10-QPeriod: Q2 FY2016

FREEPORT-MCMORAN INC Quarterly Report for Q2 Ended Jun 30, 2016

Filed August 5, 2016For Securities:FCX

Summary

Freeport-McMoRan Inc. (FCX) reported its second-quarter 2016 financial results, highlighting a significant shift in its business strategy. The company experienced a net loss of $410 million, a substantial improvement from the prior year's $1.8 billion loss, largely driven by gains from asset sales, including the significant disposition of interests in its Morenci and Timok projects, and favorable adjustments related to oil and gas property impairments. Revenues decreased year-over-year, reflecting lower commodity prices, particularly for copper. The company continues its focus on debt reduction and strengthening its balance sheet through asset sales, including the pending sale of its interest in TF Holdings Limited (Tenke), which is expected to close in the fourth quarter of 2016. FCX has also made progress in managing its debt through debt-for-equity exchanges. The company's operational focus remains on its core copper assets, with strategic decisions on capital expenditures and development projects being heavily influenced by prevailing market conditions and commodity prices.

Financial Highlights

46 data points
Beta

Revenue

$3.33B

-16.3% Gross Margin

Net Income

-$479.00M

-14.4% Net Margin

EPS (Diluted)

$-0.38

Total Assets

$41.30B

Cash & Equivalents

$330.00M

Free Cash Flow

$874.00M

Financial Statements
Beta
Revenue$3.33B
Cost of Revenue$3.88B
Gross Profit-$545.00M
SG&A Expenses$160.00M
Operating Expenses$3.32B
Operating Income$18.00M
Net Income-$479.00M
EPS (Basic)$-0.38
EPS (Diluted)$-0.38
Shares Outstanding (Basic)1.27B
Shares Outstanding (Diluted)1.27B

Key Highlights

  • 1Net loss for the quarter was $410 million, a significant improvement from a $1.8 billion loss in the prior year's period.
  • 2Revenues decreased to $3.33 billion from $3.94 billion year-over-year, primarily due to lower copper and oil prices.
  • 3The company completed several asset sales in the quarter, including a 13% interest in Morenci for $1 billion and an interest in the Timok exploration project, generating significant cash inflow.
  • 4A definitive agreement was signed to sell its interest in TF Holdings Limited (Tenke) for $2.65 billion, expected to close in Q4 2016.
  • 5Oil and gas properties experienced an impairment charge of $291 million for the quarter, with significant charges also recorded in the prior year.
  • 6FCX made progress in debt reduction, including completing debt-for-equity exchanges, reducing its overall debt burden.
  • 7The company's common stock dividend remains suspended due to restrictions under its credit agreements.

Frequently Asked Questions

FCX reported a net loss of $410 million for the second quarter of 2016, a notable improvement compared to the $1.8 billion net loss in the same period of 2015. This improvement was largely driven by gains from asset sales and reduced impairment charges, although revenues saw a decline due to lower commodity prices.

The decrease in revenues from $3.94 billion in Q2 2015 to $3.33 billion in Q2 2016 is primarily attributable to lower average realized prices for copper and oil, which are key commodities for the company. Lower sales volumes for molybdenum also contributed to the decline.

FCX is actively managing its debt through asset sales and debt-for-equity exchanges. The company completed asset sales totaling $1.3 billion in the quarter and has a pending sale of its interest in TF Holdings Limited, which is expected to generate substantial proceeds. Additionally, FCX has been actively engaging in privately negotiated exchanges of its senior notes for shares of its common stock to reduce its outstanding debt.

FCX entered into a definitive agreement to sell its 70% interest in TF Holdings Limited (which represents an effective 56% interest in Tenke Fungurume Mining S.A.) for $2.65 billion in cash and contingent consideration. The transaction is expected to close in the fourth quarter of 2016, subject to regulatory approvals and other customary closing conditions.