Economic Value Added (EVA)
EVA is registered trademark of Stern Stewart.
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 analysis of the financial data over the five-year period reveals several noteworthy trends and insights related to profitability, capital costs, invested capital, and economic profit.
- Net Operating Profit After Taxes (NOPAT)
- NOPAT exhibited a significant increase from 2020 to 2021, rising from $1,698 million to $6,188 million. However, starting in 2022, there was a declining trend, with NOPAT decreasing to $5,116 million, then $4,632 million in 2023, and $4,538 million in 2024. Despite the decline after 2021, NOPAT remains substantially higher than the 2020 level.
- Cost of Capital
- The cost of capital remained relatively stable over the period, fluctuating slightly around approximately 20.8%. It increased marginally from 19.96% in 2020 to a peak of 20.9% in 2024. The stability suggests consistent capital market conditions or risk perceptions during these years.
- Invested Capital
- Invested capital steadily increased from $32,173 million in 2020 to a peak of $36,035 million in 2022. Thereafter, it declined to $35,126 million in 2023 and further to $33,889 million in 2024. This pattern indicates initial growth in capital investment followed by a retrenchment or divestment phase in the last two years.
- Economic Profit
- Economic profit remained negative throughout the period, indicating that the return on invested capital did not exceed the cost of capital at any time. The economic loss narrowed significantly from -$4,725 million in 2020 to -$1,106 million in 2021, reflecting improved profitability relative to capital costs. However, from 2022 onward, economic profit deteriorated again, with losses deepening to -$2,391 million in 2022 and moderately worsening to -$2,674 million and -$2,545 million in 2023 and 2024, respectively. This suggests that despite the large increase in NOPAT in 2021, the company struggled to sustain returns above its capital costs in subsequent years.
Overall, the data reflect a peak in operational profitability in 2021, followed by gradual declines in both operating profit and invested capital. The consistent cost of capital and continued negative economic profit indicate ongoing challenges in generating value beyond capital costs, despite changes in scale of operations and capital investment. This situation suggests a need for strategic review to enhance capital efficiency and profitability going forward.
Net Operating Profit after Taxes (NOPAT)
Freeport-McMoRan Inc., NOPAT calculation
US$ 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 economic profit of the company exhibits a significant negative trend over the five-year period analyzed. Starting from a highly negative value of -4725 million US dollars in 2020, there is an improvement in 2021, with economic losses reducing to -1106 million US dollars. However, from 2022 onward, economic profit worsens again, showing substantial negative values of -2391 million in 2022, -2674 million in 2023, and a slight improvement but still negative at -2545 million in 2024. This pattern indicates the company's consistent struggle to generate positive economic profit, with only a temporary and partial improvement in 2021.
Invested capital shows a steady increase from 2020 to 2022, rising from 32,173 million US dollars to a peak of 36,035 million in 2022. This increase suggests that the company continued to allocate more capital into its operations during this period. However, from 2023 onwards, invested capital begins to decline, falling to 35,126 million in 2023 and further to 33,889 million in 2024. This reduction might indicate a strategic scaling back or optimization of capital employed in the business.
The economic spread ratio remains negative throughout the entire timeframe, reflecting the cost of capital exceeding the returns generated. It starts at a deeply negative -14.69% in 2020, significantly improves to -3.16% in 2021, indicating a reduction in negative spread and better capital efficiency. Despite this improvement, the ratio deteriorates again in subsequent years, moving to -6.64% in 2022, -7.61% in 2023, and slightly improving, but still negative, at -7.51% in 2024. This suggests that the company's economic returns consistently fall short of its capital costs, with some fluctuations but no sustained positive spread.
Overall, the data portrays a company facing persistent challenges in generating economic profit and positive capital returns over the analyzed period. The temporary improvements seen in economic profit and economic spread ratio in 2021 are not sustained in subsequent years. Additionally, the fluctuations in invested capital—first increasing then decreasing—may reflect changes in investment strategy or operational adjustments in response to profitability pressures.
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 analysis of the financial data over the five-year period reveals several important trends in key performance indicators.
- Adjusted Revenues
- Adjusted revenues show a general upward trend across the period. Starting at 14,251 million US dollars in 2020, revenues rose significantly to 22,971 million in 2021. They remained relatively stable in 2022 and 2023, with slight fluctuations around 22,665 and 22,940 million respectively, before increasing again to 25,385 million in 2024. This indicates an overall growth trajectory in the company's revenue generation capabilities.
- Economic Profit
- The economic profit figures display persistent negative values throughout the entire period, indicating that the company did not achieve positive economic profit at any point from 2020 to 2024. The loss narrowed considerably from -4,725 million in 2020 to -1,106 million in 2021, suggesting an improvement in profitability or cost management. Nonetheless, this was followed by a deterioration to -2,391 million in 2022, with further decreases in 2023 (-2,674 million) and a slight recovery in 2024 (-2,545 million). Despite some improvement after the initial severe loss, economic profit remained negative with increasing losses after 2021.
- Economic Profit Margin
- The economic profit margin correlates with the economic profit trend by remaining negative over the entire timeframe. The margin improved significantly from -33.15% in 2020 to -4.82% in 2021, reflecting a more efficient profit generation relative to revenues. However, it then worsened again to -10.55% in 2022, declining further in 2023 to -11.66%, before slightly improving to -10.03% in 2024. This indicates that although the company managed to improve profit margins sharply in 2021, it has been struggling to maintain that level of efficiency in the following years, showing persistent negative profitability ratios.
Overall, the data suggest that while the company has experienced consistent revenue growth, it has faced ongoing challenges in translating this revenue into positive economic profit and healthier profit margins. The significant improvement in economic profit and margin in 2021 was not sustained, leading to a reversion to more negative results through 2024, indicating areas of concern regarding cost management, capital efficiency, or other underlying operational factors.