01—Abstract
Summary
Summary of the 10-K filed March 1, 2017. Cited figures are marked; the original filing is the authoritative source.
Southern Copper Corporation (SCCO) reported its 2016 annual results, highlighting a robust operational performance with significant increases in copper production, driven largely by expansions at its Mexican operations, particularly Buenavista.
Despite a challenging market environment characterized by lower copper and molybdenum prices compared to prior years, the company maintained strong net sales and operating income, demonstrating effective cost management and operational efficiency. Financially, SCCO showed a slight increase in net income attributable to the company, reaching $776.5 milliona, up from $736.4 million in 2015. The company's significant capital investment program continued, with $1,118.5 million invested in 2016, primarily focused on expanding production capacity and improving operational efficiency across its Peruvian and Mexican assets.
SCCO also highlighted its substantial copper reserves, reinforcing its position as a leading global copper producer. The company's outlook for 2017 was cautiously optimistic, anticipating a structural supply deficit in the copper market due to underinvestment and growing demand.
02—Key points
Key Highlights
- Increased total copper production by 21.1% to 1,984.1 million pounds in 2016, a new company record, largely due to higher output from the Buenavista mine expansion in Mexico.
- Reported net income attributable to SCCO of $776.5 million, an increase from $736.4 million in 2015, driven by higher sales volumes and improved cost efficiencies.
- Invested $1,118.5 million in capital programs in 2016, focusing on expanding production capacity and improving operations, with $1,105.2 million planned for 2017.
- Maintained strong cost control, with operating cash cost per pound of copper without by-product revenues decreasing by 12.1% to $1.45 in 2016.
- Ended 2016 with substantial cash and cash equivalents of $546.0 million, providing liquidity for operations and future investments.
- Held significant copper ore reserves, estimated at 71.4 million tons of contained copper as of December 31, 2016, positioning the company favorably for long-term growth.
- Navigated a challenging commodity price environment, with copper prices lower than prior years, but saw increased prices for silver and zinc.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2016, Southern Copper Corp kept $0.14.
- Revenue$5.38B100.0%
- Cost of revenue−$3.68B68.4%
- Gross profit$1.70B31.6%
- Operating costs−$134.4M2.5%
- Operating income$1.56B29.1%
- Interest, other & tax−$787.7M14.6%
- Net income$776.5M14.4%
Where FY2016 revenue went
$5.38B- Cost of revenue: $3.03B, 56% of revenue
- Interest, other & tax: $787.7M, 15% of revenue
- Net income: $776.5M, 14% of revenue
- Other operating costs: $687.2M, 13% of revenue
- SG&A: $94.3M, 1.8% of revenue
Kept 14% as net income
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2016filed March 1, 2017Financial Statements
FY2016 against FY2015
| Line item | FY2016FY2015 | Change |
|---|---|---|
| Revenue | $5.38B$5.05B | +6.6% |
| Cost of Revenue | $3.03B$2.93B | +3.6% |
| Gross Profit | $1.70B$1.61B | +5.7% |
| SG&A Expenses | $94.30M$99.40M | −5.1% |
| Operating Expenses | $3.82B$3.63B | +5.1% |
| Operating Income | $1.56B$1.41B | +10.6% |
| Net Income | $776.50M$736.40M | +5.4% |
| EPS (Basic) | $1.00$0.93 | +7.5% |
| Shares Outstanding (Basic) | 773.60M794.70M | −2.7% |
05—Questions
Frequently Asked Questions
What were Southern Copper's primary revenue drivers in 2016?
Copper remained the primary revenue driver, accounting for approximately 78.4% of net sales. Other significant contributors included silver (5.5%), zinc (4.4%), and molybdenum (5.0%).
How did the company manage its costs in 2016?
Southern Copper focused on cost control, resulting in a decrease in operating cash cost per pound of copper. Without by-product revenues, the cost was $1.45 per pound, down from $1.65 in 2015. With by-product revenues, the cost decreased to $0.95 per pound from $1.11 in 2015, reflecting higher production volumes at lower per-unit costs and reduced fuel expenses.
What are the company's key capital investment priorities for the near future?
Southern Copper's capital investment program is focused on growth, with plans to invest $1,105.2 million in 2017. Key projects include the Toquepala Concentrator Expansion in Peru, aimed at increasing copper production capacity, and ongoing completion of the Buenavista expansion projects in Mexico.
What is the company's outlook for the copper market in 2017?
The company anticipates a structural supply deficit in the copper market for 2017, driven by a lack of investment in recent years and expected demand growth from China, the US, and Europe. This is expected to provide support for copper prices.
06—Continue