10-QPeriod: Q1 FY2020

SOUTHERN COPPER CORP/ Quarterly Report for Q1 Ended Mar 31, 2020

Filed May 4, 2020For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported its first quarter 2020 results, marked by a decline in net income attributable to SCC by 44.7% year-over-year to $214.8 million, or $0.28 per share, compared to $388.2 million, or $0.50 per share, in the prior year period. This decline was primarily driven by lower metal prices, particularly for copper (down 9.2% LME) and molybdenum (down 18.3%), which were only partially offset by increased sales volumes for copper, molybdenum, and silver. Despite the revenue and profit decrease, the company demonstrated resilience by increasing its copper production by 5.9% and maintaining strong operating cash flow from operations at $475.1 million. The company's liquidity remains robust, with cash and cash equivalents at $2,051.6 million as of March 31, 2020. Management is actively monitoring the evolving impact of the COVID-19 pandemic, which has introduced significant volatility and uncertainty into the global economy and commodity markets. Operations have largely continued, with approximately 90% of production capacity utilized as of March 31, 2020, and no major supply or sales delays encountered.

Financial Highlights

47 data points
Beta

Revenue

$1.72B

44.4% Gross Margin

Net Income

$214.80M

12.5% Net Margin

EPS (Diluted)

$0.28

Total Assets

$16.21B

Cash & Equivalents

$2.05B

Free Cash Flow

$374.10M

Financial Statements
Beta
Revenue$1.72B
Cost of Revenue$955.80M
Gross Profit$763.90M
SG&A Expenses$29.10M
Operating Expenses$1.19B
Operating Income$533.30M
Net Income$214.80M
EPS (Basic)$0.28
Shares Outstanding (Basic)773.10M

Key Highlights

  • 1Net income attributable to SCC decreased by 44.7% to $214.8 million ($0.28/share) from $388.2 million ($0.50/share) in Q1 2019.
  • 2Net sales decreased by 1.9% to $1,719.7 million from $1,753.4 million, primarily due to lower copper and molybdenum prices.
  • 3Copper production increased by 5.9% to 533.5 million pounds, driven by higher output at Peruvian mines.
  • 4Operating cash flow from operating activities was strong at $475.1 million, an increase of 28.0% from Q1 2019.
  • 5Cash and cash equivalents stood at $2,051.6 million as of March 31, 2020, indicating solid liquidity.
  • 6Operating costs and expenses increased by 12.0% to $1,186.4 million, impacting profitability.
  • 7The company is actively managing the impacts of the COVID-19 pandemic on its operations and supply chains.

Frequently Asked Questions

The COVID-19 pandemic introduced significant volatility and uncertainty. While operations continued at approximately 90% capacity with no major supply or sales delays by March 31, 2020, the pandemic contributed to lower copper prices and potentially impacted future demand. The company's financial performance was affected by lower metal prices, and management is actively monitoring its ongoing impact.

The primary driver for the decrease in net income attributable to SCC was a decline in metal prices, particularly copper (down 9.2% LME) and molybdenum (down 18.3%). This was partially offset by higher sales volumes of copper, molybdenum, and silver, but the lower prices significantly impacted revenue and profitability. Additionally, operating costs and expenses increased by 12.0%.

Capital expenditures decreased significantly in the first quarter of 2020, amounting to $101.0 million, which is 41.7% lower than the $173.1 million spent in the same period of 2019. This reduction reflects the company's prudent approach to capital allocation amidst market uncertainties.

Southern Copper maintained a strong liquidity position. As of March 31, 2020, cash and cash equivalents totaled $2,051.6 million, an increase from $1,925.1 million at the end of 2019. This robust cash position provides flexibility to navigate market challenges.