IRSA Inversiones y Representaciones SA (IRS) 2025 Q2 法說會逐字稿

Good morning, everyone. I'm Santiago Donato, Investor Relations Officer of IRSA, and I welcome you to the second quarter of fiscal year 2025 results conference call. First of all, I would like to remind you that both audio and a slide show may be accessed through the 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. If you want to make a question, please use the chat.

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. Matias Gaivironsky, CFO.

Thank you, Santiago. Welcome, and thank you for joining us in this presentation of our second-quarter 2025 results. Let me summarize the main events of the quarter. During this six months period, we reported a net loss of ARS41 billion, mainly explained by a noncash effects of the appraisal of our investment properties. Our shopping malls have shown a steadily recovery in occupancy and tenant sales.

We have also completed the acquisition of our 16 mall Terrazas de Mayo in Greater Buenos Aires. In the Office segment, we have achieved a full occupancy of our premium portfolio. About our Hotel segment, after a record high during the last year, this year, we are seeing weaker results, both in occupancy and revenues. Also, we have achieved a major milestone with the sales of the first two plots of our main project, Ramblas del Plata, but Jorge will explain that later. Finally, during the last quarter, we pay again dividends with a yield of 8% plus shares in treasury.

So now let me introduce Santiago Donato, our IRO, to continue with the presentation.

Thank you, Matias. Here, we can see on this page, page number 3, the evolution of real tenant sales in the last years in our shopping malls and occupancy rates as well. As Matias mentioned at the very beginning, our shopping malls keeps recovering on a quarterly basis. They increased by 21.4% on the second-quarter '25 compared to the previous quarter, but still 8.5% below compared to the same quarter of last year. The positive news is that we are starting to see positive numbers in recent months, so we expect that the next quarter, the third quarter of 2025 is going to be really good. So prospects are positive in line with the economic and real wages recovery in Argentina.

In terms of the stock, as you can see there, we incorporated to our portfolio a new shopping mall this quarter, Terrazas de Mayo, that then Jorge Cruces will explain a little bit more about that acquisition, adding almost 34,000 square meters of GLA to the portfolio. Occupancy remained quite very high and stable at levels of almost 98%, but grew compared to last quarter, last quarter was a little bit down. This figure, we are excluding here Terrazas de Mayo as it -- we have recently acquired.

Terrazas is occupied at 82.3%, but we expect to improve its occupancy level in the upcoming months. The plan there is to do a turnaround and an improvement in tenant mix and occupancy and profitability that then Jorge will explain better.

Moving to next page. Here, we have the office operating figures. We have been selling some additional floor. We sold one floor more of Della Paolera in the last quarter at very competitive prices. So we currently manage a portfolio of 58,000 square meters of GLA, mostly A+ and A category.

The great news is that we fully occupied that portfolio. That premium portfolio will reach 100%, mainly due to the full occupancy at that building. So there is a return to office to work in the country, and we are seeing very good occupancy levels in the whole industry, even though our portfolio is above the average of the market.

And in terms of rents, we are similar levels, quite stable in levels of $25 per square meter per month. And to finish the rental part, we have the hotels. The hotels has represented a challenge this year after two years of boom and record EBITDA and occupancy. The tourism activity and hotels activity in Argentina is facing the context of the appreciation of the Argentine peso compared to the dollar and lower influx of international tourism in the country. So you see occupancy a little bit down compared to last year from 70% -- almost 72% to levels of 67% and rates per room also decreased a little bit, except in Llao Llao that we reached almost $500 per room. Despite this situation, the hotels are generating good revenues when you compare to its historical average levels and provides a good diversification to our rental portfolio. Of course, the evolution of this segment will depend on the FX and tourism trends in the country.

So moving forward, I will introduce Jorge Cruces, our CIO, for all our CapEx plans and projects under development.

Thank you, Santiago. Good morning, everybody. Well, as said, we have acquired Terrazas de Mayo Shopping Mall located in Malvinas Argentinas. By the way, I live close by. This is the outskirts of the city of Buenos Aires towards the Northwest.

It has a gross leasable area of approximately 33,700 square meters. It features around 86 stores, 20 stands, plus 15 food court shops, and 10 cinemas. The transaction amount was set at $27.75 million, of which $16.65 million have been already paid. As for the rest, it will be canceled by half, 20% 36 months after the first payment and the other 20% upon the designing. We have -- we are very excited about this acquisition, not only because $800 for each gross leasable area is a very reasonable acquisition price, but also because we believe there's a great turnaround opportunity.

Let's recall key numbers of Ramblas del Plata, 870,000 buildable square meters with basements, it totals more than 1 million square meters. If we convert to sellable square meters, it's around 700,000 square meters, more than 10,000 new homes, and an estimated investment over $1.8 billion. We are proud to say that it's the most important private development ever in the city of Buenos Aires history, and it's rolling. Marketing the Peninsula is divided into three phases.

Stage 1 covers over 125,000 sellable square meters. It's located surrounding Central Bay. Stage 2 covers close to 300,000 sellable square meters, and it's located towards Puerto Nuevo. Stage 3 covers around 270,000 sellable square meters and is closest to the river. We sold two parcels to a well-known developer for $23.4 million with a 30% down payment. The parcels are A number 2 and G number 1.

More than 40,000 square meters are allowed to be built. We also signed a lease agreement for the development of a sports complex. It will have a driving range, paddle tennis, gym, and other attractions. Meanwhile, we are moving forward with 14 swaps, of which 10 are in an advanced stage. All together, we estimate sales for $120 million.

The environmental approval certificate was issued in December, enabling us to start construction of the infrastructure, roadworks and public part of the first stage and part of the second stage. The infrastructure work will be in the service of 27 plots, almost half of the total amount of plots. We estimate an investment of $23 million. We've broken ground with the earthmoving works, consolidating the earth mound around Central Bay. This is required so we can complete the steel sheet piling water.

The sheet piling work contract has been awarded to Acindar and [Centronic] and will start delivering steel sheets and working on site by April. We have also received biddings for road works, sewers, and drainages. We shall be awarding those contracts in the next weeks. During the month of November, the building hosted Casa 4, one of the most important design and architecture exhibitions in Latin America. For the event, our sales office was set up along with two model units to showcase and launch commercial actions.

Around 100 apartments have been reserved at an average price of $4,000 per square meter. That's $15.3 million. We have begun the process of signing the purchases agreements. Regarding construction, architectural projects have been delivered. So we're ready for bidding. Upcoming bids shall concrete structure and major civil works. In the meantime, we have already started a first phase of construction by doing some demolishing work in the basements.

Nexo Dot Housing. The project is located between Dutch Shopping Center and Salta office building. It includes two levels of office space, around 5,000 square meters, 160 apartments in 5 levels, and a commercial esplanade that links with Salta. We estimate the environmental aptitude certificate renewal will be granted by March, which will allow us to start work plans and construction permits. The estimated delivery date for architectural projects is by the end of May.

Project Caballito, City Block number 35. The project has three residential towers with 500 apartments and 500 parking spaces. We have been adjusting the project to meet new market needs. As for the construction work, the focus is on Tower number 3. The concrete structure in elevation is totally finished. Masonry work has been completed up to the fourth floor, and we are currently working from the fifth floor to the 13th floor.

La Plata. Construction works are in progress. So in moving stage has been completed, and Stage 2 should be finished by the end of May. We started outdoor gas infrastructure work, and we estimate completion by October.

Last but not least, we are soon beginning concrete and steel structure work. From then, we shall start marketing the residential parcels surrounding the shopping mall. We expect this to be another success story like Alto Rosario has been in the past.

Alto Rosario is a mixed-use development. First, we built the shopping mall. Then we sold the whole city block for mostly residential, but it also had office building and a hotel. And now subdivision of the parcel of the shopping mall has been approved. This allows us the construction of four residential towers, approximately 40,000 sellable square meters.

Alto Rosario is still growing and has become one of the trendiest areas in Rosario. Mixed-use developments close to our shopping malls have been very successful, not only in Alto Rosario, but also it happened in [Navalto] Residential buildings in La Plata Diagonal District and in that should be a hit and in DOT should be a hit, no doubt about it.

Nuevo Quilmes II is in Ezpeleta. we expect the infrastructure to be finished by the end of the year. The overall project has 330 single-family lots. 125 lots are ours, and we expect to sell them for approximately $23 million. We began commercialization. To date, 33 lots are being sold for $5 million. We spoke quite a bit about residential developments, and that's because we believe in their potential. First, as a percentage of GDP mortgages are 0.5%, close to nothing.

But this is changing. Credits have grown 15% this last year. Apartment prices have also increased somewhere between 10% and 20%, depending on the neighborhood. That's because there's been a lot of sales this last year, as we can see on the chart. These fundamentals are driving us to focus on residential.

Now let me give the floor back to Matias. Thank you.

Thank you, Jorge. Trying to explain our financials for this six-month period. First, we need to understand what happened with inflation and the devaluation. Remember that last year in December was a big jump in the FX from ARS350 to ARS800 per dollar. And during this year, the government implemented a strategy of a crawling peg going at 2% per month and now at 1% per month.

So that in terms of real appreciation or depreciation of the peso, last year, we have an important devaluation of 52%. And this year, we have an appreciation of the FX of 7%. And also regarding the blue chip swap, this year, the FX almost -- the gap between the official and the blue chip swap almost disappear. And remember that we to express in pesos term valuation of our offices and land bank, we used the dollar map. And because of that, we are posting some losses this year because that gap didn't exist anymore.

So going to the next page about the adjusted EBITDA, we can see numbers in line with the previous year in malls and in offices. In offices, we have some improvement because of the FX in terms of dollars, it's almost the same. Remember that we signed the agreements at official dollars per square meter. So now we have a little better numbers in pesos term. And we can see here also the drop in the hotel EBITDA from ARS15 billion to ARS5 billion this year.

About margins, we can see margins of malls in line with the previous year, offices improving a little and a drop in the hotel margins from 38% to 17%.

Next page, we can see on the right part, the effect of -- the main effect of this semester about the valuation of our investment properties, where the last year, we posted an important gain of ARS300,000 million compared with ARS233 billion loss during this year. When we analyze the value in dollar terms, I can say that in offices and the land bank remain very stable in dollar terms, so almost the same numbers. In malls, we are improving a little devaluation because we are using a DCF model and the country risk decreased during the year. So we are giving effect of that decrease in the country risk, and that generates an improvement of around $100 million of our mall portfolio. Going forward, we believe that this valuation of malls should increase a little more basically because the country risk is decreasing and our figures also on the operational side are improving.

So we believe that in the next quarters, we will keep increasing the valuation of that segment. About the net financial results, as I said at the beginning, last year, we have the impact of the devaluation that you can see in the table on the left side on the bottom, where you can see a net FX result of ARS205 billion loss compared with a gain of ARS21 billion this year because of the appreciation of the peso. Then we have lower results on the inflation adjustment, basically because of the reduction of the inflation. The net interest remained stable compared with the previous year. And then we have a gain of the fair value of financial assets and liability that are related to our liquidity that improved in terms of valuation.

And finally, about the income tax, we can see here a gain of ARS34 billion that is divided in a gain of ARS93 billion related to the deferred tax and a current tax of ARS60 billion that this year, we will start to pay taxes again, the income tax again after consuming all the tax credit during the last years. So we are estimating that this year, we will start to pay income tax again. So with all those effects, we finished the quarter, the 6-month period with a loss of ARS40 billion compared with the gain -- an important gain last year. When we value in dollar terms, we can see here the rental EBITDA evolution. So we can see that we will keep generating good levels of cash in all the segments in line with the previous years.

So we are happy with this performance. About our debt, we finished as of December 31 with a net debt of $255 million. Remember that during the last quarter of the year, we paid a dividend of around $77 million. And also, we paid the 60% of the acquisition of the shopping mall Terrazas de Mayo. And with that, we only increased a little the net debt to $255 million.

That is very conservative in terms of ratios, 1.6x net debt to EBITDA and LTV of only 12%. As I said, we paid the dividend in the last quarter, $77.6 million, that was a dividend yield of 8%. So we keep paying good levels of dividend during the last 3 years. So with that, we conclude the presentation.

Now we invite you to ask any questions that you may have.

Thank you, Matias. Well, we will start the Q&A session. We will take the questions by chat in the order we receive them. Yes, we have the first one related to Ramblas del Plata, if we can give some color on price per square meter that you are planning to achieve for this project?

Well, it depends on the building. There's going to be different kinds of buildings. I believe that the high towers are going to be more expensive maybe than the other ones. But let's say, when we receive those apartments, it's not going to be less than $4,000 at the beginning. It depends on how the project is going to be consolidated.

It depends on the country also. But I don't think it's going to be less than $4,000, the low buildings and maybe close to $5,000 the 12 towers. And it should get during the future, may get it all the way to $6,000 maybe. It's going to take a while. We're going to be receiving the apartments maybe like in 4 years from now.

So from now until then, it's going to be increasing quite a bit, the amount of dollars for each square meter.

Another question regarding financing of this project probably for Matias, how do you plan to finance all these huge investments that you're expecting for the next years?

Well, it depend on the project about Ramblas, as we mentioned in the past, what we are doing with this strategy at the beginning, we sold some plots that will cover the infrastructure. And also, we are swapping the rest of the plots with local developers. So basically, IRSA won't do any investment, we will receive the score of the finished units, and then we will sell the units. So that won't consume any cash for the company. And then regarding La Plata project [indiscernible] Plata, where IRSA is one of the investors, it's not the only investor.

We have around 28% of the square meters -- sorry, 23% of the square meters. So we are one of the investors. Next building, we have today a strong cash generation. So I think that any of these projects will take like two, three years of development. So you have to divide the amount of the investment by three years.

So we believe that with our own cash generation, we can finance easily all those projects. And then if we need to increase a little our debt, today, we believe that our debt structure is too conservative in terms of ratios, in terms of LTV, considering also that the company will start to pay taxes again. So the tax shield on the debt also will help us to improve our capital structure. So maybe if we need, we will increase a little our debt.

Well, we give some more minutes for any additional questions that you may have. Please use the chat. Well, I don't see any more questions. So I will turn back -- we conclude the presentation. I will now turn back to Matias for his closing remarks.

Here, I have one more, sorry. Well, how do you plan on managing all the maturities next year, 2025?

Well, first of all, we have liquidity. So we have a cash -- important cash position. So if we want to just to cancel the debt, we can. So we will analyze the best structure if we go to the market or to raise debt in the banking system. But we have today the liquidity to cancel the debt.

So we feel very comfortable about the following amortization.

Now yes, Matias, you can conclude with your closing remarks for the period, and we see you the next quarter.

Okay. So we expect the next two quarters to bring positive news for our shopping mall segment. As Santi said, as we compare against the period following the beginning of Milei administration when consumer spending experienced a significant contraction, we anticipate seeing improved numbers on a -- when we compare with the last year. Additionally, we should see further progress in signing of the initial swaps of Ramblas del Plata. So we expect in the next two quarters positive news about that as well as the commencement of the construction of the several of our projects.

So we see the year very positive with good news to come. So thank you very much for all of you to participate in this call and see you in the next one.