10-QPeriod: Q2 FY2018

FREEPORT-MCMORAN INC Quarterly Report for Q2 Ended Jun 30, 2018

Filed August 8, 2018For Securities:FCX

Summary

Freeport-McMoRan Inc. (FCX) reported a significant increase in financial performance for the second quarter and the first six months of 2018 compared to the same periods in 2017. Driven by higher copper and gold sales volumes and improved commodity prices, the company saw revenues climb to $5.2 billion in Q2 2018 and $10.0 billion for the first six months. Net income attributable to common stockholders rose substantially to $869 million in Q2 2018 and $1.6 billion year-to-date. Financially, FCX demonstrated strengthened liquidity by repaying approximately $1.95 billion in debt during the first six months of 2018, while also reinstating its common stock dividend. The company ended the period with $3.9 billion in cash and cash equivalents and $11.1 billion in total debt, with ample availability under its revolving credit facility. Investors should note the ongoing developments in Indonesia, specifically the non-binding Heads of Agreement regarding PT-FI's ownership, which is expected to close in the latter half of 2018 and is subject to several conditions, including the resolution of regulatory and environmental matters.

Financial Highlights

47 data points
Beta

Revenue

$5.17B

35.0% Gross Margin

Net Income

$869.00M

16.8% Net Margin

EPS (Diluted)

$0.59

Total Assets

$37.03B

Cash & Equivalents

$3.86B

Free Cash Flow

$1.31B

Financial Statements
Beta
Revenue$5.17B
Cost of Revenue$3.36B
Gross Profit$1.81B
SG&A Expenses$109.00M
Operating Expenses$3.50B
Operating Income$1.66B
Net Income$869.00M
EPS (Basic)$0.60
EPS (Diluted)$0.59
Shares Outstanding (Basic)1.45B
Shares Outstanding (Diluted)1.46B

Key Highlights

  • 1Revenues increased significantly year-over-year, reaching $5.2 billion in Q2 2018 and $10.0 billion for the first six months of 2018, driven by higher sales volumes and commodity prices.
  • 2Net income attributable to common stockholders saw a substantial rise, with $869 million reported for Q2 2018 and $1.6 billion for the first six months of 2018.
  • 3The company repaid approximately $1.95 billion in debt during the first half of 2018, improving its financial leverage.
  • 4FCX reinstated its common stock dividend, declaring $0.05 per share for Q1 and Q2 2018.
  • 5Consolidated capital expenditures for the first six months of 2018 were $0.9 billion, with a significant portion allocated to major mining projects, including the Lone Star oxide project and underground development in Indonesia.
  • 6A non-binding Heads of Agreement was entered into in July 2018 concerning PT-FI's ownership restructuring in Indonesia, which is expected to close in the second half of 2018 but is subject to definitive agreements and regulatory approvals.
  • 7The company continues to advance development projects, including the Lone Star oxide project and underground mining activities at the Grasberg minerals district in Indonesia, albeit with some delays noted for the DMLZ underground mine due to seismic activity.

Frequently Asked Questions

The improved financial performance was primarily driven by higher sales volumes for copper and gold, coupled with higher average realized prices for these commodities compared to the same period in the previous year. Increased production and operating rates, particularly in Indonesia, also contributed significantly.

In July 2018, FCX, PT-FI, Inalum, and Rio Tinto entered into a non-binding Heads of Agreement for a significant ownership restructuring. Under this agreement, Inalum would acquire Rio Tinto's interests and FCX's interest in PT Indocopper Investama, leading to a majority ownership of PT-FI by Inalum (approximately 51%) and FCX retaining approximately 49% economic interest. The transaction is expected to close in the second half of 2018, but is contingent upon finalizing definitive agreements, securing long-term mining rights, resolving environmental regulatory matters, and other conditions.

Freeport-McMoRan actively managed its debt by repaying approximately $1.95 billion in the first six months of 2018, including a $1.4 billion senior note maturity and other redemptions. The company maintained strong liquidity with $3.9 billion in cash and cash equivalents and had $3.5 billion available under its revolving credit facility at June 30, 2018. Additionally, the company reinstated its common stock dividend, signaling increased financial confidence.

Key operational developments include the continued advancement of underground development projects at the Grasberg minerals district in Indonesia, with anticipated large-scale production from the Grasberg Block Cave mine starting in the first half of 2019. However, the DMLZ underground mine in Indonesia has experienced delays due to seismic activity, prompting plans for hydraulic fracturing to manage rock stress. In North America, the Lone Star oxide project is progressing with initial production expected by the end of 2020.