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D.R. Horton Posts Loss, Market 'Still Challenging'

D.R. Horton, the largest U.S. home builder, posted a bigger-than-expected quarterly loss as it wrote down the value of more holdings in a decimated real estate market.

The loss for the third quarter ended on June 30 narrowed to $399.3 million, or $1.26 per share, from $823.8 million, or $2.62 per share, a year earlier, the company said Tuesday.

Analysts had forecast a loss of 82 cents per share, according to Reuters Estimates.

This was the fourth consecutive quarterly loss for D.R. Horton, whose traditional customers are first- or second-time home buyers.

The company builds homes in 27 states with sales prices ranging between $90,000 and $900,000.

With foreclosures rising and home prices falling, the worst U.S. housing slump in decades has played a major role in the bankruptcy of three builders: Tousa, Levitt & Sons and, on Monday, WCI Communities.

The survivors have had to mark down the value of their inventories.

D.R. Horton's latest loss included $330.4 million in charges for inventory impairments and write-offs for land the company owns, but does not intend to develop.

In response to the deteriorating market, builders have shifted their focus from profit and growth to cash generation by ramping up incentives and selling the land and inventory they accumulated at peak prices during boom times.

At D.R. Horton, "cash flow generation remained strong," JPMorgan analyst Michael Rehaut wrote in a note.

D.R. Horton ended the quarter with $819.4 million in cash and cash equivalents, with net cash from operations of $1.4 billion for the year to date.

The company had set a cash flow target of $1 billion for the fiscal year and met the goal in its second quarter.

In May, the company cut its quarterly dividend to 7.5 cents per share from 15 cents to conserve cash.

Home-building revenue in the third quarter dropped to $1.4 billion from $2.5 billion a year earlier, as the number of homes sold fell 36 percent to 6,167.

Net orders fell 36 percent to 5,501, while order value tumbled 40 percent to $1.2 billion, the Fort-Worth, Texas-based company said.

The declining order trends point to more charges ahead, Rehaut said.

D.R. Horton shares were up 20 cents at $11.42 in early New York Stock Exchange trade.

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