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SOUTHERN COPPER CORP/ Annual Report, Year Ended Dec 31, 2001

Filing Date
Filed March 27, 2002
Period End
December 31, 2001
Security
SCCO
In the record · 2016–202610-K1510-Q328-K86

SCCO filed 15 annual reports (10-K), 32 quarterly reports (10-Q) and 86 current reports (8-K) between 2016 and 2026.

  1. FY2018 annual report10-K · Mar ’19Mar ’19
  2. Leadership change8-K · Jul ’21Jul ’21
  3. Leadership change8-K · Jul ’25Jul ’25

01—Abstract

Summary

Summary of the 10-K filed March 27, 2002. Cited figures are marked; the original filing is the authoritative source.

Southern Peru Copper Corporation (SCCO/PCU) reported 2001 net earnings of $46.6 milliona, or $0.58 per diluted share, down 49.9% from $92.9 million ($1.16) in 2000.

The decline was driven mainly by lower copper prices (LME average fell from 82 to 72 cents per pound), partly offset by record production, higher sales volumes and cost reductions. Net sales fell 7.5% to $657.5 million, operating income dropped to $89.2 millionb from $149.6 million, and operating breakeven cost improved to 49.3 cents per pound from 51.4 cents. Copper output rose 0.5% to 755 million pounds, with record blister and cathode production at the Ilo smelter and refinery.

The balance sheet is solid but more leveraged. Cash and equivalents rose to $212.9 million and stockholders' equity to $1.21 billionc, while total debt increased to $396 million, lifting debt-to-capitalization to 24.5% from 22.4%. Operating cash flow was $198.4 million, and 2002 capital expenditures are planned at roughly $194 million, mainly for the Ilo smelter modernization, the Toquepala concentrator expansion and Cuajone leaching.

The company has also refinanced its debt, prepaying a $400 milliond credit facility and the $150 million Secured Export Notes, funded partly through new Peruvian bond issues. Investors should weigh the company's dependence on copper prices and on a single operating region in southern Peru, against its large expansion program, which includes an estimated $672 million smelter project to meet PAMA environmental standards by 2007. Ownership is concentrated, with Grupo Mexico's Southern Peru Holdings controlling 54.2% of the company, and ongoing litigation includes claims from former employees seeking investment shares.

02—Key points

Key Highlights

  1. 2001 net earnings fell 49.9% to $46.6 million ($0.58 per diluted share) from $92.9 million ($1.16) in 2000, primarily due to lower copper prices.
  2. Net sales declined 7.5% to $657.5 million, while copper sales volumes rose 36.3 million pounds year over year.
  3. Copper production rose 0.5% to 755 million pounds, with record blister output (718.4 million pounds) and record Ilo refinery cathode production (611.3 million pounds).
  4. Operating breakeven cost fell to 49.3 cents per pound from 51.4 cents, a 4.1% reduction, and administrative expenses were cut by $3.9 million.
  5. Cash and marketable securities increased to $212.9 million, but total debt rose to $396.0 million, with debt-to-capitalization at 24.5% versus 22.4% in 2000.
  6. Planned 2002 capital expenditures of about $194 million focus on the Ilo smelter modernization (estimated at $672 million through 2006), Toquepala concentrator expansion and Cuajone leaching.
  7. Ownership is concentrated: Grupo Mexico's Southern Peru Holdings holds 54.2% of the company, and the dividend was cut to $0.36 per share in 2001 from $0.34 in 2000 (rising modestly) while the board is reviewing dividend policy amid heavy capital spending.

03—Questions

Frequently Asked Questions

  1. Why did Southern Peru's earnings fall so sharply in 2001?

    Earnings fell 49.9% mainly because average copper prices dropped about 12%, with LME prices declining from 82 to 72 cents per pound. Higher volumes, better sales terms and cost reductions partially offset the price decline, but operating income still fell from $149.6 million to $89.2 million.

  2. How is the company funding its expansion program?

    Funding comes from internally generated cash, cash on hand and external financing. In late 2001 and February 2002 the company sold Peruvian market bonds totaling $73.1 million and $25.9 million, and it prepaid its $400 million credit facility and $150 million Secured Export Notes, aiming to extend maturities and reduce financing costs.

  3. What are the main risks for investors?

    Key risks include copper price volatility (each $0.01 per pound change affects annual earnings by about $0.06 per share), concentration of all operations in southern Peru and exposure to Peruvian economic, political and currency conditions, large capital spending on the smelter, environmental compliance under the PAMA by 2007, and pending labor-court litigation over investment shares.

  4. Is the dividend at risk?

    The 2001 dividend totaled $0.36 per share, and a $0.0738 per share dividend was declared in January 2002. The board continues to review dividend policy in light of the intensive capital program. Peruvian bond covenants also limit dividends to 50% of annual net income.

  5. Who controls the company and what is its production outlook?

    Grupo Mexico, through Southern Peru Holdings Corporation, holds 54.2% of the company's shares, with Cerro Trading and Phelps Dodge holding most of the remainder via Class A stock. Production is expected to improve with the Toquepala concentrator expansion (targeted for August 2002) and the Cuajone leaching project (April 2002), which should increase copper output and reduce operating costs.

04—Continue

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