Economic Value Added (EVA)
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Economic value added or economic profit is the difference between revenues and costs,where costs include not only expenses, but also cost of capital.
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Freeport-McMoRan Inc. pages available for free this week:
- Balance Sheet: Assets
- Common-Size Income Statement
- Analysis of Solvency Ratios
- Analysis of Short-term (Operating) Activity Ratios
- Price to FCFE (P/FCFE)
- Return on Equity (ROE) since 2005
- Total Asset Turnover since 2005
- Price to Earnings (P/E) since 2005
- Price to Book Value (P/BV) since 2005
- Aggregate Accruals
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Economic Profit
Freeport-McMoRan Inc., economic profit calculation
US$ in millions
| 12 months ended: | Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | |
|---|---|---|---|---|---|---|
| Net operating profit after taxes (NOPAT)1 | ||||||
| Cost of capital2 | ||||||
| Invested capital3 | ||||||
| Economic profit4 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 NOPAT. See details »
2 Cost of capital. See details »
3 Invested capital. See details »
4 2024 Calculation
Economic profit = NOPAT – Cost of capital × Invested capital
= – × =
The financial data displays several notable trends over the five-year period under consideration. Net operating profit after taxes (NOPAT) exhibited significant variation. Starting at 1,698 million US dollars in 2020, NOPAT surged to a peak of 6,188 million in 2021, followed by a decline to 5,116 million in 2022. The downward trend continued with figures dropping to 4,632 million in 2023 and further to 4,538 million in 2024, indicating reduced profitability after the initial spike.
Cost of capital remained relatively stable throughout the period, fluctuating slightly around 20.8%, with a low of 19.95% in 2020 and a high of 20.89% in 2024. This consistency suggests the company’s required return on invested capital did not materially change despite shifts in operational performance.
Invested capital increased from 32,173 million US dollars in 2020 to a peak of 36,035 million in 2022, before decreasing gradually to 33,889 million in 2024. The investments reflect a general expansion until 2022, followed by a contraction or divestiture phase in subsequent years.
Economic profit, which accounts for net operating profit after tax adjusted for the cost of capital, remained negative throughout the period. The loss narrowed considerably from -4,722 million in 2020 to -1,103 million in 2021, coinciding with the peak in NOPAT. However, economic profit deteriorated again in the following years, reaching -2,542 million in 2024. This persistent negative economic profit suggests the company has not generated returns exceeding its cost of capital during these years, despite improvements in certain periods.
- Summary of Key Trends:
- - NOPAT showed a strong rise in 2021 but declined steadily afterward.
- - Cost of capital remained stable, reflecting steady capital costs or risk perception.
- - Invested capital increased until 2022, then decreased, indicating shifts in asset base strategy.
- - Economic profit stayed negative, highlighting challenges in value creation relative to capital costs.
Net Operating Profit after Taxes (NOPAT)
Freeport-McMoRan Inc., NOPAT calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Elimination of deferred tax expense. See details »
2 Addition of increase (decrease) in deferred revenue.
3 Addition of increase (decrease) in equity equivalents to net income attributable to common stockholders.
4 2024 Calculation
Interest expense on capitalized operating leases = Operating lease liability × Discount rate
= × =
5 2024 Calculation
Tax benefit of interest expense, net = Adjusted interest expense, net × Statutory income tax rate
= × 21.00% =
6 Addition of after taxes interest expense to net income attributable to common stockholders.
- Net Income Attributable to Common Stockholders
- The net income attributable to common stockholders showed a significant increase from 599 million USD in 2020 to a peak of 4306 million USD in 2021. However, after this peak, net income declined to 3468 million USD in 2022 and continued to decrease further to 1848 million USD in 2023. There was a slight recovery in 2024, with net income rising marginally to 1889 million USD. Overall, the data indicates a pronounced volatility with a substantial peak in 2021 followed by a consistent downward trend in the subsequent years through 2024.
- Net Operating Profit After Taxes (NOPAT)
- The net operating profit after taxes also demonstrated a strong upward movement from 1698 million USD in 2020 to 6188 million USD in 2021. Following this, NOPAT experienced a decline to 5116 million USD in 2022 and a further decrease to 4632 million USD in 2023. By 2024, NOPAT slightly decreased again to 4538 million USD. Despite the reductions after 2021, NOPAT levels remained substantially higher than the 2020 baseline, signifying an overall improved operating profitability compared to the start of the period.
- General Observations
- Both net income and NOPAT peaked in 2021, indicating a year of exceptional profitability. Post-2021, both metrics declined, with net income showing a sharper drop compared to NOPAT. This divergence suggests that factors affecting net income beyond operating performance, such as non-operating expenses or one-time gains/losses, could have influenced net income volatility. Despite declines, the company maintained profitability above initial 2020 levels over the five-year span. The slight uptick in net income in 2024 may hint at stabilization or recovering profitability after several years of decrease.
Cash Operating Taxes
Freeport-McMoRan Inc., cash operating taxes calculation
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
The financial data reveals trends in the provision for income taxes and cash operating taxes over a five-year period ending December 31, 2024.
- Provision for Income Taxes
- There is a notable increase from 944 million US dollars in 2020 to 2299 million in 2021, indicating a sharp rise in tax provisions. The figures then remain relatively stable around the 2200-2270 million range for the years 2022 and 2023. In 2024, a further increase to 2523 million is observed, suggesting continuing growth in tax obligations.
- Cash Operating Taxes
- This category exhibits a significant surge from 774 million US dollars in 2020 to 2217 million in 2021, reflecting a major increase in cash tax payments. There is a slight downward trend in 2022 and 2023, with cash operating taxes recorded at 2088 million and 2009 million respectively. However, in 2024, a sharp rise occurs, reaching 2672 million, surpassing previous years' levels.
Overall, the trends indicate a substantial increase in both provision for income taxes and cash operating taxes starting in 2021. While the provision for income taxes shows a steady upward trend after 2021, cash operating taxes display more variability with a dip in the middle years followed by a significant rebound in 2024. This pattern may reflect changes in the company's profitability, tax strategies, or external tax environment impacting its tax liabilities and payments.
Invested Capital
Freeport-McMoRan Inc., invested capital calculation (financing approach)
US$ in millions
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Addition of capitalized operating leases.
2 Elimination of deferred taxes from assets and liabilities. See details »
3 Addition of deferred revenue.
4 Addition of equity equivalents to stockholders’ equity.
5 Removal of accumulated other comprehensive income.
6 Subtraction of construction in progress.
7 Subtraction of investment securities.
The financial data reveals several key trends regarding the company’s capital structure and equity position over the five-year period.
- Total Reported Debt & Leases
- The total reported debt and leases show fluctuation but overall a slight decrease from 2020 to 2024. After peaking in 2022 at 10,952 million USD, the debt level declines to 9,738 million USD by the end of 2024. This suggests an effort to reduce debt or improve debt management after a temporary increase in 2022.
- Stockholders’ Equity
- Stockholders’ equity demonstrates consistent growth year over year. Starting at 10,174 million USD in 2020, it rises steadily to reach 17,581 million USD in 2024. This upward trend indicates strengthening equity, possibly due to retained earnings growth, issuing equity, or increased profitability enhancing the company’s net asset base.
- Invested Capital
- Invested capital increases from 32,173 million USD in 2020 to a peak of 36,035 million USD in 2022, followed by a decline to 33,889 million USD in 2024. The increase up to 2022 may reflect expanded operational assets or investment in capital projects, while the subsequent decline suggests divestitures, asset sales, or depreciation outpacing new investments.
Overall, the data reflects a company focused on strengthening equity while managing debt levels relatively stable after a notable increase in 2022. Investment in capital assets has peaked and begun to recede moderately, indicating possible strategic shifts in capital allocation or operational adjustments during the latter years.
Cost of Capital
Freeport-McMoRan Inc., cost of capital calculations
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2024-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2023-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2022-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2021-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
| Capital (fair value)1 | Weights | Cost of capital | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Equity2 | ÷ | = | × | = | |||||||||
| Long-term debt, including current portion3 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Operating lease liability4 | ÷ | = | × | × (1 – 21.00%) | = | ||||||||
| Total: | |||||||||||||
Based on: 10-K (reporting date: 2020-12-31).
1 US$ in millions
2 Equity. See details »
3 Long-term debt, including current portion. See details »
4 Operating lease liability. See details »
Economic Spread Ratio
Freeport-McMoRan Inc., economic spread ratio calculation
| Dec 31, 2024 | Dec 31, 2023 | Dec 31, 2022 | Dec 31, 2021 | Dec 31, 2020 | ||
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Economic profit1 | ||||||
| Invested capital2 | ||||||
| Performance Ratio | ||||||
| Economic spread ratio3 | ||||||
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 Invested capital. See details »
3 2024 Calculation
Economic spread ratio = 100 × Economic profit ÷ Invested capital
= 100 × ÷ =
The provided financial data outlines key economic performance indicators over a five-year period, revealing notable trends in economic profit, invested capital, and economic spread ratio.
- Economic Profit
- The economic profit figures indicate a persistent negative trend throughout the period. Starting at -4722 million US dollars in 2020, the loss significantly decreased to -1103 million by 2021. However, this improvement was not sustained, as economic profit worsened again in subsequent years, reaching -2388 million in 2022, -2671 million in 2023, and a slight improvement to -2542 million in 2024. Despite the fluctuations, the company consistently experienced economic losses each year, reflecting challenges in generating profits above the cost of capital.
- Invested Capital
- Invested capital showed an overall upward trend from 2020 to 2022, increasing from 32,173 million USD to a peak of 36,035 million USD in 2022. This peak was followed by a slight decline, reducing to 35,126 million in 2023 and further to 33,889 million in 2024. The initial growth suggests increased investment or asset bases, while the subsequent reduction might indicate divestments, asset depreciation, or reevaluation of capital employed.
- Economic Spread Ratio
- The economic spread ratio remained negative throughout the timeline, starting at -14.68% in 2020. It improved substantially in 2021 to -3.15%, indicating a better spread between returns and cost of capital during that year. However, this improvement reversed in the following years, with the ratio falling to -6.63% in 2022, and slightly worsening to -7.6% in 2023 and -7.5% in 2024. The persistent negative values underline an ongoing challenge in achieving returns exceeding the cost of capital, despite some temporary improvement.
In summary, the data illustrates a company facing sustained economic losses and negative spreads on invested capital despite fluctuations. While invested capital grew initially, suggesting expansion or increased asset usage, profitability measures failed to demonstrate corresponding improvement, highlighting potential issues in operational efficiency or market conditions affecting returns.
Economic Profit Margin
Freeport-McMoRan Inc., economic profit margin calculation
Based on: 10-K (reporting date: 2024-12-31), 10-K (reporting date: 2023-12-31), 10-K (reporting date: 2022-12-31), 10-K (reporting date: 2021-12-31), 10-K (reporting date: 2020-12-31).
1 Economic profit. See details »
2 2024 Calculation
Economic profit margin = 100 × Economic profit ÷ Adjusted revenues
= 100 × ÷ =
The financial analysis over the period from 2020 to 2024 reveals several key trends regarding the economic profitability and revenue performance.
- Economic Profit
- The economic profit figures indicate persistent negative values over all years, reflecting ongoing economic losses. Starting at -4,722 million USD in 2020, the negative economic profit substantially improved in 2021 to -1,103 million USD. However, subsequent years saw a deterioration, with economic profit declining to -2,388 million USD in 2022, then further to -2,671 million USD in 2023, before slightly improving to -2,542 million USD in 2024. This pattern suggests that while there was a significant recovery in 2021, the company has struggled to sustain profitability according to economic profit measures in the following years.
- Adjusted Revenues
- Adjusted revenues showed a strong upward trend over the analyzed timeframe. The revenues grew consistently from 14,251 million USD in 2020 to 25,385 million USD in 2024. Notably, the largest increase occurred between 2020 and 2021, where revenues surged by approximately 61%. The growth stabilized somewhat in the following years but remained positive, indicative of increasing sales or service income despite the ongoing economic losses reported.
- Economic Profit Margin
- The economic profit margin trends align closely with economic profit, remaining negative but showing signs of fluctuation. The margin improved dramatically from -33.13% in 2020 to -4.8% in 2021, denoting enhanced efficiency or profitability relative to revenues that year. However, the margin deteriorated again in 2022 and 2023, registering -10.54% and -11.64%, respectively, before a modest recovery to -10.01% in 2024. This indicates that despite revenue growth, the company struggled to achieve positive margins, implying costs or capital charges have not been offset effectively to turn economic profit positive.
In summary, the data illustrates a scenario of increasing revenues accompanied by persistent negative economic profitability. While the company made notable strides in reducing losses in 2021, subsequent years have seen challenges in maintaining economic profit, reflected in both declining margins and increased negative economic profit values after 2021. This suggests operational or capital efficiency issues that prevent translating higher revenue into sustainable economic profits.