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Southern Copper (SCCO) Q3 Earnings & Sales Top Estimates

Zacks Equity Research

Southern Copper Corporation SCCO reported third-quarter 2019 earnings of 50 cents per share, which beat the Zacks Consensus Estimate of 49 cents.  The figure also improved 4% from prior-year quarter figure of 48 cents. The improved results reflect the benefits from the new Toquepala concentrator, which reached full capacity usage in the first-half 2019, and lower cash cost and other cost reductions.
 
Net sales came in at $1,860 million, up 8% year over year. The top line improved on higher sales volume of copper, silver and molybdenum, and higher silver prices. However, lower copper and zinc prices somewhat offset these gains. Further, the reported sales figure surpassed the Zacks Consensus Estimate of $1,826 million.

In the reported quarter, operating cash cost per pound of copper net of by-product revenues was 82 cents, down 9% from the prior year quarter. This can be attributed to higher by-product revenues and the unit cost effect of higher production.

Southern Copper Corporation Price, Consensus and EPS Surprise

 

Southern Copper Corporation Price, Consensus and EPS Surprise

Southern Copper Corporation price-consensus-eps-surprise-chart | Southern Copper Corporation Quote

Adjusted EBITDA improved 5% year over year to $907.7 million in the third quarter of 2018. Adjusted EBITDA margin was 48.8% compared with the prior-year quarter figure of 50.4%.

Operating Highlights

Copper: Southern Copper mined 252,380 tons of copper during the reported quarter, up 12.7% year over year, owing to higher production at the Peruvian Toquepala and Buenavista mines in Mexico. However, lower production at the Cuajone mine thanks to lower ore grades impacted overall production.

Molybdenum: The company mined 7,130 tons of molybdenum during the reported quarter, indicating year-over-year growth of 23.8% driven by higher production at the Toquepala mine from the new molybdenum plant that commenced production in April 2019.
 
Zinc: The company’s zinc production declined 1.2% year over year to 17,259 tons in third-quarter 2019 on account of lower production at IMMSA mines, which offset the higher production at the San Martin mine.
 
Silver: Southern Copper’s silver production surged 27.3% year over year to 5,388,000 ounces. The increase can be attributed to higher production at Toquepala, Buenavista and IMMSA operations.

Financials
 
The company generated net cash from operating activities of $1,371 million in the nine-month period ended Sep 30, 2019 compared with $1788.9 million reported in the prior-year comparable period.
 
Cash and cash equivalents were at $1,935 million at the end of the third quarter, up from $967.3 million recorded at the end of the prior-year quarter. Long-term debt increased to $6,540 million at the end of the reported quarter from $5,959.3 million at the end third-quarter 2018.

The company made capital investments worth $536 million during nine-month period ended Sep 30, 2019. These are in sync with Southern Copper’s growth program, which aims to reach annual production of 1.5 million tons of copper by 2026.
 
Price Performance



Shares of Southern Copper have fallen 5.3% over the past year compared with the industry’s decline of 4.6%.

Zacks Rank & Stocks to Consider

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

A few better-ranked stocks in the Basic Materials space are Agnico Eagle Mines Limited AEM, Franco-Nevada Corporation FNV and Kirkland Lake Gold Ltd. KL, all currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle Mines has an expected earnings growth rate of 162.86% for 2019. The company’s shares have gained 50% in the past year.

Franco-Nevada Corporation has a projected earnings growth rate of 39.32% for the current year. The company’s shares have rallied 52% in a year’s time.

Kirkland Lake Gold has an estimated earnings growth rate of 71.32% for the ongoing year. Its shares have appreciated 123% in the past year.

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