10-QPeriod: Q3 FY2011

FREEPORT-MCMORAN INC Quarterly Report for Q3 Ended Sep 30, 2011

Filed November 4, 2011For Securities:FCX

Summary

Freeport-McMoRan Inc. (FCX) reported strong financial results for the nine months ended September 30, 2011, with revenues of $16.7 billion and net income of $3.9 billion attributable to common stockholders. This represents a significant increase from the same period in 2010, driven by higher realized prices for copper and gold, as well as increased sales volumes in certain commodities like molybdenum. Despite these strong overall results, the company faced operational challenges in the third quarter, notably labor disruptions at its Indonesian operations (PT Freeport Indonesia) and strikes at Cerro Verde in Peru. These disruptions impacted sales volumes, particularly for copper, and led to revised production forecasts for the remainder of the year. Financially, FCX maintained a solid liquidity position with $5.1 billion in cash and cash equivalents at the end of the quarter, while also reducing its total debt to $3.5 billion. The company continued its commitment to returning capital to shareholders through dividends, paying $1.2 billion in common stock dividends during the first nine months of 2011, including a significant supplemental dividend. Management remains optimistic about the long-term outlook for copper, citing supply constraints and demand from the global economy, while acknowledging near-term economic uncertainties and commodity price volatility.

Financial Highlights

43 data points
Beta

Net Income

$1.05B

EPS (Diluted)

$1.10

Total Assets

$31.71B

Cash & Equivalents

$5.13B

Free Cash Flow

$1.83B

Financial Statements
Beta
Cost of Revenue$2.83B
SG&A Expenses$102.00M
Operating Expenses$3.04B
Operating Income$2.15B
Interest Expense$78.00M
Net Income$1.05B
EPS (Basic)$1.11
EPS (Diluted)$1.10
Shares Outstanding (Basic)948.00M
Shares Outstanding (Diluted)955.00M

Key Highlights

  • 1Revenue increased to $16.7 billion for the first nine months of 2011, up from $13.4 billion in the prior year, driven by higher copper and gold prices.
  • 2Net income attributable to common stockholders was $3.9 billion for the first nine months of 2011, a substantial increase from $2.7 billion in the same period of 2010.
  • 3The company held strong liquidity with $5.1 billion in cash and cash equivalents as of September 30, 2011, and reduced total debt to $3.5 billion.
  • 4Operational disruptions, primarily labor strikes at PT Freeport Indonesia and Cerro Verde, impacted sales volumes, particularly for copper, in the third quarter of 2011.
  • 5FCX paid $1.2 billion in common stock dividends during the first nine months of 2011, demonstrating a commitment to returning capital to shareholders.
  • 6Exploration activities near existing mines show potential for future reserve additions in North and South America, as well as in the Tenke minerals district.
  • 7The company reaffirmed its positive long-term outlook for copper, despite near-term economic uncertainties and commodity price volatility.

Frequently Asked Questions

The primary drivers were higher realized prices for copper and gold, which significantly boosted revenues. Additionally, increased sales volumes in molybdenum and favorable price realizations for gold contributed positively. These factors more than offset a slight decrease in copper sales volumes during the period.

The company experienced significant operational challenges due to labor disruptions. This included an eight-day strike and an ongoing strike at PT Freeport Indonesia (Grasberg minerals district) and a strike by the union workforce at Cerro Verde in Peru. These labor issues led to reduced production and impacted sales volumes, particularly for copper, and caused the company to revise its production forecasts.

FCX demonstrated strong financial management by maintaining a robust liquidity position with $5.1 billion in cash and cash equivalents as of September 30, 2011. The company also proactively reduced its total debt to $3.5 billion, repaying $1.2 billion in debt during the first nine months of 2011, including the redemption of significant senior notes. This financial discipline, coupled with strong operating cash flows, allowed for debt reduction and continued dividend payments.

Despite near-term economic uncertainties and recent commodity price declines, FCX maintains a positive long-term outlook for the copper market. This optimism is based on perceived limitations in future copper supply and the essential role of copper in the global economy. The company acknowledges that future prices are likely to remain volatile and influenced by factors such as demand from China, economic activity in major economies, and the development of new supply sources.