Southern Copper Corp. (SCCO, Financial) closed the fourth quarter of fiscal 2017 with adjusted one-time charges earnings of 59 cents per ordinary share or $455.8 million. The adjusted net profit per share was in line with expectations and 168.2% higher than the comparable of 2016.
Thanks to a year over year increase in copper and zinc sales volumes and an improvement in base metal prices, Southern Copper Corp. closed the reporting period with a nearly 33% growth in revenue to $1.86 billion. The company beat consensus on fourth-quarter revenue by $90 million.
The adjusted income for the entire year of fiscal 2017 was $1.47 billion on a topline of $6.65 billion. The income increased by almost 90% on a year over year basis, thanks to higher sales and lower energy costs.
Annual revenue increased 23.7% compared to 2016. The improvement was mainly attributed to a higher production of copper and an increase in the price of copper per pound. The copper future increased by 27.7% to $2.806 per pound in 2017 from year-prior.
At its Peruvian operations, the company reported a production record with a total volume of 1,153,486 tons of copper concentrates processed at the smelter.
The company also produced concentrates of molybdenum, zinc and silver. However, sale of the red metal accounts for approximately 85% of the Southern Copper’s total revenue.
Sales of Molybdenum (-1.7% year over year) and silver (-2.1% year over year) went down in 2017 to 21,358 tons and 16.86 million of ounces. The decrease was a consequence of lower base metal mined and refined. The sales volume of zinc increased by 2% to 107,573 tons.
The following charts show the trend in Southern Copper Corp.'s production of copper over the last 5 fiscal years.
Chart 1. Production of copper over the last 5 fiscal years.
Behind the 114.1% year over year growth in the cash flow from operations to $1.977 billion in 2017 there are also higher sales of copper and metal prices.
During 2017, Southern Copper Corp. invested funds of $1.02 billion. The mining company expects Toquepala to commence production of copper at the beginning of the third quarter of 2018. From the expansion of Toquepala, a volume of 40,000 tons of copper is expected to be produced in 2018 and 100,000 tons will be added to the company’s annual copper production from 2019 onwards. Toquepala represents a catalyst for 2018 and beyond.
Chairman of the Board German Larrea believes that Southern Copper Corporation is “in a great position to take advantage of the favorable price environment.”
Southern Copper Corp. is currently trading at $45.47 per share on the New York Stock Exchange and is about $3.70 above the midst of a $32.63 to $50.90 52-week range.
The recommendation rating is 3.4 out of a total of 5. Consensus is between a hold and an underperform rating. Therefore, it is perhaps wise to wait for the stock to retrace a little bit before increasing holdings of Southern Copper Corp. With a RSI (14-days) of 37.48 and down trending, there is indeed some more room left for further depreciation.
Southern Copper Corp. has a price-book (P/B) ratio of 5.75 times, which is higher than the industry average ratio of 2.01. The EV-to-Ebitda ratio is 12.23 times versus an industry median of 10.14 times. Southern Copper has a market capitalization of $35.15 billion.
(Disclosure: I have no positions in any security mentioned in this article.)
