IRSA Inversiones y Representaciones SA (IRS) 2007 Q4 法說會逐字稿

Good morning. My name is [Showana], and I will be your conference operator today. At this time I would like to welcome everyone to the IRSA Fourth Quarter Fiscal Year 2007 conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks there will be a question and answer period.

(OPERATOR INSTRUCTIONS).

Thank you. It is now my pleasure to turn the floor over to your host, Mr. Alejandro Elsztain, director of the company. Sir, you may begin your conference.

Good morning, everybody. We are going to talk about the close of the fiscal year 2007, what we think was a very good year, and we are going to enter to a very deep presentation that explains each of the lines of the company. The year was very good in the whole segment, and we are going to see that in the rental part we were very -- we were near full in all of the segments. In the land reserves, the appreciation of the land was huge and so we can see that IRSA spent -- and Argentina, mainly, spent a very good year. So I will invite Mr. Gabriel Blasi, our CFO, and David Perednik, our Chief Administration Officer, to talk about them, and I will talk a little later.

Thank you very much, Alejandro. Good morning, everybody. We are starting with some [macro] of Argentina and we are going in detail over our result. As you know, Argentina continued to grow at a steady rate as in the last four years, and 2007 has not been an exception to that.

We -- going to the next page, page three, we have a positive balance of [trading] which have shown also significant recovery, and the composition of [exports], as you can see from the right graph, continued to be a very, very importantly [fueled] by the agriculture mainly, but also we have important share of industrial manufacture, which is having a positive impact in the labor occupancy.

Going to next page, it's important always the situation that the surplus, fiscal surplus and the current account surplus, although we are in our election year with a huge, of course, expenditure increase, together with the level of research keep the country safe to any type of external potential hazard.

Going to the next page, we continue to see a positive evolution of [underemployment] and inflation evolution for last year in the range of ten years. This year the expectancy is moving towards a 10% to 15% level of inflation.

Moving to the next page, it is important to address the increase of wages which is having a significant impact, particularly on consumption ability and also in the ability of the people to buy houses. There you can see in the graph (inaudible) -- you can see from the left graph the general level in red and the private register in blue, which is, of course, the highest increase since 2002. The considerable confidence in this continues to be very high especially considering that we are in our election year. We have elections in the next month.

Regarding the foreign exchange rate, is important already the situation and the peso is [devaluating] in real terms both considering against inflation, and also against the basket of currencies which Argentina creates the biggest part of its foreign trade.

Investment in real -- in residential construction continues to grow, and the local [sewage] supply has increased up to the beginning of this year to 30%, showing a best situation for this business and having a positive impact in the real estate evolution.

Regarding the energy issues, you have some data here including which is the gap that is presenting. We can say that if no type of measure has been taken, which by the way is not the situation neither in our case or neither in the governments. For instance, the government has limited the ability of certain industries to produce in certain times of demand of the days with significant reduction. But leaving aside that, if the demand trends continue to grow exactly the same and no measure is taken by any of the parties, the total impact of that in our case would be, at most, 15% of decrease which, as I mentioned, is not the case as both the company and the government are taking different type of measures to cope with this energy situation.

Regarding the fiscal 2007 highlights, the net income amounted to ARS170 million so an increase of almost 11% compared to the previous year, EBITDA was 8.5% higher than in the previous year, occupancy reached 97% with an average over 99% on the year, with sales of 24% increase of the state of our developments in the Shopping Centers, and the operating income of the Shopping Centers grew 18% to ARS125 million almost for the period.

In 2007, the income from Sales and Development was ARS75.8 million and we acquired the property of Vicente Lopez to develop a large-scale project with the new business model, which we are going to [restart]. The office buildings occupancy continued to recover reaching 97.3% during 2007. The revenues of this segment increased 92%, as we are going to see, and the revenues in the hotel segment increased by 18% for the period. We had significant increase in the average price per room to ARS469 from ARS379.

Now, David is going to explain out the main highlights of our income statement.

Good morning. Net profit of 2007 increased 11% from ARS107 million compared to 2006, ARS96.5 million. The operating result decreased 2% in 2007. It was ARS198.5 million compared to ARS201.6 million in 2006, but we have had increases in almost every line of our business.

In office rents, we have had an increase of 63% in the operating result comparing year-to-year, in Shopping Centers we have had an increase of 18%, in Hotels an increase of 0.7%, in our Credit Cards operation, Tarjeta shopping, 31.4%, and only in our Sales and Development segment line we have had a decrease in the operating result of 86%.

We have -- if we want to see exactly the operating result without having the effects of previous fiscal years, if you remember we have [added] in 2002 in the [cause] of Argentina, we have made an impairment on our fixed assets almost ARS120 million in that year, and we have been recovering this impairment every year. Last year, in 2006, we recovered ARS12 million compared to ARS2 million this year. So, if we see the operating result without that effect of ARS10 million, and also this year we have make a technical study in our amortization, and in the useful life of our office buildings, and on now for hotels that increased the amortization, and with an impact net of 8.2% -- ARS8.2 million, a total of ARS18.2 million towards the operating result, we see that we have an increase in our operating result, without these two effects of different adjustments, of 7.5% comparing to the year 2006.

Going into the different segment lines. In the Development and Sales of properties the revenues decreased 27% from ARS104 million to ARS75.8 million in 2007. This -- the line of sales was composed by revenues of ARS31 million for the sale to third parties of 10% of Santa Maria del Plata, revenues of ARS26.2 million from the sale of [block Z] from [job 3], revenues of ARS8.6 million from the sale of unit of San Martin de Tours, and revenues of ARS8.4 million of the sale of Edificios Cruceros. The operating income of this segment line Development and Sales decreased 86% from ARS44. 5 million to ARS6.2 million in 2007.

Going into the Office segment line, the revenue from our Office increased 82% going from ARS30 million in 2006 to ARS55.7 million. This evolution of the Office revenues is due to a 5.1% increase in the average occupancy rate, also in the inclusion of two buildings that we bought this year, Dock del Plata and Bouchard 551 occupied both 100%, and the almost full occupation of the building located in Reconquista 823. We have also had a 108.7 increase of the annual rents. We have mentioned acquisition of the two new premium buildings that increase our leaseable areas of class A buildings 53% from 78,000 to 119,000 square meters.

Going into the cost of the Office segment, this increased from ARS9 million to ARS16.7 million. The principal cost component in this segment is the depreciation of the buildings which I have already mentioned. This [tenure of title] we made produced a decrease in the remaining useful life from an average of 41 years to an average of 21 years, and the difference in the amortization was of ARS5.8 million. The operating income arising from the Office segment increased 52.5% from ARS12 million to 19.6 million.

Going into the Shopping Centers segment line, revenue from our line of Shopping Centers increased 25.7% from ARS215 million to ARS270 million in fiscal year 2007. This is a consequence of 18% increase in the average price per square meter, and also of the 24% increase in the total sales of our leases which increase from ARS2,273 million to ARS2,825 million in 2007. With respect to the operating income of the Shopping Centers, increased 18.2% from ARS105.6 million to ARS124.8 million.

Going to the hotel lines, the revenues from our hotel operations increased 18.2% from ARS103.8 million to ARS122.7 million in 2007, principally due to an increase of 23.7% in the average price per room from ARS379 to ARS469 in 2007. The cost of the hotel operations increased 19% from ARS85 million to ARS69 million, and this higher cost can be explained mainly by the increase in the asset depreciation that -- which produced a decrease in the remaining useful life of the hotel from an average of 34 years to 17 years, with an impact of ARS2.4 million in the cost. The operating income increased from ARS14.6 million in 2006 to ARS14.7 million in 2007.

With respect to our Credit Cards operations, the revenues increased 73.2% from ARS123 million to ARS213 million in 2007. The selling expenses [door] increased 100% from ARS30.9 million to ARS62 million in 2007, due to increase in advertising cost of ARS12 million and increase in bad debt of almost ARS12 million, and a charge -- an increase on -- in the turnover tax of almost ARS6 million. Operating income of the Credit Cards segment increased 31.4% from ARS24.8 million to ARS32.6 million.

If we go to the gross profit line, we had an increase of 28% from ARS333 million to ARS427 million in our income statement. We have an increase in our selling expenses of 89% from ARS60 million to ARS113.7 million. We had also increases in our administrative expenses line of 46.7% from ARS96.4 million to ARS141.4 million.

The operating income, as I already mentioned, slightly decreased from ARS201.6 million in 2006 to ARS198.5 million in 2007. Financial results decreased from a loss of 40 -- from a loss of -- sorry, increased the result from a loss of ARS41.4 million in 2006 to revenues of ARS4.1 million. That's an increase of ARS45.5 million. And this was due mainly to an increase of ARS40.4 million that were -- which were generated as a result of financial operations, a positive exchange difference of ARS12.1 million due to lesser depreciation of the Argentine pesos towards the US dollar in 2007, ARS9.9 million due to higher results of interest gains, and ARS16.5 million for we have higher interest expenses in interest from our financing debt.

The equity gain from related companies decreased 3.9% from a gain of ARS41.7 million in 2006 to a gain of ARS40 million in 2007, which came from mainly a decrease of ARS5.7 million in the gain of Banco Hipotecario from ARS47 million to ARS 41.3 million. And the income tax and asset tax is showing an increase of 48.9% from ARS58.5 million to ARS87.5 million. This is coming mainly from an increase of ARS23.6 million in the expense for the income tax of IRSA from ARS4 million last year to ARS27.6 million this year, and also an increase in Alto Palermo tax from ARS48.5 million to ARS56.3 million, and in the end the net income of our company increased 11% from a gain of ARS96.6 million in 2006 to ARS107.1 million in 2007.

If we go to the EBITDA of our different segments, lines of the company, we have had a total EBITDA increase of 8.5%, and going into every line we have had an increase in the Office line of 96% to the EBITDA, in Shopping Centers an increase of 20%, the Hotels increased in EBITDA 13%, our shopping business -- shopping card -- sorry, Credit Cards business increased 32%, and we have had a decrease in our -- only a decrease in the sales of developments in our EBITDA of ARS38 million.

Thank you, David. Going to next page, [divisions were up] as David explained. The main highlight is the positive evolution of all the business lines in step with [tighter] developments but with finance increases in sales of 28% and 29% in EBITDA, as David has shown.

Moving to the next slide, there we want you to [note] change in our P&L statement to have a better view of that. If you consider the EBIT of 2007, less ARS3.1 million negative, with a depreciation of ARS26 million, that David has explained, EBITDA for the same period of ARS23 million, and the breakdown that shows, except the (inaudible) evolution of Sales and Development and the positive outlook of all the business lines. As we have already stated, we are going to refer to the effective Sales and Development later.

Going to next page, just a review of what David explained regarding the evolution of sales and EBITDA, with a positive evolution of all the business lines, with the exception of development. You see there the very positive outlook and evolution of the Offices, also in the Shopping Centers, also in sales and EBITDA in both cases. In the [Tarjeta], which is very significant and important -- sorry, as we are going to see, there is very important increase in sales and an increase in EBITDA from one year to the other, and in Hotels there is also a positive trend with the result that we have already seen in [Tarjeta].

Moving to next page, page 15, you can see that we consider that still there is room for a very positive outlook in the real estate market in the country. As we know, we have a very low level of leverage and significant room for high quality [mortgage origination] in an environment where the salaries have recovered very significantly.

Moving to next page, going to the [Tarjeta] business, it's important that as we have seen from our income statement, the impact that [Tarjeta] is having in the figures of Alto Palermo when you look at the contribution that it is causing in the use of figures through Alto Palermo, [Tarjeta] in 2006, this is page 16, contributes 36% of the total sales and the shopping 64%. In the case of 2007, this has improved to 44% and 56% of the shopping. This is mainly because the revenues of [Tarjeta] increased 73% versus the Shopping Centers revenues, 25% of growth. When we look at the EBITDA margin comparison of the two years you see that shopping's EBITDA margin was 73.7% in the previous years, 70% in this year, [Tarjeta] 20.8%, 15% in 2007, but the difference in the contribution and the different in the mix ends with a shopping [power plant Tarjeta], EBITDA contribution combined of 54% plus 46%.

Moving to the next page we have the (inaudible) evolutions in the Shopping Centers where the positive trend continues. The base rent reaches 15% of the total. The percentage rent, 20% of the entire speed that we charge to the renewal of the leases, 13%. As you can see here, there are no major changes in the structure of the revenues of the Shopping Centers business.

Moving to the occupancy rate, 99% in the period, (inaudible) of 97% for the whole year. The Shopping Centers business unit, EBITDA increased 15% [positive attribute]. That means that figures including [Tarjeta].

Regarding the significant investment in 2007, we acquired, as you remember, main shopping in the city of Cordoba, Cordoba being one of the three biggest cities in the country, and we have executed a significant part of the remodeling plan that we have already disclosed and discussed with you as part of the use of proceeds of the net issued by Alto Palermo.

We have also started the construction, on page 20, of the biggest shopping mall that we are planning to launch in Panamerican [as part of the] main business to [Alcoshush], to the city of Buenos Aires, the capital city of the country where you can see development of the project in there.

On page 21, the project in [Lopez] that we are also launching in one of the most important cities in Patagonia, and Caballito, which we are -- we have beginning to establish a project but no construction has started yet there.

On page 22, the portfolio of shopping centers with the inclusion of the new ones that we are constructing will increase its capacity of the (inaudible) almost by 23%.

On page 23, we can see the evolution of [Tarjeta] there we see that the four years' evolution of the [EBITDAs] of the company is more than 450% increase. More than 700,000 [classes] issued showing the excellent momentum that the company is having, the significant increase in sales with a delinquency rate that is basically very aligned with market evolution and compared with the peers of Banco Central de la Republica Argentina, having [accepted the] situation as the average of the market.

It's important to address that the company is analyzing some type of major moment regarding [Tarjeta]. This is some type of strategic alliance to continue the development of the company.

Going to the [built] office business, there you have the market evolution and we have [frequency] show to you. We have reached 20% of market share in the AAA business and 20% in the AA segment of the market. The company is, as we discussed in the year, continuing the expansion in this segment as to the shopping mall segment.

Now going to last page, page 25, you see the evolution as David has mentioned. We are (inaudible), and the rate that we perceive during this fiscal year showing that the recovery that we expected is well on track. Page 26, the acquisitions that we made during the period, where mainly the Bouchard, [most of you know it as the] Edificio La Nacion, Dock del Plata located in Puerto Madero. Page 27, the option to [regulator] and Dique IV is the new building that we are starting the construction in Puerto Madero area.

Going to the Hotels, page 28, we have already started contribution of the business. We are well on track with the refurbishment of the (inaudible). There you have the [tender] for the new rooms under construction in the Llao Llao.

If we move to the next page, you see in page 29, the picture of the construction with the raising of the project below the [real] hotel will be finished by (inaudible). One investment we made in the region is a strategic plot that we acquired very close to the present Llao Llao, with the ability to construct another important project in that beautiful area of the country.

The rest on page 31, the rest of the projects that we have, with the evolution, you already know this, we are going to go over this very quickly, and we [sent a lot of exposure] that we started first with acquisition of the plot and we started with the last movement under construction. This project will imply the first person with the new business model that we are launching for this segment of business.

The little -- the last result that we have just for information, and going to page 35, there you have the plot that was approved with (inaudible) remember that Dock del Plata has the 70 hectare property in Puerto Madero, expanding the [prior] authorization of the Chief of the government of the city of Buenos Aires by (inaudible), we have assigned 35 hectares of the land for public places such as park, boulevards, and [waterfalls] which are mainly all the green areas located in the borders of the property. As you can see, that's the plot that was discussed with the authority. The company has sold 10% of the project to realize an evolution of $100 million to remain industry player, a sister group is also our partner in Llao Llao and is the owner of the [Delgar] Hotel, the (inaudible).

Regarding our debt situation on page 36, you have there the total [debt fees] of almost $250 million but the net debt, considering the comparables of the cash of $141 million is almost $50 million to be received from the exercise of the warrant attached to the convertible note, and regarding Alto Palermo we have a present debt of $188 million after the issuance of the note that we issued in May and in June, but the net cash position of the company is $37 million. This funds are going to be used for the investment projects that we have already discussed.

The next page, page 37, we see the debt profile of maturity. The most relevant is the maturity 2009 of the [FRM] loan that we have that was issued several years ago of $43 million. As you can see, the company has been very strong and well-financed structure.

And if we move to the next page, page 38, we have the evolution of the share base of the company. We are almost in the process of finishing the convertible note. The reduction has almost been completed. It's important to address with that also the evolution almost doubled the amount of shares, the share price from the beginning of the issuance of the convertible note and the issuance of the corresponding share. As of yesterday, the price has increased 173% although the amount of shares almost doubled. It's important that we have [pending] to receive $52 million from the warrant of -- and the -- that as you can see this is going to be completed by November of this year, probably before that too.

Thank you very much. Now Alejandro is going to talk.

We were -- we enter very deeply in each of the lines and I would like to stress and point many -- point, in the case of Tarjeta Shopping, Gabriel explain how it grew and you know that companies like that, they are only showing their cash flows generation but not their growth, and this company almost doubled its size, and its capitalization but none of that --

(technical difficulty)

Ladies and gentlemen, this is the operator. Today's IRSA teleconference will resume momentarily. Please stay connected on line. Until that time you will again hear music.

(OPERATOR INSTRUCTIONS).

(technical difficulty)

(spoken in Spanish)

Operator, are you there? Hello?

(spoken in Spanish)

Operator? Hello?

(spoken in Spanish)

I can hear you.

Ah, yes, thank you very much, because the operator seems to be sleeping. We don't know where (inaudible) and we are going to go to the Q&A, maybe if you can make us (inaudible) Alejandro will directly make a comment on the perspective for the company.

Okay. It's actually Ian Kirk from Raymond James here. Hi, how are you all today?

Fine, thank you.

Okay, look, I just have two questions. The first question is, can you tell us anything about, now that (inaudible) has been elected as mayor, and he's going to start in December, can you say anything about what this means for Santa Maria del Plata, and whether you're more optimistic or less optimistic, or what the new mayor means for your project in Santa Maria del Plata?

And the second question is just regarding -- you know that I'm looking at your quarterly results, so I break out your annual results to your quarter results, and I just noticed that the margins on the EBITDA, the EBITDA margins on the shopping and on the hotel segments fell a little bit, so I'm guessing that your costs, your operating costs in the shopping and the hotel segment in the fourth quarter went up, and I just wonder if you can tell me, you know, confirm that and tell me a bit about your operating costs, and if you're seeing some inflation or some effects that are pushing your costs up?

Can I ask you where we finished to know where -- what was the last page you hear from us, to be sure what you hear?

We got through the end, and Alejandro was just about to -- just starting to talk, and then it dropped.

Okay, so I didn't talk. Okay, I will do that. I will summarize what I talked alone, because we can't [stay here] for five minutes more, and I, after the whole [residential] we may, and after I will answer your two questions. But first I will summarize what I did. But we hear about the growth of the year, and in many of the segments, like the (inaudible) shopping segment, we saw only the results, but we don't show what was the growth of the companies, near doubling the size, because [it all goes to the expense]. So the capital is still essential in many of the companies, and the real estate was huge, and was not reflected in the balance sheet. This year, 2007 is the beginning and 2008 will be more a year of construction. (inaudible), we were mainly buyers. We bought almost all the buildings, shopping centers, all these buildings. But this year we are launching the shopping centers (inaudible), and we are launching a deal at the end of the year (inaudible) shopping centers.

In the office buildings, we launched a month ago at the office building in Puerto Madero and we launched besides a shopping center (inaudible) an office building, too. And in the hotels, we are opening a new hotel this year. So the company is beginning to transform (inaudible) purchases (inaudible) construction. We want to keep the market share in the segments we have, and will also keep by buying and building. And as we lead in office buildings, we bought almost all of the properties were in the market were those of (inaudible), and the same in the shopping centers.

In the case of the (inaudible) development, that was the only line that explained losses compared to the last year. The explanation that was a decision that the company made, instead of swapping our land reserves, we decided to keep the land to make a new company that we will launch this year. We are bringing an international player to make a residential company that will be making in large scale for all the segments of the market in Argentina, that will be very, very happy in residential, something that IRSA was not involved last year, but will be in the near future. But the explanation why that segment doesn't explain gains, but will come in the future we are going to launch, and we are planning to launch our first project, (inaudible) this year. So the showroom of that project will be in 2007.

A part of what I said, we are thinking in an international expansion. The company is thinking now in going to the region using the (inaudible) we made in the last ten years, and to expand the scale of the company, not only Argentina, but in the rest of the region. So something that will be in the market, we think, very soon.

Really we got, I said, what I said before, so I will answer your two questions, about (inaudible) and Santa Maria del Plata. We hope that (inaudible) will come in December, will be approving, because the technical approval (inaudible) this year (inaudible), is the part of the government of (inaudible) to decide, and this (inaudible) the (inaudible) that (inaudible) for ten years, and (inaudible) this year approved. So, the only thing today is meeting (inaudible) the last part, and we expect to be (inaudible) a number of options. We expect that (inaudible) and (inaudible) man that was building of new neighborhoods, and we open the neighborhood that he wants. In fact, we had a closed neighborhood that we accepted to give (inaudible) and (inaudible) [percentage] of the [budget] of the property to this city. So we think there are not any more barriers to this project, so we expect to have that to be approved very, very soon. And we have a good relation with (inaudible) you know since a long time ago, and we expect that this government will approve this project, too.

In the case of the costs, David will explain.

With respect of the [difference] that you are telling us in the hotel segment, the difference comes mainly from the decrease in the years of useful life of our hotels. If you see the fourth quarter, we isolate in that respect of ARS2.4 million, the gross margin that dropped from 38% to 32%, a 6% decline, is increasing without that effect of the (inaudible), 2.5% from 38% to 40.6% in 2007. That's the answer to your question about the hotels. And in shopping centers, in the fourth quarter, we had almost -- we had an impact of the (inaudible), that means, if you remember my explanation, we have a recovery in our impairment of the losses that came from the 2002 prices of ARS9.5 million, that in the fourth quarter, if we adjust that line. And also we have -- we are improving the building of our shopping at Alto Palermo, and we are spending ARS6 billion that are affecting the operative costs. The change in the margin would be from a loss in the fourth quarter of 5.5% from 63.5% to 58%. We go to a 9.4% increase in our operative result from 33% to 43%. Okay? If you want, we can send you a mail explaining (inaudible) these differences.

Next question, please? Hello? Hello? Operator? Operator? [Showana]?

(OPERATOR INSTRUCTIONS).

Our first question is coming from (inaudible) Romano, with Altima Partners. Please go ahead.

Good morning, it's Michael Holman here from Altima. I'm just looking at your fourth quarter '07 results, this is page 21 of your release. You've talked a little bit about the selling and admin expenses. I just wanted to confirm the Hotels and the Shopping Centers. Those, call-it one-offs, are going into the SGNA line?

Michael, repeat the last part?

The question is, I'm looking at the fourth quarter '07, or selling and admin expenses, are almost ARS87 million. There were ARS42 million in the first quarter of the year, and about ARS62 million for the second and the third quarter. When you're talking about the lowering the useful life of the hotels, and the asset impairment, is that reflected in selling and admin expense line?

No, no, no. (inaudible) One is being reflected in the cost, in the line of cost. That's the difference in the depreciation. And the other is a separated line in our financial statement, if you see, it's, let me check, on page 11, it says we saw from operation and holding of real estate assets, that's where we show the impairment, regarding 2006, we have 12.6, and in 2007, we have 2.5.

All right. And could you explain for the fourth quarter your financial result net was negative almost ARS20 million, and then your income tax was ARS31 million, more or less, which actually was greater than your ordinary income. Could you explain those two line items, please?

The income tax is increasing because we are -- because of the impact of the deferred tax. As you know, we are accounting the income tax as a result not only of the taxes paid, but also of the taxes that are accrued by the method of deferred tax. And in the case of the operation of Santa Maria del Plata, the sales that we made to our affiliated company. We have incurred in the deferred tax of almost ASR12 million, okay? And the (inaudible), that was accounted in the fourth quarter.

Okay.

And I guess -- could you just give us an overview, I think your EBITDA increased year-on-year about 8%, and I think you've done a good job of explaining the effect of sales on development, but could you explain why your net cash provided by operating activities has fallen 16%?

(inaudible)

(inaudible)

Michael, I will tell you later the explanation.

Okay. Thank you very much.

That's it from me. Thanks.

(inaudible) I will ask --

Thank you. Our next question --

Our next question is coming from Steven Trent with Citi. Please go ahead.

Ah, yes, good day, gentlemen. Some of my questions have already been answered, but just one or two additional questions. The first is also getting back to EBITDA. You know, you explained that some of the fiscal year 2007 was one-time, the accounting changed, you took some charges from the acquisition of [Cordoba] shopping mall, etc. What is your expectation, broadly, for 2008, as you shift from purchaser to builder? What should be the EBITDA trend?

And to build on the previous question, how should we think about the effective tax rate going forward? Thank you.

Okay, the first part about what will be the company next year, the growth, the two shopping centers we're (inaudible) under construction until (inaudible) 2008. These (inaudible) will be, it's a two year construction, so you won't see the EBITDA in next year, so we will see only the EBITDA of the existing. The only change will be that [Cordoba] was half a year, next year will be all through the year. Last, (inaudible) of each of them and we're fairly sure of them that will increase, they're (inaudible), so the growth of next year will be only from purchase if they can. After now, we didn't close any purchase, that will be (inaudible), but we're (inaudible) you know, the company intends to keep these, and we're going to try to buy what we find for (inaudible), and a good price we're going to buy it. We have the cash, we -- the company has the cash after the [launch], that we should be (inaudible) so we have the intention of continuing purchasing. That is, the construction will take us two years more.

The other question (inaudible)? We (inaudible).

Certainly, Gabriel, I was just curious about taxation. How should we think about the taxation going forward as the company, for example, shifts from more of a purchasing phase to more of a building phase? How should we think about taxation going forward, and perhaps the potential impact from an asset tax standpoint?

Oh, this is a -- we don't expect significant changes in taxation. The only comment I would make, and it is a general comment (inaudible) foreign corporations in Argentina, is that during this fiscal year, the fiscal year (inaudible) all the tax grades that were -- the tax losses that were generated by the losses during the crisis. You know that (inaudible) tax losses lasted all six years, and that's (inaudible) affecting the market. So while I will say that, regardless, the results of any company, that's a general situation for all the Argentine market in terms of significant tax variation. In terms of our results, we will continue with the same taxation for final results of today. As you can see that the (inaudible) are generating positive results in all the (inaudible).

Okay, thanks very much.

Thank you. (OPERATOR INSTRUCTIONS).

As there are no further questions, I would like to turn the call back over to --

Okay, thank you very much, gentlemen. We (inaudible) are glad to finish the conference call, saying (inaudible) here, and we expect a much better (inaudible) next year, so (inaudible) third quarters of 2007-2008.

Thank you very, very much, and have a good day.

Thank you. This concludes today's IRSA conference call. You may all disconnect, and have a great day.