10-QPeriod: Q2 FY2021

SOUTHERN COPPER CORP/ Quarterly Report for Q2 Ended Jun 30, 2021

Filed July 27, 2021For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported a significant increase in financial performance for the six months ended June 30, 2021, compared to the same period in 2020. Net sales surged by 54.9% to $5.43 billion, driven by a substantial rise in metal prices, particularly copper, molybdenum, silver, and zinc. Net income attributable to SCC also saw a remarkable increase of 257.7% to $1.70 billion, reflecting improved market conditions and stable operating costs. The company's operations are benefiting from a strong recovery in demand and relatively low global inventory levels for key metals. Despite a slight decrease in copper sales volume, the significant price appreciation led to robust top-line and bottom-line growth. SCCO's strategic focus on cost control and production enhancement continues to position it well in the current market environment.

Financial Highlights

48 data points
Beta

Revenue

$2.90B

66.0% Gross Margin

Net Income

$932.70M

32.2% Net Margin

EPS (Diluted)

$1.21

Total Assets

$17.70B

Cash & Equivalents

$2.39B

Free Cash Flow

$841.70M

Financial Statements
Beta
Revenue$2.90B
Cost of Revenue$985.50M
Gross Profit$1.91B
SG&A Expenses$31.40M
Operating Expenses$1.22B
Operating Income$1.68B
Net Income$932.70M
EPS (Basic)$1.21
EPS (Diluted)$1.21
Shares Outstanding (Basic)773.10M
Shares Outstanding (Diluted)773.10M

Key Highlights

  • 1Net sales increased by 54.9% to $5.43 billion for the six months ended June 30, 2021, compared to $3.51 billion in the prior year period.
  • 2Net income attributable to SCCO more than tripled, rising by 257.7% to $1.70 billion from $474.3 million.
  • 3Operating income saw a substantial increase of 172.6%, reaching $3.03 billion.
  • 4Metal prices, including copper (+65.9%), molybdenum (+40.9%), silver (+58.8%), and zinc (+37.6%) on a year-to-date basis, significantly boosted revenue.
  • 5Capital expenditures increased by 111.1% to $452.4 million for the first six months of 2021, reflecting investments in growth projects.
  • 6The company reported a strong cash position with cash and cash equivalents of $2.39 billion as of June 30, 2021.
  • 7Dividends paid increased significantly to $1.01 billion for the six months ended June 30, 2021, from $463.8 million in the prior year.

Frequently Asked Questions

The primary driver for the substantial increase in net sales and income was the significant rise in global metal prices, particularly for copper, molybdenum, silver, and zinc. This, combined with stable operating costs, led to improved profitability despite some decreases in sales volumes for certain metals like copper and molybdenum.

Southern Copper maintained stable operating costs (+0.3% for the six months ended June 30, 2021) by focusing on cost control and operational efficiencies. While costs before by-product revenues increased per pound, the significant increase in by-product revenues helped reduce the overall operating cash cost per pound of copper net of by-product revenues.

The company is investing heavily in growth projects. Key investments include the Buenavista Zinc project in Mexico (expected to double zinc production capacity), the Pilares and El Pilar projects in Mexico (increasing copper production), and ongoing development at projects in Peru such as the Quebrada Honda dam expansion and the Tia Maria project. These investments are aimed at increasing production and maintaining cost competitiveness.

Southern Copper anticipates a positive outlook for the copper market, citing strong demand, low inventory levels, and potential production deficits from major supplying countries. While expecting a temporary reduction in copper production in 2021-2022 due to ore grade and recovery factors, the company projects a recovery and increased production by 2023 from new projects coming online.