10-QPeriod: Q1 FY2010

SOUTHERN COPPER CORP/ Quarterly Report for Q1 Ended Mar 31, 2010

Filed May 4, 2010For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported a significant turnaround in its financial performance for the first quarter of 2010 compared to the same period in 2009, driven primarily by a substantial increase in copper prices. Net sales more than doubled year-over-year, reaching $1.22 billion, while net income attributable to SCC surged from $78.7 million to $383.2 million. This strong performance enabled the company to significantly increase its dividend payout to shareholders. The company also highlighted its robust capital expenditure program for the next three years, totaling $2.8 billion, aimed at increasing copper and molybdenum production. Despite ongoing labor disputes at some Mexican operations, SCCO secured a favorable court ruling in the Cananea case, which is expected to allow for the resumption of operations and potential future expansions. The company also made significant financing arrangements, including issuing $1.5 billion in fixed-rate senior unsecured notes to fund its capital programs and general corporate purposes.

Financial Highlights

48 data points
Beta

Net Income

$383.20M

EPS (Diluted)

$0.45

Total Assets

$6.00B

Cash & Equivalents

$651.96M

Free Cash Flow

$231.88M

Financial Statements
Beta
Cost of Revenue$510.98M
Gross Profit$641.60M
SG&A Expenses$21.72M
Operating Expenses$610.63M
Operating Income$608.80M
Net Income$383.20M
EPS (Basic)$0.45
EPS (Diluted)$0.45
Shares Outstanding (Basic)850.00M
Shares Outstanding (Diluted)850.00M

Key Highlights

  • 1Net sales more than doubled year-over-year to $1.22 billion, driven by a significant increase in copper prices (average LME copper price rose from $1.56/lb to $3.28/lb).
  • 2Net income attributable to SCC jumped dramatically to $383.2 million from $78.7 million in the prior year's quarter.
  • 3Earnings per share increased to $0.45 from $0.09, reflecting the improved profitability.
  • 4The company paid a significantly higher dividend of $0.43 per share in Q1 2010, compared to $0.12 in Q1 2009.
  • 5A substantial $2.8 billion capital investment program is planned for 2010-2012 to increase copper and molybdenum production.
  • 6Southern Copper resolved the Cananea labor dispute with a favorable court ruling, clearing the way for potential operational restart and expansion.
  • 7The company successfully issued $1.5 billion in fixed-rate senior unsecured notes to fund capital expenditures and general corporate purposes.

Frequently Asked Questions

The primary driver was the significant increase in commodity prices, particularly copper. The average LME copper price more than doubled from $1.56 per pound in Q1 2009 to $3.28 per pound in Q1 2010, which directly led to higher net sales and profitability.

The company received a favorable court ruling in the Cananea case, terminating labor contracts, which is expected to allow for the resumption of operations and future expansions. However, strikes continue at the Taxco and San Martin mines.

Southern Copper issued $1.5 billion in fixed-rate senior unsecured notes on April 16, 2010. These funds are earmarked for general corporate purposes, including financing the company's capital expenditure program, which is a significant $2.8 billion over the next three years.

Higher commodity prices, especially for molybdenum, significantly boosted by-product revenue. This had a positive impact on the company's operating cash costs, effectively reducing them by providing a higher credit against production expenses.