Matias Gaivironsky
Analyst
Thank you, Carlos. So if we move to Page 7, here, we have a breakdown, a short version of our results -- operational results on IRSA -- our commercial properties on IRSA. So we can see that the shopping malls, the sales of our tenants decreased in real term in the last quarter by 16%. So basically here we have our results are affected by the use of purchasing power of the people. The salaries haven't adjusted at the same pace than the inflation in Argentina and the inflation [indiscernible] during the last two quarters in Argentina. So we can see that in nominal terms, our sales grew 23.8%. In the case of our offices, the rent per square meter increased a little from the last year to $27 per square meter. Our occupancy is 90% as of December. So we have a vacancy of 94 floors in two different buildings. Going forward, our real estate [indiscernible] this country and that we will recover similar occupation levels than the year ago. Also, including the Zetta Building in Polo Dot that we will open soon, probably in the next 2 or 3 months. The occupancy will go up to 93%. In the case of our hotels, the occupancy was 68.5% and we will see later much better results in our operations since the evaluation. And also, you can see here that the rent -- or the rate per room increased to $205 against $185 last year. In the case of our shopping centers' occupancy, occupancy went down to 95%. Here basically, we have one cancellation of a contract. Walmart resigned their contract in DOT shopping center. So leaving aside that store, that is a big store in DOT, the occupation would have been 98.7%. And also Walmart paid a penalty for resigning their contracts or it will be last time to rent again without losing profitability. Also, an important event on the semester was the end of the concession of Buenos Aires Design. So for that reason, our total stock decreased to 332,000 square meters. In the case of the offices, the size of our portfolio remains stable comparing with the previous year. Basically, we sold 1 floor in 1 building, so we grew to 83,200 square meters, but we expect to almost double the size of our portfolio in the next two years because of the incorporation of the Zetta Building in Polo Dot and 200 Della Paolera. Going to Page 8. We can see the main event on our operation in Israel. So in IDB, the main news are regarding Clal. We sold -- we did two more swap transactions in August 2018 and January 2019. So our current stake in Clal Insurance is 25.3% of the shares, but the economic rights remain in 54.9%. Remember that in the beginning, we used to have 55% of the shares, so we remain in the same levels like at beginning of our acquisition. So we are trying to selling the shares in the market. Regarding DIC, we have been very active in working in our structure, so we sold shares in Shufersal. We reduced our stake to 26%. And we acquired shares in other subsidiaries like in PBC, in Elron and in Cellcom, so we were active on that. Also, we announced that our share repurchase plan of up to ILS 120 million in DIC, so the remaining stock is currently no less than 10%. And also, we did a distribution in dividends of ILS 100 million. ILS 60 million were in kind and ILS 40 million were in cash. We will remain active in working in this structure, where we have to solve the Concentration Law Phase 2, and we have to reduce one more layer by the end of this year. So we have to work on that. Also, in the case of IDB, we are in the process of selling Israel -- or we sell the online store in Israel, so we are in the process of that disposal. Going to Page 10, an important note regarding our financial statement is the adjustment for inflation. Argentina surpassed 100% of inflation accumulated during the last 3 years. And according to IFRS rules, any country that surpassed that threshold has to start adjusting their balance sheet by inflation. So the Argentina passed that during last semester, and the CNV now allow the companies to adjust, and it's an obligation for us. So we uploaded in our website an explanation of all the effects on inflation adjustment here. I will mention some of them, but we have more details if you need to have more breakdown on all the details in our website. So basically, you have here 2 main effects. One is regarding our comparative figures, that now all the 2018 numbers were adjusted to reflect the current nominal value of their currency. So basically, we adjust all the figures of the previous year by 47%. So first of all, the quarter of the previous year, we have to adjust for inflation at that quarter and then we express that figures into current figures, multiplying the result by 1.47% that was the inflation. When we see the different assets that we have, we have the obligation to adjust all monetary -- nonmonetary assets in Argentina. So all our assets abroad, Brazil, Bolivia, Paraguay, United States and IDB in Israel were not adjusted by inflation. Only we need to express previous year figures to the current purchasing power of the peso, the nominal value of the peso. In Page 11, we can see the main assets in Argentina. Remember that all our investment properties that are basically shopping center, land reserves, offices and farms that we leased to third parties are valued at fair value in our financial terms, so we don't need to adjust by inflation. Only the result from the difference in the fair value before were all reflected in one line that was the appreciation of the fair value of investment properties. Now that effect is divided in two. One goes to the line of inflation. And if we surpass the inflation on the appreciation, we're recognizing that line. And if not, we have a loss. That is what happened in this semester, and we will see a decrease or a loss in our investment properties. That is basically the main explanation of our loss in this year. Regarding other assets, we have to adjust for inflation. If we go to Page 12, we have our farms that were valued at historical values, so acquisition cost plus CapEx. So we used to be at $27 million as of June 30, 2018 without adjusting anything. Now that is $87 million in our books. That is lower than the fair value. So we are not in the middle, but we adjust some, but it's not the fair value of the properties. So we only need to adjust that inflation, not to reflect the real value of that. The real value here, we have the appraisal that we have as of December 31 that was in the order of $260 million. And then in Page 13, the rest -- all the liabilities. Monetary liabilities we don't have to adjust because of they're monetary. And the shareholders' equity risk, we have to adjust our equity by inflation. And the effect of that is a loss in our income statement that if we don't adjust the asset at the same pace, then we will have a loss. So part of that -- of the investment properties in peso term generated a profit, but the result, you will see that is in the IRSA case, and it is our commercial properties, a loss in the line of inflation. In Cresud, since we have also a farm, it's a profit in our financial statement. So when we go to Page 14. As Alejandro mentioned, we have our net income loss of ARS5.6 billion against a gain of ARS11.5 billion at the previous year. Attributable to our controlling shareholders is ARS3.9 million against a gain of ARS5.3 million. So the main effect we can see by segment. The Agribusiness, the performance was very good. We have an operating income of 9% higher than the previous year. Remember that this year when we compare with the previous year, we're already adjusted by 47%. So on top of that, Cresud record a gain of 89% more than inflation. In Argentina business segment, we can see a drop in our results in operating income from ARS10.6 billion to a loss of ARS3.8 billion. Basically, you have the main difference in the line 4, the change in fair value, that in the last year we posted a gain of ARS8.3 billion against a loss of ARS6.3 billion at this year. In the Israeli business segment, to understand or to compare the results, you need to also consider that the real appreciation or depreciation between the shekel and the peso, that was 17%. So to compare the previous year, if you see numbers ahead of the 17%, it's better performance or lower in the case of costs. We can answer in more details in the following pages. So if we move to Page 15. We can see, the figures for us reflect better our operational performance, that is our adjusted EBITDA, because we are able to have a breakdown of all our segments starting with the Agribusiness. We can see farmland sales, that increased significantly. And here we have an accounting effect that is important to explain that in the case of Shufersal that we saw, that here is reflected a gain of Shufersal. When you go to our financial statement, since we have part of that farm rented to third parties, we have to value at fair value. So when we sell the land, we are not posting a gain because we already recognized that part of the gain when we valued that property. But here in the adjusted EBITDA, we are including the gain against our historical cost. In the case of the farming, you can see that we have very good results. Something important to mention, the results are changed in the -- when we come to adjust by inflation -- is that all the holding results, that before were included in the lines of the segment. For instance, if we have a stock of grains or if we have a stock of cattle, we recognize the difference in the value of the product. In that line now, with the inflation adjustment, you have part of the results in the inflation line and part that surpass the inflation here in the segment. So to calculate, our gross margin will be difficult because we will have part of the holding results in the financial line and not in the operational line. Sorry for that. It's not something that we decide. It's the rule that we need to fulfill. So for instance, in the line 5, that we can see a drop or a loss in the cattle activity. It's basically because the holding result were excluded in this line. Regarding the sugarcane that you can see a drop here, 14%, it's related to the farm, San José, that we acquired last year that at the beginning, we received some plantations that we don't have to plant this year. So last year, we had better results than this year. Regarding the other segment, it's basically our operation in FyO, the [indiscernible] the agro-industrial, the meat packing facilities. FyO posted very good result this year. And the agro-industrial, they yield a loss but still generate a loss for that service segment. Regarding the urban segment, as we explained in IRSA, shopping mall decreased by 10% basically because of the lower consumption in Argentina during the last 6 years -- 6 months, sorry, the acceleration of inflation and the lag on salaries that had an effect on people, who lost some purchasing power. So that is affecting all metrics of consumption in Argentina. Offices, very good results since the revenues -- or the agreement are in dollars. Hotels, very good results. Probably, one of the best in the last year, 563% more than the previous year. And sales and development, that is this semester we haven't sold important units yet. In the last year, we sold Baicom and other properties, so it's why we have this improvement. And regarding Israel, real estate, very good results 36%. Telecommunications, in shekel term, lower than the last year basically because of the competitive environment in the telecommunications sector in Israel. So therefore, the main effects on the operational side. And the financial line, the net financial result, remember that this year, in Page 16, this year, we have an important devaluation. We have the graph of the exchange rate in the bottom left. That is semester, the devaluation was 30% against a devaluation of 12% during the last year. So that generated a higher interest rate and higher net exchange difference since all our debt or most of our debt is dollar-denominated. And then you can see in the line five all the effects of inflation goes to this line, the adjustment for inflation. Here we have all the impacts of the different lines. In IRSA, it's the same, so basically, we have dollar-denominated debt, so we are paying more interest in pesos term and more net exchange differences. And in Israel, if we see that figure in shekels, the net interest loss is decreasing, so we are paying lower interest because we reduced some of the debt and also we refinanced part of the debt at a lower interest rate, so that is decreasing. And also the other important effect is regarding the situation of CLAL shares. Last year, increased by 4%, and then we will restate that figure by 47%. So you have higher profit in the line 4 last year compared with this year. And also, there was another important effect in the line three that was the swap that we did at the DIC level, swap of the structure of debt. So we issued new debt. And at the beginning, we had to incur a loss. That was last year. That is reflected in the 6 months of 2018, ARS3.5 billion in the line three against a gain of ARS113 million this year. If we move to Page -- finally in Page 17, we can see our net debt as of December 31. Our current net debt is $395 million. And the net debt amortization schedule. We were able to issue a new one at the end of the last semester. So we have a debt amortization schedule, the different breakdown and different year. The short-term is basically because in Argentina, the banks are forbidden to lend dollars to companies. Only they can lend dollars to exporters or exporter-related. And since Cresud exports or sells its products to its exporters, can access to that financial line, and it's one of the most attractive in Argentina in the current scenario. So for that reason, we will concentrate that in the short term. So with this, we finished the formal presentation. Now we open the line to receive your questions.
