Peru miners to see Q3 earnings rebound, construction to disappoint - research firm

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Monday, October 17, 2016

Most of Peru's large miners are expected to have fared better in the third quarter following a rebound in metals prices and rising output, while the construction industry continues to grapple with weak demand, Lima-based brokerage Inteligo SAB reported.

A sample of 17 companies that trade on the Lima stock exchange's general index showed combined earnings rose by an estimated 76% in the quarter, the brokerage said.

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"The mining industry will benefit from the great performance of commodity prices during the third quarter," Inteligo analyst Luis Eduardo Falen wrote in a report. "It is the first time since the fourth quarter of 2012 that all metals will post gains."

MINING RESULTS FORECASTS

The Peruvian mining industry – the country is the world's third largest copper, zinc and tin producer – is expected to see combined net income jump ninefold, according to the brokerage.

Zinc-lead-silver miner Milpo, a unit of Brazil's Votorantim Metais, registered the biggest gains in the quarter, with profit jumping to an estimated US$26.3mn from US$1.19mn in 3Q15, Inteligo said.

Freeport-McMoRan's Cerro Verde unit, which completed a US$4.6bn expansion of its open pit copper mine, increased net income to an estimated US$84.4mn from US$6.70mn. Fellow copper miner Southern Copper boosted earnings to an estimated US$239mn from US$99.4mn.

Three other miners swung to a profit from losses a year earlier, the brokerage said. Precious metals miner Buenaventura, which also holds a minority stake in Cerro Verde, posted an estimated US$40.8mn profit compared with a US$23.2mn loss a year ago.

Minsur, Peru's only tin producer, registered an estimated US$21.4mn profit compared with a US$26.9mn loss a year earlier, while zinc-lead-silver producer Volcan posted an estimated US$17.6mn profit vs. an US$10.9mn loss in Q315 after completing expansion projects and implementing cost-cutting measures.

CONSTRUCTION RESULTS FORECASTS

Cementos Pacasmayo, which is planning to spin off its Fospac phosphates project, and mining equipment distributor Ferreycorp are both expected to post losses in the third quarter on account of weak demand, Inteligo said.

Cement producer Unacem will boost earnings by an estimated 45% to US$10.7mn, while construction firm Graña y Montero is expected to swing to a US$6.89mn profit from a US$9.94mn loss a year earlier, according to the brokerage.

Construction firms are counting on US$20bn in public-private partnership infrastructure concessions and a US$54bn mining investment portfolio to boost demand.

President Pedro Pablo Kuczynski, who took office July 28, has pledged to fast-track US$25bn in delayed infrastructure projects, as well as spurring investment in large-scale copper mines.