As expected, McMansion builder Toll Brothers (TOL) reported a steep loss this morning, and the company declined to give guidance for 2009.
One thing Toll has going for it is its cash. It’s got $1.6 billion, a $1.3 billion credit facility and no public debt maturing until 2011, so it handle several more quarters of $80 million losses. Hence its market cap is still $3 billion, and its only 32% off its year highs.
The good news for Toll is that if it can survive, it’s likely to come out the other end in an industry with far few players. Said CEO Bob Toll:
As we look to the future, we see reduced competition from the small and mid-sized private builders who are our primary competitors in the luxury market. Their access to capital already appears to be severely constrained. We envision that, in the future, there will be fewer and more selective lenders serving our industry. Those lenders likely will gravitate to the home building companies that offer them the greatest security, the strongest balance sheets and the broadest array of potential business opportunities. We believe a less crowded playing field, combined with attractive long-term demographics, will reward those well-capitalised builders who can persevere through the current challenging environment.
As for the new government efforts to spur the housing market by lowering interest rates, Toll sounded pretty cautious:
Two days before Thanksgiving 2008, the U.S. Government announced a plan to aid the housing market by pumping hundreds of billions of dollars into the mortgage market, an action that significantly lowered mortgage rates immediately. Perhaps this initiative, which is a positive first step, combined with already dramatically improved affordability, will be a catalyst to stimulate customer demand, stop the decline in house prices and restore confidence in the new home market.
Not exactly the ringingest comments, but it’s something.