Southern Copper Posts Record Profit as Metal Prices Climb
Adjusted EBITDA reached $2.856 billion as the margin widened to 66.6%.
Southern Copper Corporation (SCCO), the copper producer, reported record second-quarter net income of $1.670 billion, up 71.6% from a year earlier and 5.9% from the preceding quarter. Its net margin expanded to 38.9% from 31.9% a year earlier.
The profit gain extended an acceleration in sales growth even as production weakened. Net sales reached a record $4.289 billion, rising 40.6% year over year after a 36.2% increase in the first quarter. Sales edged up 0.9% sequentially, slowing from the prior quarter’s 9.9% advance.
Higher metals prices drove the increase. Year-over-year copper prices rose 39.8% on the London Metal Exchange and 30.5% on COMEX, while copper sales volume fell 1.5%. Molybdenum, zinc and silver prices also climbed despite lower sales volumes for each by-product.
That pricing strength translated into greater operating leverage. Operating income rose 65.3% to $2.623 billion as cost of sales increased 14.7%, well below the 40.6% rise in revenue. Adjusted EBITDA climbed 59.5%, and its margin widened from 58.7% a year earlier and 63.8% in the first quarter.
Copper production fell 3.5% from both the prior quarter and a year earlier to 230,662 tonnes. A 12.0% sequential decline at the company’s Peruvian mines outweighed 3.2% growth in Mexico, with lower Peruvian ore grades also weighing on year-to-date output. Smelted production rose 8.2% year over year and refined-and-rod output increased 9.3%, even as total copper production declined 3.6%.
Operating cash flow rose 17.3% sequentially to $1.989 billion, while first-half cash flow more than doubled to $3.683 billion. Southern Copper invested $422.8 million during the quarter, up 79.4% from a year earlier, and issued $1.25 billion of senior notes to fund Tía María, other Peruvian projects and general corporate purposes.
The board raised the quarterly cash dividend to $1.10 a share from $1.00 and increased the stock dividend to 0.0120 share for each common share, directing more of the price-driven cash gains to shareholders while mine output remained under pressure.