10-QPeriod: Q3 FY2019

SOUTHERN COPPER CORP/ Quarterly Report for Q3 Ended Sep 30, 2019

Filed October 28, 2019For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported its third-quarter and nine-month financial results for the period ending September 30, 2019. The company experienced a modest increase in net sales for the quarter driven by higher sales volumes of copper, molybdenum, and silver, though this was partially offset by lower metal prices, particularly copper. Net income saw a slight increase for the quarter but declined year-over-year for the nine-month period, largely attributed to lower copper prices. Production levels increased significantly year-over-year, especially for copper, benefiting from the new Toquepala concentrator. The company maintained a strong focus on capital investment and organic growth, with ongoing projects aimed at increasing copper production capacity. Financially, the company issued $1.0 billion in senior notes to fund expansion programs. SCCO also continued its regular dividend payments to shareholders.

Financial Highlights

49 data points
Beta

Revenue

$1.86B

40.5% Gross Margin

Net Income

$389.60M

21.0% Net Margin

EPS (Diluted)

$0.50

Total Assets

$16.49B

Cash & Equivalents

$1.94B

Free Cash Flow

$402.50M

Financial Statements
Beta
Revenue$1.86B
Cost of Revenue$906.50M
Gross Profit$752.70M
SG&A Expenses$32.00M
Operating Expenses$1.15B
Operating Income$713.80M
Net Income$389.60M
EPS (Basic)$0.50
Shares Outstanding (Basic)773.10M

Key Highlights

  • 1Net sales increased by 7.9% to $1,859.5 million for the third quarter of 2019 compared to the same period in 2018, driven by higher sales volumes in copper, molybdenum, and silver.
  • 2Net income attributable to SCCO for the third quarter of 2019 was $389.6 million, a 5.5% increase compared to $369.4 million in the third quarter of 2018.
  • 3Total mined copper production increased by 13.7% to 1,625.6 million pounds for the first nine months of 2019 compared to the same period in 2018.
  • 4The company incurred capital expenditures of $536.1 million in the first nine months of 2019, a decrease from $831.8 million in the same period of 2018, with significant investments in Peruvian and Mexican operations.
  • 5On September 26, 2019, SCCO's subsidiary Minera Mexico S.A. de C.V. issued $1.0 billion of fixed-rate senior notes to finance expansion programs.
  • 6Operating cash cost per pound of copper produced, net of by-product revenues, was $0.84 for both the nine-month periods of 2019 and 2018, indicating stable cost management.
  • 7The company declared and paid dividends totaling $1.20 per share for the first nine months of 2019, an increase from $1.00 per share in the same period of 2018.

Frequently Asked Questions

Revenue for the third quarter of 2019 increased primarily due to higher sales volumes of copper, molybdenum, and silver, driven by increased production from the new Toquepala concentrator. Net income for the quarter also saw a slight increase. However, for the nine-month period, net income decreased year-over-year due to lower metal prices, particularly for copper, which offset the gains from increased production volumes.

Southern Copper reported significant increases in production for the nine months ended September 30, 2019, compared to the prior year. Mined copper production rose by 13.7%, molybdenum by 16.4%, and silver by 12.3%. These increases were largely attributable to the successful startup of the new Toquepala concentrator and operating improvements at the Buenavista mine.

The company noted that copper prices decreased in the third quarter and for the nine-month period compared to the prior year, reflecting a slowdown in the global economy and trade tensions. Molybdenum and silver prices also saw some fluctuations, while zinc prices decreased. Management believes that clear solutions to global economic uncertainties are necessary for copper price recovery. The company provided sensitivity analysis indicating potential changes in net income based on $0.10 per pound fluctuations in copper prices.

Capital expenditures for the first nine months of 2019 were $536.1 million, primarily directed towards projects in Peru and Mexico, including the Toquepala concentrator expansion and various Mexican operations' developments. Financially, the company issued $1.0 billion in senior notes through its subsidiary Minera Mexico to fund expansion programs, including the Buenavista Zinc, Pilares, and El Pilar projects.