10-QPeriod: Q2 FY2019

SOUTHERN COPPER CORP/ Quarterly Report for Q2 Ended Jun 30, 2019

Filed July 26, 2019For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported its second quarter and first half 2019 financial results, showing a slight decline in net sales and net income compared to the same periods in 2018, primarily driven by lower commodity prices, particularly for copper. Despite the price pressures, the company saw an increase in copper sales volume due to higher production from the newly expanded Toquepala concentrator. The company maintained a focus on operational efficiency and cost control, with operating cash costs per pound of copper remaining competitive. Significant capital expenditures were directed towards growth projects in both Peru and Mexico, aimed at increasing future production capacity. SCCO also continued its commitment to social and environmental initiatives, underscoring its long-term sustainability strategy. Looking ahead, SCCO anticipates a potential deficit in the refined copper market, which could support prices in the latter half of 2019. The company's strategic investments in expanding production capacity position it to benefit from any market improvements, while its diversified product portfolio and cost management strategies provide resilience.

Financial Statements
Beta

Key Highlights

  • 1Net sales for the six months ended June 30, 2019, were $3,571.4 million, a 2.9% decrease from $3,678.4 million in the same period of 2018, primarily due to lower metal prices.
  • 2Net income attributable to SCCO for the six months ended June 30, 2019, decreased by 10.2% to $790.6 million, compared to $880.3 million in the prior year, largely due to lower copper prices.
  • 3Mined copper production increased by 14.2% to 1,069.2 million pounds in the first six months of 2019 compared to 936.5 million pounds in the same period of 2018, driven by higher production at Toquepala and Buenavista mines.
  • 4Capital expenditures for the first six months of 2019 were $353.5 million, a 35.7% decrease from $549.6 million in the first six months of 2018, reflecting continued investment in growth projects.
  • 5The company declared and paid dividends of $0.80 per share for the first six months of 2019, an increase from $0.60 per share in the same period of 2018.
  • 6As of June 30, 2019, the company's cash and cash equivalents were $752.2 million.
  • 7SCCO is undertaking significant capital projects, including the Toquepala Expansion Project and potential developments like Tia Maria and Michiquillay, aimed at increasing copper production capacity.

Frequently Asked Questions

For the six months ended June 30, 2019, Southern Copper reported a decrease in net sales to $3,571.4 million from $3,678.4 million in the prior year, a 2.9% decline primarily due to lower metal prices, especially copper. Net income attributable to SCCO also decreased by 10.2% to $790.6 million from $880.3 million, largely influenced by these lower commodity prices.

Mined copper production saw a significant increase of 14.2% in the first six months of 2019, reaching 1,069.2 million pounds. This growth was primarily driven by higher production at the Toquepala mine, benefiting from the ramp-up of its new concentrator, and improved operations at the Buenavista mine. Molybdenum and silver production also increased.

Southern Copper anticipates a deficit in the refined copper market for 2019, estimated at approximately 350,000 tons. This is attributed to production disruptions from labor strikes, heavy rains, and technical issues. The company expects this deficit to put upward pressure on copper prices in the second half of 2019, with an adjusted view of refined copper demand growth at 2.0% for the year.

The company invested $353.5 million in capital expenditures during the first six months of 2019, a decrease from the previous year, reflecting a strategic focus on growth projects. SCCO is advancing its organic growth plan to increase copper production volume to 1.5 million tons by 2025 through projects like the Toquepala Expansion, and potential developments such as Tia Maria and Michiquillay, aiming to enhance future production capacity and competitiveness.