El Nino is prompting bond investors to flee Peru’s Camposol.
The world's biggest avocado exporter has seen its $125 million of notes due in 2017 tumble 11 per cent in the past three months as the higher-than-normal temperatures associated with the weather pattern reduce production. That’s compared to a 0.7 per cent average return on high-yield emerging-market bonds, according to Bloomberg’s index.
Things are likely to get worse for Camposol, which also produces shrimp and asparagus, as the strongest El Nino in almost two decades cuts harvests and threatens to unleash deluges on farmland on Peru’s Pacific coast. Concern the fallout may drive up leverage at the Lima-based company led Moody’s Investors Service to cut Camposol’s rating on 29 October to Caa1, seven steps below investment grade.
“There’s no support from anybody in the market for Camposol,” Cornel Bruhin, a money manager at MainFirst Schweiz AG, said from Zurich. “No one knows what the impact on the company will be from El Nino.”
Camposol Executive Chairman Samuel Dyer Coriat didn’t reply to an e-mail seeking comment on El Nino.
On 29 October, Camposol said sales plunged 8.1 per cent in the first nine months of the year, causing profit to drop 15 per cent.
During an 29 October earnings call with analysts, Dyer Coriat said heavy rains could affect irrigation systems, delay harvests and damage shrimp in the ponds close to the shore. Camposol has allocated about $500,000 to protect farms, he said. El Nino isn’t expected to be as intense as it was in 1997, when the sea’s temperature was about two degrees higher than it is now, according to Coriat.
From 1997 to 1998, Peru suffered $3.5 billion in damage, equal to 6.2 per cent of its gross domestic product at the time. Floods and landslides destroyed 73,000 hectares of crops, damaged a further 131,000 hectares and washed away homes, roads and bridges.
There’s a 55 per cent probability the El Nino will be strong to extraordinary in intensity, according to Grinia Avalos, director of meteorology at Peru weather agency Senahmi in Lima.
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