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Toll's Orders Plunge, Forecasts Larger Land Writedown

Toll Brothers Inc. reported a 33 percent plunge in first-quarter orders and said land writedowns will exceed earlier forecasts. The shares fell as much as 5.4
percent.

Orders declined to 1,027 units and homebuilding revenue slid 19 percent to $1.09 billion in the three months ended Jan. 31, Horsham, Pennsylvania-based Toll said today in a preliminary earnings statement.

Toll, the largest U.S. builder of luxury homes, said land writedowns could rise to $160 million after earlier forecasting a charge $60 million. Chief Executive Officer Robert Toll said the company is abandoning parcels “because some deals don’t make sense under current market conditions.’

“It still shows that demand is weak, especially at the high end of the market,’ John Tomlinson, an analyst at Majestic Research in New York, said in an interview.

Orders for Toll, whose houses cost three times the U.S. median, have fallen as its inventory of unsold homes swells. Lennar Corp. and D.R. Horton, the two largest U.S. home builders, have reported profit declines as incentives failed to stem cancellations and sales slumped the most in 15 years.

Shares of Toll fell $1.28, or 3.7 percent, to $33.15 at 10:31 a.m. in New York Stock Exchange composite trading, after earlier falling to $32.57. A Standard & Poor’s measure of 16 homebuilding stocks dropped 3.2 percent.

Cancelled Contracts

Hovnanian Enterprises declined as much as 5.2 percent. Lennar dropped as much as 2.8 percent. D.R. Horton fell as much as 3.2 percent.

Toll said 436 customers, or 30 percent, canceled contracts in the first quarter, down from 585, or 37 percent, in the previous three months. A year earlier, there were 151 cancellations. There was a net decline of 33 percent to 1,027.

Writedowns of the company’s land holdings will “significantly’ exceed previous estimates, the company said.

The average price of a Toll home that closed was $676,523 in the quarter, down 0.5 percent from $680,149 a year ago.

Toll’s backlog, the number of units ordered that have not yet been sold, totaled $4.15 billion at the end of January, down 30 percent from a year earlier.

Demand in a number of markets picked up in January and the first week in February, Toll said.

Improving Markets

The “pace of cancellations is starting to abate,’ Robert Toll said in the statement. “However, we are still well above the company’s historical average of about 7 percent.’

Markets in Hoboken and Jersey City in New Jersey and in Manhattan and Brooklyn were quite strong, Toll said.

“Some markets, such as Detroit, Minneapolis, Chicago, Reno and parts of Florida may not yet have stabilized,’ he said

Toll canceled about 3,800 land plots in the quarter and now has 70,000 under its control, compared with 91,200 at the end of April last year.

Revenue fell short of the average estimate of $1.12 billion by 10 analysts surveyed by Bloomberg. Toll plans to publish its earnings Feb. 22.

New Century Financial Corp., the second-largest home lender to the riskiest borrowers, said yesterday it may report a loss for last quarter and will restate other 2006 earnings after not setting aside enough for repurchases of so-called subprime loans it had sold. The shares plunged as much as 29 percent.