Toll Brothers Profit Drops on Writedowns, Weak Demand (Update2)

Toll Brothers Inc., the biggest U.S. extravagance homebuilder, said financial third-quarter net income drop 85 percentage as the deepening lodging slack cut gross sales and forced the company to compose down place values.

Net income in the three calendar months ended July 31 declined to $26.5 million, or 16 cents a share, from $174.6 million, or $1.07, a twelvemonth earlier, the Horsham, Pennsylvania-company said today in a statement. The norm net income gauge of analysts surveyed by Bloomberg was 2 cents a share.

Five of the biggest U.S. housebuilders reported combined losings of $1.85 billion and took complaints of $2.9 billion to compose down land values and walk away from place options in their most recent quarters. The limited handiness of ``jumbo'' mortgages of more than than than $417,000 and higher involvement rates are cutting the figure of purchasers for Toll, which sells places at an norm terms of more than $600,000.

``It's pretty ugly out there correct now,'' said Dave Crossman, senior research analyst at Kirr Marbach & Co. inch Columbus, Indiana. ``They're doing about as well as they can.''

Toll rose as much as 4.6 percentage before the unfastened U.S. trading. The shares gained 96 cents to $22.05 at 8:09 a.m. inch New York. Kirr Marbach pulls off about $571 million in assets and owned about 380,000 shares of Toll as of July 31.

Weak Demand

``We go on to wrestle with the interconnected challenges of softer demand and extra lodging supply in most markets,'' Head Executive Military Officer Henry Martin Robert Toll said in the statement.

While the company have got been helped during the downswing by edifice places only when an order is received, ``we have experienced a much higher charge per unit of cancellations than at any clip in our 21 twelvemonth history as a public company,'' Toll said.

Net Income included a pretax writedown of $147.3 million for land, developments and options. Gross dropped 21 percentage to $1.21 billion.

The uncertainnesses surrounding sales, mortgages and possible hereafter complaints intends Toll is ``not comfy providing fourth- one-fourth counsel at this clip or confirming any former guidance,'' Head Financial Military Officer Joel Rassman said in the statement.

The weakening lodging marketplace is reducing economical growing and forcing detergent builders to cut new place terms and offering gross gross sales inducements such as as free cellars to seek and encouragement sales.

Toll shares drop 93 cents, or 4.2 percent, to $21.09 in New House Of York Stock Exchange composite trading yesterday. They're toss off 35 percentage this twelvemonth through yesterday, compared with a 41 diminution in a Standard & Poor's measurement of homebuilding companies.

Housing Glut

Henry Martin Robert Toll said on Aug. Eight that tightening recognition criteria are cutting the pool of possible buyers. A oversupply of new and existent places for sale and prospective buyers' inability to sell their existent places is reducing demand. Consumers are also holding off on purchases on concern terms will fall further.

``Our purchasers generally should be able to go on to procure mortgages, owed to their typically less loan-to-value ratios and attractive recognition profiles,'' the chief executive officer said in today's statement.

U.S. place gross sales dropped to a four-year low in the 2nd one-fourth as terms declined in a 3rd of U.S. cities, according to the National Association of Realtors.

A recognition crunch that began when subprime borrowers began defaulting have also distribute to prospective purchasers with even the best credit. Companies including elephantine mortgage specializer Thornburg Mortgage Inc. have got stopped loaning after investors in the $2.2 trillion U.S. commercial-paper marketplace refused to purchase the short-term debt that it used to finance loans.

`Quick Delivery' Homes

``It's certainly not something that's going to assist them,'' Crossman said. ``What you're seeing is an overreaction in the recognition markets.''

Toll is advertisement ``quick bringing homes'' for sale in many countries of the country. In Phoebus Beach, Florida, south of Tampa, it's trying to sell a 3,883 foursquare foot, five-bedroom, five-bath place with a three-car garage for $619,975.

Such places include those that clients planned to buy, only to call off their orders. Henry Martin Robert Toll graded the Tampa marketplace an ``F-minus'' on the company's conference phone call on Aug. 8.

Toll shares were downgraded by Banc of United States Securities analyst Daniel Oppenheim on Aug. Twenty to `` sell'' from neutral.''

The company may see cancellations addition and gross sales borders narrow as the recognition crunch curtails possible buyers' entree to mortgages, Oppenheim said. The analyst cut his terms mark on Toll shares to $19 from $29.

To reach the newsmen on this story: Brian Joe Louis in Windy City at
; Simon Peter Woodifield in Edinburgh at
.