Here’s How Much Freeport’s Indebtedness Has Improved In 2017

August 28th, 2017 by Trefis Team
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Freeport-McMoRan continues to take steps to lower its outstanding debt, with the planned redemption of bonds totaling $543 million in principal amount in September the latest step in this direction. [1] This latest step would help Freeport further reduce its indebtedness and help improve its creditworthiness. The table shown below estimates the improvement in the company’s estimated level of indebtedness (the 2017E debt and cash figures have been calculated post adjusting the company’s balance sheet figures at the end of Q2 2017 for the September debt redemption).

Freeport has managed to lower outstanding debt since the end of 2016 using operating cash flows and the proceeds of the company’s asset sales (oil and gas properties and the company’s African copper mining operations). Moreover, a significant improvement in the copper pricing environment has given the company considerably greater breathing room in terms of its ability to service debt (as illustrated by the improvement in EBITDA and the Net Debt/EBITDA metric).

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An improved Chinese demand outlook for copper (supported by a fiscal stimulus targeting the infrastructure sector) has boosted prices sharply this year. While copper prices have increased sharply this year, the long term trajectory of prices would depend upon the sustainability of elevated demand conditions from China. As question marks remain over the sustainability of copper demand from the world’s largest consumer of copper, the company’s management is doing the right thing in getting its balance sheet in order, when the going is good.

Have more questions about Freeport-McMoRan? See the links below.

Notes:

1) The purpose of these analyses is to help readers focus on a few important things. We hope such communication sparks thinking, and encourages readers to comment and ask questions on the comment section, or email content@trefis.com
2) Figures mentioned are approximate values to help our readers remember the key concepts more intuitively. For precise figures, please refer to our complete analysis for Freeport-McMoRan

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Notes:
  1. Freeport-McMoRan Announces Redemption Of Five Series Of Senior Notes, Freeport-McMoRan News Release [↩]