Besalco Drops in Chile Amid Signs of Building Slowdown

Besalco SA (BESALCO), Chile’s largest builder by market value, fell to the lowest in 21 months as signs of a construction slowdown damped the outlook for profit.

Besalco slumped 3.9 percent to 645 pesos at 12:05 p.m. in Santiago, the lowest price on a closing basis since October 2011. It was the biggest loser today on the benchmark IPSA index, which advanced 0.5 percent. Santiago-based Besalco’s shares have retreated 5.9 percent in the past three days.

The shares dropped on a “combination of signs of an economic slowdown in Chile and that Besalco had been performing better than some of its peers,” Jorge Sepulveda, an analyst at Euroamerica Corredores de Bolsa SA, said in a phone interview. “In a slowdown, engineering companies have to charge less to secure projects, which erodes their profit margins.”

Construction activity in Chile grew 4.6 percent in May year-on-year, which compares with an expansion of 11 percent in the same month of 2012 and of 7.2 percent in December, according to data from the Chilean Construction Chamber. Chile’s economy will grow 4.5 percent this year, the slowest since 2009, according to the median of estimates compiled by Bloomberg.

Besalco’s shares have fallen 26 percent in 2013, less than peers such as Salfacorp SA (SALFACOR), Chile’s largest builder by revenue, which has fallen 45 percent, and Ingevec SA (INGEVEC), down 34 percent.

The company will report second-quarter earnings Aug. 6, according to data compiled by Bloomberg. Banco Santander SA expects Besalco to report a profit of 3 billion pesos in the second quarter, compared with 2.8 billion pesos a year earlier, according to data compiled by Bloomberg.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: David Papadopoulos at papadopoulos@bloomberg.net

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