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Southern Copper’s Quarterly Net Drops on Declining Metals Prices

Southern Copper Corp., the largest producer of the metal in Peru and Mexico, said first-quarter profit fell for a fourth quarter on declining copper and silver prices, matching analysts’ estimates.

Net income declined 20.3 percent to $495.4 million, or 59 cents a share, from $621.4 million, or 73 cents, a year earlier, the Phoenix-based company said yesterday in an e-mailed statement. Profit, excluding one-time items, was in line with the average of five analysts’ estimates compiled by Bloomberg.

Sales fell 10 percent to $1.62 billion. Copper futures in New York averaged 4.8 percent lower in the quarter than a year ago, while silver prices fell 8 percent. Costs rose as the company met interest payments on a $1.5 billion debt offering in November, said Inteligo SAB analyst Lali Merino, who doesn’t own shares and rates the stock a buy.

“With copper production little changed, earnings were mainly hit by lower metals prices,” Merino said in a telephone interview from Lima before the report was released. “Financial costs were also a factor as they took on a lot of debt compared with a year earlier.”

Southern Copper sold a total $1.5 billion in 2022 and 2042 bonds in November, increasing its long-term debt by 53 percent to $4.2 billion. The bond sale added to a previous $1.5 billion offering in April 2010.

Quarterly copper production declined 2.2 percent to 149,485 metric tons, while silver output fell 8 percent. Zinc and molybdenum both rose 4 percent.

The company, which is 81 percent owned by Grupo Mexico SAB, plans to increase copper production capacity 84 percent to 1.18 million tons by 2017. Copper for July delivery fell 1.7 percent to $3.186 a pound yesterday on the Comex in New York.

Grupo Mexico’s first-quarter net income fell 19.6 percent to $576.7 million, the company said in a separate statement yesterday.

The report was released after the close of regular market trading. Southern Copper slid 68 cents, or 2 percent, to $32.89 in New York. Grupo Mexico fell 1.6 percent to 42.52 pesos in Mexico.

(Southern Copper is scheduled to have its quarterly conference call April 30 at 11 a.m. New York time. U.S. participants 1-888-771-4371. To call from outside the U.S.: 1-847-585-4405, Code: 34783459.))

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