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Cencosud Rises to Six-Week High on Expansion Restart (Update1)
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By James Attwood and Nathan Gill

Dec. 7 (Bloomberg) -- Cencosud SA rose to the highest level in six weeks in Santiago trading after announcing plans to resume expansions in South America including a project to build the region’s tallest building.

Chile’s biggest retailer by sales gained 0.9 percent to 1,684.9 pesos at 8:47 a.m. New York time, heading for the highest closing price since Oct. 26.

The Santiago-based company plans to restart work this month on its Costanera Center real-estate project in Santiago as the economy recovers from its steepest slump in a decade. Cencosud will spend more than $700 million next year in Latin America, Chairman Horst Paulmann told reporters Dec. 4.

“You are starting to see the fruits of the company’s efforts this year,” Alvaro Pipino, head of research at IM Trust, said today in a telephone interview from Santiago. “The company’s shares should have positive momentum today.”

Costanera Center, once a symbol of Chile’s soaring copper- driven economy, became an emblem of its decline as Cencosud halted construction in January amid a global recession that cut prices of Chilean commodity exports and curbed spending.

Chile’s gross domestic product grew 1.1 percent in the third quarter from the previous three months, benefiting from rebounding copper prices, record-low interest rates and government stimulus spending. It’s on course to grow about 5 percent next year, the fastest pace since 2005, Finance Minister Andres Velasco said Nov. 27.

Tallest Building

Costanera was poised to be South America’s tallest building at 300 meters (984 feet) before work halted. The 700,000-square- meter (7.53-million-square-foot) project includes a 12-screen cinema, a five-star hotel and more than 300 retail outlets including department stores and home-improvement centers.

Paulmann, a German-born entrepreneur, spent about $1 billion buying up retailers in Brazil and Peru and expanding the Easy home-improvement chain to Colombia in the year before deciding to wind down work on the tower. Laurence Golborne, the former Cencosud chief executive officer who had guided the acquisition spree, was replaced in January by Daniel Rodriguez. The new chief promised to focus on cost savings and return debt to pre-acquisition levels.

Cencosud plans to fund Costanera Center with its own cash and will continue reducing debt, Rodriguez said. “You’ll see that in our fourth-quarter results,” he said Dec. 4.

Cencosud was retained in BCI Corredor de Bolsa’s portfolio of recommended Chilean stocks in a note to clients today, citing the plan to finance expansions with its own cash rather than with debt. Cencosud will hire 2,000 workers and invest $35 million in road works for Costanera Center, Paulmann said. The project’s shopping center is scheduled to open by mid-2011.

To contact the reporters on this story: James Attwood in Santiago at [e-mail] Gill in Santiago at [e-mail].
Last Updated: December 7, 2009 09:06 EST