Grupo Mexico’s first half hit by lower metal prices

Despite an aggressive cost-cutting campaign, Grupo Mexico posted a loss of US$42.7 million (7 per share) on revenue of US$1.5 billion during the first six months of 2001.

This compares with a net profit of US$6 million (1 per share) on revenue of US$1.7 billion a year earlier. The company figures that, during the first half of the year, improved efficiencies and administrative cost savings amounted to US$142.5 million. This was 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 earnings of US$45 million (7 per share) on US$856.4 million during the same period of 2000. Cost savings during the recent second quarter were US$97.8 million, an improvement of 14% over the same period of 2000.

Lower sales volume and decreased metal prices hit the base metal producer’s bottom line. Sales of the company’s bread-and-butter metals production was lower nearly 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, thanks to the temporary shutdown of the lead smelter in East Helena, Mon. The smelter will remain closed until lead concentrate market conditions pick up.

Similarly, the prices for the company’s metals during the half fell nearly across the board. Copper fell 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 slipped 6.9% to US$265.60 per oz. and molybdenum was off 11.5% to US21.7 perlb. 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 an operating profit of US$56 million on US$320.1 million a year earlier.