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Southern Copper’s Financial Performance: Key Investor Takeaways

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Dec. 4 2020, Updated 10:52 a.m. ET

Southern Copper’s financial performance

So far in this series, we’ve looked at Southern Copper’s (SCCO) key operations and mining portfolio. In the rest of this series, we’ll look at the company’s financial performance. We’ll also compare SCCO’s financial health compared to other copper producers, including Freeport-McMoRan (FCX) and Teck Resources (TCK).

Let’s start by looking at the trend in Southern Copper’s revenues and EBITDA (earnings before interest, taxes, depreciation, and amortization) margin.

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Southern Copper’s revenues have fallen

Southern Copper’s revenues have fallen over the last couple of years, as you can see in the graph above. The falling revenues are largely attributable to copper price volatility. Copper prices fell between 2011 and 2014, negatively impacting Southern Copper’s revenues.

Southern Copper’s copper production has risen by a CAGR (compounded annual growth rate) of only 3.1% between 2011 and 2014. However, Southern Copper is investing in new mines as well as the expansion of its Buenavista mine. This should help increase Southern Copper’s sales volumes in the coming years.

Currently, Southern Copper forms 1.85% of the iShares Latin America 40 ETF (ILF) and 0.65% of the SPDR S&P Global Natural Resources ETF (GNR).

EBITDA margins have also fallen

Southern Copper’s EBITDA margins have also fallen over the last couple of years, as you can see in the chart above. In 2014, SCCO had an EBITDA margin of 46.3% compared to 57.4% in 2011. Copper producers’ earnings are sensitive to copper prices. Falling copper prices have negatively impacted all copper producers’ earnings.

Southern Copper’s EBITDA margin could come down further in 2015, given the way copper prices are currently playing out.

Having said that, Southern Copper’s strong balance sheet enables the company to tide over the current weakness in copper prices. In the next part, we’ll look at key ratios from Southern Copper’s balance sheet.

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