IRSA Inversiones y Representaciones SA (IRS) 2021 Q1 法說會逐字稿

Good morning, everyone. I'm Santiago Donato, Investor Relations Officer of IRSA, and I welcome you to the first quarter of Fiscal Year 2021 Results Conference Call. First of all, I would like to remind you that both audio and a slide show may be accessed through company's Investor Relations website at www.irsa.com.ar by clicking on the banner Webcast Link. The following presentation and the earnings release are also available for download on the company website.

After management remarks, there will be a question-and-answer session for analysts and investors. (Operator Instructions)

Before we begin, I would like to remind you that this call is being recorded, and the information discussed today may include forward-looking statements regarding the company's financial and operating performance. All projections are subject to risks and uncertainties, and actual results may differ materially. Please refer to the detailed note in the company's earnings release regarding forward-looking statements.

I will now turn the call over to Mr. Alejandro Elsztain, Second Vice President. Please go ahead, sir.

Good morning, everyone. Welcome to our first quarter results. The main event that we can see in Page #2 related to net results. We can see that this first quarter IRSA achieved ARS 8.3 billion result, a decrease from the ARS 15 billion of last year, and comparing the net results attributable to controlling shareholders, we increased from 4.5% to 6.6% in this quarter. And related to the adjusted EBITDA, and when we compare to last year numbers, we can see a big impact, a big growth, 155%. This is -- we can here compare the regular segments decrease the pure rental of the package went down mainly because of the explanation of the shopping centers and the hotels, and an increase, there is a positive number in the office, but making a decrease of 96% comparing year-to-year.

From other side, we had the ability to sell some of our properties at very good prices. We are going to explain later. And with that, we make like a ARS 4.8 billion gain that makes this jump in the adjusted EBITDA for the quarter. Related to the main and subsequent events of this quarter, in September '20, this core decreased the insolvency of IDB, and the liquidation and the group lose the control and proceedings to the deconsolidation of these financial statements. So this is -- that was done now. The Greenvielle shopping centers reopening after the lockdown for almost 6 months, now in October '20, 100% is open of our stock of the 14 shopping centers.

From office sales, we achieved ARS 170 millions in a combination of first quarter and some other that we're going to explain later in the second quarter of this year. Related to the hotels, in Buenos Aires city, our remained the 2 are closed. Llao Llao has recently opened this week. So this is the beginning, still for locals, but beginning for the future for tourism for the region. Relating to the cancellation of our notes, of July and August, we successfully exchanged the offer done in November notes under Argentine Central Bank communication, and Matias will later explain in details how successful it did IRSA in that restructuring of those bonds canceling this year.

Related to distribution of dividends, this week, the company is distributing shares of IRSA Commercial Properties for a dividend of ARS 484 million in kind. We can move to -- now to Page #3, and we can see about the Argentine rental segments, the 3 lines, shopping centers, office buildings and hotels. Related to shopping centers, the stock remains the same, occupancy is almost the same with almost 93%, with some big players leaving the country that is affecting our occupation. But we are -- thanks a lot of work of the team, we are recovering a lot of small tenants trying to occupy what big tenants are leaving. Related to the first quarter, there is a slight recovery in the first quarter, only 4% of the malls were opened. But now after these days, Buenos Aires region, Buenos Aires city and the greater Buenos Aires, open too, and this is main sales for our company. So we are very optimistic that the second quarter sales are recovering, not to the prices and the sales that the past, really the beginning of the sales is tough, but we are beginning to see comparisons and some of the shopping centers that they began to open in May, June, the first ones, now they are surpassing the sales of the past in historical numbers. But we are seeing maturity on the sales of the shopping that they stay open.

We decided the wave of billing and collection of base rent and commercial fund from April to September, supporting tenants, and we understood the mission of the company to keep occupation and to keep alive the experience, and that was done through helping and subsidizing them to their survival and that's what the company is doing. And with that, collecting much better, and now we are surpassing the billing because supporting them, and they are now selling their pain past -- the past sales -- the debt that they had with us. From the office building segment, here, we have the stock that is decreasing because of the sales I'm explaining on the next page.

The occupation is almost the same, close to the 92%, higher than the levels of Buenos Aires city, the average rent a little drop, small drop to the $26 per square meter. The operation in this business is almost normal. There is less occupation of the buildings and the site. The tenants are coming with this capsules, but they're still paying normally. And we are little slight increase in vacancy, but above the average of the market. Related to the Della Paolera, the construction was suspended for many months, but now we're established and a few days from now, we are going to open that building and not only that, we are on moving our office to this office in the month of December. So the progress is almost done, 97% of the work is done. The leases, 61% are signed, and the second quarter is the opening of this building.

Related to hotels, these stocks are the same, the 3 hotels. Occupations is close to 0. They were closed, the 3 almost closed. The shutdown since March of the Intercontinental already working with under contingency with some travelers that almost closed, and the other 2 were closed. But this week, Llao Llao, November 16, reopened its stores, and now under strict protocols, we are beginning to see occupation, and we are optimistic the Argentinians and tourists enjoying the quality of this resort in Patagonia. So with these communications, I can move to Page #4 and see the first quarter sales of the Bouchard 710, the entire building for this $87 million, 15,000 square meters returning us internal rate of return, combining the prices of sales and by -- and the rental of 16% in dollars since this time, we sold at $5,800 per square meter, and we sold some floors in the Boston Tower in the first quarter, 7,500 square meters for a price for $41 million, $5,500 per square meter. After that, in November, we sold 7 floors more, 7,100 square meters of leasable area for $42 million that they're going to come in the next quarter. And with that, we are selling a total of $170 million, that was a big portion that was paid on the note of the quarters that expired.

So now I will introduce Mr. Matias Gaivironsky.

Thank you, Alejandro. Good morning, everybody. If we move to Page 5. Here, we have the recent news about the investment in IDB. As we mentioned in the previous quarter, at the end of fiscal year, we had a resolution on the charge there in Israel that instruct insolvency and the liquidation of the company. So the impact in this quarter was the deconsolidation. We started today consolidate all our investment in IDB this quarter. Remember that in the last quarter, we already gave impact on the solo balance sheet on all the investments. So we marked down to 0 all our investment in the solo balance sheet. This quarter, we have to give impact on the deconsolidation that under the accounting rules, there were some reserves like conversion reserves or controlling reserves that we have to right down to 0 as well. So this quarter, we are recognizing ARS 6.3 billion in the decontinuated operations and the rest of the lines from now on are at 0.

The liquidation process was taking place in Israel these days. So yesterday was a resolution on the selling of the VAC shares to a third party. So we are analyzing if we have any legal proceeding to try to execute something more there, but the recent news are the liquidation and the disposal of the DIC shares there. If we move to Page 7, we have here the P&L of the company for this quarter. There is still the division between the Israel business center and Argentina business center for the last time that we are showing the 2 segments. From now on, we will start to show all the Argentina business segment. So we can see the result that we finished the quarter with a net income of ARS 8.3 billion attributable to our controlling interest, 6.6% against 4.5% of the previous year. The main explanations of the quarter are -- the first one came in the line 4, the change in the fair value that we can see a gain of ARS 24 billion against ARS 12 billion of the previous year. This is basically the recognition of the appreciation of our offices and land bank because of the exchange rate. Shopping centers remain at the same levels than the previous quarter. The second important impact is in the line 10, the net financial results that we can see ARS 11.4 billion of loss last year against ARS 1.1 billion this quarter, that I will explain with better detail in the following pages. And then the other important effect is in the line 11, the income tax that you can see that is more related to the deferred tax that is according to the change in the fair value, we have to recognize the deferred tax on that appreciation, but it's a noncash effect.

Finally, the other effect is what I mentioned about IDB in line 15. We have the result from discontinued operations that this quarter, we are recognizing a loss of ARS 6.3 billion or ARS 6.4 billion, against a gain last year of ARS 13.9 billion related to the deconsolidation of one of the subsidiaries of IDB. If we move to Page 8, we can see a breakdown on the operational side in the adjusted EBITDA. This quarter, we have a negative result in the shopping malls with most of our operations closed until September. So we still have a very effective from the COVID situation. Offices, we have here a decrease, 32.9% in real terms. The main reasons here are, last year, we have 1 effect of the devaluation that in real terms, we have a devaluation of the peso and we have all our agreements in dollars. Also, we have some effect on the disposals of offices that we have now lower square meters than before and some increase in the vacancy that generate this drop of 32.9%. The hotels is the same then the shopping malls, all the operation is closed up to now. So we don't have basically revenues in the hotel. And the sales and development is related to the disposals of the offices that Alejandro mentioned, that in the adjusted EBITDA, you know that we eliminate always the appreciation of the fair value of the properties, but when we sell, we show the result in the adjusted EBITDA. So the ARS 4.9 billion is generated by those disposals.

If we move to Page 9, we have the breakdown of the net financial results. As I mentioned, and you can see on the bottom of the page, the evolution of the exchange rate, last year we have a real devaluation of 20.5% and this quarter, the valuation was almost the same than the inflation. So we don't have a real devaluation, and that impact directly in the line 2, the net foreign exchange that you can see last year that generated a loss of ARS 9.1 billion and this year, is only ARS 159 million. Then in the net interest loss is similar than the previous year, 7.2% below the result. This is basically some reduction in debt. And also that this year, in terms of devaluation, we don't have the devaluation and last year it was more significant. The other effect in the net financial results is in the line three, the fair value gain from financial assets and liability that this year, we have a gain of ARS 816 million related to our liquidity and the investment of our liquidity that generated profit this quarter.

If we move to Page 10, we can see how our NAV is today. We can see that gross asset value of almost $1.8 billion, this is in dollars, and is all divided by the official exchange rate is $1.8 billion against a debt of $429 million, that give NAV of $1.3 billion that if we compare or we calculate the LTV is 24%. So we can see that in terms of leverage, the company has low leverage compared with other real estate companies in the world.

In Page 11, we have disclosed in the previous communications, the impact on the resolution of the Central Bank, the Resolution 7106 that force the companies with debt maturities between October and March, to refinance part of the debt in order to be able to acquire dollars at the official exchange rate. Basically, what the Central Bank rule is that they will only sell up to 40% of the amount that expire. And basically, the company has to refinance the rest. That was a very big challenge for us because this was a note that we issued in Argentina. If you see in Page 12, we have an expiration of the debt of $181.5 million. And so what we did basically was we created a structure where the holders can choose between 2 options. The option A gave the alternative to receive the cash. So we put all the cash that the Central Bank allow us in this option. And the option B was for the ones that prefer or to maintain the credit and not collect money today.

So we were very successful in the exchange, 98.31% of the people approved the offer. So the rest, since we have here a CAC clause at the same time of the exchange, the holders gave consent to rescale the rest to 2023. So with this, we restructured 100% of the notes and and you can see that in the option A, people that choose to receive cash at the end of the day, received 67% of the original amount in cash and only refinanced 33%. And the rest of the people that choose option B that we issue a new note that will expire in March 2023. Also, together with exchange, we did new issuance, and we received subscription for $6.5 million that also is a large, the option or the one -- the new one of option B. If we see the debt amortization schedule now in Page 14, we can see that before this exchange offer we have concentrated most of the amortization in 2020. Now the situation of 2020 was already clear and now we have more diversified the amortization between the following 3 years. So now the debt situation of -- sorry, of IRSA is more clear. We can see that the gross debt of ARS 428.9 million as of September. But after that, IRSA, will receive around $95 million from the dividend that IRCP will pay in the, I think, it's next week. So during the year, we can sell the 2 previous notes on July, we cancel one for $71 million and almost another one for $41 million. Now with this exchange offer, we canceled $72 million additional. So the company was able to fulfill all the obligations and also reduce the cost of the interest rate because before we issued $2 linked notes at a cost below the previous debt. And so we were efficient also in the new conditions. Also it's important to mention that the shareholders meeting approved a dividend distribution that we did it in IRCP shares. So last -- or this week, we distributed 1.2% of the IRCP shares. That was approved by our shareholders' meeting.

So with this, we finished the formal presentation. Now we open the line for a Q&A session.

(Operator Instructions) If there are no questions, we conclude the Q&A session. At this time, I would like to turn back to Mr. Alejandro Elsztain for any closing remarks.

Just to summarize, we have seen through the presentation how good is now the financial situation of the company. How successful was this restructuring through all the year, through sales and through issuing new bonds, now the portfolio is almost the same between what we built and what we sold. We are balancing the portfolio with the same shoppings and the same office. We have a lot of land bank to begin to build using this opportunity that the construction cost is giving to the country. And so you are going to see us finishing in the next quarter the Catalinas building and to begin to think and to share about new investments in the country. And from the other side, with the reopening on the rental through the shoppings and the hotels, we are beginning to see, again, EBITDA in our main activities.

So only for thanking, everybody. Have a very good day and safe with these COVID times. Thank you very much.