10-QPeriod: Q1 FY2018

SOUTHERN COPPER CORP/ Quarterly Report for Q1 Ended Mar 31, 2018

Filed May 2, 2018For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported strong financial performance for the first quarter of 2018, with net sales increasing by 16.2% to $1.84 billion year-over-year, driven primarily by higher commodity prices for copper, molybdenum, and zinc. Net income attributable to SCC also saw a significant jump of 49.7% to $470.7 million, leading to an earnings per share of $0.61, up from $0.41 in the prior year. The company highlighted a positive outlook for copper demand, expecting demand growth between 2.5% to 3.0% for 2018, supported by a balanced market and limited supply growth. Capital expenditures remained robust, indicating continued investment in growth initiatives and operational improvements, with a focus on increasing copper production capacity. The company generated strong operating cash flow of $649.8 million, demonstrating effective cost management despite a slight increase in operating costs before by-product revenues. The improved by-product revenue significantly lowered the net operating cash cost per pound of copper, showcasing efficient resource utilization. SCCO also demonstrated a strong commitment to returning value to shareholders, significantly increasing dividends paid year-over-year, reflecting confidence in its financial health and future prospects.

Financial Highlights

46 data points
Beta

Revenue

$1.84B

43.6% Gross Margin

Net Income

$470.70M

25.6% Net Margin

EPS (Diluted)

$0.61

Total Assets

$14.04B

Cash & Equivalents

$1.07B

Free Cash Flow

$354.10M

Financial Statements
Beta
Revenue$1.84B
Cost of Revenue$876.50M
Gross Profit$802.60M
SG&A Expenses$24.10M
Operating Expenses$1.07B
Operating Income$773.30M
Net Income$470.70M
EPS (Basic)$0.61
Shares Outstanding (Basic)773.00M

Key Highlights

  • 1Net sales increased by 16.2% to $1.84 billion in Q1 2018 compared to Q1 2017, driven by higher commodity prices.
  • 2Net income attributable to SCC grew by 49.7% to $470.7 million, with EPS rising to $0.61 from $0.41.
  • 3Operating cash flow was robust at $649.8 million, showing strong operational performance.
  • 4The company reported a significant increase in dividends paid, up 275.0% year-over-year, reflecting shareholder value focus.
  • 5Positive outlook for copper with projected demand growth of 2.5-3.0% in 2018 due to synchronized global economic growth and constrained supply.
  • 6Capital investments totaled $295.7 million, indicating continued investment in growth and operational capacity.
  • 7Operating cash cost per pound of copper, net of by-product revenues, decreased by 10.2% to $0.79, primarily due to higher by-product prices.

Frequently Asked Questions

The primary drivers for the increase in net sales were higher commodity prices, particularly for copper, molybdenum, and zinc, which saw significant year-over-year price improvements. Additionally, higher sales volumes for copper and silver in some segments contributed to the overall revenue growth.

Profitability significantly improved. Net income attributable to Southern Copper Corporation increased by 49.7% to $470.7 million, and earnings per share rose to $0.61 from $0.41 in the prior year. This was largely driven by the higher commodity prices and effective cost management.

Southern Copper has a positive outlook for the copper market in 2018, anticipating demand growth between 2.5% and 3.0% due to synchronized global economic growth. They expect a balanced market with limited supply growth, which should provide strong support for copper prices.

The company invested $295.7 million in capital expenditures during the first quarter of 2018, reflecting ongoing commitment to growth and operational improvements, including projects in Peru and Mexico. They also significantly increased dividends paid to shareholders by 275.0% year-over-year, indicating confidence in their financial position.