10-QPeriod: Q1 FY2021

SOUTHERN COPPER CORP/ Quarterly Report for Q1 Ended Mar 31, 2021

Filed April 30, 2021For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported a significant improvement in financial performance for the first quarter of 2021 compared to the same period in 2020. Net sales surged by 47.3% to $2.53 billion, driven primarily by a substantial increase in commodity prices, particularly copper, which saw a 50.4% rise in LME prices. This favorable pricing environment, coupled with stable operating costs, led to a remarkable 255.6% increase in net income attributable to SCC, reaching $763.8 million, or $0.99 per diluted share. The company also demonstrated strong operational execution, with capital investments increasing by 130.3% to $232.6 million, signaling a commitment to growth and expansion projects. Despite a slight decrease in copper sales volume, the robust market conditions and efficient cost management positions SCCO favorably for continued performance in the near term.

Financial Highlights

48 data points
Beta

Revenue

$2.53B

62.7% Gross Margin

Net Income

$763.80M

30.2% Net Margin

EPS (Diluted)

$0.99

Total Assets

$17.22B

Cash & Equivalents

$2.27B

Free Cash Flow

$550.00M

Financial Statements
Beta
Revenue$2.53B
Cost of Revenue$943.80M
Gross Profit$1.59B
SG&A Expenses$30.10M
Operating Expenses$1.18B
Operating Income$1.35B
Net Income$763.80M
EPS (Basic)$0.99
EPS (Diluted)$0.99
Shares Outstanding (Basic)773.10M
Shares Outstanding (Diluted)773.10M

Key Highlights

  • 1Net sales increased by 47.3% to $2.53 billion in Q1 2021 compared to Q1 2020.
  • 2Net income attributable to SCC significantly increased by 255.6% to $763.8 million, with EPS rising to $0.99.
  • 3Strong commodity prices, particularly copper (+50.4% LME price), molybdenum (+17.1%), silver (+55.8%), and zinc (+28.9%), were key drivers of revenue growth.
  • 4Operating cash costs per pound of copper, net of by-product revenues, decreased by 3.9% to $0.74.
  • 5Capital expenditures increased by 130.3% to $232.6 million, reflecting investment in growth projects.
  • 6The company maintained strong liquidity with cash and cash equivalents of $2.27 billion at the end of the quarter.

Frequently Asked Questions

The primary drivers of Southern Copper's revenue growth in the first quarter of 2021 were significantly higher commodity prices, particularly for copper, molybdenum, silver, and zinc. Copper prices on the LME increased by 50.4% year-over-year. This was partially offset by a slight decrease in the sales volume of some key products.

Southern Copper managed its operating costs effectively. While the operating cash cost per pound of copper before by-product revenues increased by 6.7% due to higher production costs and lower production volume, the operating cash cost per pound of copper net of by-product revenues decreased by 3.9%. This was largely due to a significant increase in by-product revenues, indicating efficient byproduct management and favorable market conditions for these metals.

The company's outlook is positive, driven by strong copper market fundamentals. Expected factors include recovery in the automotive industry, potential demand from infrastructure packages, low inventory levels, and projected market deficits. Molybdenum prices also saw a healthy increase and are expected to remain supported by industrial use. Silver and zinc also show strong long-term fundamentals due to industrial consumption and value preservation characteristics.

Southern Copper is investing significantly in growth projects. Key projects include the Buenavista Zinc project in Mexico (expected to double zinc production capacity) and the Pilares and El Pilar projects in Mexico, which aim to increase copper production. In Peru, investments are being made in projects like the Quebrada Honda dam expansion and the significant Tia Maria project, which is a large copper greenfield development.