• Cumulative Revenue: Over $20 billion for the first nine months of 2024, a 12.5% increase compared to the same period in 2023.

• EBITDA: Increased by 17.3% for the first nine months of 2024 compared to the same period in 2023; 23% improvement on a quarterly basis.

• Net Cash Costs: MXN1.12, a more than 7% improvement versus 2023.

• Copper Production: 819,638 tons for the first nine months of 2024, a 7.1% increase compared to the same period in 2023; 10.6% increase on a quarterly basis.

• Dividend: MXN1.3 per share approved for the quarter, up from MXN1.2 last quarter, with a 4.7% implied dividend yield.

• Net Debt to EBITDA Ratio: 0.1, indicating low leverage.

• Cash and Equivalents: $7.6 billion at the end of the quarter.

• Mining Division Revenue: Over $9.4 billion for the first nine months of 2024, a 13.2% increase compared to the same period in 2023.

• Mining Division EBITDA: $5.1 billion year-to-date, 22.8% higher than 2023; 32.3% higher on a quarterly basis.

• Transportation Division Revenue: Almost $2.6 billion for the first nine months of 2024, a 7.5% increase versus the previous year.

• Infrastructure Division Revenue: Increased by over 9.1% year-over-year.

• Infrastructure Division EBITDA: Grew by almost 27% year-over-year.

• Infrastructure Division Net Income: Grew by 75% year-over-year, totaling $100 million.

• Warning! GuruFocus has detected 5 Warning Signs with MXL.

Release Date: October 23, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Grupo Mexico SAB de CV (GMBXF) reported a 12.5% increase in cumulative revenue for the first nine months of 2024 compared to the same period in 2023, driven by higher copper and byproduct volumes sold.

• The company’s EBITDA increased by 17.3% year-over-year for the first nine months of 2024, with a notable 23% improvement in quarterly results compared to the previous year.

• The mining division achieved a 13.2% increase in revenue for the first nine months of 2024, supported by higher copper, gold, and silver prices.

• Grupo Mexico SAB de CV (GMBXF) maintained a strong balance sheet with low leverage, boasting a net debt to EBITDA ratio of 0.1.

• The infrastructure division demonstrated robust performance with a 27% growth in EBITDA and a 75% increase in net income year-over-year, driven by increased revenues and traffic across various business units.

Negative Points

• The transportation division experienced an 8% decrease in EBITDA for the first nine months of 2024, attributed to network congestion and operational challenges.

• Grupo Mexico SAB de CV (GMBXF) faced a slowdown in the average train speed due to network congestion, impacting operational efficiency and increasing costs.

• The company reported a decrease in revenue from the cement and automotive segments, with a 4% and 5% decline respectively, due to reduced demand and competition.

• Southern Copper, a subsidiary, has been paying dividends partially in stock, which may indicate liquidity preservation concerns.

• The company is cautious about future capital allocation, focusing on organic growth rather than diversification, which may limit expansion opportunities.

Q & A Highlights

Q: Given the comfortable balance sheet position, how should we think about capital allocation? Are there plans for new acquisitions or changes in dividend distribution? A: Marlene Finny de la Torre, Chief Financial and Administrative Officer, stated that the focus is on organic growth rather than diversification. The company is prioritizing projects within its current divisions. Regarding dividends, they are reviewed quarterly based on cash needs and project CapEx, maintaining a solid dividend yield.

Q: Could you provide expectations for copper production and cash costs for 2024 and 2025? A: Leonardo Contreras Lerdo De Tejada, CEO of ASARCO and CFO of AMC, mentioned that for 2024, copper production is expected to be around 160,000 metric tons with cash costs before byproducts at $2.25 and after byproducts at $2.10. For 2025, production is projected at 117,500 metric tons with costs aligning with 2024 levels.

Q: What is the strategy behind Southern Copper’s hybrid dividend payments, and will this continue? A: Marlene Finny de la Torre explained that the decision for hybrid dividends is made at the Southern Copper board level, considering cash generation and upcoming maturities. The strategy aims to preserve liquidity, with a $500 million maturity due next year. Grupo Mexico plans to maintain its position in Southern Copper without selling shares received as dividends.

Q: How do you view potential changes in Mexican mining regulations and the impact on open-pit mining? A: Leonardo Contreras Lerdo De Tejada noted that any regulatory changes would likely affect new concessions. Grupo Mexico’s current projects are already within existing concessions, so they are not expected to be impacted by potential regulatory shifts.

Q: What are the cash costs before and after byproducts during the third quarter? A: Leonardo Contreras Lerdo De Tejada reported that the cash cost before byproducts was $3.40, and after byproducts, it was $3.26 during the third quarter.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.