Freeport-McMoRan Profit Beats Estimates as Copper Sales Rise

Freeport-McMoRan Copper & Gold Inc., the metals producer that in December agreed to buy two energy companies, reported first-quarter profit that exceeded analysts’ estimates after copper sales and costs were better than expected.

Net income fell to $648 million, or 68 cents a share, from $764 million, or 80 cents, a year earlier, the Phoenix-based company said today in a statement. Profit excluding charges to extinguish debt early and other one-time items was 73 cents a share, topping the 71-cent average of 17 estimates compiled by Bloomberg. Sales declined 0.5 percent to $4.58 billion from a year earlier.

Freeport agreed to buy Plains Exploration & Production Co. and McMoRan Exploration Co. in a $9 billion cash and stock deal. Freeport said at the time it couldn’t find a suitable copper acquisition and wanted to diversify its production portfolio. The deals are expected to close in the second quarter, Freeport said today.

The company’s shares fell 27 percent from the day before the transactions were announced through yesterday. Freeport rose 0.2 percent to $28.05 at the close in New York today.

First-quarter copper sales rose 15 percent to 954 million pounds, higher than forecast, because of increased output and sales from the company’s Tenke Fungurume mine in the Democratic Republic of Congo, Freeport said.

Beating Forecast

Freeport’s Jan. 22 forecast was for 940 million pounds, while the average of four estimates compiled by Bloomberg was for 943.5 million. Gold sales were 214,000 ounces, compared with 288,000 ounces in the first quarter of 2012.

First-quarter net cash costs to produce a pound of copper rose to $1.57, compared with $1.26 a year earlier and less than the $1.60 average of four estimates. Freeport’s forecast in January was for $1.67.

Earnings beat estimates mostly because of lower-than-expected costs, Fraser Phillips, a Toronto-based analyst at RBC Capital Markets, said in a note today.

It appears the company has cash costs “under control,” Laurence Balter, chief market strategist at Oracle Investment Research in Fox Island, Washington, said in an e-mail.

Copper for delivery in three months on the London Metal Exchange averaged $7,958 a metric ton in the quarter, 4.4 percent less than a year earlier. The metal, used in wires and pipes, declined 4.9 percent in the quarter on concern that slowing global economic growth would erode demand.

Freeport, which also operates in the Americas, said it still expects 2013 copper sales of 4.3 billion pounds. The company increased its forecast for net cash costs this year to $1.45 a pound of copper, from $1.35 forecast on Jan. 22.