"We're going to double the size of our company by 2021"
JJC, one of the most important Peruvian companies in the construction sector, estimates that its turnover will surpass US$ 820 million for the bicentennial of Peru, hoping to consolidate its diversification and internationalization.
The last two years have yielded uneven, not to say opposite results, for the JJC group, one of the most important companies of the Peruvian construction sector. While in 2015 the company's turnover reached a record high of US$ 430 million, the turnover in 2016 will be lower, because some of the mega projects for which the company has been pre-qualified have not materialized yet, such as the water diversion of the Marcapomacocha mine (in the department of Junín) or the Andean Longitudinal road ("Carretera Longitudinal de la Sierra") and other civil works.
However, despite the temporary negative context, the chairman of JJC, Fernando Camet, keeps a positive outlook about the immediate future and the medium term and expects a recovery of the construction sector for 2017 and beyond, so that by 2021, the year of the bicentennial of our country, the group can celebrate with the announcement of having doubled its size, nothing less.
What strategies does the achievement of your goal for the bicentennial depend on?
There are several lines of action that we must follow in order to double the size of JJC by 2021. We think we can achieve this, first, by consolidating the three business lines we have: (1) engineering and construction (2) Real estate development and (3) infrastructure concessions. We are aiming to have more than five concessions by the bicentennial (today we have three), and we want to further strengthen our internationalization process: the company already operates in Colombia and Chile, and could also do so in Ecuador. We believe that we can achieve this: we are going to double the size of our company by 2021.
If you do achieve this, how much will your turnover be?
Slightly over US$ 820 million, approximately.
What is the basis of your plan?
2016 is not being a very auspicious year for the construction sector. Yes, this has not been a very positive year for the industry. In fact, this year 2016 our turnover will be lower than that of 2015, although we have more work. It happens that the civil works this year are smaller in size and this reduces the turnover. However, our expectation is that construction will be reactivated starting the year 2017. The new government is taking immediate action to boost public and private investment measures, and to promote access to housing, so we feel confident in a quick recovery.
Next year, for example, what projects will sustain your progress?
We hope that next year some of the concessions for which we have been pre-qualified are put out for tender once and for all, so that we can submit our bid. They are overdue.
What are those?
There is the water diversion of the Marcapomacocha mine (in the department of Junín), the Andean Longitudinal road ("Carretera Longitudinal de la Sierra"), and railroad Huancayo - Huancavelica, among other projects. All these proposals have not made any progress this year, so we hope that they will be put out to tender in 2017.
What else are you working on for year 2017?
We are bidding for works in the Talara refinery, the expansion of Toquepala, and at the same time we are bidding to build two thermal power plants in Colombia and two hydroelectric power plants in Chile.
And that is how you will strengthen your presence abroad, then. One of those bids has to come to fruition, right?
Well, there is still a very important step between bidding for a project and being awarded the project. But, yes, in fact we expect that some projects abroad will materialize. We have very strong partners in both countries and, although we are not established permanently in Colombia or Chile, in both cases we are already known thanks to the work we have done before. We have built the Cartagena refinery in Colombia, and a couple of hydroelectric power plants in Chile, which have been very important.
Have you looked into alternatives in other countries of the region?
Recently there have been talks of a possible interest of JJC in Bolivia and, as you mentioned at the beginning of this interview, there is Ecuador. I cannot tell you much about Bolivia, because I do not know the rules of the game there when it comes to private investors and regulation. In Ecuador, yes, there are two or three projects where we have been invited to participate and we are looking into them. One of them is in the mining sector, so we will evaluate them.
And beyond 2017, what initiatives are you developing for 2018 through 2021?
We have eight private initiatives that will contribute to the growth of the company since 2018, and which involve contracts of three to four years, on average. These initiatives are at different stages of development but two are already in an advanced stage and should be the first to happen. One of these will be a project for the Dos de Mayo hospital.
Building private and public hospitals, or the renovation of hospitals, such as the Dos de Mayo, are some of the opportunities for construction companies such as JJC, what other opportunities have you spotted?
We are always looking to evaluate projects at a national and international level. to give you an idea, we receive projects every week. Obviously, we then study each particular case to assess whether or not they are worthwhile. The market is much more complex nowadays, and we need these studies to support our investments. Nowadays you can no longer be guided only by experience or judgment alone. Therefore, apart from opportunities in the health sector, as the ones you have mentioned, we want to have a stronger presence in road and sanitation works.
And, are you finding any opportunities in the real estate business -another of its lines of business- despite the slowdown in home buying?
JJC has taken a cautious approach when it comes to real estate, and that is why have opted to use investment funds and to enter as partners in all our projects in this line of business. The issue is that the housing sector has reduced significantly in the last two years. Sales have dropped by half, partly because banks tightened the eligibility requirements for credit applicants and partly because the past government gave the wrong signals, which held back the investment. Still, we are confident in his recovery, and we are working on five real estate projects at present, four in Lima and one in Arequipa.
The latest is a "mixed use" development on Avenida La Mar (in Miraflores): shopping center, offices and housing. Is this the model of the future?
Mixed-use projects are an alternative that we're going to exploit. In the next five years the country will require homes and offices, no doubt about it.
Interview published in the supplement Día 1 of the Peruvian newspaper El Comercio, of Monday October 3, 2016, pages 10-11.