Southern Copper Q2 Earnings Beat on High Prices & Volumes

Southern Copper Corporation SCCO reported second-quarter 2024 earnings of $1.22 per share, which beat the Zacks Consensus Estimate of $1.13. The bottom line marked a 73% improvement from the -year-ago quarter, mainly driven by higher sales volumes and prices of copper, molybdenum, silver and zinc. This was somewhat offset by elevated operating costs related to sales volumes, G&A and exploration expenses.

Net sales were $3.12 billion, up 35.5% from the year-ago quarter. The figure also surpassed the consensus estimate of $2.96 billion. 

Southern Copper reported a 78.1% year-over-year surge in zinc sales volumes. Molybdenum volumes were up 21.4%, silver volumes improved 31.6% and copper sales volumes were up 5.5%. The rise in sales volumes as well as higher prices for copper (15%), molybdenum (3.9%), zinc (12.2%) and silver (19%) drove the increase in sales. 

The cost of sales rose 9% year over year to $1.25 billion. Total operating costs were up 8% year over year to $1.5 billion.

Operating profit was $1.6 billion, reflecting a 78.5% year-over-year improvement. The operating margin was 51.5% compared with 39.1% in the year-ago quarter. Adjusted EBITDA jumped 61% year over year to $1.8 billion. Adjusted EBITDA margin was 57.6%, a 914-basis point expansion from the year-ago quarter's margin of 48.5%.

Production Details

Copper: SCCO mined 242,474 tons of copper, up 7% year over year. This was driven by an increase in production at the company's Peruvian operations due to higher ore grades. Copper sales were up 5.5% year over year to 231,105 tons.

Molybdenum: The company mined 7,654 tons of molybdenum, reflecting a year-over-year improvement of 21%, driven by higher output at all operations, barring La Caridad, as well as higher ore grades and recoveries. Molybdenum sales were 7,640 tons, a 21.4% increase from 6,295 tons in the second quarter of 2023.

Zinc: The company's zinc production surged 73% year over year to 29,419 tons attributed to the contribution from the new Buenavista zinc concentrator. Zinc sales surged 78% year over year to 39,012 tons.

Silver: Southern Copper's silver production was up 8% year over year to 5.2 million ounces. Sales increased 31.6% year over year to 5.3 million ounces.

Cash Flow & Balance Sheet Updates

Southern Copper generated net cash from operating activities of around $1 billion, up from $0.8 billion in the year-ago comparable quarter. Cash and cash equivalents were $1.9 billion at the end of the quarter compared with $1.15 billion as of the end of 2023. Long-term debt was $5.76 billion as of Jun 30, 2024, lower than the debt balance of $6.25 billion as of Dec 31, 2023.

SCCO made capital investments worth $332 million, 31.4% higher than the spending in the year-ago comparable quarter.

Guidance for 2024

SCCO expects to produce 963,000 tons of copper, which projects a 6% increase from 2023. Molybdenum production is expected to be around 27,400 tons, 2% higher year over year. The company expects to produce 20.6 million ounces of silver, 12% higher than the prior year. Zinc output is expected at around 121,800 tons, which represents an 86% increase from the 2023 production level.

Price Performance

Shares of Southern Copper have gained 19% in the past year compared with the industry's 7.5% growth.

Image Source: Zacks Investment Research

Zacks Rank

Southern Copper currently carries a Zacks Rank #3 (Hold).

Peer Performances

Teck Resources TECK reported second-quarter 2024 adjusted earnings per share of 58 cents, which surpassed the Zacks Consensus Estimate of 47 cents by a margin of 23%. The bottom line marked a 37% plunge from earnings of 91 cents per share reported in the year-ago quarter. 

Gains from increased copper sales from QB, elevated copper prices and higher steelmaking coal sales volumes were offset by lower steelmaking coal prices. Finance and depreciation and amortization expenses increased year over year, as Teck Resources has started taking the depreciation of QB assets into account and is no longer capitalizing interest on the project. The decline in earnings was also attributed to the reduced ownership in Elk Valley Resources, TECK's steelmaking coal business. 

Freeport-McMoRan Inc. FCX reported adjusted EPS of 46 cents in the second quarter, which topped the Zacks Consensus Estimate of 39 cents. The bottom line was 31% higher than the year-ago quarter's EPS of 35 cents. Including one-time items, earnings were 42 cents per share, up around 83% from 23 cents in the year-ago quarter.

Revenues rose roughly 15% year over year to $6,624 million. The figure surpassed the Zacks Consensus Estimate of $5,985.9 million. The company witnessed higher copper and gold prices in the quarter, which helped offset the impact of lower sales volumes.

Vale S.A. VALE reported second-quarter adjusted EPS of 43 cents, which beat the Zacks Consensus Estimate of 38 cents. The bottom line marked a 115% surge from earnings of 20 cents per share reported in the year-ago quarter. The improvement in earnings was attributed to higher iron ore shipments, increased copper sales, as well improved copper and iron ore prices. However, this was somewhat offset by a decline in nickel sales volumes and prices.

Vale's net operating revenues were up 3% year over year to around $9.92 billion. The top line missed the Zacks Consensus Estimate of $9.97 billion.

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