Year in review: 2006 was a year of pulling back for Standard Pacific.
Amid a housing slowdown, the homebuilder saw a decline in the number of homes it sold,the first after years of gains. Standard Pacific sold 10,763 homes in 2006, a 5.7% drop from a year earlier.
The company saw both demand and new homes delivered slow last year. Standard sold 2,703 homes in California last year, 14.6% fewer than in 2005. Its Southwest region,Arizona, Texas and Colorado,was the only one to see an increase in sales, up about 12% to 4,066.
Florida and the Carolinas saw a nearly 20% decline to 3,718 homes sold.
Still, revenue for the year was off a mere 1%. The company posted a fourth-quarter loss of $98.4 million on slowdown-related charges, versus a profit of $154.9 million a year earlier.
Standard chalked up the loss to land it hasn’t been able to build on.
“The sudden and swift decline in demand in most of the major housing markets across the country last year gave rise to significant price reductions and incentives to move inventory, which quickly eroded our margins and triggered asset impairments and land deposit write-offs,” Chief Executive Stephen Scarborough said in a release.
The homebuilder’s been cutting back drastically. It took hits on sales of land for less than what it paid and on fees to walk away from projects it had committed to.
Looking ahead: Prospects for a quick rebound haven’t come in early 2007. Scarborough said in February a full recovery could be a year or two off.
New home sales for February and January were down 19% from a year earlier. Meanwhile, order cancellations for the two months fared slightly better at 24%, versus 26% a year earlier. But Florida and Arizona remain weak, the company said.
Even so, Standard recently gave a brighter picture than Wall Street had expected for 2007. It said sales for the year could come in at about $3.3 billion. Profit could be $110 million. The company said it could sell 8,700 homes this year.
Wall Street had expected much weaker sales of $2.25 billion.
The question for Standard, as for several homebuilders, is whether there’s more slowing ahead and how much will the subprime mortgage meltdown will impact business.
Wall Street’s take: In a word, uncertain.
Standard’s shares are off 22% so far this year. They’re down 29% in the past 12 months.
“Lower homes prices will lead to more write-downs at the homebuilders, which are taking impairment charges on land as they slow their production machines,” wrote Daniel Oppenheim of Banc of America Securities.
Still, he reiterated his buy ratings on a couple of homebuilders, including Standard, which he said was trading at a discount to book value.
,Alisha Gomez
WHO’S IN CHARGE
STEPHEN SCARBOROUGH
Chairman, chief executive, Standard Pacific
Joined company: 1981
Education: bachelor’s, master’s in business from USC
Career: Joined the Orange County division of Standard Pacific in 1981 as president, managing operations in Orange, Los Angeles, San Bernardino and Riverside counties. Elected president in 1996, appointed chief executive in 2000, chairman in 2001.
Notable: Downturn is no surprise. In 2004, Scarborough told the Business Journal he didn’t expect a downturn at that time but had a plan for one that called for paring land buying and cutting back on building.
Headquarters: 15326 Alton Parkway, Irvine
Employees: 2,367; 374 in OC
Business: homebuilder
Market value, as of April 2: $1.3 billion
2006 revenue: $3.96 billion, down 1%
2006 net income: $123.7 million, down 72%
