Bloomberg News

Chile's Cencosud Falls on Argentina Intervention Concern

April 16, 2012

Cencosud SA (CENCOSUD), the Chilean retailer that gets a quarter of its earnings from Argentina, fell to the lowest in two months on speculation that the Argentine government’s planned nationalization of oil company YPF SA may be a first step in other expropriations in the country.

Cencosud, which operates more than 300 supermarkets and home-improvement stores in Argentina, fell 0.9 percent to 2,978.6 pesos, the lowest price since Feb. 8.

Argentina will send a bill to Congress to take control of Buenos Aires-based YPF from Spain’s Repsol YPF SA, President Cristina Fernandez de Kirchner said today in a speech. Argentina accounted for 28 percent of Cencosud’s sales and 27 percent of earnings before items in the first nine months of last year, according to the company’s website.

“The fall is directly related to the announcement of the nationalization of YPF,” said Adolfo Ortuzar, an analyst at the Chilean unit of Banco Santander SA. (SAN) “The market gets nervous with this kind of news and speculates on other targets. I see a Cencosud expropriation as very unlikely.”

Today’s announcement follows more than two months of government pressure on YPF, a unit of Spain’s Repsol YPF SA, to boost investment and output. The administration sought to block YPF dividend payments and backed provincial governments’ decisions to revoke 15 oil field licenses since March 13.

Cencosud shares have fallen 1 percent so far this year while peers SACI Falabella (FALAB) and Ripley Corp SA (RIPLEY) have gained 13 percent and 9.7 percent, respectively. Cencosud’s underperformance is explained by the company’s Argentine operations and its plans to sell as many as 270 million new shares, Ortuzar said.

Cencosud said March 1 it would announce the price of the new shares within the next 120 days.

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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