Release Date: September 04, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- IRSA Inversiones y Representaciones SA (IRS, Financial) achieved a rental adjusted EBITDA of ARS171 billion, an 8.8% increase from the previous year.
- The company maintained high occupancy rates across offices, malls, and hotels, with shopping malls reaching a historical record of 98% occupancy.
- IRSA was aggressive in distributing dividends and buying back shares, paying ARS119 billion in dividends and repurchasing 4% of total outstanding shares.
- The company saw a significant increase in the value of its investment in Banco Hipotecario, with the bank generating ARS30 billion in results and distributing dividends for the first time in several years.
- IRSA made strategic acquisitions and sales, including the purchase of Alto Avellaneda property and the sale of the Suipacha Building and three floors of Della Paolera, enhancing its real estate portfolio.
Negative Points
- IRSA posted a net income loss of ARS23 billion, primarily due to the exposure of the fair value of investment properties and macroeconomic volatility.
- The company experienced a 4.5% drop in tenant real sales and occupancy in shopping malls, attributed to high inflation and economic contraction in the second half of the fiscal year.
- There was a decline in international tourism affecting hotel occupancy rates, mainly due to lower FX competitiveness in Argentina.
- The convention center sector, including La Rural, is still in the process of fully recovering from the pandemic, with occupancy levels not yet back to historical norms.
- The company faces challenges in maintaining high occupancy and rates in hotels, particularly with the decline in international tourism and the need for recovery in the corporate events segment.
Q & A Highlights
Q: The Eurobond funding code in the city of Buenos Aires is currently being reviewed. How do you think this situation will develop and what impact could it have on your prospects?
A: (Jorge Cruces, Chief Investment Officer) The mayor has discussed potential changes during the election. These changes are expected to affect certain parts of the city where we don't have projects, so it shouldn't be a problem for us. Most of our projects are already approved, and the changes will apply to new projects.
Q: Regarding Costa Urbana, will IRSA join national investors or look for financing for development alone?
A: (Matias Ivan Gaivironsky, Chief Administrative and Financial Officer) The project is now called Ramblas del Plata. We are happy to announce the name and start commercialization. This is a huge project with different plots of land that we can develop ourselves or through swap transactions with developers. We don't plan to finance this as a project finance but rather at the IRSA level. Developers will handle the investment, and we will receive units as part of the payment.
Q: What kind of total development capital is needed for the whole Ramblas del Plata project and the time involved?
A: (Jorge Cruces, Chief Investment Officer) It's difficult to estimate due to changing construction costs in Argentina. The project will take more than 15 years. The total size is around 900,000 square meters, and construction costs today are roughly $1,500 per square meter, making it a project of more than $1.3 billion to $1.4 billion.
Q: Does the company intend to continue selling down the office portfolio?
A: (Jorge Cruces, Chief Investment Officer) We plan to sell the remaining floors in the InterContinental and Catalina buildings but don't intend to sell the SETA building. We may develop new office buildings in future projects.
Q: What are the company's plans regarding its stake in Banco Hipotecario?
A: (Matias Ivan Gaivironsky, Chief Administrative and Financial Officer) We have held our stake in Banco Hipotecario since the late 90s and plan to continue holding it.
Q: How does the company plan to allocate capital in terms of future dividends, leverage, and buyback programs?
A: (Matias Ivan Gaivironsky, Chief Administrative and Financial Officer) The last three years were exceptional in terms of capital allocation, focusing on reducing debt and paying dividends. Going forward, we plan to invest in new projects while continuing to pay dividends and buy back shares if we see a significant discount against NAV.
Q: Do you plan to tap the global debt markets to refinance debt and accelerate development projects?
A: (Matias Ivan Gaivironsky, Chief Administrative and Financial Officer) We don't plan to tap the international debt market in the near future as we don't need the size of financing it offers. We will continue to manage with local market debt and bank financing.
Q: What is the political outlook, and how do you think Milei will impact Argentina's economic future?
A: (Matias Ivan Gaivironsky, Chief Administrative and Financial Officer) Personally, I have a lot of faith in Milei. The new administration is putting effort into ordering the economy, reducing inflation, and the deficit, which is significant for the country. We hope to see a good performance and a stable macroeconomic environment that encourages long-term investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
