01—Abstract
Summary
Summary of the 10-K filed February 28, 2020. Cited figures are marked; the original filing is the authoritative source.
Southern Copper Corporation (SCCO) reported strong operational performance for the year ending December 31, 2019, with record net sales of $7.3 billiona.
This growth was driven by increased sales volumes across its key products, particularly copper, molybdenum, and silver. Despite a slight dip in copper and molybdenum prices, the company's focus on cost control and production efficiency, coupled with robust copper reserve positions, positions it favorably within the global mining industry. SCCO's capital investment program remains significant, with substantial spending allocated to expanding production capacity and maintaining operational excellence across its Peruvian and Mexican facilities.
The company also highlighted its commitment to social and environmental responsibility, continuing to invest in community programs and sustainable practices. While facing some market volatility and operational risks inherent in the mining sector, SCCO's integrated business model, substantial reserves, and ongoing investment in growth projects suggest a resilient operational outlook. Investors can monitor copper price fluctuations and the company's progress on its extensive capital project pipeline for key performance indicators.
02—Key points
Key Highlights
- Record net sales of $7.3 billion in 2019, an increase from $7.1 billion in 2018, primarily driven by higher sales volumes of copper, molybdenum, and silver.
- Copper production increased by 12.5% year-over-year to 2,191.0 million pounds, boosted by strong performance at Toquepala and Buenavista mines, and the restoration of San Martin mine operations.
- Significant capital investments of $707.5 million were made in 2019 to support growth projects and operational improvements, with $1.15 billion planned for 2020.
- The company maintains a strong liquidity position, with cash and cash equivalents of $1.9 billion as of December 31, 2019.
- Southern Copper emphasizes its position as one of the world's largest copper producers with the largest copper reserve position globally.
- The company's operating cash cost per pound of copper, net of by-product revenues, was $0.88 in 2019, reflecting efficient cost management.
- Total proven and probable copper reserves were estimated at 52.7 million tons, based on SEC guidance.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2019, Southern Copper Corp kept $0.20.
- Revenue$7.29B100.0%
- Cost of revenue−$4.37B60.0%
- Gross profit$2.91B40.0%
- Operating costs−$161.8M2.2%
- Operating income$2.75B37.8%
- Interest, other & tax−$1.27B17.4%
- Net income$1.49B20.4%
Where FY2019 revenue went
$7.29B- Cost of revenue: $3.61B, 50% of revenue
- Net income: $1.49B, 20% of revenue
- Interest, other & tax: $1.27B, 17% of revenue
- SG&A: $131.8M, 1.8% of revenue
- Other operating costs: $794.4M, 11% of revenue
Kept 20% as net incomeSG&A $131.8M · 1.8%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2019filed February 28, 2020Financial Statements
FY2019 against FY2018
| Line item | FY2019FY2018 | Change |
|---|---|---|
| Revenue | $7.29B$7.10B | +2.7% |
| Cost of Revenue | $3.61B$3.41B | +5.8% |
| Gross Profit | $2.91B$3.01B | −3.3% |
| SG&A Expenses | $131.80M$102.60M | +28.5% |
| Operating Expenses | $4.53B$4.22B | +7.5% |
| Operating Income | $2.75B$2.88B | −4.4% |
| Net Income | $1.49B$1.54B | −3.7% |
| EPS (Basic) | $1.92$2.00 | −4.0% |
| EPS (Diluted) | $1.92— | — |
| Shares Outstanding (Basic) | 773.10M773.00M | 0.0% |
| Shares Outstanding (Diluted) | 773.10M— | — |
05—Questions
Frequently Asked Questions
What were Southern Copper's primary revenue drivers in 2019?
In 2019, Southern Copper's revenue was primarily driven by copper sales, which accounted for approximately 80.2% of total net sales. Molybdenum, silver, and zinc contributed significant amounts as well, representing 7.5%, 4.5%, and 3.8% of net sales, respectively. The company's integrated operations allow for the recovery of these valuable by-products during copper production.
How did the company's production volumes change in 2019 compared to 2018?
Southern Copper saw a significant increase in production volumes in 2019 compared to 2018. Copper mine production rose by 12.5% to 2,191.0 million pounds, primarily due to higher output at the Toquepala mine following the ramp-up of its new concentrator and improved performance at the Buenavista mine. Molybdenum production also increased by 22.3%, and zinc production saw a 4.4% rise, supported by improved operations and the restoration of production at the San Martin mine.
What is the company's outlook for capital investments and growth?
Southern Copper made substantial capital investments totaling $707.5 million in 2019, with plans to increase this to $1.15 billion in 2020. These investments are focused on expanding production capacity, enhancing operational efficiency, and developing new growth projects. The company aims to increase its annual copper production to 1.5 million tons by 2028 through the development of new projects, including Buenavista Zinc, Pilares, and El Pilar in Mexico, and Los Chancas and Michiquillay in Peru.
How did market prices for copper and other metals impact the company's financial results in 2019?
While net sales increased due to higher volumes, the company's financial results were influenced by lower metal prices in 2019. The average LME copper price decreased by 8.1% to $2.72 per pound, and molybdenum prices fell by 5.0%. Zinc prices also declined by 12.8%. Silver prices showed a modest increase of 3.3%. These price fluctuations, combined with increased operating costs and depreciation, led to a slight decrease in net income attributable to SCC in 2019 compared to 2018.
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