10-QPeriod: Q1 FY2012

SOUTHERN COPPER CORP/ Quarterly Report for Q1 Ended Mar 31, 2012

Filed May 2, 2012For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported a strong first quarter for 2012, with net sales increasing by 12.7% year-over-year to $1.8 billion. This growth was primarily driven by a significant 23% increase in copper production volumes, alongside higher production of by-products like molybdenum, zinc, and silver. Despite lower average commodity prices for copper, molybdenum, and zinc compared to the prior year, the company achieved a 29.9% increase in net income attributable to SCC, reaching $621.4 million, or $0.73 per share. The company's operational performance was boosted by higher production across its open-pit mines, particularly at Buenavista, and improved ore grades and recoveries at its Peruvian operations. SCCO also generated substantial operating cash flow, which supported significant capital expenditures of $177.4 million focused on expansion projects at its Buenavista, Toquepala, and Cuajone mines, underscoring a commitment to organic growth and long-term value creation.

Financial Highlights

47 data points
Beta

Revenue

$1.81B

55.8% Gross Margin

Net Income

$621.40M

34.4% Net Margin

EPS (Diluted)

$0.73

Total Assets

$8.49B

Cash & Equivalents

$1.52B

Free Cash Flow

$542.99M

Financial Statements
Beta
Revenue$1.81B
Cost of Revenue$721.93M
Gross Profit$1.01B
SG&A Expenses$25.43M
Operating Expenses$833.03M
Operating Income$972.90M
Net Income$621.40M
EPS (Basic)$0.73
Shares Outstanding (Basic)849.98M
Shares Outstanding (Diluted)849.98M

Key Highlights

  • 1Net sales increased by 12.7% to $1.8 billion in Q1 2012 compared to Q1 2011.
  • 2Net income attributable to SCC rose by 29.9% to $621.4 million, or $0.73 per diluted share.
  • 3Copper production volume increased by 23% year-over-year.
  • 4Molybdenum, zinc, and silver production also saw significant increases of 8%, 13%, and 17%, respectively.
  • 5Operating cash flow generation was strong, supporting $177.4 million in capital expenditures.
  • 6Despite lower commodity prices, the company's focus on production volume and cost control drove improved financial results.
  • 7The company continues to invest in major expansion projects at its Buenavista, Toquepala, and Cuajone mines.

Frequently Asked Questions

Southern Copper Corporation's primary business is the production and sale of copper. In the first quarter of 2012, approximately 77% of its revenue came from copper sales, with the remaining 23% derived from by-products such as molybdenum (8%), silver (7%), and other materials like zinc and gold (8%).

While average commodity prices for copper, molybdenum, and zinc were lower in Q1 2012 compared to Q1 2011, Southern Copper Corporation was able to offset this impact through a significant increase in production volumes. This strategic focus on higher output, coupled with effective cost management, led to improved net sales and net income.

Southern Copper Corporation's strategy focuses on value creation through increasing copper production, maintaining a competitive cost structure, and advancing its expansion projects. The company invested $177.4 million in capital expenditures in Q1 2012, primarily directed towards its large-scale expansion projects at the Buenavista, Toquepala, and Cuajone mines, signaling a strong commitment to organic growth.

The company is involved in various legal proceedings, including a significant ongoing labor share litigation in Peru and a class action lawsuit related to a past merger. Additionally, the 'Tia Maria' project in Peru remains suspended due to environmental and community concerns, requiring a new EIA study. While the company believes it is in material compliance with environmental laws and does not expect these matters to have a material adverse effect, these contingencies warrant investor attention.