Southern Copper Corporation (SCCO) Cash Flow Statement

The OCF/NI ratio has consistently been above 1.0 in recent quarters, except for Q1 2025 and Q1 2024, suggesting that reported earnings are well-backed by cash generation. The Q2 2026 ratio of 1.19, combined with negligible stock-based compensation, implies that earnings are not inflated by non-cash items. This strong conversion is likely driven by robust copper prices and efficient working capital management, though investors should monitor if this persists when copper prices normalize.

Free cash flow reached $2.4B in Q2 2026, a significant jump from $741M in Q2 2025, driven by a 105% increase in operating cash flow and only a modest rise in capex. The FCF margin of 56.7% is exceptionally high, indicating that the company is converting a large portion of revenue into cash after investments. This trajectory suggests that SCCO is well-positioned to fund shareholder returns and growth initiatives, though the sustainability of such margins depends on copper price stability.

Quarterly capex has ranged from $214M to $442M, with the latest quarter at $442M, indicating increased investment likely tied to expansion projects. The capex-to-revenue ratio of 10.3% in Q2 2026 is slightly above the historical average, but still moderate for a mining company, implying that SCCO is not over-investing. Given the company's long reserve life, this level of capex appears sufficient to maintain operations and support modest growth, though investors should watch for any escalation in capital intensity.

The working capital line has been highly variable, with positive contributions in some quarters and negative in others, likely due to changes in receivables and inventory linked to copper price fluctuations. In Q2 2026, working capital added $56M to cash flow, a modest positive, suggesting efficient management of receivables and payables. However, the large swings in prior quarters highlight the cyclicality of the business, and investors should expect continued volatility in this line item.

SCCO has consistently paid dividends, with the latest quarter's payout of $826M being the highest in the period, reflecting the company's commitment to returning cash to shareholders. Over the last four quarters, dividends have consumed roughly 70% of cumulative FCF, leaving limited room for other uses like buybacks or acquisitions. This high payout ratio may be sustainable given the fortress balance sheet, but it could constrain flexibility if copper prices decline.

The cumulative OCF/NI ratio of 1.24 over the last five quarters suggests that earnings are more than fully backed by cash, with the excess likely due to non-cash charges like depreciation and favorable working capital movements. This divergence is a positive signal for earnings quality, as it implies that reported profits are not being inflated by aggressive accruals. However, investors should note that this trend may reverse if copper prices weaken, as working capital could become a drag on cash flow.