IRSA Inversiones y Representaciones SA (IRS) 2004 Q3 法說會逐字稿

Good morning and welcome to the IRSA and APSA conference call. [OPERATOR INSTRUCTIONS]. Now it is my pleasure to turn it over to your host Alejandro Elsztain. Sir, you may begin.

Thank you very much and good morning everybody. We'll talk about the nine months that end in March 31, 2004 when the net income was 45 million pesos. We had in these nine months, in this quarter a debt buyback of 12 million that we bought from HSBC at a 28% discount that was again continuing reducing our debt that today is at reaching what is the GAAP level of $90 million, today that level of $60 million.

We had in this quarter, a conversion of 7.5 as a result of the conversion of the bonds. So, we are issuing more and we are receiving cash from the warrant exercise too.

In the lines of business we calculated that Alto Palermo net income was 4.8 million pesos and that was an increase in the operating result 229% comparing year-to-year. A very good result in the Alto Palermo cases that is the largest line of business of IRSA. In the rest of the storage, start later, we began the construction of shopping center.

Alto Rosario is a big shopping center that was launched in the 4th of December of 2003 and will be open at the end of 2004 and is a near 30,000 square meters shopping center in the Rosario Province in the Rosario City sorry. In the shopping centers industry, the level of occupancy is still very high, a level of 99%.

We could be 100% occupied but will be deciding the tenants in each place. In the case of hotel shops, its again in a good shape and will talk later. And in the rental properties, we are recovering from the low levels of 72 to 78 this quarter.

So, this is going faster than what we thought after low prices but recovering from remember many quarters ago, the level was without like 60% until they were talking about 78% of occupancy.

So, the net results were at 45 millions comparing to last year where we were 265 millions. So, very lower in this year but financially explained because the last year, the main explanation was on the line of the exchange rate where this year worked against what last year worked in favor of the result.

This year, the financial part that explained part of the result was the gain in the Banco Poposario (ph) that was 57 million pesos comparing last year that we didn't have these results.

So, we will talk about the lines of business each of them will go directly first to the office where I explained the 78% comparing to 72. In the recovery, it shows small companies coming to the industry. They are not being operational they are only small.

At levels of $7, $8, $9 or $10, the first year and we are making scales going to nine or 10 when it comes from seven, so, an increase of a dollar per year, they are consultants for three years, that is their minimum period in Argentina. So, this business came from levels you remember in the past, we achieved like $18 million.

We went to the GAAP to near four and a half at lowest levels. Today we are levels of like $6 million a year are recovering. So, we think this is a business that is slowly recovering and shows that we have two good parts; in the revenues plus the reduction in costs of the vacancy.

So, this is giving better time but not like the revenue that the shopping center is giving. Going directly to that level, in the shopping center to be explained in the last quarter and we improved this quarter again.

The shopping center total revenue was 103 million that is 23% higher that the same period of last year. And with that we have the tenants' situation is really good. We are very liquid and they are very liquid. Their sales are growing amazingly. To give you an idea, we will grow in April 37%, year-to-year.

So, it shows that the recovery is still there and May is coming within very good numbers too. So, a lot of public in the shopping centers, that is making up to be very bullish, in the construction in the Rosario Project that will be open soon. Our tenants are asking for growth, they need to open more stores because their liquidity is amazing.

They come from very bad levels and today they are spending very good time. In the other hand, the 98.6% shows that we have no vacancy and we would like to have bigger shopping centers because we would full them too. The generation of cash was like a monthly average of 7.2 million pesos these nine months.

So, that shows like an EBITDA of 77 million pesos for the whole period. That shows the generation of cash that Alto Palermo is having remember that the total cash the total debt of the company to be left on $30 million so, that EBITDA of the year will be more than total debt of the company.

In the Targeta shopping the Targeta shopping is the company that comes from negative numbers to positive numbers. We have today 2.5 positives comparing to level of 4.4 negative last year that is a conversion of the business.

Customer consumption increased a lot we are issuing like 4,000 or more cards per month so that is not only in Buenos Aires, we went to Salta province, we are opening in other parts of Argentina and that is growing very well too.

In the Alto Rosario project, we began with a small project and we have to increase the size of that because our tenants have asked for bigger shops and we had a lot of demands that made us to open a big shopping center, we have cinemas that are coming with us, with a coastal supermarket that is coming with us too.

So, this would be an event at the end of the year and we are seeing that they will be appearing more opportunities of making more shopping centers using the free cash flows that the company makes. In the sales of lands, we have a small recovery I would say with the cash flow, two reserves of lands, one was Benevides that we have 100 hectares we had in the north that we sold.

We gave an option to a company and we brought back lands instead of that we received 110 lots in payment about of a million in cash, 110 lots to be sold. So we swapped instead of having land without any development to have 110 lots plus cash.

Other thing we did in this business was we sold in a 40% basis. One land we sold we had in Puerto Madero, so we gave them the reserve and they gave us 40% in plans in basis of fees apartment that they began few months ago.

And we are now closing another deal with more land reserve the company owns. So what we thought would take more time, the reserves came and we close two - we are closing one more, using land we have reserved in Puerto Madero area and we are waiting for the approval we are seeing for next semester.

Half of the year we will be working in Puerto Madero in sierra portivo la boca (ph) where we think we will receive soon the approval to construct so we are working with our group of management preparing to the launching of that project the second semester of 2004.

So, I think in the hotels which on top that this sector recovered a lot retained to levels to 72% occupancy coming from 65 last year so, this recovery driven mainly by the Llao, Llao. So the generation of cash of the three hotels is positive so the hotels are too in a very, very good shape.

We see here the EBITDA numbers that's 2.6 million in the case of the Llao Llao - sorry $0.9 million in the case of the shared delivered dollar, $1.5 million in the intercontinental and $2.6 million in the case of Llao Llao.

So the hotels are receiving a lot of tourism, plus the recoveries - small recovery of corporations scanning through the hotels of Buenos Aires to give you an idea of breakdowns in the Llao Llao case, we had 50/50% between tourists on Argentina and in the other tours the tourism is growing too.

So, the combination of both is giving a positive cash flow in the hotel sectors. Talking about financial I will introduce Gabriel Reznik, that is the the new Chief Financial Officer of the company that he will explain many of the transactions within his quarter.

Hi, good morning to everybody specifically speaking on APSA. We received a rate improvement from fee to Argentina on the local rating rational under that improvement is based on the consolidation on the grow past for the main benchmarks on the company activity, which are now over the precautions level.

Regarding its use per consolidation deal as a part of the strategic the company is having term of reducing its financial debts, a trend what acquired to HSBC bank $12 million, which belongs to the syndicated loan.

The loan that (inaudible) of $51 million with a final maturity in November of 2009. This deal was closed at $8.6 million where at 72 face value with a discount achieved of $3.4 million.

The procedure was the procedure agreed in the syndicated loan agreement and this acquisition was made final with the influence of the company received because of exercise of warrant, which were exercised at the end of last year.

Mainly the financial results have two main components at this stage. One is the result - as I mentioned link to certain holdings some investment that is perhaps and the other is the result link to the foreign exchange differential, which was significantly different to the previous year because of the dollar -- denominated that.

To finalize and summarize what we were talking we had nine months of very positive profits in the majority of our lines of business. Recovery in the worst likes profits that was at the work and is recovering from June to now.

We saw something that amazes it -- the real estate is a saving and we see a lot of Argentineans going to properties because we saw in the real estate case the neighborhood we made in the past how we were selling at levels of $80 or $90 per square meter coming from levels of 25 at the worst part of the crisis.

So, we saw how the level of real estate improved and how the asset value of this improved, and we see the land reserve, how they are paying out the Puerto Madero area, the projects we are launching. And so the asset evaluation improved a lot, IRSA owns a portfolio that today is very valuable and not repeatable and Argentineans are applying to this real assets like in the world usually happens the same.

A lot of investment is going to there and that's the reason why we can sell the lots in Baldovinos or the lots in Puerto Madero or why we think we will launched this year the sierra portivo la boca and in the service part, we see how Puerto Madero and Alto Palermo are selling a lot and making very free cash flow, very high - high free cash flow.

So, the nine months are very optimistic and we are seeing the growth that is very good here. We have that last evolution in the Alto Palermo state because we didn't convert when other investors compared the advance and may be we will revert that dilution next quarter that is an effect like 10 million pesos -- 11 million pesos dilution because we didn't converge with others converted.

So maybe this will appear in the last quarter and so, at the last quarter we have seen that all the lines of business will stay at very good shape.

So, we expect good results at the end of the year and we think we will be launching more projects of development like the Rosario project we did will grow using the cash we have on the pockets, very small amount of debt the company has, so we've seen it is a very good time for real estate company to think is up today.

So thank you very much for your attention, we'll wait for your questions if you have. Thanks.

Thank you. [OPERATOR INSTRUCTIONS].

Our first question is coming from Steve Trent with Smith Barney.

Good Afternoon gentleman. I have just a couple of quick questions for you. I was wondering, could you actually give us some sense of what is the breakdown of the quarter's financial income of 16.2 million pesos like what portion of it was actually bona fide net interest income and may be what was the remainder and I also wanted to ask, if you could repeat that which - what was the time frame around launching Puerto Madero, thank you.

The first question, we will answer by e-mail, they are for in the balance sheet and they know your name. So they will answer you by mail about the volume and I have not been here with the details.

The second one, we are thinking on the second semester from the government side we see that they have - they talked to us like they have approved it, but we did not receive the final paper.

So, we think we will be launching the project in the second semester of 2004, because of their comment but this verbal, we have no nothing within but in the government they talk about like it was approved. But we did not receive that paper.

So that's the reason we cannot confirm that up to now, but we are optimistic that we in the second quarter, we will be begin to show you exactly what will be the steps that we will follow to make all this 700,000 square meters of construction that we have to receive the approvals.

Oh great, Thank you very much.

With pleasure.

[OPERATOR INSTRUCTIONS].

You can answer the question of the 60 million here is coming to, sorry, although as Alejandro mentioned we are going to send you the detailed figures, just to give you good idea, we can say that about 20% of that amount is related to foreign exchange differences and the rest is directly a result of the holdings that IRSA has in its portfolio. Among them, is Banco Poposario holding

Are there more questions? Hello.

[OPERATOR INSTRUCTIONS]. We have a question coming from Daisy Siam (ph) with AITN.

Hi, this is Daisy Siam with AITN, Chile. I have a couple of questions. One is kind of a follow up from Steve Trends question on the Puerto Madero. Are you talking about Puerto Madero or are you talking about Santa Maria? I wasn't clear on that and then secondly I wanted to get a better feel on - you got a little bit better office occupancy in the first quarter. What do you think on pricing and when the expected pricing will start improve on the office sector?

We have talked about those in the Puerto Madero area we sold one lot we had and we received 40% of apartments in payment of that lot. That is Puerto Madero. We are launching a second project in Puerto Madero that is not optimal reflected but we are closing one deal of reserved land not sure in Puerto another lot we have in Puerto Madero.

What was the question before was about the (inaudible) the big lot of 70 hectares we have in the Puerto Madero area that is the big project of 700,000 square meters and that is the one we are waiting for the formal approval what we think we have not in written we have in verbal terms so, we are waiting for that approval to begin in the second semester of 2004.

In the case of office base, we talked about a recovery comparing last quarter to 72% to 78% and the price is per square meter are improving. We are renting in an average of today the average rent is like $7 per square meter 7.5 and the new rents we are doing today they are at levels of eight, seven, nine, one, we are using still of the first year at eight, second year nine, third year at 10. So, we see a small recovery remember in the past these levels were at $20 or $25 per square meter. So, we are third a half in the recovery that we are recovering from very low we were at five, now we are at seven, eight, we are going to 10 or 12.

Does that conclude your question?

Yes, thank you.

We have a question coming from Carlos Canon (ph).

Just a practical question. I was wondering in those who have asked in to sit in the pursued conference calls stay on the line.

That is for operator. The operator can connect directly or is to make another conference. I think you have to line in try to connect we are going to begin in five minutes the other one.

Great, thank you.

Do you have any closing comments or do you want to disconnect?

We appreciate your questions and we think that the assets the company owns they are very available and lets talk next quarter that's close of the year and thank you very much for your attention. Have a good day. Thank you very much.