10-QPeriod: Q2 FY2015

SOUTHERN COPPER CORP/ Quarterly Report for Q2 Ended Jun 30, 2015

Filed July 31, 2015For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported a decrease in net sales and net income for the six months ended June 30, 2015, compared to the same period in 2014. This was primarily driven by lower metal prices, particularly for copper and molybdenum, which impacted revenue. Despite the decline in profitability, the company saw an increase in copper sales volume, indicating underlying operational strength in its core product. Operationally, SCCO made significant capital investments, with $507.7 million allocated in the first half of 2015, focused on increasing copper production capacity. The company also experienced a substantial increase in cash and cash equivalents, more than tripling from December 31, 2014, to $1.57 billion, largely due to significant debt issuance. While facing a challenging commodity price environment, SCCO continues to focus on disciplined growth and cost management.

Financial Highlights

50 data points
Beta

Revenue

$1.38B

39.8% Gross Margin

Net Income

$294.70M

21.3% Net Margin

EPS (Diluted)

$0.37

Total Assets

$13.22B

Cash & Equivalents

$1.57B

Free Cash Flow

$49.80M

Financial Statements
Beta
Revenue$1.38B
Cost of Revenue$706.90M
Gross Profit$550.70M
SG&A Expenses$25.00M
Operating Expenses$879.80M
Operating Income$503.10M
Net Income$294.70M
EPS (Basic)$0.37
Shares Outstanding (Basic)798.20M

Key Highlights

  • 1Net sales decreased by 6.5% to $2.66 billion for the six months ended June 30, 2015, compared to $2.84 billion in the prior year, primarily due to lower commodity prices.
  • 2Net income attributable to SCC decreased by 12.6% to $577.1 million for the six months ended June 30, 2015, compared to $660.6 million in the prior year.
  • 3Copper sales volume increased by 14.0% to 779.2 million pounds for the six months ended June 30, 2015, compared to 683.6 million pounds in the prior year.
  • 4The company invested $507.7 million in capital expenditures in the first six months of 2015, a decrease from $697.0 million in the same period of 2014, primarily for expansion projects in Mexico and Peru.
  • 5Cash and cash equivalents increased significantly to $1.57 billion as of June 30, 2015, from $364.0 million as of December 31, 2014.
  • 6The company issued $2.0 billion in fixed-rate senior unsecured notes in April 2015 to fund general corporate purposes and its capital investment program.
  • 7Operating cash cost per pound of copper produced, with by-product revenues, increased to $1.05 in the first six months of 2015 from $1.00 in the same period of 2014, largely due to lower by-product credits from decreased metal prices.

Frequently Asked Questions

The primary drivers were lower commodity prices, particularly for copper and molybdenum, which reduced overall revenue. This was partially offset by an increase in copper sales volume.

Southern Copper's cash position significantly improved, with cash and cash equivalents increasing to $1.57 billion by June 30, 2015, up from $364.0 million at the end of 2014. This substantial increase was largely driven by the issuance of $2.0 billion in senior unsecured notes in April 2015.

Southern Copper maintains a long-term positive outlook on copper, anticipating demand growth driven by China and Europe, despite short-term macroeconomic headwinds. They believe structural supply constraints will lead to a market deficit in the coming years and are continuing to invest in capacity expansion to capitalize on this expected trend.

Yes, subsequent to the quarter end on July 6, 2015, Southern Copper successfully closed the acquisition of the El Pilar copper project in Sonora, Mexico, for $100 million. This project is expected to add 35,000 tons of copper cathodes annually starting in 2018.