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:
- Income Statement
- Balance Sheet: Assets
- Balance Sheet: Liabilities and Stockholders’ Equity
- Common-Size Income Statement
- Common-Size Balance Sheet: Assets
- Analysis of Long-term (Investment) Activity Ratios
- Enterprise Value to EBITDA (EV/EBITDA)
- Enterprise Value to FCFF (EV/FCFF)
- 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 reveals several notable trends in operating performance and capital efficiency over the five-year period under review.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT showed significant growth from 2020 to 2021, increasing from 1,698 million USD to 6,188 million USD. This peak was followed by a decline over the subsequent years, with NOPAT decreasing to 5,116 million USD in 2022, then continuing a gradual downward trend to 4,632 million USD in 2023 and 4,538 million USD in 2024. Despite the decline after 2021, NOPAT levels remained well above the 2020 baseline, indicating a generally stronger profit-generating ability compared to the start of the period.
- Cost of Capital
- The cost of capital remained relatively stable across the period, fluctuating narrowly between 19.89% and 20.82%. This stability suggests that the company's risk profile and capital structure did not experience significant changes and the external financing environment remained consistent.
- Invested Capital
- Invested capital steadily increased from 32,173 million USD in 2020 to a peak of 36,035 million USD in 2022. Thereafter, a slight decline was observed, with invested capital decreasing to 33,889 million USD by 2024. This pattern indicates continued investment in assets until 2022, followed by a moderate reduction or optimization of asset base in the last two years.
- Economic Profit
- Economic profit was consistently negative throughout the period, indicating that returns did not cover the cost of capital. The loss narrowed significantly from -4,701 million USD in 2020 to -1,079 million USD in 2021, reflecting improved capital efficiency or operational performance. However, from 2022 onwards, economic profit deteriorated again, reaching -2,363 million USD in 2022 and further declining into 2023 and 2024 with values around -2,500 million USD. This suggests that despite operational profit growth and high levels of invested capital, the returns were insufficient to meet the company’s cost of capital in the later years.
In summary, the company experienced a pronounced increase in profitability in 2021, accompanied by consistent capital costs and growing invested capital. However, the improvement in operating profit was not sustained, leading to declining profitability and persistent negative economic profits, implying a need for enhancing capital utilization and operational efficiency to create true economic value going forward.
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 financial data reveals several notable trends over the five-year period ending on December 31, 2024. The economic profit figures indicate consistent negative values throughout the period, signaling that the company has been generating economic losses each year. Although the economic loss decreased significantly from -4701 million USD in 2020 to -1079 million USD in 2021, it rose again to -2363 million USD in 2022 and further deteriorated to -2647 million USD in 2023. In 2024, there was a slight improvement with economic profit rising to -2519 million USD, yet the company still experienced a substantial economic loss.
Regarding invested capital, the figures show an overall increase 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. This trend indicates that the capital base expanded until 2022, after which it contracted gradually over the next two years.
The economic spread ratio, representing the spread between return on invested capital and cost of capital, remained negative throughout the period, consistent with the negative economic profit. The ratio improved dramatically from -14.61% in 2020 to -3.08% in 2021, reflecting a narrowing gap. Nonetheless, it worsened again to -6.56% in 2022 and further declined to -7.54% in 2023. In 2024, the economic spread ratio showed a minor improvement to -7.43%, yet it continued to signal negative value creation.
- Economic profit
- Consistently negative, with an initial sharp improvement in 2021 followed by deterioration from 2022 through 2023, and a slight recovery in 2024.
- Invested capital
- Increasing trend from 2020 to 2022, reaching a peak, then declining over the last two years to 2024.
- Economic spread ratio
- Negative throughout the period; initial improvement in 2021, followed by worsening in 2022 and 2023, with a slight positive adjustment in 2024.
Overall, the data suggests a challenging period in terms of economic profitability, with the company struggling to generate returns above its cost of capital despite fluctuations in invested capital. There were temporary improvements, but these have not been sustained, indicating ongoing issues related to value creation and operational efficiency within the financial metrics examined.
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 data reveals a notable shift in the economic profit and adjusted revenues over the five-year horizon.
- Adjusted Revenues
- There has been a consistent upward trend in adjusted revenues from 2020 through 2024. Revenues increased markedly from approximately 14.25 billion USD in 2020 to 25.39 billion USD in 2024, representing a substantial growth trajectory. The most significant jump occurred between 2020 and 2021, with revenues rising by over 60%. Following that, revenues stabilized with modest growth through 2023 and a stronger increase again in 2024.
- Economic Profit
- Despite the increase in revenues, economic profit remains negative across all years, signifying continued losses from an economic value-added perspective. However, the extent of losses improved notably from 2020 to 2021, with economic profit improving from -4.7 billion USD to about -1.08 billion USD. This improvement was followed by a decline again in 2022 and subsequent years, with losses deepening to approximately -2.36 billion in 2022 and hovering around the -2.5 to -2.6 billion USD range in 2023 and 2024. This pattern suggests challenges in converting revenue growth into positive economic profitability.
- Economic Profit Margin
- The economic profit margin, which reflects economic profit as a percentage of revenues, also improved dramatically from -33.0% in 2020 to -4.7% in 2021. It then deteriorated to around -10.4% in 2022 and has stayed between -9.9% and -11.5% for the following years. Although still negative, the improvement from 2020 to 2021 indicates better efficiency or cost management initially, but the subsequent decline points to difficulties maintaining that trend amid rising revenues.
In summary, while revenues expanded significantly over the period observed, economic profit remained negative, reflecting persistent losses despite higher sales. The initial improvement in economic profit and margin between 2020 and 2021 was not sustained, suggesting underlying issues impacting profitability beyond revenue growth, such as increased costs or capital inefficiencies. Management attention may be warranted to address these challenges to translate revenue gains into economic value creation.