Daniel Elsztain - COO Matias Gaivironsky - CFO

Good morning everyone and welcome to IRSA's Third Quarter 2015 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/ir by clicking on the banner, conference call. The following presentation and earnings release issued last week will soon be 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] You will also have the possibility of sending a question via webcast by clicking the question to host tool. 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. Daniel Elsztain, Chief Operating Officer. Please go ahead, sir.

Hello, good morning, and thank you everyone for joining us on a third quarter results conference call. During this quarter exactly on March 17, 2015, we opened our 15th shopping center in Alto Comahue after years of years of promising, new shopping center is finally open. We have solid channel sales growth during the quarter, we had good results in office and hotels during the quarter. Sales of investment properties were about 801 million pesos during the nine months of 2015 fiscal year. And on February 15, we did an additional impact endorsing for $105 million. The summary of the financial results upto the nine months of 2015 we had revenues including the sales of investment properties for around 5.1 billion pesos, that is 135% more than the nine months of 2014. The EBITDA of this period was about 2.1 billion pesos, it's a growth of 99.7% versus the nine months of 2014 and if we exclude the effect of the selling of the investment properties, the growth on the EBITDA was around 19%. Net income for this period was a loss of 163 million pesos versus the loss of 78.8 million pesos on the nine month of 2014. Talking about operating results on the third quarter, we had a good - we can see on page number 3, a growth of 35.4% in the sales of our tenants, if we want to see this at same-store sales, its 31.3% increase and this is the effect of the inclusion of the two shopping centers. We included Distrito Arcos, and Alto Comahue on this quarter so we went from a stroke of 311,000 square meters to a stroke of 333,000 square meters on this fiscal quarter. So our stock grew up occupancy remains very stable at very high numbers. This is…

Thank you, Daniel. Good morning, everyone. So going to page 9, we can see the breakdown in different segments of the company, we are very happy with the performance of our rental segment and in general terms, the rest of the segments all generate good results in terms of EBITDA. So revenues grew 29% in shopping centers, 26% in offices, and EBITDA for shopping grew 28% and 31% for offices. Here we are excluding the effect of the cost for the transference of the office portfolio from IRSA to IRSA Commercial Properties that generates a cost of around 110 million pesos, we had explained from that calculation. Sales and development also grew significantly in the nine months period, increasing by 368%, that is mainly because of the office buildings and the office floors that we sold during the nine months period that exclude the sale that we did in the last week of the Intercontinental Plaza that we'll recognize in the next quarter on the following one. Offices grew at 13% and international - we hear include the sale that we did in of Madison building in the last nine months period. So EBITDA margin grew in offices from 69% to 71%, and shopping remain at the same levels, and around 78% on hotels, the same level than previous quarter. So the breakdown between EBITDA of the company, shopping centers, build at segment number one of the company with 74% participation, that exclude the sale of Madison that we did in the last quarter. Going to page 10, here we include the results that we received from Banco Hipotecario. This quarter we received from Banco Hipotecario 98.7 million pesos against 174 million pesos in the previous year, that is mainly due to financial results that demands generate last year against…

Thank you. The floor is now open for questions. [Operator Instructions] Your first question comes from the line of Gaurav Gulati [ph].

Good morning, gentlemen. I was curious to know a little bit more about the investment in IDB that you announced and was approved by the Board of Directors on May 6. I was wondering if all these commitments go through the 150 million shekel warrants and the commitment for 100 million shekels of capital injection, what does that mean in terms of your ownership stake for IDBD - for IRSA's ownership stake. And also, would it go beyond 50% and require consolidation of the balance sheet?

The investment was divided into - the proposal was to advance a commitment to exercise what our number for, so what are number for - we committed to exercise 150 million, so that will go through that instrument and the other part, the 100 million shekel, it's a new commitment and the structure probably will be a new capital increase in IDB. It's not defined yet the way that we will inject the money and from which vehicle. In fact the proposal of toll free is to - the commitment is from dosing or any vehicle that Eduardo [ph] is in control. So it's not defined yet how we will inject that money. Regarding consolidation of IDB is something that is not defined it, according to the current situation we have 49% of IDB so it's not necessary to consolidate but of course if we change that threshold, probably under the current IFRS rule, we could consolidate IDB but that is not defined yet how will be inject the money, so it's not clear if we will participate - IRSA will participate upto 49% and the rest of investment will come from third parties or if IRSA will inject that money, so that is not clear yet.

Okay. My second question is regarding your office properties, if you look at the earnings release for IRSA Commercial Properties, and I compare to IRSA, the new guys, I see that the EBITDA margin is about 60% for IRSA for the office properties, and its closer to almost a 100% for IRSA Commercial Properties. So I was trying to understand why it does - I mean I know there is different set of office building but the majority are the same. So I was just trying to understand if there is something accounting wise that is different there and what is accounting for the difference in margins in one - for one set of assets and for the similar set of assets in another company?

The answer is the cost - regarding the margin is the cost when we transferred the assets we haven't transferred the cost yet, according to our agreement we will transfer the cost since April 1. So probably since April we will start to see the same margins in both companies. Today the - in IRSA we have some assets that are held for sale, so it's alone 14,000 this quarter mirror [ph] that is still under IRSA level, and haven't been transferred to use at Commercial Properties. So that is the reference why we have some additional square meters on a consolidated basis but regarding margins the main reason is that. Also there is an accounting effect that we divide our corporate services or our corporate cost into the different segments depending on certain ratio. So some of the corporate cost of IRSA is allocated to the segment of properties, when we transferred that to IRSA Commercial Properties we haven't did that so far, so most of the cost of the corporate services of the IRSA Commercial Properties who are allocated to this shopping center segment. I'm probably it's something that we will review in the next quarters.

Okay. Thank you very much.

You're welcome.

And there are no more questions at this time. And this concludes the question-and-answer session. I would like to turn the floor back over to Mr. Daniel Elsztain for any closing remarks.

Okay, thank you. So we see on this fiscal quarter that we keep looking, that we are doing well with the latest, good occupation, we are looking also very low cap rates but what we know and we desire, how we will take advantage of that - we took advantage of that. And we are also thinking what will end soon, and so we think what's a very good year, we finish the same way. And we hope to see you all in our next call that we would - fiscal year in September. Thank you very much for participating. See you soon.

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