Yahoo Finance Freeport-McMoRan’s 1Q16 Call: Mostly About Asset Sales
Freeport-McMoRan’s 1Q16 Earnings Call: Mostly About Asset Sales
Freeport-McMoRan’s 1Q16 call
During its 4Q15 earnings conference call, Freeport-McMoRan (FCX) mentioned an asset sales program to raise $5 billion–$10 billion to shore up its balance sheet. The asset sales issue dominated management discussions and analysts’ questions during Freeport-McMoRan’s 1Q16 call. And that’s not without a reason. Asset sales have been the key driver of Freeport’s price action this year. You can find out more about this in How Morenci Deal Changed Freeport-McMoRan’s Future.
Other commodity (DJP) producers, including Rio Tinto (RIO), BHP Billiton (BHP), and Glencore (GLNCY), are looking at various ways to strengthen their balance sheets.
Updates from 1Q16 call
So far, Freeport has announced asset sales transactions totaling $1.4 billion, as you can see in the above graph. According to Richard Adkerson, Freeport’s CEO (chief executive officer), the company is “advancing discussions on additional transactions.” He also said that “the scarcity of quality assets in the copper business is attracting significant interest from potential purchasers.”
Although Freeport had earlier listed several alternatives to generate cash, the tone of its 1Q16 call suggests that management is primarily looking to sell stakes in some of its copper assets. However, Freeport might not consider selling its oil and gas assets since they might not fetch the expected price in the current markets. Instead, Freeport hinted at further cost reduction in the energy business and preserving the asset.
Equity transaction?
Last year, Freeport-McMoRan raised $2 billion by selling shares. But according to Freeport, the company might not immediately consider another equity transaction. However, the company didn’t totally rule out raising fresh equity as an alternative, should the asset sales transactions not materialize.
Nonetheless, copper, which has always been Freeport’s strength, might just bail out the company from the debt trap it’s in from the failed energy adventure.
Stay tuned to Market Realist’s Copper page for the upcoming earnings in this industry.
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