Earnings Call Transcript - IRS Q1 2021

Santiago Donato, Investor Relations Officer

Good morning, everyone. I'm Santiago Donato, Investor Relations Officer of IRSA, and I welcome you to the First Quarter Fiscal Year 2021 Results Conference Call. First of all, I would like to remind you that both audio and a slideshow 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. Before we begin, I would like to remind you that this call is being recorded and that 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.

Alejandro Elsztain, CEO

Good morning everyone. Welcome to our first quarter results. The main events that we can see in Page #2, related to net results. We can see that this first quarter IRSA achieved ARS8.3 billion in results, a decrease from the ARS15 million of last year, and comparing the net results attributable to controlling shareholders, we increased from 4.5 to 6.6 in this quarter. And regarding the adjusted EBITA when we compared to last year's numbers, we can see a big growth of 155%. Here we can compare the rental segments decrease; the pure rental of the package went down mainly because of the impact from the shopping centers and the hotels, while there is a positive number in the office, but a decrease of 96% comparing year-to-year. On another note, we have been able to sell some of our properties at very good prices. We are going to explain that later. With that, we made ARS4.8 billion gain, which impacted the adjusted EBITA for the quarter. Regarding the main and subsequent events of this quarter, on September 20, the curve decreased the insolvency of IDB and the liquidation, and the group lost control and proceeded with the deconsolidation of these financial statements, so this was executed now. The gradual reopening of shopping centers after the lockdown for almost six months has now reached 100% open capacity from our stock of 14 shopping centers as of October 20. From office sales, we achieved USD170 million in a combination from the third quarter and others that we're going to explain later in the second quarter of this year. Regarding hotels in Buenos Aires City, our remaining two are closed, but Llao Llao has recently opened this week. So this is just the beginning for locals, but it's a step toward the future for tourism in the region. Regarding the cancellation of our notes in July and August, we successfully exchanged the offer made in November on Notes under Argentine Central Bank Communication, and Matías will later explain in detail how successfully we did with IRSA in the restructuring of those bonds canceled this year. About the distribution of dividends, this week the company is distributing shares of IRSA Commercial Properties as a dividend totaling ARS484 million in kind. Now, if we move to Page #3, we can see the Argentine rental segments: the three lines of shopping centers, office buildings, and hotels. Regarding shopping centers, the stock remains almost the same. Occupancy is nearly unchanged at approximately 93%, with some major players leaving the country affecting our occupancy. We sincerely appreciate the hard work of our team as we are recovering a lot of small tenants to fill the spaces left by the larger ones. Overall, there is a slight recovery this quarter.

Matías Gaivironsky, CFO

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 the fiscal year, we had a resolution from the judge in Israel that instructed the insolvency and liquidation of the company. So the impact in this quarter was the deconsolidation. We started to deconsolidate all our investments in IDB this quarter. Remember that in the last quarter, we already reflected the impact on the solo balance sheet for all the investments. We marked down to zero all our investment in the solo balance sheet. This quarter, we are recognizing ARS6.3 million in discontinued operations due to the gains from this deconsolidation. Under the accounting rules, there were some reserves like conversion reserves or controlling reserves that we had to write down to zero as well. The liquidation process has been taking place in Israel these days. Yesterday, there was a resolution on the selling of the DIC shares to a third party. We are analyzing if we have any legal proceedings to try to take further action there, but the recent news is focused on the liquidation and the disposal of the DIC's shares. If we move to Page 7, we have here the income statement of the company for this quarter. There is still a division between the Israel Business Center and Argentina Business Center for the last time that we are showing these two segments. From now on, we will start to show all these Argentina business segments in a consolidated manner. We can see the results with a net income of ARS8.3 billion attributable to our controlling interest, which is ARS6.6 billion against ARS4.5 billion from the previous year.

Santiago Donato, Investor Relations Officer

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

Alejandro Elsztain, CEO

Just to summarize, we have seen throughout the presentation how strong the financial situation of the company is now, how successful the restructuring efforts have been this year through sales and issuing new bonds. Now, our portfolio is almost evenly balanced between what we built and what we sold. We are balancing the portfolio with the same number of shopping centers and offices. We have a lot of land bank to begin development, taking advantage of the opportunities that construction costs are providing in the country. So, you will see us finishing the Catalinas building in the next quarter and beginning to explore and share our interests that align with the best interests of the country. From our side, we have reopened rental activities through shopping centers and hotels. We are starting to see EBITDA return in our main activities. So thank you, everybody. Have a great day and stay safe during these COVID times. Thank you very much.