Ryland continues turnaround, with profit up 36% Strategies, more sales spur quarterly results

Homebuilding

October 23, 1998|By Kevin L. McQuaid | Kevin L. McQuaid,SUN STAFF

The Ryland Group Inc., continuing a financial turnaround, yesterday reported that its third-quarter net profit climbed 36 percent.

The Columbia-based homebuilder attributed the increase in net income -- to $9.2 million, or 61 cents a share, from $6.7 million, or 42 cents a share -- primarily to improved sales in new communities, higher profit margins, lower interest rates and the effectiveness of its land-buying and new-product strategies.

Ryland's revenue in the quarter was $462.2 million, a 10 percent gain from last year.

The improved results came despite a $3.3 million extraordinary loss from the extinguishment of debt, which clipped net earnings by 23 cents per share. In July, Ryland redeemed $100 million in notes that were due in 2002 in favor of debt carrying a lower interest rate.

Excluding the charge, Ryland made $12.5 million, or 84 cents a share, considerably more than the 67 cents a share expected by analysts surveyed by Zack's Investment Research.

"We are very pleased with the results of our drive to increase shareholder value through profitability improvement in our core operations," said R. Chad Dreier, Ryland's chairman, president and chief executive.

"The success of our strategies -- improving our land positions and product lines, effectively controlling costs, and establishing leadership positions in each of our markets -- is evident in our strong earnings results. Our current outlook for the fourth quarter continues to be positive."

In the three months that ended Sept. 30, Ryland's homebuilding pretax earnings totaled $25.1 million, more than double the $10.5 million it generated from home sales in the comparable period in 1997 and the highest for the third quarter in Ryland's history.

Ryland also reported that its gross profit margins from homebuilding -- a key industry gauge of performance -- rose to 16.3 percent, from 13.4 percent a year ago. The gain marked the fourth consecutive quarter that Ryland's gross profit margins were up, the result of sales in new communities and overall market conditions.

The company's number of backlog sales in the quarter also were up 16 percent from the same period in 1997, to 3,831 units, and backlog sales reached a contract value of $738.3 million, a 22 percent gain. The average outstanding contract price was $193,000.

Closings rose in the quarter by 9 percent, to 2,361 units carrying an average price of $187,000. New orders were up in every part of the country except the West.

In the first nine months of 1998, Ryland's net income surged 84 percent to $22.7 million. Revenue in the period rose 6.4 percent, to $1.2 billion.

Meanwhile, housing gross profit margins averaged 15.3 percent, up from 13.3 percent a year ago.

Ryland's common stock closed unchanged at $23.0625 per share yesterday.

Pub Date: 10/23/98

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