10-QPeriod: Q2 FY2019

FREEPORT-MCMORAN INC Quarterly Report for Q2 Ended Jun 30, 2019

Filed August 6, 2019For Securities:FCX

Summary

Freeport-McMoRan Inc. (FCX) reported its second-quarter 2019 financial results, indicating a challenging period marked by a net loss attributable to common stockholders of $72 million, or $0.05 per diluted share. This contrasts sharply with the prior year's significant profit, reflecting lower copper and gold sales volumes due to the ongoing transition at its Indonesian operations (PT-FI) from open-pit to underground mining, as well as generally lower copper prices. Despite the quarterly loss, the company generated $1.1 billion in operating cash flow for the first six months of 2019, albeit down from $2.7 billion in the comparable period of 2018. Total debt was reduced to $9.9 billion from $11.1 billion at year-end 2018, and the company maintained substantial liquidity with $2.6 billion in cash and cash equivalents and an undrawn revolving credit facility of $3.5 billion. Management remains focused on long-term value creation, advancing key development projects such as the Lone Star leach project and PT-FI's underground operations, while navigating commodity price volatility and operational transitions.

Financial Highlights

47 data points
Beta

Revenue

$3.55B

5.3% Gross Margin

Net Income

-$72.00M

-2.0% Net Margin

EPS (Diluted)

$-0.05

Total Assets

$41.09B

Cash & Equivalents

$2.62B

Free Cash Flow

$554.00M

Financial Statements
Beta
Revenue$3.55B
Cost of Revenue$3.36B
Gross Profit$187.00M
SG&A Expenses$92.00M
Operating Expenses$3.51B
Operating Income$33.00M
Net Income-$72.00M
EPS (Basic)$-0.05
EPS (Diluted)$-0.05
Shares Outstanding (Basic)1.45B
Shares Outstanding (Diluted)1.45B

Key Highlights

  • 1Net loss attributable to common stockholders of $72 million ($0.05 per diluted share) in Q2 2019, compared to a net income of $869 million ($0.59 per diluted share) in Q2 2018.
  • 2Consolidated revenues decreased to $3.5 billion in Q2 2019 from $5.2 billion in Q2 2018, primarily due to lower copper and gold sales volumes and lower average realized copper prices.
  • 3Operating cash flow for the first six months of 2019 was $1.1 billion, a decrease from $2.7 billion in the same period of 2018, largely due to lower sales volumes and prices.
  • 4Total debt was reduced to $9.9 billion at June 30, 2019, from $11.1 billion at December 31, 2018, indicating progress in deleveraging.
  • 5Cash and cash equivalents stood at $2.6 billion at June 30, 2019, providing ample liquidity.
  • 6Significant capital expenditures continue, with $1.25 billion invested in the first six months of 2019, primarily for major mining projects like the PT-FI underground development and the Lone Star copper leach project.
  • 7The company is actively managing commodity price risk through various financial instruments, including copper futures, swap contracts, and embedded derivatives in provisional pricing contracts.

Frequently Asked Questions

The primary reasons for the decrease in net income and revenues are lower copper and gold sales volumes, largely attributed to the ongoing transition at PT Freeport Indonesia (PT-FI) from open-pit to underground mining, and lower average realized copper prices. These factors led to a net loss attributable to common stockholders of $72 million in Q2 2019, compared to a significant profit in Q2 2018.

Freeport-McMoRan is actively managing its debt. Total debt was reduced to $9.9 billion at June 30, 2019, from $11.1 billion at December 31, 2018. The company also has access to a $3.5 billion revolving credit facility with no outstanding borrowings as of June 30, 2019, indicating strong liquidity.

The company is advancing several key development projects aimed at long-term value creation. These include the Lone Star leachable ores project near Safford, Arizona, and significant underground mine development projects at PT-FI's Grasberg minerals district in Indonesia. These projects are expected to contribute to future production and cash flow.

The company acknowledges that world prices for copper, gold, and molybdenum can fluctuate significantly and are affected by numerous factors beyond its control. While the long-term outlook for copper is viewed positively due to its essential role in the global economy and a challenging supply environment, future prices are expected to remain volatile. The company focuses on managing sales volumes, unit net cash costs, operating cash flow, and capital expenditures as key performance indicators, and utilizes hedging strategies to mitigate some price risk.