SQM - Earnings call transcript Q3 2020 | Sociedad Química y Minera de Chile S.A.

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Operator

Good day, and welcome to the SQM Third Quarter 2020 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would like now turn the conference over to Kelly O'Brien, Head of Investor Relations. Please go ahead.

Kelly O'Brien

Good morning. SQM’s XXXX joining conference for you third earnings quarter call. Thank and call webcast will conference is be This recorded being live.

Following this webcast www.sqm.com. the to able call, you at will our be access website,

of a website. our with and uploaded release press have been earnings a Our summary the results to presentation

Pablo today businesses. and Vice the Illanes, call Ramos, Gerardo Lithium speakers as Joining President Ricardo of are CEO; CFO; Altimiras, Iodine and

expenses development Ricardo no future to made identified Securities Sustainable with release our such our statements, with issued of such information, statements, you forward-looking the the performances, update remind today, successfully and growth, a begin, that that involve factors such implement statements that Any or based the revenues, and Plan. risks, concerning let statements Ramos. earnings of anticipated law. are otherwise, conference these could differ statements factors. of facts, economic I federal Risks, forward-looking future statements other ability me product required and SQM you under uncertainties are not forward-looking Exchange a uncertainties other those are term currently are anticipated and to actual Commission cause should company's by in best we including factors together filings items, new securities accuracy materially U.S. defined be obligation leave available those our information public outlook, judgment from Before this that stated business with and our number Development the affect forward-looking statements financial on as We whether in cost and and profitability, in historical of considered in except CEO, and laws. light with estimates to results assume the is now could synergies other of result as line as statements service reflecting the or

Ricardo Ramos

today. Thank joining for our call earnings you, Kelly. Good morning. Thank you

to similar during first $XXX you was the as Our gross average know half. gross approximately million, profit profit

dedicated lines over we by related month, prices almost Our compared were last Development very the up profound have more average third with to our expanding XX%. Plan, to and sold steady communities efforts neutral volumes iodine than our we quarter proudly sales better and XX% our neighboring to extraction than brine months announced Last busy and includes, the system, Recent in we carbon by our business and of sustainability. XX% quarter what quarter reducing and which water promoting lithium year. held been XX% higher the in last Sustainability and becoming monitoring voluntary conversations

last process of for we and part goal index. which Dow process into in we international obtaining the this certification Index step were began sustainability first the strict In the Atacama As plan, Jones standard we Index international under is Chile certifications the Dow the accepted made self in MILA September, week a the and Alliance and this de participating IRMA, assessment Index. also Pacific Salar of Jones Sustainability Sustainability

we pass encourage feel now system, comment more who learn committed these website about and all our the you with out Altimiras, and I Pablo with will and concerns company prepared call online Plan the Development plans. on lithium and commitments iodine and have about monitoring I the any us or visit invite more to goals Sustainability and now questions I to protection and to to to market. you. to reach been will to social We proud always you environmental our responsibility, share of

Pablo Altimiras

X% seen expected on or x-ray year, We last result This fades COVID-XX. decrease Good the lithium the of was more media the the believe recover compared iodine start After year the approximately demand to momentum. away. the market iodine will XXXX morning, the pandemic you, the slowest segment. in contrast as our everybody. when as of a a Ricardo. but have we in sales Thank a impact market X% In mostly impact gaining to whole, of impact saw demand, iodine in negative been

our demand metric mentioned, strong and with Ricardo lithium and world. importantly, more As volumes ability growth sales acquire growth year to this and, of This the the customers result continue existing sustain relationships quarter. tons the clients in second of new a in fourth volume XX,XXX expect the we surpassed around quarter, third the half to into our is strong recovery

and of The quality been demand efficiencies have able was Asia, process the We customers' recent to our low recovery all our most in to result all result products being improving our position. of of increasing in production requirements, which seen as and in of of were our the months, do able cost pandemic. meet a ensuring this as while a

significant sales in demand this increase computers. addition an Asia. a seen and of e-bikes This and bit unit XXX% increase we increased the the Europe more in vehicle electric electric To than third in XX%, have China in year-on-year. approximately Europe, in believe We sales in to and in demand was quantify vehicles a scooters personal quarter, and

we is there economic long-term growth the market remain in lithium optimistic the lithium uncertainty and the in Although on near still the surrounding perspective about impact pandemic the space. future, the

of is in sales see demand strategy our volume, our to to increase which aligned beyond. and growth our compared more grow XXXX expect sales by when XXXX expected market XXXX our share. Because lithium volumes we to to than strong a with this, We in expect XX%

Gerardo CFO, which I For this let out a have reason, laid plan, we our to comment. CapEx robust Illanes, for will

Gerardo Illanes

in thank everyone, approximately will press today. require which currently This expansion underway that details our our our for $XXX are Pablo, we in described facilities billion in of will Antofagasta of requiring include night, at our plans you, XXXX-XXXX Chile. investment completion million. the joining plan, Last you, release, $X.X lithium the call approximately Thank plan and

hydroxide to requiring expansions XXXX, years. of metric in the we will an under $XXX plan short, XXX,XXX tons XX,XXX reach an tons capacity of expansion of in and carbonate investment million. Board approved coming In approximately million lithium Additionally, yesterday, just in lithium the $XXX invest lithium metric

As mentioned last Mt. finalizing project release yesterday. a in been partners continues, the in billion studies, decision XXXX. not $X.X our we the potential hydroxide we'll future is project to definitive develop some investment with Any our night, related make included this January working Holland diligently and the CapEx outlined have in plans to press CapEx lithium

at of are year, modify To of respectively. Given we incorporate working operations and markets. approximately mining be iodine and diverse We tons as facilities site increase to approximately seawater mining of meet of plant our to XXX,XXX our production production we $XXX in solar million. assurance potassium able and our the expansion nitrate This portfolio, and equipment iodine this, and the maintaining that per these plan nitrates will investments our update the will centers. we future by history iodine, achieve will annual expected use metric to increase that needs nitrates require is X,XXX our plan to us It the and well. a salt the gives operational and

to four-year per approximately amortization addition, be XXXX period $XXX and year. $XXX XXXX million million while million year, for to from In should per depreciation will $XXX between be maintenance the

and investment we go will the been in our financing now a strong relevant in always you, We strategy have with have conservative the Thank Q&A sheet, timely The market and be discussed financial we balance always information session. December be shared manner. being operator. equity-weighted a can policies, a And will in company. to strong

Operator

BMO Markets. [Operator Jackson Joel Please go Instructions] ahead. with Our first Capital question comes from

Joel Jackson

few a I'll have questions. by I everyone. morning, Good them ask one. one

mean you versus the expansions your under quite the seems not attractive So in the get like larger up be contracts. expect carbonate. to tons to to seek I you to have contracts. ensure How to to those able to liked prices? to can out lithium It one of finally lithium because has of longer-term to XXX,XXX market? experience, you contracts know you place go be at realizations doing Will XXX,XXX tons sell with approved well to you guess iodine price competitors I'd know do now I you that tons

Pablo Altimiras

speaking. Altimiras Pablo Okay,

Regarding that been have yes, competitors today contracts customers. with you're some some we right to some long-term long-term contracts, have that

on We are working that as well.

to contracts, expanding We secure because believe and allow exactly today, us doing, that we capacity volumes. for that trying expansion and a position to believe have long-term are and is well, what sure. long-term more better are producing our will we that contracts We step-like

past, at But working why when boom want will if to secure price. are price was some we aligned in you of hard that. the long-term and markets. contracts different the on to contract to we saw what well, we maybe some in near in your happened the question long We customers, order price that, to supply, the we end, of with Regard is some today, have That's to the contract. lithium that's spot the prices, contract, you so In secure that and a the the prices. was high And difference on they our future. to demand, have the are continue the your the of regarding do have yes,

Joel Jackson

the payments, lithium. about – Okay. about cost as volumes it's lithium the costs of and price over non-community your talk you And kind how sales non-CORFO, going you five a triple next be, assuming for cash like of of, of talk kind just can non-royalty, out to take let's years, just wherever just

say. going volume your five let's years, You're triple to over

now more lot changing going look network things changing volume sustainability, What sustainability a you you're cost you costs ramp how will on have for lot, your and but produce. the brine, do lot also you as potash You you're more changes? things, reducing a a have like

Gerardo Illanes

expansion Well, statements, seen our been Joel, to we ramp-up we this lithium our our on cost lowering finish quarter-after-quarter, when reach speaking. promised is as XX,XXX production of have Gerardo you tons. financial metric have

the effects Of sorry, quarter reported we third you excluding CORFO the that ex see were in $X,XXX. the were I'm in under – prices And there. costs course, CORFO,

will in expand significantly. let will cost. capacity efficiencies We working in keep lowering capacity on our come these of our us And more that will expansion also with projects us production this that let are

cost. we time. sustainability our how are working having doing. part everyone is And your be the sustainability included of to produce the already a able on and regarding the industry without strong question for in have sustainable impact about way for Now of challenge these in for and what cost, long to the initiatives a may been in we're on costs the And that impact cost challenge a well, us

Joel Jackson

just And in finally, you've well done Okay. really iodine.

several quarter. the every well last years done the to of price up year. really push COVID this happened iodine You've

your kilo? see step prices to third a $XX can – back you when quarter you – get What's with the volume, took be pricing. ago? sequential a You year? achieved do two going do How not that back base say back on to in three you like What's when level case? to the think the iodine coming it do you years, years, long see Is one

Ricardo Ramos

demand. change the Okay. thing Well, in prices the affected is that that see this of the the with fundamentals. is know up fundamentals was that And is first don't than you the believe growth any related to We growth say which market. of demand that is demand actually, believe supply. of in something go bigger temporary, because not remember to the COVID-XX, We but was the the the of fundamentals by important started we the the of the important

Regarding to the have change. big not any we supply, seen

optimistic news. today us And healthy are the will is that allow regarding once doing our to to are we arises. well, the what levels inventories, because reveal the recovery reach we recovery, demand of to So

So believe similar year, we demand future, happen we will of the that next in in a to the expect the will levels reach recovery see levels XXXX. we and that to near

Joel Jackson

you. Thank

about seek, fixed When seeking be more would or price you talk question. contracts you one floating contracts, might the contracts contracts? long-term you Just fixed-price lithium

Ricardo Ramos

you also end but is the of important say different and from suppliers' in from Well, to good I to know good contracts, the of get point that the needs at customers try view. when And contracts, it's the the it regard, that different. customers are

on customers, we different strategy we with these the that have specific do customers, things. depending the depending on So

have alternatives quality, to volumes. you is So pricing, related which

specific is it – So every I customer. would that for to say

Joel Jackson

much. very you Thank

Operator

go Our with P.J. next question Citigroup. comes ahead. Please from Juvekar

P.J. Juvekar

terms you normal? what Can inventory And much in morning. normal will for think or about talk dollars? return good you? of you you of of carrying, either inventories Yes, to in do do is you – how And when terms are months supply

Pablo Altimiras

Okay.

been allowing been have we we So very production the this month, We and recover year. forecast And program. sales have want we that we to will good that order inventory our year today, to to rate this more compared today. have ahead regarding producing expect you as announced last with at face enough to has to we – have go the XX% know, next in positions in a which inventories, us investment to

to don't any issue see regarding we So inventories. our

P.J. Juvekar

of last was you how you had think you inventory million that you $XXX I talk Can have not I So to I had. about of it think lithium? billion quarter, close sorry, inventory $X in meant just of much mentioned, billion, – inventory do sort you

Gerardo Illanes

P.J., is inventories we Yes, the Illanes. $X more across this Gerardo billion have of do than board.

You includes inventories materials statement. our financial basic and and of That lithium, can in so see forth. that on iodine, so nitrates,

for the line, information. was be enough But year. specific the projecting we with each next level we able of as in to inventories Regarding saying, comply we business have Pablo don't growth that that inventories disclose are have particular we to

P.J. Juvekar

regionalization of chain, second my other And the question about companies towards Okay. are trend COVID. supply without talking a is,

exports certainly the lithium are And gear. high. sales And you. what's develops, higher there? market you European go China? into positioned selling EV how of into towards Europe? your Europe how So kicking say, to Thank your strategy as is And let's are much

Ricardo Ramos

manufacturers. Well, you world. industry because here strategy manufacturers and batteries. you of many remember of China supply many vehicles demand for the you But only know all to that around than in EV's this right, today, as in would and is many, XX% car that we I But are will lithium be the that customers, our been are and China, more know in the lithium a so our explained But sales China. means lithium about because that our more in exposition continue for battery that that demand many, XX% is of producer, that are and we revolution to talking and years, explained today in the we SQM of is for customers big. is electric than say exposure have not

applications. industrial the have We

important those their expansion also it remain and plans. relationship us, is to to support with For in customers customers those

P.J. Juvekar

Thank you.

Operator

from America. comes Isabella next ahead. Our go Bank question Please of Simonato with

Isabella Simonato

Good questions. you Ricardo, and the Thank Gerardo. morning, the for for call

iodine. First about of all, I'd like ask to

mentioned And sales ready. details that. potentially in XX,XXX you're of time the when the long the for I in also the expansion – get X,XXX tons X,XXX yield the when right, expansion by to of You is additional tons. about we plans term, just sales the tons with release, frame like right ready to should more about think

of How know but I SPN And have how Just understand XXXX? your outlook coming also, and that wanted demand you to in confirm that. potash would – We SPN. prices is what's like prices for about thinking down. to are pricing for actually resilient quite been

Ricardo Ramos

Isabella, the mentioned hard Ricardo billion very it's are included $X.X CapEx Gerardo. the in iodine speaking. by already working we About in business, our as

next to metric we expect are very We expect XX,XXX to and end recovery us That's at that year. order to XXXX. tons than higher that of be be iodine demand in and for important market we than ready at for the be the level, of prepared more

markets. and We capacity the fertilizer, this in will And COVID it's been that the the XXXX. to CapEx think will was way mentioned. in originally order you consider first, that included of specific market of we we ready have think have lower question, to demand On in is the to the some this be to has XXXX, inventories that expected have already more of recover, iodine and first in year effect – answer than price going some the I today,

some our MOP low is price think main raw all you to in there demand potash material than during this more be is this And direction expect some year. the in potassium to of is competition demand what certainly, using My lower that increase, the that was third here recovery MOP. markets. lower, have was in year. the means we that are the outlook compared are of the Second, the some this nitrate. signals year. to we the that maybe next and due that having the pricing by short-term today are to faced fact We year order next competitors last not is MOP to and And reasonable quarter as pricing some price year we will fourth will demand consider going had we have having that year to introduce recovered

Your next question, I think?

Isabella Simonato

– what should about to Ricardo more expansion XXXX, more than when right? Just wanted confirm be said even volume XX,XXX iodine tons done in is

Ricardo Ramos

sure. Yes. Yes, of right we’re order working course, [indiscernible] that’s have for the in now to

Isabella Simonato

you. Thank Okay.

Operator

Pactual. Cesar with Instructions] go [Operator from Our BTG ahead. comes Perez-Novoa question next Please

Cesar Perez-Novoa

Thank delivered note Hi, for you color will mostly that if or actually steps taken questions. next debt effective? Ricardo, January. regulatory next press taken be please need heard combination two a more study. an could to equity a understand and on that environmental you Mt. the just be last on you mentioned very and you announced where question funding I this details program recently standpoint to relates if that investment my feasibility Holland, second program be understand much. of from and month, that release your and And I you perhaps Pablo, definitive on this will correctly, On debt. to already provide but a would have on Also decision be iodine Kelly. Gerardo, for lithium, have what I make

achieve from a a value this larger Or be the However, remind if Any this would of Is building this what there? Thank color just want us facility you of is appreciated? could you. asset? please the joint you combination to essentially enhancing perhaps, review?

Ricardo Ramos

Hi, Cesar.

So comment let the the first about environment? – was me question

Gerardo Illanes

environmental permits… CapEx, About

Ricardo Ramos

In needs. we far. been last XX expert single very order have so years every that in in environmental think, for I be about we the permits, environmental are ready hard The to working project,

the why and lithium, any metrics mining the are the ready. we environmental or expect hand, for XXX,XXX you any the the permits with tons. delay in need project, the last permit don’t to XXX,XXX already the permits have permit the years, issue at that’s nitrates we case included have XXX business, almost In working in are we working different and mean, tons iodine we permits. you of XXX,XXX As prepared three In we I the – single regarding moving all other in the metric is know, every today that

permits during and a advance on now can permits very half in the delay have the big we – pipeline, and of the be first in We’re issue water, we of we’re foresee in permits the seawater that side, and the that’s order It working of we working $X.X of all ready plus without mining I the environmental next working the the don’t have think, permits some we the the to we In part sea engineering, of with go terms It’s the project construction. environmental. some the in means, year. have important going the it. do expect We problem. in of to we’re in because have any there. billion permits

second question was, Gerardo… The

Gerardo Illanes

of… financing About

Ricardo Ramos

as you have we to Board before, in expect informed the meetings Gerardo Financing, December.

to is alternatives. Board different the present the commitment Our to

it’s many know, a alternatives. have secret, we not you As

have But XX we – conservative XX me Users the you December, said very course, about moving and forward an and Of alternative you a been to of – today. us the the we in word meeting, the that years, very that about the Board alternatives let followed be I balance Board what a know years, my as present we press are the the that release decision have you after strong of in you to last before Board we we mentioned conservative will whatever, remind of that company. during sheet are very area. open know, is going be will clear before, have very don’t SQM that a part have Gerardo we

engineering We Mt. balance. point Mt. can financial that conservative from the will finally, we final strong and you Holland, for continue are are And on we Holland to be the our plan future. It strong a one very that in the means going we feasibility company. – study have just waiting will for mentioned, imagine to I very

We document receive the the expect days. final next to XX

a the meetings project announce. have our we is partner. announcement in because partners next great days the XX to formally expect announcement order with to have We in the Every a in joint

partner are proud the We we in of very Australia. have

of be that informed. this with document be we in We’re have during expect the we announcing you working have the us. are we going papers after will to think meeting project believe a the project We together January and in idea. farmers Australia. with good And very front strongly all I to in

Ricardo Ramos

Thank you, and everyone. Thank you. Ricardo Congratulations.

Operator

Scotiabank. question Our from go with next ahead. comes Isaacson Please Ben

Ben Isaacson

few of the Good call. missed first I morning. Hi. minutes the

I’m just So me that was asked. something asking let know if already

domain some coming in the it So that’s in is the any point. question constitution? to opening about the constitution SQM lithium sees terms relates the first year the there level players lithium to any discussion to or Is the it at royalties? next general on more constitution as space at the the up government industry, that new just as risk relates public rethinking are access new If the of or there in for

Ricardo Ramos

To directly have not specific I’m a question, don’t in – I That’s your in point. not for about I’m discussion constitution. lithium the – new aware the I first about – any answer

Chile new decision to to the After as to very the moment about just ahead the today. normal. I’m a last constitution, personal move opinion, is future back Second, optimistic of everything

hard working We’re very now.

single It’s from work, There’s opinion. We my productivity, time full And countries. the every that personal in to have happens to personal something mean, nothing a I normal full wrong it’s constitution. different time opinion, company. review

everyone you strongly have order go We the change money. I that to more need growing in demand that the pension end, that And the change order economy about for to that And changes agree to care, potential discussions have that Anyway, be will or want. reasonable the you is reasonable talking talking best way probably main to it need the talking money, about all sounds about the it about to people the education, I solve forward constitution, And more looking this believe better. at think economy. growing an that have process in institutional with to in this the needs have, means plan, construction. health ahead order

that’s agree not why think in outlook the the about new I’m discussion that, the and I side negative the of everyone constitution. of about

Ben Isaacson

I But of question in the timing so, lower. actual and cost of My to if terms of you lower, a time? understand that can payments in lower prices ton, terms cost are see is work when your the is, talk are about you royalty cost you second your produce where could And over lithium, there magnitude of that?

Ricardo Ramos

course, order we initiatives productivity have costs, of quality. the to working. Yes, many we’re improve in and to improve reduce And

step the in That’s Because have about cost market. is end, total SQM, for costs. space. the And competitive why to the Some the the XXX,XXX is our confidential of cost, advantage because metric new prepared really extraordinarily more order go we it. very a you are lithium about talk investment. low. but marginal low, company is investment we we This tons, in It have of the of of yesterday, consider if XXX,XXX investment them to than competitive so when to amount one very in in and be we in you that important is talk The it’s increasing so. and course, have news that’s we’re are really, internal, to you And in very been be announced good first at the investment we pay capacity, that from total means are a going and the a that the my cost effective reduced. – of most to doing

our price, quarter, need investment payment, the number be cost of have We going payments the if expect why to aside. cost maintenance, total in initiatives or included to I future, than going CORFO big, to flow our a is shared cost, process. and put this cost, And royalty to it’s going that’s is every But it’s the hard the on where with but it’s lithium. careful cost we profits it are in it’s to the to details, continue news profit-sharing a And aside, that is have cash of price do so a Be it Because CORFO, depreciation, that that it. have careful but pay working you a of suspect we the percentage more we cost, you we voice down. in depending of the production, rent with reduce of in process that down. big review lot a have to in order payment reduce will including is the our putting order to of including public very with the sales the you the amount the a cost and

Ben Isaacson

profit share Are you achieve? willing to $XXX kind to you XXXX excluding some in save do want do to or you what per you Like ton guidelines want yet? of goalposts terms sharing? by Or of to want not targets give

Ricardo Ramos

to share want now. I don’t Sorry,

week, a going what a as is R&D potential to to we the that. now. meeting they’re steps on working be projects order with clear are to We And have in going the week department step. I we’re next effect, course, hope Every the their in their have and soon about it week. projects different as public have we understanding know by we are where going, of final of working we’re

Ben Isaacson

Okay. And quarter. go course, my of now last quarter you realized that ton. you the for about $X,XXX back question And I And is, if realized ton. about the was per $X,XXX a ago, average you’ve per think

think you been a little I’m must’ve lower. when you it about ended bit So guessing September, where

rising see same do price in you QX, the a to order in have bit? little So average prices

Pablo Altimiras

speaking. Altimiras Pablo Ben,

result is positive. you As and price demand. before, And the know, perspective a on supply of is demand as our I commented

some potentially the supply, pressure some of we investments seen recoveries. to despite in some price have continue However, on decrease that some to production of regarding put players, could market

for that However, and and near been mean They’re during the year with better recovering of Therefore, slowed. seeing important we price recovery have the having which prices inventories, next which a success year, market. should is demand see we the we could next China, future. use in level, the have already the the

Ben Isaacson

appreciate very you it. much. Thank I

Operator

turn to remarks. conference Kelly like O'Brien, concludes I for back closing any This Relations, would our the of Head Investor question-and-answer over to session.

Kelly O'Brien

Thank see for today. our next Great. at quarter We’ll joining you call. you

Operator

now has conference The concluded. presentation. attending for Thank today’s you

disconnect. You now may

Sociedad Química y Minera de Chile (SQM) 19 Nov 202020 Q3 Earnings call transcript