Southern Copper Corp (SCCO) Q1 2024 Earnings: Mixed Results Amidst Market Challenges

  • Net Income: Reported at $736.0 million, down 9.5% from $813.2 million in 1Q23, but significantly up from $445.0 million in 4Q23, surpassing the estimated $562.0 million.

  • Revenue: Totaled $2,599.8 million, a decrease of 6.9% from $2,793.9 million in 1Q23, but exceeded the estimated $2,368.5 million.

  • Earnings Per Share (EPS): Recorded at $0.95, decreasing from $1.05 in 1Q23 and above the estimated $0.74.

  • Adjusted EBITDA: Reached $1,417.7 million, down 9.6% from $1,567.9 million in 1Q23, yet showing a robust increase of 34.3% from 4Q23.

  • Cash Flow from Operating Activities: Increased by 22.0% to $659.9 million from $540.9 million in 4Q23, although it was 55.7% lower than $1,185.2 million in 1Q23.

  • Copper Production: Grew by 2.6% quarter-over-quarter, with significant contributions from the Buenavista mine.

On April 26, 2024, Southern Copper Corp (NYSE:SCCO) disclosed its first-quarter financial results through its 8-K filing. The company, a leading integrated producer of copper and other minerals, reported a net income of $736.0 million for Q1 2024. This figure represents a 9.5% decrease from the $813.2 million recorded in Q1 2023, yet a substantial 65.4% increase from $445.0 million in Q4 2023. The reported earnings per share (EPS) of $0.95 fell short of the analyst estimate of $0.74 for the quarter.

Southern Copper Corp (SCCO) Q1 2024 Earnings: Mixed Results Amidst Market Challenges

Despite the challenges posed by declining metal prices, which saw copper prices drop by 5.4% and molybdenum by a significant 38.1%, SCCO managed to increase its copper production by 2.6% quarter-over-quarter, primarily due to enhanced outputs at the Buenavista mine. However, the overall sales volume for zinc and silver saw a decrease, impacting the net sales which totaled $2,599.8 million, down by 6.9% from the previous year.

Operational Highlights and Financial Health

The company's adjusted EBITDA for the quarter was $1,417.7 million, a decrease of 9.6% year-over-year but an increase of 34.3% from the previous quarter. This reflects a robust adjusted EBITDA margin of 54.5%, although slightly lower than the 56.1% recorded in Q1 2023. The net income margin also experienced a slight contraction, settling at 28.3% compared to 29.1% in the same quarter the previous year.

Operational efficiency was evident in the 22.0% increase in cash flow from operating activities, which amounted to $659.9 million. This improvement is attributed to higher sales and stringent cost-control measures. However, it's important to note that the cash flow was significantly lower by 55.7% compared to Q1 2023, primarily due to a $310.8 million increase in working capital, driven by the company's Mexican operations.

Strategic Investments and Future Outlook

Southern Copper continues to invest heavily in strategic projects to bolster future growth. The company's capital investment program surpasses $15 billion, focusing on significant projects like the Tia Maria and Los Chancas in Peru, and the Buenavista Zinc and El Arco in Mexico. These investments are crucial for the company's long-term strategy to enhance its production capacity and operational efficiency.

Chairman of the Board, Mr. German Larrea, highlighted the company's resilience amidst market volatility. He noted, "This quarter our strengths are once again at the forefront as we report a 65% increase in net earnings compared to 4Q23. This positive result was driven by a 2.6% uptick in copper production; a 14.2% drop in the cash cost; and higher metal prices for copper (+3.2%), molybdenum (+7.8%) and precious metals."

Environmental and Social Governance (ESG) Initiatives

SCCO is also making significant strides in its ESG commitments. The company was included in S&P Global's Sustainability Yearbook for the third consecutive year, ranking among the top 15% of the best-rated companies in sustainability in the mining and metals sector. This recognition underscores Southern Copper's ongoing efforts to integrate sustainable practices into its operations and corporate strategy.

In conclusion, while Southern Copper faced challenges due to fluctuating metal prices and increased operational costs, its strategic investments and operational efficiencies paint a promising picture for its future. The company's focus on sustainable growth and cost management is expected to support its performance in the evolving global metals market.

Explore the complete 8-K earnings release (here) from Southern Copper Corp for further details.

This article first appeared on GuruFocus.

Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

By Matt Earle

Matthew Earle is the Founder of MiningFeeds. In 2005, Matt founded MiningNerds.com to provide data and information to the mining investment community. This site was merged with Highgrade Review to form MiningFeeds. Matt has a B.Sc. degree with a minor in geology from the University of Toronto.

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