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Salfacorp Gains Most in Year After Profit Rises: Santiago Mover

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Sept. 4 (Bloomberg) -- Salfacorp SA, Chile’s biggest construction and engineering company, rose the most in more than a year after a jump in profit allayed concern about debt levels.

Salfacorp advanced 6.5 percent to 1,028.7 pesos at the close of trading in Santiago, the most since Aug. 11, 2011. Volume was almost five times the average of the last three months.

Second-quarter net income rose 13 percent from a year earlier to 4.12 billion pesos ($8.6 million), led by real-estate sales, the company reported Aug. 29 after the close of trading. Before the announcement, Salfacorp had been the worst performer among members of the Ipsa stock index in the past 12 months, with a 43 percent drop.

“There was uncertainty on how the company was going to perform and its second-quarter results dispelled that,” Javier Gunther, an analyst at Santiago-based brokerage IM Trust, said in a phone interview. “Salfacorp also showed an improvement in leverage ratios.”

Salfacorp’s ratio of earnings before interest, taxes, depreciation and amortization, or Ebitda, over net financial costs rose to 3.22 times at the end of the second quarter from 3.05 times at the end of the previous quarter, according to filings sent to Chile’s securities regulator. Bond covenants require Salfacorp to keep a ratio of at least 3 times.

Fitch Ratings cut its rating for Salfacorp to BBB from BBB-in April, citing an increase in debt levels due to recent acquisitions. Santiago-based brokerage Celfin Capital said Aug. 31 that Salfacorp’s underperformance created a buying opportunity and “compelling entry point.”

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

To contact the editor responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net

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