IRSA Inversiones y Representaciones Sociedad Anónima (NYSE:IRS) Q2 2026 Earnings Call Transcript

IRSA Inversiones y Representaciones Sociedad Anónima (NYSE:IRS) Q2 2026 Earnings Call Transcript February 5, 2026

Santiago Donato: Good morning, everyone. I’m Santiago Donato, Investor Relations Officer of IRSA, and I welcome you to the Second Quarter of Fiscal Year 2026 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. After management remarks there will be a question-and-answer session for analysts and investors. If you want to make a question, please use the chat. Before we begin, I would like to remind you that this call is being recorded, and the 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 Gaivironski, CFO.

Matias Gaivironsky: Good morning, everybody. So we are finishing this semester with a net gain of ARS 248.8 billion compared with a loss during the same period last year that was mainly driven by a gain in fair value of our investment properties. About the operational side, we have good numbers in Malls, in Offices, and Hotels. Malls have grown in terms of revenues and EBITDA. Offices also remain fully occupied with an increase in the EBITDA. And we have a recovery in the Hotels rates and margins. At Ramblas del Plata, we will see later with deeper analysis, and we have very good progress in development and in commercialization. We signed during the period 2 additional swaps agreements with different developers. So Eduardo will enter in more details later.

Also during the quarter, we issued an additional $180 million in the existing notes maturing 2035. So the company today has a strong cash position to take advantage of opportunities and also to finance our growth. Finally, during the quarter, also, we finished the payment of our dividends of the year. We paid a dividend yield of 10% during 2025. So with this, let me introduce Santiago Donato, our IRO, to follow the presentation.

Santiago Donato: Thank you, Matias. Moving to Page 3 to the Shopping Malls segment. Here, we can see our GLA slightly increased during this quarter. We have done some small expansion in [indiscernible]. Last year, we bought Terrazas de Mayo. So we did a big increase. And we are also working in some — in the new development in La Plata, and we are also working in Oeste Shopping, doing some development there. We’re going to have the mall closed. So we are growing in Shopping Malls in recent years. Occupancy have reached almost 98%, so very, very strong occupancy. Regarding consumption, over the last 2 quarters, we have seen a decline in our tenants’ real sales, minus 7% last quarter, it’s minus 9% this quarter. What we are seeing — there was some impact of all the electoral context during October — September, October, but we are also seeing now currently some pressure on prices.

Q&A Session

Prices are going a little bit down, while volumes continue to grow. And also, we are seeing a strong consumer traffic in our malls. So we hope we can increase at the level of the economic activity. Our sales are in general — shopping sales follows inflation plus GDP, and the economy is expected to grow in this 2026 in Argentina. Despite these lower sales in real terms, our revenues and our EBITDA are growing plus 4% revenues in the 6 months compare period and plus 2% EBITDA — the adjusted EBITDA in the compare 6 months period. And this is basically because of our inflation-linked fixed lease structure. As you can see on the right, almost 84% of our components of revenues in the malls are fixed or — well, you have the monthly base rent and then some other concepts like key money, parking, generally adjusted by inflation.

And the variable today is just 16% of the total structure. In the next page, we can see Office evolution. This segment, we have maintained a small portfolio today. We currently manage 58,000 square meters. This is mostly A and A+. We have just 1 building that is B category that is Philips, today is transforming in a coworking in the workplace by IRSA. In occupancy, we are in 100% of our portfolio and rents are stable in levels of $25, $26 per square meter per month. Hotels, we have seen this quarter a gradual recovery, mainly improvements in occupancy that reached 69% in the 3 hotels in the total portfolio, average rates at $227 per room and slight increase also in margins. And this has mainly been explained by good performance in our hotels in Buenos Aires, which benefits from stronger activity in sports and corporate-related events.

In the case of the [ Llao Llao ], the occupancy was a little bit affected by renovation works in 1 section of the hotel. If you exclude the rooms that are currently under construction, occupancy shows a more stable trend. So this is the rental portfolio of the 3 segments that have shown strong results. I will introduce Jorge Cruces, our CIO, for all the CapEx and the development projects.

Jorge Cruces: Thank you, Santiago. Good morning. Distrito Diagonal; in the city of La Plata, construction works are gaining momentum. Overall progress currently stands at around 23% and close to 78% of the contracts have already been awarded. We remain on track to open in May 2027, and it will become a milestone for beginning — for being La Plata’s first and only shopping mall. This new project will add 22,000 square meters of GLA to our shopping portfolio. Including the acquisitions of additional shopping centers and expansion projects we have mentioned lately, our GLA is expected to reach 458,000 square meters over the next years. Ramblas del Plata; recently, we added several new plots to our commercialization pipeline. So now we have a total of 26 plots, representing almost 207,000 sellable square meters.

We signed swaps for plots L-1 and J-1 for a total amount of $11.7 million. These 2 transactions represent almost 4,000 sellable square meters for IRSA. To date, we’ve sold 2 lots and swapped another 13 and the combined value of these deals stands at $93 million, covering over 124,000 sellable square meters to be developed. Looking ahead, we are planning to implement early activation programs in the future development of area of Phase 3. These initiatives may include a golf driving range and practice areas, paddle courts, a gym, driving test circuits, as well as food trucks. To support these [ temporary ] uses up to 20 parcels scheduled for development in the final phase may be leased in a short-term basis. This approach will allow us to create an on-site destination, encouraging the public to discover Ramblas del Plata.

Construction is progressing in line with schedule currently at 20%. The consolidation works of the Central Bay and the riverfront along the future [ access to ] boulevard have been completed totally. We have nearly finished the planting of the buffer forest of Phase 1, along with its irrigation system. To date, more than 1,900 trees have been planted. At the same time, construction of road works, sewers, and drainage infrastructure for Phase 1 is progressing well and has now reached 60%. Through a public auction, we acquired the former Israelita Hospital on the property located in Flores neighborhood of the city of Buenos Aires. Our plan is to transform this iconic asset into a mixed-use development. The property sits on a land of approximately 8,850 square meters and includes an existing developed area of about 17,000 square meters.

The acquisition was completed for a total purchase price of $6.8 million, which has been fully paid. In Uruguay, Distrito Calcagno, is a unique urban development located along the shores of Lake Calcagno. Another swap agreement was signed in October at $9.3 million. Back in Argentina, in the province of C�rdoba last week, we signed a new swap for Tower 3 at C�rdoba Shopping. IRSA will receive around 1,000 square meters of GLA, the whole third floor and 146 parking spaces. The agreement also includes an option for fourth floor at a cost price plus a 12.5% of development fee. Well, now I’ll give the floor back to our CFO, Mr. Matias Gaivironski. Thank you.

Matias Gaivironsky: Thank you. Thank you, Jorge. So about the results of the semester, we have to understand what happened on the variables of FX and inflation. During this semester, we have a real devaluation of the peso compared with an appreciation of the peso last year. That generated — but during the last year, we have losses in our investment properties since the value are mostly related to dollars. And this semester, we have significant gains. Also, when we express our debt in pesos term, the devaluation this year generate a negative result compared with a positive result last year. So we will see it in the next pages. So about the operational side first, on Page 12, we have good results in the Rental segment with a 4.9% increase in pesos — in real pesos terms compared with the previous year, 2% increase in Shopping Malls, 15% increase in Offices, and 44.8% increase in Hotels.

When we see margins, we see a slight decrease in Shopping Malls, most related to [ 1 short ] event during the quarter. So we expect the recovery in the coming quarters. And in Offices, in line with this with the previous year and hotels an increase, as [indiscernible] mentioned. About the fair value of the investment properties, that was the most important change. As I said, last year, we posted a significant loss, ARS 306 billion compared with ARS 185 billion gain this year. If we analyze numbers in dollar terms, we will see that during this year, prices or value of our properties remained stable. This is only the effect of the devaluation of the pesos that when we express the dollars into pesos generate a higher gain than the inflation effect.

About the net financial results. As I said, you can see in the table below the first line, the net FX results that during this year, we are generating a loss of ARS 15.9 billion compared with a gain last year of ARS 28 billion. That is basically the main important effect. About the net interest remained stable compared with the previous year, but probably for the rest of the year will increase a little since we increased our debt as we can see later. So we expect that to pay higher interest compared with the previous year. The income tax, here, we are giving effect on the deferred tax on the investment properties. You know that every time that we generate a gain in the investment properties, we have to post a deferred tax in this line. So last year, we generated losses.

And because of that, we generated gains in the income tax, and this year is the opposite. Although the company started to pay income tax again, last year, we started to pay, so that has a cash effect on the current tax. So we expect that, going forward, the company will keep paying income tax again after consuming all the credits — the tax credit that we used to have. So finally, we finished the quarter or the semester with a net income of ARS 248 billion compared with the loss last year. About the evolution of the rental segment, the EBITDA and the adjusted EBITDA in dollar terms, we can see that the progress has remained positive. We are finishing the semester with $102 million. So if we continue with this trend, we anticipate very good numbers compared with the previous year.

So the company remains strong in the cash generation. About the debt, the news is that the company tapped the international market again during December. So we closed — we did the reopening of the existing bond that we issued in March 2025. So we issued an additional $180 million at a yield of 8.25%. Remember that the bond has a coupon of 8%. So you can see on the bottom right that the debt amortization schedule, we almost don’t have any debt in the short term. So with the proceeds and the cash position that we have, we will cancel the $226 million amortizations, and most of the debt today [ outstanding ] will expire during 2023 (sic) [ 2033 ], 2034, and 2035. With this, we — the ratios remain very conservative with a net debt to rental EBITDA of 1.6x, LTV of only 13%, and coverage ratio of almost 7x.

And remember that only 60% of our assets today are generating EBITDA. The other 40% are land reserves or other assets that are not generating EBITDA. So we believe that we have a very conservative debt structure. Finally, we saw that during the last quarter, but we finished the payment of the dividend of the year. We paid a dividend yield of 10%, so $116 million that were paid during November and October. So that was the [ arrears ]. So with this, we finish the formal presentation. Now we open the line to receive your questions.

Santiago Donato: Well, now is the time for the Q&A session. If you have a question, please click the button labeled Raise Hand or use the chat. We’ll take the questions in the order we receive them. Okay, here, we have the first question regarding tenant sales that impacted by — were impacted by softer consumptions in the second half of the year. What are your expectations for consumption trends this year?

Matias Gaivironsky: There is a big debate these days in Argentina about the prices of clothing. What we saw, and probably if you visit Argentina, for the locals, price of clothes were expensive in dollar terms compared with other countries. What happened in the last, I would say, year that if you compare prices of cloth compared with the CPI, the clothes increased much lower than inflation. So when we show our tenant sales, we are doing the [indiscernible]. So if we see the quantity, the tickets that we are generating in the malls, this remain in good levels. So when we compare with the previous year are at very good levels. And also in terms of traffic, the public that are entering the malls remain stable compared with the previous year.

So only when — probably what is happening, the price of the clothes start to reduce compared with the previous year. So when you do the equation, then that result in lower consumption or lower pesos compared with the previous year. Going forward, as I always said, the company will be tied to the evolution of the economy. So if we see Argentina growing, probably we will grow in terms of consumption, and we will have the volatility according to what happened in the economy of Argentina. But this trend of reducing prices is something that is happening. So probably it’s a new trend in Argentina.

Santiago Donato: There is a question here from [ Lorena Reich ] that is in that direction. Given the impact on consumption and crisis in the textile sector in Argentina, do you expect this to impact the rental income? Do you expect more tenants to base rents instead of percentage of sales?

Matias Gaivironsky: Well, this also was new for the company in the last years. You know that in the past, we were not allowed to adjust rents by CPI. So we always include a step-up clause in our agreements, putting some estimation of the inflation, but we always misestimate inflation. Unfortunately, inflation were much higher than what we expected. That means that the base rent was lower than we expected, and then we compensated our revenues by the variable part. After the change in the law, we started to adjust all the agreements by CPI. So today, all the agreements are adjusted on a monthly basis by CPI. So we captured that part. So that means that in terms of percentage, today, the base rent is much higher or it is more important than what was in the last years.

That is a protection for the company [indiscernible] you have a slowdown in consumption. But also, what we see is that if that is sustainable or not. So of course, we can’t charge in the long term an occupancy cost to our tenants that are not sustainable for them, so that is the equation. So — and we will see that in renovations and in negotiation with tenants every time that the agreements expire.

Santiago Donato: I will give the word to Gordon Lee from BTG. He probably want to ask. Gordon, are you there?

Gordon Lee: Yes. Can you hear me?

Matias Gaivironsky: Yes.

Gordon Lee: A couple of questions. The first, I guess, is a follow-up to the previous one, which is more specifically whether you’ve had requests from tenants to rebalance the structure of the contracts or whether your new contracts are seeing a different balance between base and variable overage? And then just a question on the lease up of the Philips building, which was significant during the quarter. The workspace that you’re referring to, just to confirm, that’s being leased to a third-party provider of these services. You’re not doing the workspace management yourself. And then the second question, if you are leasing it to third parties, does IRSA underwrite any of their re-leasing risk? Or is that completely absorbed by the tenant?

Matias Gaivironsky: Thank you, Gordon. So the first part of the question. Sorry, I…

Santiago Donato: Given the weakness in [indiscernible] existing tenants.

Matias Gaivironsky: Sorry, the balance — no, typically, Gordon, what you have to analyze to see the shape of the industry is some drivers: first of all, occupancy; second, delinquency; third, consumption; and fourth, the prices that you are able to sign with the tenants. All the variables are okay today. So we see good levels of occupancy, good levels of traffic, good levels of renovations, delinquency remain very low. So we haven’t seen yet any [ signal ] that force us or make us to think that we should change some of our drivers in commercialization. So far, all the renegotiations were good. Something else that is happening is that is a new trend that we have more demand for international brands coming to Argentina. So that probably gives us a sustainability in demand for new spaces.

So no, today, all the signals are good. And regarding the second part about the workplace, if I understood well the question, no, IRSA is managing everything. So it’s a property that is under the control of IRSA, and we have the operations. So we operate directly. So we are in charge of the services and everything. And it’s a new segment for offices that is performing very, very well. What is happening there is amazing and the community that we are building there is great. So it’s a new business for IRSA. So far, the performance we compare with what happened if we just rent to a traditional tenant and the results so far are good. So we are happy on this new business line.

Gordon Lee: And is that — if I could follow up, is that a business line that is, let’s say, uniquely intended to address the vacancy of Philips? Or is this something that you could see reproducing by maybe looking at B-class properties?

Matias Gaivironsky: Yes, it’s something that we will try to replicate in other locations. So we are thinking probably to launch the second workplace soon. So yes, it’s something that we will try to replicate.

Santiago Donato: There is a question related to the sector in general. How do you see the sector? I imagine, in general, real estate sectors going forward from sales, well, the experience across shopping malls, you have talked about retail. So perhaps Jorge can give some color on the real estate sector, how do you see it going forward?

Jorge Cruces: Well, actually, going forward, we’re very optimistic. It’s about the time. It’s about when actually the things that are happening to the country is people are going to be able to get a credit to buy an apartment, the middle class. So that’s going to — that sooner or later is going to happen. The demand is fantastic. It should be incredible. It’s going to be a thing of pricing, and we have a lot of land reserve. We have a lot of products. So I’m very optimistic. The thing is just about time. It should take some time, but we’re going to get there. And that’s residential. And we talked about the Retail — well, office buildings. We’re optimistic regarding mixed uses, close to our shopping malls, residential office buildings.

So we’ve been selling office buildings in these late years. So we’re looking at office buildings to develop and to have some more spaces in office buildings in good locations. So generally, we’re optimistic. We’re even — I think we told this before, we’re looking at maybe logistics or maybe warehouses. So we’ve been shopping around and sooner or later, we’re going to get there with warehouses also. So we’re very optimistic with real estate in general and especially here in Argentina.

Matias Gaivironsky: There is a question here regarding Ramblas, Jorge. How much is already sold of the total project? I think it’s around 20% approximately.

Jorge Cruces: We had that in the presentation.

Matias Gaivironsky: Yes. I think it’s approximately 20% that is the big part of the Stage 1 over the total project. And if prices are ahead of expectation compared to your initial plans, prices of the land and what the prices of the residential apartments that you could sell if are ahead of the first [ plans ].

Jorge Cruces: Our balance sheet is very, very conservative. We talked about that before that we have to be conservative. So in our balance sheet, you’re going to see and Ramblas everything that we — all…

Matias Gaivironsky: It is at $600 the square meter of the land…

Jorge Cruces: All the swaps, the price of the swaps are $3,000 for each square meter. And well, that’s — I believe that’s very, very cheap. I believe the residential is going to be over — I think it should be already $4,500, but it should be — it’s going to be more than $5,000 for each square meter of residential. And when the buildings are finished, it will be more than $5,000. And well, we have a lot of commercial area. Commercial area is going to be a little bit cheaper, but it should be more than $4,000 anyway. So I think the prices in residential is going to be higher than $5,000 average when the buildings are finished.

Santiago Donato: I have 2 questions on the financial front. With the deterioration of the net leverage from 1.2x to 1.6x, what is the maximum level of net leverage that you feel confident? Any targets?

Matias Gaivironsky: Well, I don’t see this as a deterioration of the leverage [ broadly ]. As we increased a little, the debt was [ ridiculous ] low during the last year. Remember that the company were not executing any CapEx during the last year. So we feel very, very comfortable with the cash position before. And now that the company is entering a more aggressive expansion plan, we decided to increase a little the debt. But remember that this company with an EBITDA margin of around 80% is a cash machine. So after you open the properties that we are developing, then the leverage will go very fast down if we don’t execute new CapEx or pay dividends. So with the plans that we have going forward, we believe that we have enough cash to finance all the expansions and acquisitions.

So the company is not expecting to raise more debt. Probably the net debt will increase because we will use the cash. So we will use part of the cash. Today, the company has more than $300 million in cash. So part of that, definitely, we will use it in the expansion. So for that reason, the leverage will go up. But I would say that, I don’t know, 2x EBITDA is probably the possible outcome during the year. But I feel comfortable with probably less than 3x EBITDA, I feel very comfortable. But it will be tough to see the company with that leverage because we should increase significantly the acquisitions or the development. So take into consideration that any development for real estate will take like 3 years. So if we, I don’t know, launch $100 million projects, the cash that we will need per year is $30 million per year.

And the free cash flow of the company today is more than $100 million. So we have enough cash generation to finance in the future the expansion. So we don’t expect to see much more leverage going forward.

Unknown Executive: And also all those projects that we are putting into production will bring additional EBITDA, of course, in the next years.

Matias Gaivironsky: Of course. And a question regarding the dividend that we paid to ADR holders in December, if it was net of the 7% Argentine tax retention? Yes, it was. I think we covered all the questions. I give some minutes more. There is one related to, if you could give some details on Golden Juniors Segregated Portfolio. Yes, that is a fund that we created last year to put some of our liquidity with the diversification. Most of our liquidity was — is in dollars or dollar-related instruments. And that was a way to diversify the liquidity. The company has a strong liquidity, as I said, $300 million, and we invested $6.5 million in that fund that basically invest in companies or in gold and silver. So the performance of that fund was very good during the last 6 months, but it’s a small part of the liquidity of the company.

Santiago Donato: Thank you, Matias. Well, if there are no more questions, we conclude the session and the presentation. We thank you all. I would like to turn back to Matias for his ending or final remarks.

Matias Gaivironsky: Thank you, Santi. So finally, what we see at IRSA is that we are entering — we have entered in a new expansion phase for the company. We were very conservative during the last years about growth, but we changed that during the probably last years, and the company is trying to execute a lot of projects [ broadly ]. We will launch new projects in the coming quarter or in the coming — the rest of the year. We will announce new developments that the company is planning to execute. Also, we are working in different M&A transactions. So hopefully, we will announce some acquisitions also going forward. So the company is very concentrated trying to speed up the process of growth. So we hope to see that happening during the rest of the year.

And the rest of the operational segments remain in good shape with very good levels of cash generation and good drivers. So we are very confident for the rest of the year. So thank you very much, and see you next quarter.