01—Abstract
Summary
Summary of the 10-K filed February 28, 2023. Cited figures are marked; the original filing is the authoritative source.
Southern Copper Corporation (SCCO) reported solid financial results for the fiscal year ending December 31, 2022.
While net sales saw a modest decrease compared to the record performance in 2021, primarily due to lower volumes and prices for copper and silver, the company maintained strong profitability. This was supported by higher prices for molybdenum and zinc, increased sales volumes for zinc, and effective cost management, despite rising fuel, energy, and contractor costs. SCCO continues its significant capital investment program, focusing on expanding production capacity and improving operational efficiencies.
The company boasts substantial mineral reserves, positioning it favorably for long-term copper supply, particularly given copper's critical role in the clean energy transition. Key operational highlights include strong production across its Peruvian and Mexican segments, with ongoing efforts to optimize mining and processing methods. However, investors should note the company's exposure to commodity price volatility and operational risks in its primary mining jurisdictions of Peru and Mexico, including potential community relations and regulatory challenges.
02—Key points
Key Highlights
- Southern Copper Corporation generated $10.05 billion in net sales for the year ended December 31, 2022, a decrease of 8.1% from $10.93 billion in 2021, primarily due to lower sales volumes of copper, molybdenum, and silver, and a decrease in copper and silver prices.
- Net income attributable to SCCO was $2.64 billion for 2022, down from $3.40 billion in 2021, impacted by higher operating costs and lower sales volumes.
- Operating cash cost per pound of copper produced, net of by-product revenues, increased by 16.5% to $0.78 in 2022, primarily due to increased production costs and a decrease in copper production volume.
- The company reported significant capital investments of $948.5 million in 2022, with a planned $1.1 billion for 2023, focused on expanding production and improving operational efficiency.
- SCCO holds substantial mineral reserves, with 99,502 million pounds of contained copper as of December 31, 2022, indicating strong long-term production potential.
- Production volumes for copper decreased by 6.6% in 2022 compared to 2021, largely attributed to lower output at the Cuajone, Toquepala, and La Caridad mines.
- The company remains committed to ESG initiatives, achieving improved sustainability assessment scores and pursuing ISO certifications for its environmental and safety management systems.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, Southern Copper Corp kept $0.26.
- Revenue$10.05B100.0%
- Cost of revenue−$4.65B46.3%
- Gross profit$5.40B53.7%
- Operating costs−$963.0M9.6%
- Operating income$4.44B44.1%
- Interest, other & tax−$1.80B17.9%
- Net income$2.64B26.3%
Where FY2022 revenue went
$10.05B- Cost of revenue: $4.65B, 46% of revenue
- Net income: $2.64B, 26% of revenue
- Interest, other & tax: $1.80B, 18% of revenue
- SG&A: $125.0M, 1.2% of revenue
- Other operating costs: $838.0M, 8.3% of revenue
Kept 26% as net incomeSG&A $125.0M · 1.2%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed February 28, 2023Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $10.05B$10.93B | −8.1% |
| Cost of Revenue | $4.65B$3.89B | +19.4% |
| Gross Profit | $5.40B$7.04B | −23.3% |
| SG&A Expenses | $125.00M$125.20M | −0.2% |
| Operating Expenses | $5.61B$4.87B | +15.3% |
| Operating Income | $4.44B$6.07B | −26.9% |
| Net Income | $2.64B$3.40B | −22.3% |
| EPS (Basic) | $3.41$4.39 | −22.3% |
| EPS (Diluted) | $3.41$4.39 | −22.3% |
| Shares Outstanding (Basic) | 773.10M773.10M | 0.0% |
| Shares Outstanding (Diluted) | 773.10M773.10M | 0.0% |
05—Questions
Frequently Asked Questions
What was Southern Copper's financial performance in 2022?
Southern Copper reported net sales of $10.05 billion for the year ended December 31, 2022, a decrease from $10.93 billion in 2021. Net income attributable to SCCO was $2.64 billion, down from $3.40 billion in the prior year. This decrease was mainly due to lower sales volumes for copper, molybdenum, and silver, along with reduced copper and silver prices, although this was partially offset by higher prices and volumes for molybdenum and zinc.
How did production volumes change in 2022?
Copper production decreased by 6.6% in 2022 compared to 2021, totaling 1,972.5 million pounds. This decline was primarily attributed to lower output at the Cuajone mine (due to a stoppage), and reduced ore grades at the Toquepala and La Caridad mines. Molybdenum production fell by 13.3%, while zinc and silver production also saw decreases.
What are Southern Copper's key capital investment projects for 2023?
Southern Copper plans capital investments of approximately $1.1 billion for 2023. Key projects include the Buenavista Zinc project in Mexico, expected to start operations in the second half of 2023, and the Pilares mine in Sonora, Mexico, which is already operating and expected to contribute to the La Caridad concentrator's full capacity in Q2 2023. The El Pilar project in Sonora is also progressing with construction of its SX-EW plant, with production anticipated in 2024. In Peru, the Quebrada Honda dam expansion is nearing completion.
What is the company's outlook on copper prices and demand?
Southern Copper believes the current cycle of low copper prices will be short-lived, citing factors such as reduced global inflation potentially slowing interest rate hikes, China's easing of COVID-19 policies and stimulus measures, and historically low global copper inventories. The company highlights copper's crucial role in the clean energy transition as a driver for strong long-term demand. For 2023, the company expects copper production to reach 925,800 tonnes, a 3.5% increase over 2022.
06—Continue