Hovnanian Enterprises Inc., the Red Bank, N.J.-based homebuilder, fell the most since 2011 after Chief Executive Officer Ara Hovnanian said he was disappointed following a widening in the company's quarterly loss and drop in its profit margin.
The net loss for the fiscal second quarter ended April 30 was $19.6 million, or 13 cents a share, compared with a loss of $7.9 million, or 5 cents, a year earlier, Hovnanian said Tuesday in a statement. The homebuilding margin was 16.1%, down from 20.2%.
Hovnanian, the second-worst-performing company this year in a Bloomberg index of 22 homebuilders, has been adding more communities to benefit from the housing recovery and offering concessions to drive sales. Still, net contracts fell 0.7% in the second quarter from a year earlier to 1,796.
"We expected our second-quarter gross margin to be adversely affected by incentives and concessions on started unsold homes," Ara Hovnanian said in the statement. "However, the impact was greater than we anticipated and we are disappointed with our second-quarter results."
Hovnanian said the company owns enough land to further increase its community count and expects 2016 to be a "breakout year for deliveries and revenues, which should lead to a substantial increase in profitability as compared to recent years."
