01—Abstract
Summary
Summary of the 10-K filed April 2, 2001. Cited figures are marked; the original filing is the authoritative source.
Southern Peru Copper Corporation (SCCO, NYSE: PCU) reported a sharp recovery in fiscal 2000, with net earnings of $92.9 milliona ($1.16 per diluted share), up from $29.4 million ($0.37) in 1999.
Net sales rose 21.6% to $711.1 millionb on higher copper prices (LME averaged 82 cents/lb vs. 71 cents in 1999) and 4% higher volume of copper sold (780.8 million lbs). Management credits cost reductions, with operating breakeven cost falling to 54.0 cents/lb from 56.1 cents, along with better sales conditions for the earnings improvement. Operating income more than tripled to $149.6 million, and operating cash flow rose to $183.6 million.
The balance sheet reflects a company in heavy investment mode. Capital expenditures were $131.7 millionc in 2000, and management plans roughly $360 million in 2001 for the Ilo smelter modernization, Toquepala concentrator expansion, and Cuajone leaching work, with the broader smelter project estimated at $672 million through 2006. To fund this, total debt climbed to $347.2 million from $222.5 million, and debt rose to 22.4% of total capitalization from 16.3%.
Cash and equivalents increased to $149.1 milliond. Covenants limit dividends to 50% of quarterly net income, and the company is subject to a minimum stockholders' equity requirement of $750 million, though it was in compliance at year-end. Key risks for investors include concentration of all operations in southern Peru, exposure to Peruvian sol inflation, dependence on copper prices, and ongoing litigation brought by former employees over investment shares.
Ownership is highly concentrated: Grupo Mexico's affiliates hold about 54.2% of the company through Southern Peru Holdings Corporation, with additional stakes held by Cerro Trading and Phelps Dodge. The Board declared a $0.143 per share dividend payable April 4, 2001.
02—Key points
Key Highlights
- Net earnings rose to $92.9M ($1.16/share) in 2000 from $29.4M ($0.37/share) in 1999, a more than threefold increase
- Net sales grew 21.6% to $711.1M, driven by higher copper prices (LME avg. 82¢/lb vs. 71¢) and higher sales volume (780.8M lbs vs. 749.9M lbs)
- Operating breakeven cost fell to 54.0¢/lb from 56.1¢/lb, reflecting cost-reduction programs despite higher fuel prices
- Total refined copper production rose 6.8% to 707.3M lbs, supported by Ilo refinery efficiency gains and SX/EW expansion at Toquepala
- Planned 2001 capital expenditures of approximately $360M for the Ilo smelter modernization, Toquepala concentrator expansion, and Cuajone leaching, targeting over 900M lbs/year of capacity by 2004
- Total debt increased to $347.2M from $222.5M, lifting the debt-to-capitalization ratio to 22.4% from 16.3%; cash rose to $149.1M
- Ownership remains concentrated, with Grupo Mexico affiliates holding ~54.2% and Cerro Trading, Phelps Dodge, and public common holders owning the rest; dividend declared at $0.143/share payable April 4, 2001
03—Questions
Frequently Asked Questions
What drove the large increase in SPCC's 2000 earnings?
Net earnings increased by $63.5M to $92.9M, primarily due to higher copper prices (up about 11 cents/lb on the LME), higher sales volumes, better sales terms, and reduced costs. Operating income rose to $149.6M from $45.6M in 1999.
How is the company funding its expansion program?
The company is funding its program through internally generated cash, cash on hand ($149.1M at year-end), a $100M Mitsui loan, $50M in Peruvian bonds issued in 2000 under a $200M CONASEV program, and the $600M seven-year facility (undrawn at year-end), along with additional external financing expected in 2001.
What are the main risks for investors?
Key risks include the company's concentration of operations within a 48-km radius in southern Peru, exposure to Peruvian political and economic conditions, sol inflation and devaluation effects, volatility in copper and molybdenum prices, and pending litigation by former employees seeking investment shares and dividends. Loan covenants also restrict dividends and require a minimum $750M in stockholders' equity.
Will the company continue paying dividends?
Dividends are subject to quarterly review by the Board, weighed against the intensive capital investment program. Dividends paid rose to $0.340/share in 2000 from $0.152 in 1999, and a $0.143/share dividend was declared in February 2001. Loan covenants limit payments to 50% of quarterly net income, paid by June 30 of the following year.
Who controls Southern Peru Copper Corporation?
Southern Peru Holdings Corporation, a subsidiary of ASARCO (which is controlled by Grupo Mexico following its late-1999 acquisition), owns 54.2% of the company. Cerro Trading Company holds 14.2% and Phelps Dodge Overseas Capital holds 14.0%, while common stockholders own 17.6%. Class A shares carry five votes each, giving the controlling holders significant voting power.
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