Mining companies, with little brightness in the third quarter

The Mexican mining companies that are part of the main index of the Mexican Stock Exchange (BMV), the S&P/BMV IPC, would have a “negative” third quarter, derived from the increase in costs due to inflationary pressures and a complicated base of comparison in the price of industrial metals, according to consensus estimates of analysts.

Grupo México, owned by Germán Larrea, would suffer an annual drop of 34.51% in its net profit in the period from July to September of this year, to 11,203 million pesos, according to the forecasts of Banorte analysts.

In the operating flow (EBITDA), the drop would be 27.9%, to 31,494 million pesos, while its income would fall 11.3% (totaling 64,876 million pesos), according to Banorte estimates.

Analysts from the Monterrey bank explained in a report that the higher costs will put pressure on Grupo México’s margins, in addition to the fact that “metal prices face a difficult comparative basis.”

“As for Grupo México, we see lower volumes in copper production for two reasons: given its extraction strategy and to maximize the capacity of its mines, it is extracted first in areas rich in minerals and second in areas rich in minerals. with less presence of them. Currently, several of its mines are in the second case,” said Adolfo Margain, a sector analyst at Signum Research.

Under pressure

The net profit of Industrias Peñoles would fall 22.7% compared to 2021, to 51 million dollars, according to Banco Ve Por Más (BX+).

The EBITDA would drop 18.5%, to 281 million dollars and its income would have a negative variation of 7.7% (for a total of 1,321 million dollars).

“For Peñoles we expect contractions in gold production volumes and falls in silver prices, resulting in lower revenues. About 60% of his income depends on these two metals, ”explained Adolfo Margain.

For her part, Alejandra Vargas, analyst of the industrial sector at BX+, expects a negative report for Peñoles, “since we observe pressures due to complications in the distribution chains, increase in costs, energy prices and raw materials, which would be reducing margins ”.

He explained that in 2021 the prices of industrial metals rebounded due to the reactivation of economic activity after the Covid-19 pandemic, particularly in industry and construction.

Last year, copper rose 25.17%, closing at 9,720.50 dollars per ton; aluminum rose 41.83%, to 2,807.50 dollars per ton and zinc soared 28.46%, to 3,534 dollars.

These increases boosted the income of mining companies, especially Grupo México, whose sales depend largely on copper.

So far in 2022, copper is down 21.57%, trading at $7,624 per ton. Aluminum has fallen 21.42%, to 2,206 dollars per ton, while zinc has lost 17.15%, to 2,928.00 dollars per ton.

Industrial metal prices have been pushed down on fears that a significant slowdown in economic activity will cause demand for these commodities to plummet.

The shares of both Grupo México and Industrias Peñoles accumulated sharp falls on the Mexican Stock Exchange during the year. In the case of the first, its papers fall 24.38%, to 64.62 pesos per paper, for a loss in market capitalization of 192,056 million pesos.

For its part, Peñoles drops 10.86%, to 209.98 pesos, with which it accumulates a decrease in market value of 15,629 million pesos.

This Wednesday, Grupo México will publish its financial results report for the third quarter of 2022, while Peñoles will do so on Friday.

sebastian.diaz@eleconomista.mx