Moody’s: Peru companies to strengthen through 2019 as disruptions fade away

Restored dynamism in Peru’s corporate sector in 2019 will follow a period of modest economic growth, Moody’s Investors Service projected in its latest report.

Since 2017, Peruvian companies have had to fend off a number of hazards: weak metals prices, a turbulent political environment, Odebrecht-related corruption allegations, and devastating floods.

“For 2019, we expect a more benign environment as the effects of these problems continue to ebb, although political risks will continue to factor into investor sentiment,” Moody’s expressed.

It went on to add Peru’s corporate leverage and coverage ratios will likely improve accordingly in 2019, compared to 2017, a difficult year all around for Peruvian companies.

Currently all 13 rated non-financial companies in Peru have stable outlooks, except Southern Copper (Baa2 positive), whose positive outlook reflects our expectations that it will sustain its credit metrics and competitive cash position through 2019.

According to Moody’s, mining returns will moderate in 2019 compared to 2017 and early 2018, with metals prices reflecting increased uncertainties on global economic growth.

In addition, with declining ore grades, it will be key for mining companies to continue to invest for growth to maintain or expand production volumes.

Minsur (Ba3 stable) has started its expansion into copper with the Mina Justa project and Southern Copper will continue with its expansion projects in Peru and Mexico.

In this sense, mining companies will also face risks come from Peru’s still-volatile political environment following recent regional elections.

In addition to the probable expansions in Peru’s mining sector, the Inca country’s building materials companies will benefit from new infrastructure projects in 2019-20, including ongoing reconstruction efforts following 2017’s devastating Coastal El Niño floods in northern regions.

Cement producers such as Unacem (Ba2 stable) rely more heavily on consumer activity than big projects, however, so rising consumption will account for most of the growth in Peru’s building materials sector in 2019.

Peru’s private consumption will likely accelerate to 3.6% in 2019 as the economy recovers, slightly faster than its 3.3% average annual growth from 2014-18.

More benign climatic conditions will also support Peru’s protein and agriculture sectors after a troubled 2017.

Climate experts anticipate stable weather through the first quarter of 2019. Camposol’s (B2 stable) production and distribution will likely continue to grow over the next few years, with global demand projections that appear strong for agricultural products such as blueberries and avocados.

A higher first fishing quota for 2018 will benefit Pesquera Exalmar (B3 stable), diminishing its leverage and boosting its profit margin.


Fuente: Andina

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