Cresud SA Q1 FY2020 earnings call

Management Statement and Operational Highlights

• Planting and Expansion: Planted 268,000 hectares across countries, with a 10% increase from the previous year. Developing 7,400 hectares.
• Share Repurchase and Dividends: Launched new ARS300 million share repurchase plan in August, approved distribution of shares bought last year (2.6% of capital stock to be delivered in November). Receiving $5 million dividend from Brasilagro and 1.2% of IRSA's commercial properties (~$5.5 million) as dividend in kind.
• Agrofy: Made a capital increase of $12.9 million in October 2019, Cresud owns 27.4% of Agrofy with a net worth of $42.9 million. Plans to operate in nine Latin American countries over the next three years.
• Urban Insights: In Argentina, shopping malls showed signs of recovery, office buildings performed well, and hotels faced challenges. In Israel, progress on privatization and leadership changes.

Segment Performance

• Agribusiness: Planted 268,000 hectares across four countries, with a 10% increase from the previous year. Sugarcane had better results (36.8% above prior year), cattle loss decreased from ARS124 million to ARS35 million. Grain segment was affected by planting season. Farming had positive results with 26.3% growth compared to last year.
• Urban (Argentina): Shopping malls had a 14.5% drop adjusted by inflation, but showed signs of recovery with a 5% drop in the last quarter. Office buildings had 62% higher adjusted EBITDA due to more square meters and dollar-denominated business. Hotels had a greater drop due to lack of insurance payments received in the prior year.
• Urban (Israel): Nomination of new CEO for IDB & DIC, selling CLAL shares (now running ~30% through swaps/direct stake), deconsolidation of Gav-Yam contributing to ARS15 billion gain, and progress on privatization of ISPRO public debt (focus on Mehadrin).

Guidance

• Planting: Expect continued planting growth with 268,000 hectares planted.
• Agrofy: Plan to expand operations to nine Latin American countries in the next three years.
• Debt and Refinancing: Refinanced $60 million in July 2020 via capital market to address debt maturities, and considering further capital market and potential convertible bond issuances.
• Urban Outlook: Expect recovery in shopping malls in Argentina with new government measures.

Risks

• Economic Conditions: Impact of currency fluctuations in Argentina and Brazil, and consumption trends.
• Commercial War: Effect of US-China commercial war on commodity prices.
• Debt Maturities: Upcoming debt maturities over the next two years, requiring careful refinancing.
• Policy Uncertainty: Uncertainty around government policies in Argentina affecting business operations.

Question and Answer

• Q: John Durso asked about capital allocation given Argentina's events and debt profile. A: Alejandro mentioned being conservative, considering liquidity and opportunities, previous share purchases, and refinancing via capital market.
• Q: Wesley Golby asked about shopping malls outlook and Cresud's debt profile. A: Alejandro discussed recovery in shopping malls with new government measures and breakdown of debt into working capital and long-term, noting refinancing via capital market and potential capital increase.