Grupo Mexico hurt by lower prices

Despite cost-cutting, Grupo Mexico suffered a loss of US$42.7 million (7 per share) on revenue of US$1.5 billion during the first half of 2001.

By comparison, earnings in the first half of last year totalled US$6 million (1 per share) on revenue of US$1.7 billion.

Improved efficiencies and administrative cost savings amounted to US$142.5 million in the recent half, 10.1% better than a year earlier.

During the second quarter, net profits amounted to US$6.1 million (1 per share) on revenue of US$772 million, compared with US$45 million (7 per share) on US$856.4 million in the corresponding period of 2000. Cost savings during the recent quarter were US$97.8 million, amounting to a year-over-year improvement of 14%.

Lower sales volume and decreased metal prices weakened the base metal producer’s bottom line. Sales related to the company’s bread-and-butter metals production was lower, virtually across the board.

Sales volume of zinc production for the first six months of the year fell 5.9% to 100,041 tonnes, silver production was off 25.2% to 30.5 million oz., gold sales slid 28.7% to 215,926 oz., molybdenum fell 7.7% to 7,396 tonnes, and lead was off 26% to 45,620 tonnes. Copper, the company’s primary metal, stood out from the pack, edging up 0.2% to 554,136 tonnes.

Zinc production and sales were hit by the closure of the high-cost Velardena and Rosario underground facilities in Mexico. Lead and silver sales were lower, owing to the temporary shutdown of the lead smelter in East Helena, Mont. The smelter will remain closed until the lead concentrate market picks up.

Similarly, prices for the company’s metals during the half fell nearly across the board. Copper slipped 3.3% to US78.6 per lb., zinc was off 13.8% to US44.3 per lb., silver fell 11.8% to US$4.50 per oz., gold shrunk 6.9% to US$265.60 per oz. and molybdenum was off 11.5% to US21.7 per lb. The average price for lead, which rose 9.6%, was the lone bright spot.

Grupo Mexico’s Asarco subsidiary posted a first-half operating profit of US$3.5 million on revenue of US$502 million, compared with a year-ago loss of US$24.3 million on revenue of US$638 million.

Southern Peru Copper (PCU-N), in which Grupo Mexico owns a 54% interest, had an operating profit of US$48.4 million on revenue of US$325.2 million, compared with a profit of US$56 million on US$320.1 million a year earlier.