IRSA Inversiones y Representaciones SA Q4 FY2026 earnings call

• Strategic Growth & Acquisitions: Entered a new growth cycle by acquiring Aloeste Shopping and Los Gallegos Shopping Mall, and launching Distrito Diagonal in La Plata. Portfolio GLA is expected to reach 432,000 sqm next year.
• International Brand Expansion: Significant influx of international brands (e.g., Decathlon, Victoria’s Secret) driven by economic liberalization, creating high demand for space within existing malls.
• Development Pipeline: Major projects include Oeste Outlet (70% complete), Los Gallegos redevelopment ($5M investment), Distrito Diagonal (completion mid-2027), SETA office expansion (15,000 sqm, $35M investment), and Ramblas del Plata (Phase 2 environmental approval secured, infrastructure works ongoing).
• Financial Resilience: Net income reached 420.9 billion pesos, driven largely by positive fair value adjustments of shopping malls and favorable FX effects on dollar-denominated debt. Cash position strengthened to $390 million.
• ESG Initiatives: Expanded renewable energy generation in four malls, launched sustainable purchasing pilots, and maintained LEED certifications for key office buildings.

Rental Segment (Malls, Offices, Hotels): Achieved record adjusted EBITDA of nearly $200 million. Mall revenues grew by 1.5% due to inflation-linked fixed components (87% of revenue), despite an 8.5% real decline in tenant sales. Occupancy remained stable at 97% for malls and 100% for offices. Hotel segment generated approximately $10 million in EBITDA with occupancy rising to nearly 65%. Gross margin for the rental segment slightly decreased from 67.9% to 66% in Q4 due to one-off costs.

• CAPEX Forecast: Expect a peak in CAPEX for fiscal 2027, estimated at approximately $150 million, covering development costs for multiple projects and remaining acquisition installments.
• Dividend Policy: No fixed policy, but management intends to maintain the trend of being a top dividend payer in Argentina, contingent on cash flow and capex needs. A new dividend proposal is expected to be announced shortly.
• Share Repurchase: Management is internally discussing the possibility of adding a share repurchase program given the current valuation and strong financial results.
• Debt Metrics: Net debt-to-EBITDA is currently 1.4x; this ratio is expected to increase in the near term due to deployment of cash for ongoing capital expenditures.

• Macroeconomic Volatility: Exposure to Argentine inflation and currency devaluation, which distort financial statements although currently providing some FX benefits on debt.
• Consumption Slowdown: Real tenant sales in malls declined by 8.5%, reflecting softer consumer spending environments.
• Banking Sector Challenges: Investment in Banco Hipotecario faced headwinds from increased non-performing loans (NPLs) and compressed margins, though the bank remains profitable and dividends continue.
• Operational Execution: Aggressive development timeline requires careful execution across multiple simultaneous large-scale projects to avoid delays or cost overruns.

Q: How did the price effect impact mall performance, and what drove the Q4 margin compression?

A: The 'price effect' refers to a decrease in real terms for ticket prices, as inflation outpaced price increases for goods like clothing due to import difficulties. Q4 margin compression was primarily caused by non-recurrent one-off costs related to management program implementations and specific investments recognized as losses rather than capitalized assets.

Q: What is the strategy for Ramblas del Plata regarding construction timing and future phases?

A: Construction of the 20 buildings in Phase 2 is expected to begin late this year or early next year after city approvals. While Phase 1 relies heavily on land swaps, future phases (2 and 3) will involve more direct development by IRSA and strategic partnerships with international developers, moving away from pure swap models.

Q: Will new leases with international retailers command higher rents?

A: New lease agreements are generally priced similarly to the existing portfolio rather than at a premium. However, because a portion of revenue is variable (based on tenant sales), improved performance by these international brands could positively influence overall rent yields over time.

Q: Are there plans to divest the hotel business or enter the data center market?

A: IRSA may consider selling its Buenos Aires hotels, as they are managed by partners and represent older assets. Regarding data centers, IRSA is exploring the sector but views it as capital-intensive; they may seek strategic partners or fund structures to participate in this growing market alongside warehouse opportunities.