10-QPeriod: Q1 FY2024

SOUTHERN COPPER CORP/ Quarterly Report for Q1 Ended Mar 31, 2024

Filed April 30, 2024For Securities:SCCO

Summary

Southern Copper Corporation (SCCO) reported its first quarter 2024 financial results, showing a decrease in net sales and net income compared to the same period last year, primarily driven by lower commodity prices. Net sales were $2,599.8 million, down 6.9% year-over-year, and net income attributable to SCC was $736.0 million, a decrease of 9.5%. Despite the top-line and bottom-line decline, the company demonstrated strong operational performance. Copper production increased by 7.6% to 529.6 million pounds, boosted by higher ore grades and recoveries at key Peruvian operations and the commencement of production at the Buenavista zinc concentrator in Mexico. The company also saw significant growth in zinc production, up 74.9%. Capital expenditures remained substantial at $213.8 million, focused on growth projects and operational improvements. Looking ahead, SCCO remains optimistic about long-term copper demand, driven by clean energy transitions and emerging technologies. While short-term commodity price volatility is a factor, the company's focus on cost control and production enhancement positions it to navigate market fluctuations and capitalize on future growth opportunities.

Financial Highlights

48 data points
Beta

Revenue

$2.60B

55.5% Gross Margin

Net Income

$736.00M

28.3% Net Margin

EPS (Diluted)

$0.95

Total Assets

$16.79B

Cash & Equivalents

$1.25B

Free Cash Flow

$445.90M

Financial Statements
Beta
Revenue$2.60B
Cost of Revenue$1.16B
Gross Profit$1.44B
SG&A Expenses$30.80M
Operating Expenses$1.41B
Operating Income$1.19B
Net Income$736.00M
EPS (Basic)$0.95
EPS (Diluted)$0.95
Shares Outstanding (Basic)773.10M
Shares Outstanding (Diluted)773.10M

Key Highlights

  • 1Net sales decreased by 6.9% to $2,599.8 million in Q1 2024 compared to Q1 2023, influenced by lower commodity prices.
  • 2Net income attributable to SCC decreased by 9.5% to $736.0 million in Q1 2024.
  • 3Copper production increased by 7.6% to 529.6 million pounds, driven by improved ore grades and recoveries, as well as contributions from new projects.
  • 4Zinc production saw a significant increase of 74.9%, primarily due to the startup of the Buenavista zinc concentrator.
  • 5Operating cash cost per pound of copper, net of by-product revenues, increased by 40.8% to $1.07, mainly due to lower by-product revenue credits.
  • 6Capital expenditures were $213.8 million in Q1 2024, primarily directed towards growth projects and maintenance in Mexican and Peruvian operations.
  • 7The company declared a quarterly stock dividend of 0.0104 shares per common share, payable in May 2024.

Frequently Asked Questions

The decrease in net sales and net income was primarily influenced by lower commodity prices, particularly for copper, molybdenum, and zinc, which offset higher sales volumes for copper and molybdenum, and an uptick in silver prices. Additionally, a reduction in sales volumes for silver and zinc also contributed to the decline.

Southern Copper focuses on cost control through various initiatives. While operating cash cost per pound of copper before by-product revenues saw a slight increase, the net cost after by-product credits rose significantly due to lower by-product revenues. The company continues to optimize its operations, manage maintenance, labor, and material costs, and leverage production increases to improve efficiency.

The company continues to invest in significant capital projects, including the Buenavista Zinc project in Mexico, which began operations in Q1 2024 and is expected to double zinc production capacity. Other key projects include El Pilar in Mexico and in Peru, the Quebrada Honda dam expansion and the Tia Maria project, which is currently in the planning stages for construction. Potential future projects like El Arco, Los Chancas, and Michiquillay are also being evaluated.

Southern Copper remains optimistic about the long-term outlook for copper, citing strong market demand driven by the global shift to clean energy, AI, and decarbonization technologies. Despite a recent decrease in LME copper prices, the company believes the current cycle of low prices is likely to be short-lived and that underlying demand will sustain attractive prices.