to approve the biggest government program yet to tackle a deep housing market slump, but a lone Republican lawmaker has vowed to block the bill until he gets his way on renewable energy tax credit legislation.

"I don't have any problem being an obstructionist when you're trying to do something really good," Sen. John Ensign of Nevada told reporters, leaving Democratic and Republican supporters of the housing bill frustrated.

The bill would create a multibillion-dollar fund to help hundreds of thousands of troubled homeowners refinance their costly, exotic mortgages into more affordable loans backed by the government, if lenders agreed to take a loss on the loans.

Lennar ended its second quarter with about $880 million in cash and no outstanding borrowings under its credit facility, but market conditions are tough.

The company said the average sales price of homes delivered had fallen 8 percent so far in 2008.

"We recognize that the remainder of 2008 will likely see further deterioration in overall market conditions," said Miller, adding that the company is positioned to "navigate the current market downturn as a leaner and more efficient home builder."

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