Freeport-McMoRan, Hit By Labor Disputes, Reports Lower Earnings

on April 19 2012 9:33 AM
Freeport-McMoRan reported weaker earnings as its Indonesia operations were hit by labor disputes
Freeport-McMoRan reported weaker earnings as its Indonesia operations were hit by labor disputes Reuters

Freeport-McMoRan Copper & Gold Inc. (NYSE: FCX), the world's largest publicly-traded copper producer, reported lower first-quarter profits as production and sales fell at its giant Indonesian mine due to sometimes violent labor disputes. But results beat analyst expectations and shares jumped.

Net income fell to $764 million, or 80 cents per share, down 49 percent compared with $1.5 billion, or $1.57 per share, in the period in 2011, the Phoenix, Ariz.-based company said on Thursday.

Excluding losses from the early extinguishment of debt, net income for the quarter was 96 cents per share, compared to Thomson Reuters' consensus estimate of 86 cents per share.

Revenues of $4.6 billion fell 19 percent from $5.7 billion in the same quarter in 2011 and was below the consensus estimate of $4.45 billion as compiled by Reuters.

Consolidated sales from mines was 827 million pounds for copper, 288,000 ounces for gold and 21 million pounds for molybdenum, compared to 926 million pounds for copper, 480,000 ounces for gold and 20 million pounds for molybdenum for first quarter 2011.

The company's production in Indonesia was hit by labor-related work interruptions and the related temporary suspension of operations. These issues resulted in an estimated drop of 80 million pounds of copper and 125,000 ounces of gold in the first quarter, Freeport-McMoran estimated.

The lower copper volume in Indonesia, as well as higher mining and input costs in North and South America, also pushed up the cost of production.

The weakness in Indonesia, however, was partially offset by stronger production and sales in the company's North American sites.

CEO James Moffett noted that the company progressed in restoring normal operations in Indonesia; production has increased so far in April compared to the first three months of the year and full operations is expected to be restored during second quarter 2012.

Moffett also highlighted the highly attractive debt refinancing move his company made during the quarter, retiring $3 billion of 8.375 percent notes with $3 in new notes that carry a weighted average interest rate of about 3 percent.

The move, which was recorded as an early debt extinguishment loss of $149 million to net income attributable to common stock, saves the company about $160 million in interest cost per year.

Shares of Freeport-McMoran, which were battered in the past three months, rose 1.33 percent in pre-market trading.