Toll Brothers issues sales warning

Click here to download Adobe Flash Player.

Stock prices are delayed 15 minutes. Source: Globe and Mail.

Toll Brothers Inc., the largest U.S. luxury home builder, said Wednesday it expects to report a 34-percent drop in third-quarter revenue, citing continued weakness in most of its markets.

The company also said it is "not comfortable" providing an earnings outlook given the current state of the market.

Toll said preliminary results for the quarter ended July 31 showed home-building revenue of about $796.5 million US, down from $1.21 billion in the year-earlier quarter.

Analysts on average had expected revenue of $717.6 million, according to Reuters Estimates.

Third-quarter backlog was down 52 percent to about $1.75 billion, while net contracts signed declined 35 percent to about $469.7 million for the quarter, Toll said.

"Our third-quarter results for revenues, contracts and backlog reflect the continued weakness in most of our markets," CEO Robert Toll said in a statement. "However, we believe there is growing pent-up demand from those who have postponed buying during the past three years."

The U.S. housing market has been in a tailspin for almost two years amid surging defaults on risky subprime mortgages, rising foreclosures, excess supply, lower prices and tighter credit conditions.

To navigate the downturn, most builders have focused on bulking up their balance sheets, accumulating cash and reducing debt while waiting for opportunities to buy land at a bargain.

Toll estimated third-quarter pretax writedowns related to operating communities, land and land options, and joint ventures to be between $100 million and $200 million.

The company ended the third quarter with about $1.5 billion in cash and about $1.3 billion available under its bank credit facility.

Third-quarter cancellation rate was 19.4 percent, down from 23.8 percent a year ago.

View all stories   |   View all clips