Good morning, everyone, and welcome to IRSA’s First Quarter 2020 Results Conference Call.

Today's live webcast, both audio and slide show, may be accessed through Company's Investor Relations website at www.irsa.com.ar by clicking on the banner webcast/link.The following presentation and the earnings release issued yesterday are also available for download on the company website.

After management's remarks, there will be a question-and-answer session for analysts and investors. At this 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 notes in the Company's earnings section release regarding forward-looking statements.I would now turn the call over to Mr. Alejandro Elsztain, II-Vice President. Please go ahead, sir..

Hello. Good morning. We are beginning our presentation of first quarter of fiscal year 2020, and we can begin on Page number 2. We can see the main event for the quarter. We are achieving a gain of ARS 11 billion. That is a 21% comparison increase to the last year numbers.

That was mainly explained by the results from the loss of control that we had in -- the deconsolidation of Gav-Yam that we're going to show you a little later. That deconsolidation give us one effect result, and that is the majority of that explanation.In the net gain attributable to IRSA, we are achieving ARS 3.3 billion.

When we divide the adjusted EBITDA, we can see that the adjusted EBITDA for the period, it was ARS 5.3 billion. That is a 28% increase comparing to last year numbers. We divided, as always, the Argentinian side to the Israel side. Comparing the Argentinian side, we see that we are achieving ARS 1.4 billion.

That is a small drop comparing to last year numbers, always adjusted by inflation, as all our balance sheet in Argentina, so a drop of 8%, and mainly driven by lower results from the shopping malls, a small reduction in the shopping sales adjusted by inflation, but an increase in the -- mainly the office building that we are going to see in the next page.And in Israel side, we see a ARS 3.8 billion gain that is a 51% increase comparing to last year numbers.

And in this case, it's because of the due positive effect of IFRS 16 in the sales of Cellcom. So that we are going to see a little later, too. We can see a small comparison in Argentina related to our Argentine Business Center.I will introduce to Daniel Elsztain to do that, please..

Thank you, Alejandro. Good morning, everyone. On Page number 3, we see the Argentinian figures. On the top of the page, we start with the shopping center numbers. Adjusted EBITDA for this quarter is ARS 1.1 billion, a 14.5% decrease compared to last year, adjusted by inflation.

Our tenants sales, we can see a drop of 5.1%, but this is really a recovery from previous quarters. We're coming from levels of reductions of 14 -- 15%.

This is mainly the consumption recovery, mainly driven by government incentives to consumption in the Ahora 12, Ahora 18 programs that were launched a few months ago, and we see that trend in consumption that is really trying to achieve numbers closer to inflation.In terms of our GLA, we see a small reduction.

This is because of the finalizing of the concession of the Buenos Aires Design. It dropped now. The total stock is 332,000 square meters of GLA. We're going to see a small increase by the incorporation of a small growth in existing shopping centers in the near future. In terms of occupancy, we are running at a 94.3%.

This is a reduction of 4 points compared to last year, mainly explained by the exit of Walmart in our Dot shopping center. This space is being occupied. We already signed contracts of about 12%, 13% of this space, and we're going to keep doing the leasing on this big space. It's a very good location.

It's in the first floor of the shopping center, but it's going to take us time to make the construction and to sign with all the tenants.In the office segment, we see a big gain of 62% compared to the last year on the adjusted EBITDA, achieving ARS 424 million. This is mainly driven by two factors.

One is the -- all the -- its dollar-denominated rent in the case of the offices, and we see that it's very stable. It's in the $26.6 million per square meter per month.

And also because we increased our portfolio with the opening of the Zetta Building that opened on May of this year, now the total portfolio grew 39 -- it's a growth of 39%, achieving a total GLA of 116,000 square meters.Real square meters, there's no loss factor. Nothing that is real occupied space on our buildings.

And in terms of occupancy, we see a reduction of 5 points. This is mainly because of one big class building that we have lost a few tenants and has been a challenge to recover that occupation on the Class A segment. We have -- we are running with high occupancy and very stable in terms of pricing.

We're going to launch a program to try to see -- to occupy this specific building that was running in a low occupancy level.In the case of hotels, we see the EBITDA achieving ARS 94 million. This is a reduction of 33% compared to last year's numbers. This is mainly driven by the deflagging of one of our hotels.

Remember, we have the Sheraton Libertador. Now it's only the Libertador, there was some disruption in all the systems -- the reserve systems for the hotel. So we have some disruption. It -- we predicted that this could happen.

We have some technicalities, but we are running now in better occupancy that was running in the previous quarters.In terms of rate, we see a small drop from $199 to $167, an 11%.

Again, this is also mainly explained -- we have a reduction in the rates, and this is good thing in the hotels that we are -- the rates are also in dollars and costs are going in pesos, but we see the two things that -- the reduction in rate because of the deflagging and also some small decrease on the rate on the other hotels, too, but this in small -- a very small effect.In terms of the rooms, we have two more -- four more rooms because we converted some big spaces into more rooms, but this is small effect, four more rooms.

And in terms of occupancy, we see that we went down from 64.5% to 61.6% overall, and this is mainly, again, because of the process of the Sheraton Libertador into Libertador, but we did have some reduction also in the other two hotels, but not significantly.And finally, on the sales and development segment, we see a reduction. We see a loss.

This is basically because we are allocating all the cost, and we have seen very small sales in that -- in this segment, so we see a loss of ARS 75 million compared to last year of ARS 47 million, where we had a few more sales last year.So now on -- for Page 5, we go back to the Israel Business Center to Alejandro..

Related to some news of the quarter in Israel, there was -- in September, the company Board of Directors approved the appointment of Eran Saar as IDB and DIC CEO. This is a very good news. He's an Israelite, very well prepared, running holding companies in Israel. And the other law of the company, big law was the Concentration Law Resolution.

As you remember, we required to reduce one more layer. And we had DIC, the other companies, and the last one, Mehadrin, Gav-Yam and Ispro.For that, we need to reduce one of those layers. And we did, in the case of Ispro, that was 100% owned by us, we bought what was public debt -- we bought the bonds. Now we have 100% of the bonds ourselves.

It's private, too. So now Ispro was sold through that. In the case of Gav-Yam, the disposal of 16.7% of the shares, made that that we have 51%, we went to 34.9%. And with that, we're the consolidating and losing the control of the company.

And the final one that we need to do its Madryn that we're running with 45.6% of the shares and we're discussing now what to do before the end of December of 2019, we have to solve the last to -- not to have this third layer of companies.And we can see in the next page, about what Gav-Yam -- we did with Gav-Yam, with a much higher price, we can see what was the recovery of the share from the last six years.

We see an evolution of 135% going to the highest price of the share, and we sold these two stakes those days. And with that, we increased a lot of the liquidity of the company for more than ILS 680 million. That is almost $200 million. And the gain that gave us to our balance sheet in IRSA was again of ARS 15 billion.

And now we have this stake of almost 35%. And this is the resolution for the concentration law.I will introduce now to Matias Gaivironsky, our CFO..

Thank you, Alejandro. Good morning, everybody. So moving to Page 6. The other important news about the Israeli business segment was related to Clal. As you know, we -- under the scenario in Israel, we are forced to reduce our stake in the company.

So you can see the evolution that up to May this year, we avoid to sell the shares in the market doing SWAP transactions. And now we are forced to sell the shares. So we started in June. We commented in the last annual report that we already sold some of the shares.So after this, in September, we closed two other transactions.

One was related to the options of the former -- or the two private buyers that vote 10% of the shares. They have the option to buy 3% more. So we -- they did it. And also, the company was able to sell shares against bonds of IDB. So we do this swap or this exchange between shares and bonds.

That is like selling shares at 90% -- selling shares of Clal at 90% book value. So it was -- we believe that was a good move instead of selling certain shares in the market.After this, in November 7, last week, the other -- we gave an option to an individual Eyal Lapidot, that was the former CEO of the Main Insurance Company of Israel.

He bought 5% of the share. So the company managed to give him a loan to buy the shares. So after this, now we control 30% of the shares, 15% are through swaps. And 15% are through a direct stake that most of the shares are in a trust control via trustee.If we move to next page, we can see the evolution of the adjusted EBITDA by segment.

Something important that now in real estate we deconsolidate Gav-Yam, so we only recognize results on the PBC transactions and only PBC transaction. So here, we see that if you follow the previous, results were much lower because most of the rental -- or important part of the rent came from Gav-Yam.

So now Gav-Yam, from now on, we will recognize results under the equity method, and we don't consolidate anymore.So real estate, we can see this -- we included here information in dollar terms to avoid the understanding of the -- what happened between the peso and the shekel.

So in dollar terms, the real estate increased by 3% and telecommunication about 55%. Here, in telecommunications, we have an important new rule, IFRS 16, that established that all the rents on the leases now are recognized as amortization. So in the EBITDA, we exclude that.

So for that reason, the results are much higher than the previous year.And others, that is basically the cost allocated to the corporate cost, decrease from $8.6 million to $0.3 million. Last year, we have some disposals in this line.

Finally, regarding the debt of IDB, something important was the commitment of IRSA that due to the financial condition of IDBD, decided to invest an additional ILS 70 million that was made in September, an additional 140 million to be deployed up to 2020 and 2021, subject to certain conditions. So this is a new commitment for IRSA.

ILS 70 million were already deployed, and the rest will happen next year.So now the – in the debt amortization scale, we can see in IDB that the net debt reduced to 555. We have, until the end of the year, $137 million of amortization with a cash of 150 but most of that cash is in collaterals of the swap transactions of Clal.

So we have the money to serve the debt, but we will try to do it in a more efficient way. So we are working in Israel for that. Regarding DIC, we can see that the cash position of the company cover the amortization until 2022.

So there is no pressure at all in DIC level.If we move to Page 10, we can see the financial statements that we closed in September. As Alejandro mentioned, the net income of the company was ARS 10,983 billion against ARS 9 billion last year.

When we open to see – when we break down to see where are the main impacts, we already cover all the operational side through the adjusted EBITDA by each of the segments.So now I will concentrate only in the rest of the lines, the net – the important or the most important was the line 14.

That is the net income from discontinuing operations that we posted a result ARS 15.1 billion. That is related to the deconsolidation of Gav-Yam. According to the accounting rule, when we deconsolidate something, we need to value the stake at the fair value. That is an initial one-shot effect.

And from that point, we will start to recognize results under the equity method. So that is the gain of ARS 15 billion.The other important effect is in the line nine, the net financial results that I will comment in the next slide. And the other one was in the line four, that is the change in fair value.

This is related to the to the Argentina business segment. This year, we recognized a result of ARS 9 billion against a positive result last year of ARS 10.2 billion.

This year, in the quarter, we have the effect of the macroeconomic volatility of Argentina and the devaluation and the acceleration of inflation that in dollar terms affected our shopping malls.In pesos, we surpassed inflation, mainly because most of our assets has some component related to dollars.

And the devaluation help on this to see in pesos term. Now in dollar terms, we reduced our book value of the malls.So if we move to Page 11, we have the breakdown of the net financial results. Here, we can see the Argentina business segment. We have a net financial result of minus ARS 8.4 billion against ARS 9.2 billion of the last year.

Here, the impact is mainly related to the exchange rate. We can see in the bottom right – bottom left, sorry, the evolution of the exchange rate.Last year, we have an evaluation of 43%. This year, 36%. That affect all our dollar-denominated debt.

In the Israeli business segment, the important effect is in the line three, the fair value of financial assets. That is related to the valuation of Clal.

Remember that we value Clal at market value.And in the graph, in the bottom right, you can see that, last year, the evolution was in the first quarter 34% positive against negative 14% in this quarter.

That is reflected in the line three that last year generated a gain of ARS 7.4 billion against a loss of ARS 2.4 billion in this year.So moving to Page 12.

Here, we can see the debt amortization scale and what we did in this quarter that we issue a new bond of $85.2 million that mature in November next year and also another series of $45 million denominated in Chilean pesos, both the Chilean pesos expire in August next year.An additional comment on what happened with our payment of the IRSA note in September 9.

The company paid in a time and appropriate manner $135 million of a note that expired that day. And in that week, the Central Bank imposed new capital controls in Argentina.So what happened before that, the move of dollars from Argentina to our abroad was able without any problem.

Now there is capital controls and that require previous approval from the Central Bank. So the practical effect that happened after this was that the money we paid in dollars is in Argentina, and there are certain investors that to move that money from Argentina to abroad, they need to ask for permission from the Central Bank.

But in practical day, the Central Bank is not answering.So the money, the only way to transfer that money from Argentina to abroad is to pay the cost that today in the market is around 6%. The rest of the investors, individuals, the Argentinians, they can receive the dollars here in Argentina without problems. They can transfer abroad if they want.

So what we are doing from the company is trying to help all the investors in the operational issues.At the beginning, it was complicated because certain custodians need to open accounts, and we are helping in that process to make it easier. But unfortunately, this is something not related with us.

It’s related to the regulation of Argentina, and we were in the middle of that.Going forward, to see the breakdown of our notes, here, we included on the bottom right the two or all the bonds that are outstanding at IRCP and IRSA. You can see that in Argentina law – sorry, I haven’t commented that this is only related to the Argentinian law bonds.

The New York law bonds, up to now, there is no problem. We can transfer and pay abroad in New York without any problem, but the address of payments of the Argentine law bonds are in Argentina.So for that reason, we are fulfilling our obligations in Argentina and not on – the Central Bank is not allowing to transfer abroad.

So the bonds outstanding are at the IRCP, the 140 that expire in September. And in IRSA, the November bonds and Chilean pesos bonds that expire in August, the outstanding is 226 and the rest are in New Year low, and IRCP is 360 notes and IRSA is 2020 bonds that expire in July.So with this, we finish the presentation.

Now, we open the line to receive your question..

Thank you. The floor is now open for questions. [Operator Instructions] Our first question today will come from Gordon Lee with BTG. Please go ahead..

Hi, good morning. Thank you very much for the call. One quick question, more sort of on the strategic side.

Considering the new scenario in Argentina and putting aside or moving beyond the restructuring or reorganization of the Israeli business to comply with the holding company regulations, I was wondering whether if you look at either the Argentine business unit or the Israeli business unit or even the portfolio at the commercial properties level, if there’s anything there that you think might be worth sort of monetizing or simplifying the structure at this point, again, just given the new scenario in Argentina.

Thank you..

We – every time that we are finding that the asset – an asset is well valuated, you are seeing us realizing mutually Israel was around the direct transaction that the PBC is doing?.

No, I think not closed yet..

But it’s announced? For example, there is a transaction that we are doing now in PBC in Israel, that it’s a shopping center that we had half of that 50%. And we are in a process of closing to sell that is an asset that is a transaction that is very low cap rate. We don’t have any strategic position on the retail in Israel.

So we decided to sell and we’re in the process of closing that.

A lot of money to the company in some assets that will be reinvested in what we think is the strategic view.Like that, we are doing in all the parts of the group and every time that we see that said in a low cap rate, a form in Cresud or in BrasilAgro or piece of urban real estate to through PBC, through Gav-Yam, through commercial properties, we are doing to rebuild as we’re doing a lot of buildings at the same time or to reinvest in another asset that we like more strategic – or fly to quality.

Sometimes, we sell thing that they’re old and not replay or maybe not elite and we buy or we build new one to be that. So this is, yes, it’s absolutely our strategy and you go into see a lot of examples doing these kind of things..

Perfect. Thank you very much..

[Operator Instructions] At this time, and there are no further questions in the question queue and this will conclude the question-and-answer session. I would now like to turn the floor back to Mr. Alejandro Elsztain for any closing remarks. Please go ahead..

This is our activity just to keep doing new buildings, developing new sites and very simply we have the chance in a company that today we have not a control, but we are still participating that is the case of Gav-Yam.

That company was able to buy a new site in a beautiful area competing with other players to do new buildings very demanded area in Jerusalem. I forgot to mention in the beginning of the presentation about the dividend that was approved few weeks ago in the assembly.

In the case of IRSA, we approve to pay a dividend that is representing 1.85% of the shares of IRSA Commercial Properties, giving more liquidity to that company again. So that is going to be done in a few days in the middle of November. So the company keeps doing what we know.

It’s to buy things when no one is buying and to sell when the cap rates are very low. So thank you very much, and have a very good day. Bye..

Thank you. This concludes today’s presentation. You may disconnect your line at this time, and have a nice day..