Homebuilder D.R. Horton expects higher 2012 profits on same sales volume
Homebuilder D.R. Horton (DHI) says it can make more profit in 2012 than it did in 2011 even though it expects sales volume next year to remain unchanged. On top of that, the Fort Worth-based company doesn't expect the nation's job market or consumer confidence to improve any time soon. D.R. Horton reported Friday that it returned to profitability in its fiscal fourth quarter and had a second consecutive year of profit as housing metrics improved slightly and controlled overhead. For the full year 2011, D.R. Horton earned $71.8 million, down 71% from 2010's net income of $245.1 million. On a conference call Friday, Chief Executive Donald Tomnitz said the company's optimism for next year comes from its plan to cull through underperforming communities and replace them with better communities, resulting in higher margins. "To the extent that there is more demand out there then we would expect our sales and closings to increase, but right now we plan on being more profitable on a similar number of closings and sales," said Tomnitz, who did not give specifics. "We're also leveraging through our selling, general and administrative expenses better as we look to where we're starting this year comparing to where we started last year," Executive Vice President Stacey Dwyer said on the call. Dwyer pointed to reducing debt as a way to higher 2012 profitability. "We're going to have less interest flowing through our income statement probably," she said. An 18% increase in D.R. Hortons's sales order backlog, helped by positive sales comparisons in the company's third and fourth quarters, has positioned it for a stronger start to fiscal 2012. They're also focusing on achieving more absorption per community, or the rate at which space is filled. "The key to making money is absorbing as much per community as you possibly can," Tomnitz said. Write to Justin T. Hilley. Follow him on Twitter @JustinHilley.