IRSA Inversiones (IRS) Q1 2027 Earnings Call Transcript

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DATE

Thursday, Nov. 5, 2026

CALL PARTICIPANTS

• Investor Relations Officer - Santiago Donato
• Chief Financial Officer - Matias Gaivironsky

TAKEAWAYS

• Net Loss -- ARS 6.3 billion, compared to a profit in the same quarter last year, reflecting a decline in the fair value of investment properties as Argentine inflation outpaced currency devaluation.
• Rental EBITDA -- Increased 20% in U.S. dollar terms year over year, despite a 2% decline when measured in Argentine pesos.
• Shopping Mall Occupancy -- Reached 97.6%, an increase from 97% in the prior-year period.
• Tenant Sales -- Declined 6% in real terms year over year, which management attributed to a price effect rather than a reduction in visitor activity.
• Mall Traffic -- Rose 1.6% to 24 million visitors during the quarter, while the number of tickets increased by 7% compared to the previous year.
• Shopping Mall GLA -- Totaled 408,000 square meters, with plans to expand the portfolio to 19 assets by the end of fiscal year 2027.
• Office Rental Rates -- Averaged $25 per square meter for the premium portfolio, increasing to $27 per square meter when including the workplace co-working segment.
• Office Occupancy -- Declined slightly following the vacancy of one floor in the Dot building.
• Hotel Performance -- Achieved a portfolio-wide occupancy rate of 66%, with Buenos Aires properties reaching nearly 70% occupancy.
• Llao Llao Resort EBITDA -- Generated approximately $10 million on an annualized basis, with average room rates at $500.
• Oeste Outlet Development -- Reached 90% construction completion with a total investment of $22 million and is 100% leased ahead of its scheduled opening.
• La Plata Shopping Center -- Progressed to 55% construction completion for its 22,000 square meters of gross leasable area, with retail units set for delivery to tenants starting in Jan. 2027.
• Zetta Building Expansion -- Continued construction on a 15,000-square-meter addition, with 72% of the total building area dedicated to Mercado Libre's headquarters.
• Edificio Del Plata Sales -- Recorded sales for more than 100 residential units totaling nearly $17 million in value.
• Ramblas del Plata Transactions -- Reached 21 total transactions valued at $138 million, securing 36,000 square meters of saleable area for the company.
• Dividend Payment -- Distributed ARS 211 billion to shareholders, representing a dividend yield of 11%.
• Net Debt -- Stood at $445.8 million, with a net debt to EBITDA ratio of 2.2 and a loan-to-value ratio of 16.6%.
• FY 2027 CapEx Guidance -- Projected at $150 million, covering ongoing construction projects and installments for previous acquisitions.
• Phase 1 Infrastructure -- Achieved 80% completion on $12.5 million in awarded contracts for water, sewage, and electrical networks at the Ramblas del Plata site.
• Liquid Assets -- Reported a coverage ratio of 8.4 times, with management noting that most debt is long term.

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RISKS

• Gaivironsky stated, "the macroeconomic situation of Argentina that the inflation was higher than the devaluation generate that loss," referring to the impact on the fair value of investment properties.
• Gaivironsky warned that the company will "increase a little more the debt, probably to the levels of $500 million" to fund what he described as one of the most aggressive capital expenditure cycles in the last 10 years.

SUMMARY

IRSA Inversiones y Representaciones Sociedad Anónima (NYSE:IRS) reported a net loss for the first quarter of fiscal year 2027 as Argentine inflation outpaced the rate of currency devaluation, impacting the fair value of its investment properties. Management reported that despite the currency-driven loss, the rental segment achieved a 20% increase in EBITDA when measured in U.S. dollars. The company is currently executing a $150 million capital expenditure plan, which executives identified as one of its most significant investment cycles in a decade. This program focuses on expanding the shopping mall portfolio, revitalizing the Edificio Del Plata residential project, and advancing the large-scale Ramblas del Plata mixed-use development.

• The company expects to increase its shopping mall portfolio to 19 assets by the end of the fiscal year through the completion of the Oeste Outlet and La Plata projects.
• CFO Gaivironsky stated, "The last 12 months is a record high in terms of the recurring part of our business that is shopping malls, offices and hotels, so reaching $205 million" in rental EBITDA.
• Management confirmed that the Oeste Outlet redevelopment is 90% complete and fully leased, with the official opening anticipated in Dec. 2026.
• The Ramblas del Plata project, the company's largest development, has reached 21 transactions totaling $138 million, with management planning to begin building construction next year.
• The company maintained its 11% dividend yield for the fifth consecutive year, which Gaivironsky described as being among the highest in Argentina.
• The expansion of the Zetta building will add 15,000 square meters of gross leasable area, with Mercado Libre serving as the primary tenant for 72% of the facility.
• Management attributed the 6% decline in real-term tenant sales to apparel prices rising more slowly than general inflation, noting that apparel accounts for 50% of the tenant mix.

INDUSTRY GLOSSARY

• GLA: Gross Leasable Area, the total floor area designed for tenant occupancy and exclusive use.
• LTV: Loan-to-Value, a financial ratio used to compare the amount of a loan against the value of the asset being used as collateral.
• EBITDA: Earnings Before Interest, Taxes, Depreciation, and Amortization, a measure of a company's overall financial performance.
• Land Swap: A transaction where land is exchanged for a specific amount of future saleable square meters in a development project.
• Tenant Sales: The total revenue generated by retail tenants within a shopping center, often used as a proxy for mall health.
• Real Terms: Financial figures that have been adjusted for the effects of inflation to reflect true purchasing power or growth.

Full Conference Call Transcript

Santiago Donato: Good afternoon, everyone. I'm Santiago Donato, Investor Relations Officer at IRSA, and I welcome you to the First Quarter 2027 Results Conference Call. First of all, I would like to remind you that both audio and a 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 are also available for download on the company website. [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. Matias Gaivironsky, CFO.

Matias Gaivironsky: Thank you, Santi. Good afternoon, everybody. So we are finishing the first quarter of the year with a net loss on the final line that is mainly related to the fair value of our investment properties. So we will see later that the macroeconomic situation of Argentina that the inflation was higher than the devaluation generate that loss. Regarding the rental EBITDA, we saw a decrease of 2% against last year in pesos term. But if we measure that number in dollars, that is 20% above last year. About the shopping mall portfolio, we expect by the end of the fiscal year 2027 to finish the 2 projects that we are launching, and we will reach around 19 assets.

There was a strong performance and high occupancy in the malls that Santi will explain later. Regarding the offices, there is a slight decline in occupancy. We received one floor of one building. So it's only one floor, the vacancy. About Ramblas del Plata, we keep commercializing the project, and Jorge will explain later, but we signed 3 new land swaps during the quarter and one after the year -- the quarter -- after the quarter end. So very happy with the progress of Ramblas del Plata. And finally, about the dividend, we started the payment of dividends. We already paid in Buenos Aires and in New York will be soon for our ADR holders.

There was a cash distribution of ARS 211 billion that was a yield of 11%. So with this, I introduce Santiago Donato to continue the presentation.

Santiago Donato: Thank you, Matias. Well, moving to the shopping malls performance. Here, we can see occupancy increased almost 0.6 points from 97% last year to 97.6%. So very strong occupancy, close to 98%. And we increased the portfolio with the recent acquisitions, Los Gallegos, by the end of the year, by the end of 2026. Oeste Outlet that we incorporated to the portfolio last year, but now we are in the process of refurbishment and positioning into a premium outlet. We are going to open it by the end of this year, so the second quarter of 2027. And we did also some expansions in our current malls.

We are reaching 408,000 square meters this quarter, and we plan to add these 2 new malls. Oeste is already under construction, but will open by the end of the year and next -- by the end of the year, the fiscal year '27, we are going to add another Diagonal -- Distrito Diagonal in La Plata shopping mall. Tenant sales, as you can see there, tenant sales evolution and our revenues at IRSA. Tenant sales declined 6% in real terms year-over-year. This is mainly explained by a price effect rather than weaker activity in the shopping malls because, as you can see there, visitors remain very strong, 24 million people visit our malls in this quarter.

This is 1.6% above last year. And tickets are also increasing by 7% this quarter comparing to last year. So very good -- and in revenues, as we have, like, 90% fixed rent component, we have surpassed inflation in almost 1%. Something important to highlight is that inflation of apparel has been performing below the average of inflation, and these sales are adjusted by the general inflation. And apparel represents around 50% of our tenant mix. So very strong performance of shopping malls in revenues, in EBITDA, the same, in line with inflation and very strong occupancy as well. On the office portfolio, this is quite similar. We remain with 58,000 square meters of GLA.

Occupancy a little bit down because of the Libre -- the vacancy of one floor in Dot building next to Dot Mall. Rents quite stable in dollar terms, $25 per square meter per month. If we add -- this is the premium portfolio. If we add the B category that we have the co-working there at Philips, this is a little bit higher. The workplace by IRSA, this co-working is performing very well. And the total rent per square meter increased to levels of $27 when we add this co-working, this workplace by IRSA.

And we are increasing -- we have the project in the expansion of Zetta building that will add, by the next 2 years, another 15,000 square meters of gross leasable area to the office portfolio. On the hotels, we have seen a good year. Last year was quite good. This year, the quarter is even improving. We have reached 66% occupancy in the [ Libertador ] in the whole portfolio in the 3 hotels. Remember that we have the Llao Resort in Bariloche and the 2 hotels in Buenos Aires. Corporate events are doing very well. So the hotels in Buenos Aires, as you can see there, increased occupancy by almost 70% with rates stable.

And in the case of Llao, it's in the process of some renovation in some rooms. So there we exclude these rooms that are under that process is levels of 62%, which is average and rates going up in levels of $500 per room. So the hotel is probably -- it's a marginal segment in our portfolio, but it's doing quite well, generating in an annualized basis around $10 million EBITDA. Having said that, I will give the word to Jorge Cruces for the investments and the CapEx on the pipeline.

Jorge Cruces: Thank you, Santiago. Now let's take a look at our main construction projects. At Oeste Outlet, the redevelopment is entering its final stage. Construction has now reached 90%, so we are pleased to report that we remain on track for the official opening next month. The total investment, including both the acquisition of the asset and CapEx is around $22 million. The shopping center will include 71 commercial units combining stores and stands, which are already 100% leased. In the meantime, the shopping center will have 24,000 square meters of GLA. It should grow in the future.

Oeste Outlet is a modern outlet center designed to offer a unique shopping experience with brands such as Nike, Adidas, Puma, Levi's, Miniso and Carter's. Moving on to La Plata. Construction of the city's first large-scale shopping center continues to make solid progress. The project will have 22,000 square meters of GLA and should become a retail destination for La Plata and surroundings. Overall, construction has reached 55% with an average of 400 workers on site. Retail units will start to be delivered to tenants as from January. This is an important milestone for the project. This shopping center represents the first phase of our long-term vision for La Plata.

Looking ahead, we plan to complement it with residential and mixed-use developments that will further expand the project and create additional value. The Zetta expansion. The Zetta building expansion continues to move forward. Construction is currently focused on the concrete structure. We are also in the bidding process for several construction packages worth around $13 million. Once these contracts are awarded, about 70% of the project will be under contract. The expansion will add more than 15,000 square meters of GLA. Today, the building has around 32,000 square meters of GLA and serves as Mercado Libre's headquarters. Upon completion, the building will offer more than 47,500 square meters of GLA. Mercado Libre will be occupying 72%. Edificio Del Plata.

On the iconic 9 Avenida de Julio avenue, just steps from the Obelisk, this development will have 721 residential units and 8 retail spaces, totaling approximately 35,000 square meters of saleable area. The project is part of the city's downtown revitalization program, which provides tax incentives to support new residential developments in the area. Work on site continues to move forward. We are in the bidding process for the supply and installation of elevators as well as the curtain wall. At the same time, we continue to make good progress in sales. So far, we have sold more than 100 units for nearly $17 million. Ramblas del Plata. Let's move to Ramblas del Plata, the largest development.

It is located on the Rio de La Plata Waterfront right next to Puerto Madero. The project will create a new mixed-use district with residential buildings, hotels, retail spaces and a lot of public areas, including a big park. Altogether, more than 690,000 square meters of saleable area. Current activities are focused on the installation of key utilities, including water, sewage, electricity and gas networks. Road and storm water infrastructure works under Phase 1 have been completed, and we are now finalizing the tender process for Phase 2 and part of Phase 3. Water, sewage and electrical networks have reached approximately 50% completion, while work on the gas network continues to advance.

To date, we have awarded contracts worth $12.5 million and progress on those works has already reached 80%. By the end of the quarter, we had completed 20 transactions with a total value of $130 million, reaching sales of 81% of the expanded Stage 1. Recently, on October 29, we signed an additional swap for lot N05 with Uno en Uno. The transaction was valued at $8.7 million and will provide IRSA with approximately 2,500 square meters of saleable area. Overall, we have now completed 21 transactions totaling $138 million. As a result of these agreements, IRSA will receive nearly 36,000 square meters of saleable area. We only have 5 lots remaining in this stage.

Now I'll give the floor back to our CFO, Mr. Matias Gaivironsky.

Matias Gaivironsky: Thank you, Jorge. So as I mentioned before, this quarter -- if we can move to the next page. This quarter, we saw that inflation was a little higher than the devaluation of the FX. So was a deflation of 6% compared with a devaluation of 2%. That generates some impacts that I will try to explain in the next pages. And also last year, if we compare what happened in the same quarter last year, that was in the middle of the midterm elections in Argentina, there was volatility in the FX. There was a devaluation of the official exchange rate of 15%, while the inflation in that quarter was the same 6%.

That means that we have that devaluation. So going to the next page, well, first, regarding the adjusted EBITDA on the rental segment, as I mentioned, there was a slight decrease in pesos terms, 2%, 1% in shopping malls, 11.3% in offices. If we measure that number in dollar terms, it's completely different. You know that we generate dollars basically dollar linked in the offices. And since we are adjusting last year number with inflation compared with these numbers in pesos of this year, that generate the loss. So if we measure everything in dollars, we will have an increase of 20% compared with the previous year.

Regarding margins are stable compared with the last year, a slight decrease in shopping malls and offices, but nothing relevant to mention there. About the change in the fair value of the investment properties, there we can see the main driver of the decline compared with the previous year. As I mentioned again, so we value our investment properties basically a proxy of dollars. And since there was no devaluation and we have to publish the numbers in pesos term, that generate the loss. So if we measure the properties in dollar terms remain very stable compared with the previous quarter. So nothing relevant there. And last year was completely the opposite. There was a devaluation.

So since we are long dollars, the devaluation in pesos terms generated that gain. So moving to the next page. The other component that also is affected by the difference of the FX and inflation is the net financial results. This year, we have a loss of ARS 9 billion that basically we have a gain related to net FX results since we have there to express in pesos term, our dollar-denominated debt. And since we have an appreciation of the peso that generated a profit. Against last year, that was the opposite. So it was a loss of ARS 38.8 billion.

About the income tax, as we always mentioned, every time that we have to post a loss in the investment properties, we have to post a loss also in the deferred tax and the opposite when we have an appreciation of the investment properties, then we have to express a loss in the income tax. So that is for that reason is the difference. So with all these numbers and explanations, we closed the quarter with a net loss of ARS 6.3 billion compared with the profit of last year. Well here, we include the evolution of our rental EBITDA in dollar terms.

And the last 12 months is a record high in terms of the recurring part of our business that is shopping malls, offices and hotels, so reaching $205 million. About our debt, so no major news about the debt side, but -- regarding our cash position, we just paid the dividend these days. So we will see a decrease in the cash position, and that means that we will see an increase in the net debt position to $445.8 million. In terms of ratios, that is almost 2.2x our EBITDA and only 16.6% LTV with a coverage ratio of 8.4x.

So we feel comfortable that probably during the year, we'll increase a little more the debt, probably to the levels of $500 million because we have a CapEx this year that is probably one of the most aggressive during the last, I would say, 10 years. So we will see a slight increase going forward, but we feel very comfortable. So going -- we can reduce that debt very fast if we don't continue with the same pace of CapEx and also the dividend payment that this year was high in terms of compared with the previous year. So we feel comfortable that we can manage very well the debt position.

And as you can see on the right side, most of our debt is in the long term. So no major pressure in the short term. About the dividends, as I mentioned, so we just paid the $137 million, ARS 211 billion. In terms of dividend yield, that was almost 11%. So probably this is the fifth year in a row that IRSA is paying more than 10% dividend yield. So probably the highest dividend payer of Argentina during the last 5 years. So we feel very comfortable with the capital structure and the cash position.

So for that reason, we decided to increase the dividend this year and also it's a little more efficient in terms of the capital structure about the tax shield that we will generate with a little more debt. So remember that last year, you started to pay taxes again after using all the tax credit. So we believe that with this capital structure will be a little more efficient. So with this, we finish the formal presentation. Now we open the line for the Q&A session.

Santiago Donato: [Operator Instructions] First question here, we have from Sophia from Latin Securities. How much CapEx should we expect for the year -- for fiscal year '27? Given the ongoing projects and the CapEx expected next year, should we expect dividend distributions to remain at current levels?

Matias Gaivironsky: So we gave the guidance of CapEx during the year, probably we will have around $150 million altogether. So with all the projects that we have and some remaining payments on existing acquisitions, so acquisitions that we already did. So we have to pay some installments. So altogether will be $150 million. That is if we don't buy anything new. So if we buy something else, probably that number could increase. And about the dividend distribution, well, if we analyze the last year and specifically this year, probably is a little higher than the average.

So every time that we decide the dividend, we analyze what is our CapEx needs, what is our cash position, the debt position and the structure of our debt. So this year, we feel comfortable to increase a little. But going forward, probably that number would be -- if I have to give a guidance, probably it's more on the average of our history that is more around $70 million per year. But as you know, we don't have a fixed dividend policy. We like to pay dividends. If we have excess of cash, we like to return to our shareholders. But we don't have the fixed policy.

So we will see every October, that is the month of the -- our shareholders' meeting, the proposal of the next year.

Santiago Donato: Next question. With your strong balance sheet, are share buybacks under consideration in addition to dividends? If so, would it be proposed next October?

Matias Gaivironsky: No, we can do it if we want before October. So this is upon our Board of Directors' decision. So far, we decided to keep -- to pay the dividend. So any shareholder can buy back the shares by themselves, not directly from us. But it's something that we did it in the -- many times in the past. So makes sense. We believe that the price of the shares has enormous discount, so it could make sense to do it. Although, as I mentioned, we just paid a dividend yield of 11%. So we use part of the cash for the dividend.

Santiago Donato: We gave some minutes more for any additional questions. There are no more questions, then we return back to Matias for his closing remarks.

Matias Gaivironsky: Thank you, Santi. I think there is no much more to add from my side. We remain optimistic about the year ahead. So many projects, a lot going on. So we expect to continue with Ramblas del Plata, and we hope to start seeing cranes for the buildings starting next year. So very happy on what's going on there. So we really appreciate your interest and participation. Thank you very much for joining us today, and see you next quarter.

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