Southern Copper Corporation (SCCO, Financial) released figures for the third quarter of fiscal 2017.
The Mexican mining company beat expectations on earnings while third quarter revenue was in line with what analysts forecasted for the period.
The net profit – both on a basic and diluted basis - was 52 cents per share, 4 cents higher than expectations. The beat produced a positive surprise of 8.3%.
With a volume of approximately 773 million of weighted average shares outstanding – both on basic and diluted basis – the net profit attributable to Southern Copper Corporation was $401.8 million in the quarter in question.
Third quarter 2017 net earnings - which represented a 103.3% increase from the comparable of fiscal 2016 - were backed on revenue that for the period in question came in at approximately $1.68 billion.
The hefty increase in the quarterly net profit of Southern Copper Corporation was the result, reports the company, “of proven and consistent cost control policies sales.”
Even though Southern Copper Corporation didn’t beat expectations on third quarter 2017 revenue, the value of customers billed by the miner during the quarter increased by 19.7% compared to the third quarter of 2016 thanks to “higher prices of copper (+33.8%), molybdenum (+16.0%) and zinc (+31.4%)," the company reported.
Southern Copper Corp.’s base metals and silver sales volumes decreased in the third quarter of fiscal 2017 by 3.4% to 221,452 tons of the red metal, 2.8% to 5,407 tons of molybdenum, 20.1% to 19,572 tons of zinc and 4.3% to 4.223 million ounces of silver on a year-over-year basis.
The decreases in sales volume were due to a decline in the quarterly production of the base metals and silver compared to one year ago levels.
Mr. German Larrea – Southern Copper Corp.’s board chairman – commented on the company’s third quarter of fiscal 2017 results: “We are currently seeing a substantial price improvement caused by an expected copper market deficit in the coming years. Our very competitive cash cost, our operational and financial discipline, as well as the completed expansion projects will allow us to create more value at this new price environment.”
In the third quarter of 2017, the net profit margin was 24.0% of sales versus a margin of 14.1% in the comparable quarter of 2016.
The Ebitda – adjusted to one-time charges – increased by 57.9% to $863.1 million in the third quarter of 2017 from $546.5 million in the third quarter of fiscal 2016. Therefore, the adjusted ebitda margin raised 3,205 basis points to 51.5% in the third quarter of 2017 from 39% in the comparable of fiscal 2016.
From its operations Southern Copper Corp. generated cash flow of approximately $436.1 million in the third quarter of 2017 versus operating cash flow of approximately $307.1 million in the third quarter of 2016.
During the quarter in question the Mexican mining company used funds of about $212.7 million as capex. Therefore, the free cash flow generated during the quarter was $223.4 million. This represented a hefty 609.2% year-over-year increase and about 48.4% of the free cash flow was used by the company to pay dividends to its shareholders.
On Oct. 19, Southern Copper Corp.’s board of directors authorized a 25 cent cash dividend per share to be paid to the shareholders of the company on Nov. 22. The payment will be made to shareholders of record as of Nov. 8.
Southern Copper is a Mexican mining company engaged through mines and facilities that are in South America - Peru and Mexico - in the production of copper and molybdenum concentrates, in smelting and refining operations to produce blister, anode copper from concentrates and copper cathodes. The company produces also zinc and silver. However, the sale of the red metal accounts for approximately 85% of the Southern Copper’s total revenue.
Catalyst to Southern Copper: With the addition of 100,000 tons of the red metal to Southern Copper’s total annual production following the completion of the Toquepala expansion project the company is advancing in Peru, the Mexican copper mining company will take more advantage from the benefits that the new copper price environment will bring to copper producers.
The Toquepala expansion project will enable the Mexican copper miner “to reach one million tons of copper production capacity per year”, German Larrea said.
Southern Copper is trading at $43.13 per share with a market capitalization of $33.34 billion. The 52-week low and high range is between $26.52 per share and $44.15 per share. The P/B ratio is 5.29, the P/S ratio is 5.62, and the EV-Ebitda ratio is 14.95.
The average target price is $36.87, and the recommendation rating is 3.4 out of 5.
Disclosure: I have no positions in Southern Copper Corp.
