Key Takeaways from Freeport-McMoRan’s Q4

Freeport-McMoRan (NYSE: FCX) released its Q4 2017 earnings results and conducted a conference call with analysts on January 25. The company was able to surpass both revenue and earnings estimates driven by a strong copper pricing environment, higher shipment volume, and enhanced operational efficiencies.

The major takeaways from the announcement have been illustrated in the graphs using our new interactive platform.

Freeport displayed a 15% Year-on-Year (Y-o-Y) growth in its revenue in Q4 owing largely to higher copper prices and increased gold shipments. The average price realized for copper saw a 29% Y-o-Y growth driven by a favorable demand environment of the red metal due to China’s environmental policies and an otherwise increased consumption of the metal.

Furthermore, the company saw greater stability in its Grasberg operations in Q4 owing to a signed negotiation with a new labor union which has halted the ongoing unrest. The company signed a new two-year labor contract in December with a new union leadership in Indonesia which would be renewed every 2 years. Copper shipments saw a 9% sequential growth, although Y-o-Y growth remained subdued. The gold shipments, on the other hand, experienced a 46% Y-o-Y growth driven largely by a stability in Grasberg.

Operationally, the company saw a 14% Y-o-Y reduction in net unit cash cost for copper despite copper shipments being 10% lower in Q4 when compared to the same period last year. This was propelled by increased labor productivity which should remain beneficial for the company in the upcoming quarters. Operating margin in Q4 stood at 29% which signals Freeport’s increasing efficiency.

The company expects to have a signed agreement with the Indonesian government by H1 2018 which should put the pending matter to rest. Given that the strong environment for copper persists in the upcoming year and the Indonesian matter is resolved on time, the company may revert to its long-term tradition of returning cash to its shareholders in 2018. This would make the company more attractive to investors.