Alejandro Elsztain - CEO Carlos Blousson - GM of Argentina & Bolivia Matías Gaivironsky - CFO

Rodrigo Mugaburu - Newfoundland Capital

Good morning everyone and welcome to Cresud’s Fourth Quarter 2018 Results Conference Call. Today’s live webcast, both audio and slide show, may be accessed through company’s Investor Relations website at www.cresud.com.ar by clicking on the banner Webcast/Link. The following presentation and the earnings release issued yesterday are also available for download on the Company’s website. After management’s remarks, there will be a question-and-answer session for analyst and investors. At that time further instructions will be given [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 released regarding forward-looking statement. I will now turn the call over to Mr. Alejandro Elsztain, Chief Executive Officer. Please go ahead, sir.

Thank you very much. Good morning everybody. We are beginning our fiscal year. We are closing our annual report and the main event for the year, we can see that the adjusted EBITDA reached ARS11 billion that is a 58% comparing to last year numbers. And when we divide, we can see that the agribusiness made ARS2.1 million, comparing to 0.2 billion last year, and we are going to see through the presentation that we had good operational results and farming activity plus some farms sales in many countries. Related to the Urban & Investment, we had the good year through ARS9 billion and mainly are explained by to good operational results, very good in rental segments. And in Argentina and in Israel and in the mainly explanation of the balance sheet that because of the fair value of the investment properties that in Argentina, we’re evaluating the assets and made a big game in pesos, not in dollars. But this is the explanation on the balance sheet. Something that affected a lot the balance sheet of Cresud was the discounted operation of the Shufersal. Shufersal we had more than 50% last quarter, but recently we sold a stake of almost 16%. And with that sale, we begin the deconsolidation. So this brings to affects, one bring liquidity to our DIC, the Company of Israel like ILS850 million plus the deconsolidation bring a bigger amount of the asset to the balance sheet of Cresud and [indiscernible] to the IRSA too. So this is the main effect that may have to have the net income of ARS17.8 billion that is 250% compare in the last year number. However, we see the attributable to Cresud we have a balance sheet reflecting a gain of ARS5.4 billion comparing to last year, ARS1.5 billion. Related to the other business, there are some the main important things that we can consider. During the last year, we sold 3 firms, 2 of them are partial sold. You know that we buy big pieces and we divided in pieces and we sell them. So the total sales of last year were $46.5 million. And after the balance sheet, after the 30th of June, there was another sale of Jatoba in Brazil for BRL178 million. So this is not reflected in the numbers we’re going to see now. The last year, the whole year, we were developing land. We developed almost 11,000 hectares in the region considering the three countries Brazil, Argentina and Paraguay. Related to farming activity, we had good results mainly in Brazil and Paraguay. Argentina some good, some neutral, some negative because of relative colors will explain later and that results in Bolivia. We’re planting more than 200,000 in the region, releasing 532,000 tons of crops. This is just crops apart of that is the sugar cane. And related Urban & Investment, we have the EBITDA for the rental segment grew almost 35% comparing year-to-year. Occupancy at 98.5 in malls, 92% in office, 72% in the hotels portfolio and there was a big rebound on the office and hotels because of tourism coming to the region. In the Israel Business Center, with the last year, we were selling stakes every quarter. So we sold 30% of CLAL during the first quarter. And in all of the cases, we did swap transactions in the sense of that to take the profit of the economy of the sale. And today, we have 29.8% of the shares of CLAL and there was I explained before the sale of 60% of Shufersal that gave us a lot of liquidity. And during the year, we've launched buy back shares. We were able to repurchase ARS900 million 12.1% of the capital of the Company that we finished on July of this year. We can move to next page in Page number 3. And this is something that didn't affect last year number that of June, but it's going to affect next year number. And the government after lot of evaluation we’re going to see, the evaluation that came to the Company this year. The Company moved a lot the dollar from 17 or 15 to 28, but there was after that big evaluation later. The government decided to put again and to put a new measure of bringing taxes to the exports. This and we explained difference in the soybean to the corn and wheat. The soybean was after 26% to 27% taxes because marketing was reducing the taxes and exports, and we can see on the graph of the soybean that the blue is showing what it was promising, decreasing the taxes on the export of the soybean. They did directly a reduction to 18% instead of 24% that was of for this moment, but increasing on the taxes on export in a peso tax fixed and maximum of 12%. So with the combination of two makes at 28% today, tax with a maximum of 30% for the taxes for the soybean. nd in the case of the corn that was at zero, was one of the first measures that the government gave. Now, they put this for peso that represent in a 40% -- ARS40 per dollar at 10% and it goes to 33% will be at 12% and there is a maximum of 12% taxes, while it was for the corn and the wheat. So, there is some good news because we have revenues for the next year going to be much higher, but bad news taxes on exports again. If we move to Slide number 4, this is the evolution of the total service of Cresud combining the owned and long term leases. We can see that last year numbers were 764,000 hectares and we sold La Esmeralda -- finished La Esmeralda, so this is not partial, this is finishing this farm. No more La Esmeralda in the package, partial sale of La Suiza, 10,000 hectares, partial sale of Araucaria, 1,000 hectares in Brazil. Today we are running 744,000 hectares. There was a subsequent that I explained before, 10,000 hectares in Brazil. So today we are running 773,000 hectares in the region. We can move to next page and here we can see that from a book value of the balance sheet of our company reflecting $256 million book value for the farms of the four countries. Argentina, that is very original buying farm has $29 million. When we made a fair value that CAJ in Argentina makes, brings a $289 million. And to the other countries, Brazil, Bolivia, Paraguay, we can see that there is $701 million combined evaluation of fair parts and so it’s 2.7 times with the book value reflects and the part, the stake of Cresud considering the portion that Cresud run represents almost $500 million. In the Page number 6, the sales of the year, the three reflected the balance sales, giving us very good results with general rate of return of 18%, 9.5%, 12%, so big gains in the [indiscernible] it's a big portion of the business of Cresud and Brasilagro, 8 times, 8 times, 6 times the values of a lot of gains reflected the day we sell. If we move to next Page number 7, we can see the one that is not still reflected on the balance sheet and will be on September of this year 2019 fiscal year. This is a partial sale. This is a farm that we bought for ILS900 -- sorry BRL900 per hectare. And after the development and doing almost from zero, this was nothing developed, and today we are selling after many years. We can see that this is -- the book value of that is very low, book value of ’18 with the sale nominal -- sale of almost BRL180 million. So, it’s very profitable sales and this was the farm that was not very profitable operational, but yet this year with good condition and maturity of the land, and we begun to sale, so closing the cycle of the farm, making a very good return, we have still remaining area of 22,000 hectares of that farm. And we then move to Page number 8, we can see the development and the sales per year. Again, 2018 an active year and we know after what I have explained before, next year is much bigger than this. So, we’re expecting the buying and selling very active on the Company, and the development we are -- we developed 10,000 hectares last year. And we’re keeping development in our three countries again for next year, so actively doing the two. And so, this is an explanation of the real estate activities. Now, I will introduce to Mr. Carlos Blousson related to the market and the production of the Company.

Well, thank you, Alejandro. Good afternoon everyone. Let's begin with Page Number 9 about farming, production forecast and global stocks. In term of soybean productions, you can see that Brazil and United States has remained at var. Brazil 6% and United States 7% setting a new record. However, as mentioned before early comment on Argentina decreased because we have the significant drop, production decreased 36% and so that there were some contractions has gone down to 70 to 30% to 27%. Regarding corn and the Brazilian and American production has increased 4% and in addition Argentina has declined its production by 20% due to the drought as well. So the var stock consumption has decreased from 90% to 40% sales, these 3 countries are the most important ones. Let's move to the Page number 10 regarding farming activity in the fiscal year 2018. The Argentina weather condition was turned back mainly in the East Coast and in the Central Area. Cresud mitigate part of this, this effect due to expression in the northern of Argentina where the weather conditions were neutral. In relation to crop production which has decreased 23% in the concept to the cattle production in the northern area increased 60% like this area had a good weather conditions. But even weather conditions with several where several flooding and farmer, cost, the lost crop production by 40%. Begin Brazil and Paraguay, the positive weather conditions were very good, so where the corn product with great campaign. The corn production increased 38% in Brazil and 36% in Paraguay while the cattle production increased significantly 307% in Brazil and a 171% in Paraguay. The crop breakdown was 45% soybean, 25% corn, 17% sugarcane and 30% other products. Regarding commodity price and you can see in the graph in the lower graphics, the price decreased 8.9% in soybean and 5.5% in corn, bringing the lowest price in the last year. Let's move to the next Page 11, the farming activity. The planted area increased 2% to 209,000 hectare Brazil grew 11,000 hectares, and we estimate that Brazil still have 532,000 tons decreased 12.5% due to the Argentina weather condition as mentioned before. And in sugarcane, we estimated production of 1,901 to 1,000 tons increased 4.8% more than the last year. The regional yield evolution shows the continuous trend especially with the good weather conditions that is in Brazil and in Paraguay. Let's move to the next page, the cattle activity. The meat production increased 27% year-to-year because Brazil grew up in the var area by improving live stocks. In Argentina in the north area had a good weather condition to increase the production. In the bottom line, you can see the cattle price per country in U.S. per kilos in a carcass weight. In Argentina and in Brazil, the price went down 29%, 90% respectively while in Paraguay increased 1%. Move to the next page, the slide number -- the Page number 13, the other segment. Fyo, the world-class company continued growing in grain trade from 3.8 million tons, making the market share stronger 4.2% in the soybean and 2.4% in corn. The results in the fiscal year 2018 are ARS79.4 million growing 50% year-to-year. Agrofy, the agribusiness global marketplace continuing cooperate in commerce which more than 5,000 agribusiness suppler. It operates in Argentina and recently expanded to Brazil. Carnes Pampeanas, the meat packing plant has lower results as a consequence of the cattle price growing up, exchange rates remain stable, and the local market could not transfer the price to the higher costs. The operating results in the fiscal year 2018 loss ARS52.5 million; however, in the last three months because of the peso evaluation results became positive. Please Matias, you can continue with the presentation Matías Gaivironsky: Thank you, Carlos. Good afternoon everybody. Going to Page 14, the main event for our investment in IRSA, we control 64% of IRSA and we consolidate in our financial statement. So, the main result of IRSA that net income was ARS21.3 million attributable to IRSA ARS15 billion when an adjusted EBITDA of ARS9.3 million valid on the previous year. Main events, I will explain later the main accounting events in the next page. On the operational side, the rental grew in the rental segment in Argentina 24.7% year-to-year. The occupancy 98.5% in malls, they will compare with the previous year, 92.3% in offices, a little below last year and the hotel portfolio at 70.1%. Main event on Israel was a disposal of CLAL that we done 4 swap transactions, 20% disposal that we did through total return swap transaction, so where we keep the economic rights on the share, but we lost the political rights. And also during the year, we sold 16.6% of the share of Shufersal. So with this disposal, we don’t consolidate anymore. Shufersal and we recognizing an important gain of ILS853.7 million that in peso is around ARS8.5 million. So going to Page 16, we have the breakdown of our financial statement. So we finish the year with a net income of ARS17.780 million against ARS5 billion of the previous year; attributable to our shareholders increase by 257%. So I’m trying explain the main effect in the financial statements, you know that we divide our segment in the agribusiness. The Urban Argentina and there business center in Israel that include all the segments in Israel, so in agriculture business, I think I will show the breakdown of the operational side. But I think the main effect this year is the farm land sales that we grew compared with the previous year that we sold the 3 farms that Alejandro explained. In Urban Argentina business segment, the main effect is the change in deferred value that we have a result of ARS20.5 billion compared with ARS4.3 billion of the previous year. So, here we have the malls and the offices or malls we are using at ECS mall. Offices, we're using comparables all the evaluation are performed by third party. We’re using new work as a broker to address the value. And also the other important effect is the result from associates and JV. We have a negative effect on the environment in our Lipstick Building compensated with better results in Banco Hipotecario and good results on a subsidiary that has a lot of lands, so we've reevaluated that lot of land. That is quality in [indiscernible]. And in Israel, the main effects came from the financial -- the net financial result that I would explain in the next page, and also the other important effect in the total results is that net income from the discontinuing operations as I mentioned with the consolidated Shufersal, and we recognized the gain that ARS12.5 billion during the year again ARS4.1 billion that was related to disposal of farmlands in the previous year. We’re going to Page17. We can see the breakdown of the net financial results. So Cresud and Brasilagro that has the impact on the reevaluation, you can see the bottom of left, the evolution of exchange rate in Argentina. So last year we had reevaluation of 10.6% from 15.04 to 16.6. This fiscal year we had evolution from the 16.8 to 28.85. Today, the currency set levels of 37, so we will recognize further losses in the next quarter. So that, the impact is directly in our dollar denominated debt, so you can see in the second line of the table, the next exchange differences that went from ARS469 million of the previous year to the ARS4.3 billion this year. Also the net loss interest increased one of the reason was that the effect, because we have dollar denominated debt so our payment is in dollar but in pesos it’s higher. And also a higher cost on our debt, so this year all the interest rate in Argentina increased so our debt, the short-term debt that we have increased also. In IRSA, the same results also the same effect in the debt, so ARS9.9 billion in the line of net exchange. Difference is explained by the dollar denominated that reflected in pesos. The same in the interest then in the last line the profit from fair value of financial assets and the relative instruments is performance of our liquidity. So we have cash -- important cash position that generate results on ARS2.3 billion against 5.35 billion last year. And in IDB and DIC, we have two main effects, the one is the a debt swap that within the level of DIC that generated the loss of ARS2.2 billion and the second effect is fluctuation of CLAL shares. We recognized CLAL at market value. So last year increased by 51.9%, this year decreased by 17.5% that generates different -- the difference in the results. And it is important also to mention when you go to the line of net loss interest in Israel that although here you see an increase from 4.5 to 5.5. This is in pesos. The revaluation between the peso and the shekel was 27% during the year that means that IDB and DIC are paying less interest in shekels term. That is the result of the restrictions that we did there and are yielded on the different companies that are lower rates than traditional debt. So going to Page 18 the breakdown of our adjusted EBITDA more focused on the operational side. So the farming, we have a very strong year in terms of results in pesos, although the weak draw in Argentina, you can see very good results in all the line in grains increased from negative result of ARS167 million to a gain of ARS837 million. Remember last year, we had decrease in the holding of our crop that at the beginning of the year was a very high price and then decreased. So, we generated a lot there; this year was the opposite, so that this year increased. Although we’ve lower yields in Argentina, that price and the effect made the difference and also in Brazil and in Paraguay we are having a strong year that is reflected here; sugarcane the factories in Brazil with better prices and more surface, really compensated with a little lower result in yields as Carlos explained. Cattle and milk, remember that we discontinued the milk activity in the second quarter of this year, but the last year we have some. So increase also a little bit mainly explain that the cattle activity. And agriculture rent and services as services on farm that we rent to third-party also increased by 58%. And finally the other segments that are, our stake and field on the meat packing facility, generating losses field compensate part of that, but still a loss. But we finish with probably some recurring in terms of return over the value of our assets when you include here the farmland sales probably the return over the asset is around 10%, so with the $75 million in EBITDA, so it's a very strong year for our EBIT. On Page 19, the performance of the other segments, so the EBITDA, the adjusted EBITDA in the rest of the segment, you can see good result in -- probably a little below inflation in most offices by 21%. The segment will grow next year a lot because of the reevaluation. We collect here rent in dollars. Hotels the same, so probably with the new exchange rating Argentina, Argentina will receive much more tourism, and the rates are in dollars, so would increase. Sales and development, this year, we sold a lot of land to use the level, so early going forward, we will see what happened with the land bank on what we have. That is not material as a shopping center and offices. And in Israel good results in real estate, good results in supermarkets. Telecommunication is still challenging and competitive environment there. So, the Company is trying to improve other business lines like television and internet, but the environment in the cellular segment is very promising. So on the other line is mainly related to the cost on G&A on the corporate level. On Page 20, we have -- what we did in terms of the share repurchase plan, and during the year, we announced a share repurchase plan of up 9, at the beginning it was up to 500 then we increase it by 400 more. So, it's 900 million pesos in total. So we already finished. We vote 4.1% of the shares of the Company. We thought that is a very good way to deploy our excess liquidity in this challenging environment for all the markets in Argentina. So the other price that we paid was $18.5 the ADS, 43.27 the share, the common shares. So you can see the evolution on the shares of the companies since the beginning of the year up to to-date and the price that we paid for the acquisition. On Page 21, we have the breakdown of our debt and the debt amortization schedule. The net debt of the Company today as of June, it was $349 million. Most of that is at the dollar term. In February, we were able to issue a new bond for $113 million at a fixed rate of 6.5% that during 2023. Today, the current environment, the level of rate is much higher in Argentina unfortunately. And regarding the 2019 debt that we have $190 million, so this main composition of this is a credit line in Argentina that is refinancing of export, that the banks are allow to lend dollar. The early ways the banks can lend dollar is to exporter or exporter related. So since we sell our production to exporter, we are able to achieve those lines that the current environment in Argentina broadly is the cheapest way to finance. So, we are using short, that short-term debt because of that. So with this, we finished the formal presentation. Now, operator, we open the line to receive questions.

Thank you. The floor is now open for questions. [Operator Instructions] And our first question comes from Rodrigo Mugaburu with Newfoundland Capital. Please go ahead.

I wanted to hear your views for the upcoming ’18, ’19 crop season in Argentina. Last year was tough one and as you know for the macro of the country is really important, the results on the upcoming year. So I would like to hear your views, I know it’s too early. But we already have the weed on the ground. So any views you can share would be super helpful?

I think that we are facing a campaign that changed a lot. Every time that we see evaluation coming to the country, U.S. planting in a price and harvesting in a different, and this is going to happen in many cases. And mainly to Cresud that was able to buy before and is going to probably harvest at a very different price. So, we begin as campaign with 28, today we have 36 or 37, left taxes that is affecting it for. So, it’s a -- the evaluation coming and something that is a part of the macro that is changing. It is the inflation that is going to affect probably slow year evaluation and the climate conditions. We have comparing last year, a very bad climate conditions for the main areas of Argentina. So we were lucky that we have the North that was almost budget but the rest suffered a big drought 20%, 30% drop in yield. So, we expect, we are going to plan a lot. Argentina, for next year is a big size as 120,000 hectares of plantation. So we expect normal for the climate for the year and we expect situation of higher revenues because of the evaluation. Prices are going to -- now, we saw some effect on the prices. Taxes and excess made the decrease on the prices in dollar terms for the crop. So, we saw that at the first this moment, but this is long-term we have to move. You’re seeing the China and USA event that is going to affect the least price of the market for the whole year. So, I think you have pros and negs in the year, but we expect a good for the farmer in general because of the evaluation and every time of the evaluation is benefit for farmer for this year.

And at this time, I’m showing no further questions. So I would like to turn the floor back to Mr. Alejandro Elsztain for any closing remarks.

Thanks for finishing. Cresud will keep doing what it make that is developing, selling, buying again when we see the opportunity. We expect a big campaign. We have some business growing outside like Agrofy that is becoming to be a multinational going to Brazil and later to the rest of South American countries. The rest of the businesses are growing well, internationally speaking in [indiscernible] Urban and Israel too. So, we’re forecasting a very good year for 2018, 2019. And we thank to everybody and we see you in next quarter. Thank you very much and have a very good day.

The conference is now concluded. Thank you for attending today’s presentation. You may now disconnect.