What part of Freeport’s financials should investors track?



Freeport-McMoRan’s financials

In previous parts of this series, we looked at Freeport-McMoRan’s (FCX) global asset portfolio and its revenues spread across various products and markets.

But investors should be sure to track certain aspects of Freeport-McMoRan’s financials.

In this part, we’ll see Freeport’s latest trends in operating profits. Going forward, we’ll compare its financial performance with other copper producers. Teck Resources (TCK) Glencore International plc (GLNCY), and Southern Copper Corp. (SCCO) are among the other major copper producers.

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Operating profits

The above chart shows the trends in Freeport’s operating profits. As you can see, Freeport posted a loss of more than $3 billion in 4Q14. This translates into a loss per share of $2.90.

The loss in 4Q was primarily attributable to impairment of Freeport’s oil and gas assets. Crude oil prices have been slashed more than half over the last few months. As a result, Freeport has written down the carrying value of its energy assets.

Lower copper prices

Prices of all major commodities took a beating last year. Iron ore prices fell by more than half in 2014. Steel prices in the United States also corrected toward the end of last year.

Currently, hot rolled coil (or HRC) prices in the United States are very close to $500 per ton. Lower steel prices negatively impact all steel companies in the United States. The SPDR S&P Metals and Mining ETF (XME) is also negatively impacted by lower commodity prices. Freeport is ~35% invested in steel plays. Freeport forms 3.16% of XME.

Aluminum prices closed 2014 with modest gains over the previous year. However, copper prices fell sharply in 2014. We’ll look at this fall in copper prices and its impact on Freeport in the next part of this series.


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