Alejandro Elsztain - Second Vice President Daniel Elsztain - Chief Operating Officer Matias Gaivironsky - Chief Financial Officer.

Alvaro Garcia - BTG Pactual.

Good morning everyone, and welcome to IRSA’s First Quarter 2018 Results Conference Call. Today’s live webcast, both audio and slide show, may be accessed through the Company’s Investor Relations website at www.irsa.com.ar/ir, by clicking the banner Conference Call.

The following presentation and earnings release issued last week are also available for download on the Company’s website. After management’s remarks, there will be a question-and-answer session for analysts and investors. At that time, further instructions will be given. [Operator Instructions].

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. I will now turn the call over to Mr. Alejandro Elsztain, Second Vice President. Please go ahead, sir..

Thank you very much. Good morning, everybody. We are beginning our conference call of the first quarter 2018 in the page number 2. We can see the main events that happened on IRSA this quarter. This quarter, we achieved ARS74 million, earnings are decrease of 78% comparing to last year quarter.

And the attributable part to IRSA was ARS553 million comparing to last year ARS200 million, so very good result on the quarter. The Argentine Business Center had a gain of almost ARS2.3 billion, sorry mainly because of the higher rental results and the increase on the fair value of the investment properties of commercial properties.

And from the other side, we are going to see some good results from Lipstick and Banco Hipotecario later. Form the Israel Business Center, we have received a non-cash loss of ARS2.2 billion that mainly explained by non-cash effect in a debt exchange at DIC level and Matias will explain later.

While speaking about the adjusted EBITDA, we have reached ARS3.2 billion which is a increase of 28% comparing last year quarter. Dividing the Argentina Business Center to the Israel Business Center.

The Argentina Business Center had very good rental segment this year, combination of 26% completing Israel, occupancy of shopping 98.8%, 96.2% the office building, 68% in hotels. Higher sales and development, because of some sale of apartment and lot of land of Baicom.

There was a statement of dividend, but was approved last assembly and was redone today ARS1.4 billion representing an yield of 5% to the Company.

There was a subsequent events very importantly in the secondary market, so 10 million shares approximately for Israel Commercial Properties almost $138 million and you know that we have the intention of increasing the liquidity of this Company.

And finally we did after the election that the market was much better situation so we sold a 13% of the Company. Now we have 86%, 86.5% of the shares and the rate was done by JPMorgan two weeks ago. That money entered to the Company after the 30 September so we are not seeing today on the figures of this number because it was done in October.

From the Israel Business Center, there is a second tranche of DIC dividend paid. Remember we divided in two and was paid and IRSA that payment too for NIS181 million in total for all shareholders.

However, there were the non-binding offer from Hong Kong listed company to acquire the stake in CLAL at book value still working and the concentration law we are working on resolving that on DIC transference of the shares to Dolphin in order to meet the requirements of the Israel Law. So with that, I will introduce the Daniel Elsztain..

Thank you, Alejandro, good morning everyone. On page number three we can see our main events at the IRSA Commercial Property levels, we are going to start with the rental operating figures. Shopping malls sales grew by 22.5% on the first quarter of this year versus last year and occupancy increased to 98.8%.

we had very good results coming from the office segment due to the devaluation and lower selling expenses.

Regarding CapEx, we have the plan to develop about 21,000 squares meters on our existing shopping centers, and also we have in progress the construction of the first stage of Polo Dot and the Catalinas office building, both expected to be ready to produce rents by fiscal year 2019 the first one and 2020 the other one.

Other investments that we did on the quarter. During this quarter we acquired convertible note of TGLT for approximately $22 million. Also in the shareholders annual meeting held on October 31 was approved a cash dividend for a NIS680 million that is an approximately dividend yield of 2.2%.

The adjusted EBITDA for the first quarter reached ARS755 million an increase of approximately 35% compared to first quarter of 2017. The adjusted EBITDA of mall and offices segment reached ARS648.4 million, an increase of approximately ARS100 million to the previous year an increase of 26.2% and 39.4% respectively.

I'm sorry, ARS648 million is for the shopping segment and ARS100 million is the deduct for the office and that was increasing of 26% on the shopping and 39.4% on the office segment.

The net income for the quarter reaches ARS1934 million compared to a gain of ARS779.6 million last year mainly explained by the higher results for the changes in the fair value of the investment properties.

On Page four, we can see the construction story of the Catalinas office building, it's under construction, this is an estimated invested of ARS1.7 billion as we expected we are on time and on budget and on the construction, this is going to be opened for fiscal year 2020 a total construction of 35,000 square meters of GLAs.

On page number five, we can see some figures on the hotel segments, remember this is very small segment for the Company. Nevertheless, we can see an increase on occupancy from 65% on the previous year to 68.4% on this quarter. And also on the average price ADR from $183 to $190 average rate per available room.

So revenues went up 33% and EBITDA went down not because of the business, because of the cost allocation of the Company costs into this segment. On page number six, we can see some figures on the Lipstick Building. During this quarter, we see some decrease on the occupancy 95% a little decrease on 2016, but the same on 2017.

And the price remain very stable. The good news here is that we were able to have a refinance on the debt, we initiated the quarter with initial debt of $113 million and work cash payment of [indiscernible] for 20 million, our partner in that did another 20 million and we have a haircut from [indiscernible] of another 20.

So the outstanding debt now it’s only $53 million, compared to $113 million, when we started the quarter. And on top of that, we have a decrease on the rate from Libor plus 4% to Libor plus 2% and extension to April 30, 2020. So this is very good news for the building and we are working now and negotiating with payment.

Now we are going to speak a little about Hipotecario. In page number seven, we can see the main events of the third quarter for the bank, the bank generated a again ARS371 million, comparing to a again of 39 last year from that figure. Mainly explained by the increasing present value for financial assets.

The advantage of spending very good time, we can see here on the graph on the right. The market value for IRSA was 30%, almost 30% of IRSA shares growing 69% completing year-to-year. So this is a big growth of the banking industry in the country.

And the advantage in the good momentum of continued developing solution for housing deficit in Argentina mortgages coming to the country, increasing the share of the financial consumer market and boost the corporate products business. So there is very good news are coming through the banking industry for the country and for advantage [indiscernible].

If we turn to page number eight, we can see main events of IDBD. About Israel, we spoke in the past the signing of the transaction for the sale of Israir, that was the tourism company, airplane company of Israel.

Though this transaction was done and will be receive part in cash and part in shares depending of crucial terms, which represent the approval of Anti-Trust Authority that is under process today these days. The debt.

On IDBD level, there was a raising of the rating, strengthening of the liquidity continuing, the lowering of the yield of the bonds, removal of ongoing concern and the covenant from the balance sheet of IDBD.

We issued a note now on Series 14 for NIS360 million at 4.72% fixed rate showed a big growth, in the past year before rates were more than 10%, but today it’s below 5% fixed in Shekels. DIC debt replaced series six to 10 in NIS1.85 billion. Today the net debt of IDBD it is $783 million and the net debt for DIC $769 million.

So a big growth in numbers and big restructuring in business, so much, much cash on the Company level for the next years on the Company cash. There was a payment on DIC completed in September for ARS694 million that came part due to IRSA 2. This is a dividend divided into and we will receive the payment in IRSA and in IDBD.

Plus insurance there was an effort that is in process of due diligence and it's for book value, so this is under process today. Form the last quarter we have forced to sale 5% again in IRSA transaction and we did the second tranche of 5%, so we did two tranche of 10% as of now.

In the concentration law, we are not allowed to have more than three layers of public companies, and we are working on that with the sale of shares of DIC to a fair to a new company that will be controlled by IRSA and with that we can follow the law of Israel.

So this is under process today and Dolphin made a non binding offer to acquire all the stake of IDB in DIC. So we are in the last phase of execution of the primary approval on this process. So this is very important for the Company too.

If we move to next page, we can see the PBC the Property and Building Company, the real estate the more international real estate and residential.

The occupancy on this is 97%, there was a very important increase in value for the HSBC building, that is for 2020 increasing the rent as the year of $11 million, because of the HSBC leasing, the majority of the tower is under the rental.

We are thinking [indiscernible] the possibility of selling Ispro that is the retail company that the company have in Israel. Ispro has retail in the whole country like NIS70 million of net operating income and we are studying the market conditions now to sell it or not and we are in that discussion.

We distributed the dividend of NIS150 million and the net debt of PBC it is NIS8.2 billion this is a total net debt of the company. In other words, a very good increase on prices in dollars, year-to-year 20% increase on the PBC shares. If we move page number 10, the Gav Yam.

In Gav Yam that is pure Israel, there is a commercial property company in Israel. Gav Yam leading the high-tech parks, here we have a market caps of [indiscernible], first time in the history of the company and 28% increase in pricing dollars year-to-year.

And this is 99% occupied, more than achieving $1 million square meters of rental in Israel paying dividend of NIS180 million, developing five new buildings on the same tag, so Tazeret Haaretz in Tel Aviv, Cyber Park in Beer Sheva, Matam Yam and Rehovot closer to Tel Aviv and the raise. So the five projects on the same time.

Here is one else that is not included year. The net debt of the company is NIS2.3 billion and there was credit rating operate to AA from AA minus, so very good rental increase. Shufersal, the main supermarket company, the lead retailer of the country, with a market cap of NIS5.2 million paying dividends again in the - NIS150 million.

Increasing a lot in the private label today 21% of revenues compared to 19% of last year. The online is growing dramatically true from 8.6% last year to 11.1%. Purchase of the pharmacy company, a chain that is today under process of obtaining regulatory framework, because [indiscernible] 11 branches, because of competition.

So this is on the process today. Shufersal finance replacement of a credit card from Leumi to CAL. The net debt of this company today at low level of NIS2.2 billion and the increase of price in dollars 64% year-to-year on the share of supermarket company.

And finally the Cellcom, Cellcom is the largest cellular provided in Israel, here the increase of the price of the share went to 30% in dollars year-to-year. There was a Cellcom TV HBO deal fiber optic negotiation regarding IBC project, the net debt of the company NIS2.9 billion. So this is the main event of the main subsidiaries of the company.

So now, I will introduce Mr. Matias Gaivironsky..

Thank you, Alejandro. Good morning everybody. So if we go to Page 14, we can see a summary of our financial results. So starting with the rental segment, the adjusted EBITDA increased by 26%. So we are happy, we are growing more on inflation achieving ARS754 million in the first quarter. This is the Argentina Business Center.

Sales and developments, we only had a few sales during the quarter regarding the routine process in front of Alto Palermo Shopping Center will receive some units on the Baicom plot of land. So limited results here than some costs that we allocate to this segment.

Also the financial and corporate expenses, here is basically all our corporate structure that we allocate to the segment. So we have ARS72 million negative, again ARS65 million of the last quarter. Going to Page 15, we can see the impact of the Israeli Business Center.

So here we included both figures, adjusted EBITDA and net income and you can see a positive revolution in all the ratios and figures of all the operating subsidiaries. So real estate is growing, supermarket and telecommunication all are growing both in the adjusted EBITDA and the net income.

When you include the corporate structure of IDB, all the date of IDB and DIC structure. And this quarter we have a negative impact, because of restructuring that we did under DIC level that we issue new bond and we extend tenure of the bond that generate a negative impact that I would explain in the next two slides.

So when you go to Page 16 considering all the facts of Argentina and Israel. There gross profit of the Company increased by 19% achieving ARS6,486 million. Then we have positive source on the fair value of investment properties 44% increased compared with the first quarter of last year. Most of the increase is from Argentina.

We have a reduction in the cost of capital of Argentina and also some devaluation that impact positively in our assets. So with this, we finished with an operating income that increased 94%, 2.2 came from Israel, 3.1 came from Argentina. If you go to Page 17 then the other important fact that we have in our net financial results.

The net financial results that came from Argentina stayed stable, increased a little from 418 to 486 is basically is because this quarter we have a higher devaluation than the previous quarter, there was a evaluation of 4% against the devaluation of 1.8%. Remember that we have most of our debt in dollars, so we are adding that in the results.

And then the other important effect came from Israel, report almost ARS4 billion from loss 2.2 is this debt exchange that you can see in the bottom of the slide. But when we started to consolidate IDB we value all the debt of IDB as fair value. So at that moment market value of the debt was lower than the face value.

Remember that the moment that we acquired the Company was in a bankruptcy process IDB and DIC was affected because of that. So at that moment that the market price or the [indiscernible] launch was much higher than what its today, but today the company's investment grade again has [indiscernible] that market probably higher than the face value.

So when we swap that debt that we used to value at the historical value against a market value today. We have to recognize an important non-cash loss of ARS2.2 billion. So with this, we finish with the net income of ARS74 million against 344 of last year. When you see the part attributable to IRSA leaving aside the minority interest.

We finished with ARS553 million positive against ARS200 million of last quarter. Finally Page 18, you can see the debt of the Company and the breakdown of the debt amortization schedule. We remain with a net debt of $355.9 million.

This not consider the recent disposal that we did of the IRSA Commercial Property share and the dividend that we are paying today. When you combine all the fact after the September, we have a positive effect of $90 million.

So the dividend and the part of the shares that we sold and the dividend that came from IRSA Commercial Properties is generate the cash generation of [indiscernible] of $90 million that you will see in the next quarter. So with this, we finish the presentation and now we open to receive your questions..

Thank you. The floor is now open for question. [Operator Instructions] The first question will come from Alvaro Garcia of BTG. Please go ahead..

Hi Alejandro, Matias thanks for taking the call. Just one quick question regarding your commentary on IDBD in the release.

The question is, how should we think about Israel’s ownership in IDBD going forward? Is it something that you would want to consolidated at a 100% in a very short-term or is it something that you would want to sort of sit on, on your third ownership stake over the medium-term? Thank you..

Thank you Alvaro. When we wrote the contract before the year in our financial stake and in June, we include that sentence that said that we may increase our stake in IDB. So the reason why we included that segment is because we today have an option to acquire around 14% of the shares of IDB.

Remember that at the moment we used to have a partnership when we entered in Israel 50/50 and then there was a buyback option - buy and sell option that we exercised. And finally, IFISA acquired that stake was around October or July 2015.

At that moment, IFISA granted an option to IRSA to acquire those shares at the same price that IFISA acquired plus an interest rate of 8.5%. So that option expired in February 2018. So by February, we should decide, if we will exercise or not that option. But if we exercise, we will increase our stake in IDB. So that is why we included that sentence.

So if we do something, we will do it from now until February. So that is the reason why we….

That’s clear. That’s very helpful..

And in terms of cash, that part of the option. Remember that at the same time, IRSA granted a loan to IFISA. So if we exercise the option that is cash less transaction, because we will exercise the option, but at the same time, we will receive the cash. So that won’t represent an increase in the cash for that portion.

Then IFISA has another portion around another 18% of the shares of IDB. Remember that today, we control 68% and IFISA almost 32%. So for the other portion, if we decide to acquire, then we will represent some cash, but for the option, not..

Yes.

I guess Matias my question was that 18% that sort of second portion that will be remaining, is that something that you would want to take on sooner rather than later or something that you are not very let’s say active about and you would be okay with not controlling that over the longer term?.

Alvaro we haven't decided that yet. So I can't comment on that, but the fact is that we have the right and the option to acquire a portion of that. So that is something that we need to decide prior to February..

Perfect, that's a very clear answer. Thank you Matias..

You are welcome..

[Operator Instructions].

So if there are no more questions. We can close the quarter, expecting the momentum of Argentina is the rental segment and the momentum on the rental in Israel too. So good financial and being able to raise capital in a different vehicle. So we thank everybody for the conference of today and we have the next one on the second quarter of 2018.

Thank you very much. And have a very good day..

Thank you. This concludes today's presentation. You may disconnect your lines at this time. Have a nice day..