Q4 2019 Earnings Call
and finally just if you
To share we post your views on on the on the other extension beyond the 120 120,000 tons. Is this the plan is to go up to 160 in 2023, or is this still planning any updates on that will be helpful. Thank you.
Thank you first regarding the production for this year. We do expect a totally some carbonate equivalent production for the year two thousand and twenty would be between six to seven thousand metric tons means however deduction capacity is running today at 70,000. We're very proud about it. We're in proving the quality of our products every month. That's why we think that we complete the the the the total expansion to 70,000. We are ready to produce at the level of $70,000 basic. We are as you know, we're increasing a hundred and twenty thousand metric tons. We expect that the hundred and twenty thousand metric tons will be ready. You didn't second semester 2021 and we are working as far as we can with the expansion to the eight thousand metric tons of the other eight thousand metric tons is just on a scale of the investment in our facilities is at is Club.
between the market conditions and
The best way to approach the construction phase but we are committed to go to the two stages of the at the end sixteen thousand metric tons of liquor Microsoft. Finally. I think you asked the 816 about a hundred and six years we mentioned last year is the next step. We still believe we have to be at the hundred sixty-eight at the end of 2023 as we expected before we will announce our official plan during Second have this year
Very clear. Thank you.
The next question comes from Lucas Ferreira of JPMorgan, please go ahead.
Hi gentlemen. Sorry, I joined a a little later on a call. Sorry she answered that question already, but I wanted to ask more or less what what should be your exposure. What's your exposure in terms of mix to to China in lithium today and more or less where that should be trending in the first quarter given the potential disruption of Kobe's and finally in 2020 where you see assuming the full ramp-up of the 70,000 Stones where this meets China makes should be baptized.
Hello Lucas speaking in China and last year. We sold like the 30% of our total sales China and doing this year. We expect to increase that field and we will reach 40% of of of in China from total sales of lithium.
Anything say if you can give a little bit more color on this expectations of lower sales where I should go with the impact and the first quarter if you already took some delays in orders how they meant has been behaving if you see any accumulation of inventories that is relevant to highlight.
Yeah, of course, the current situation is impacting our sales as regardless of set now we decrease in our focus is $2,000 for the month that you won. However, you know, of course any last week we have been in touch with all of our customers and they believe that right now, you know the things in China becoming like normal life, so they they most of them see, you know that the recovery will come in Q2. So that means that we expect that finally. We have a recovery of demand that will allow us to fulfil with them lethal sales, you know for the whole year. So we estimate we see more positive news from YouTube.
Anything that was something that still under discussion, but we we thought you know something from some news that the government in order to stimulate the demand is disgusting to talk to give more subsidies. So also something that we are following, you know with a lot of attention that could impact in a positive way the demand in China as well.
That's weird. Thank you very much. The next question comes from Ben Isaacson of Scotiabank, please go ahead. And first question is you talked about the coronavirus impacting sales it is that impacting sales because of logistics constraints or or underlying end-user demand.
Well sure, you know, first of all, you know that it's supposed that originally, you know people from China at the end of the new year. We come back to the office like very serious. You know, that finally birth date was changed because of the coronavirus. So first of all, you have less activity because people you know workers didn't, you know came back at the original day as wealthy Dalek seeing that is is is because of all the restrictions like quarantine on this kind of thing you have lack of workers in different plants that of course that impacting production and wages. So you think is an important issue as well in terms of internal logistic because you know that today tracks and and drivers, you know are really, you know for the basic things down a hill things, you know a food. That's the the idea to transfer things that I I priorities. So this affecting, you know the way to move the problem, you know to the customer warehouse and and so on Thursday
is important but as I said before we have been seeing the last week, you know with sinus that everything is getting
He's getting normal. So we will leave that finally. We will will you know be able to sell your products from 52 of this year? Thank you. My second question is on what you just said that seventy percent of sales in 2019 was to China is that 70% of volume or 70% of dollars?
No, no, no. Sorry. The few 30% of the volume was in China last year of 30% Okay, and was that sales or volume?
Volume, okay, and and then finally on the hydroxide expansion that's going to go into two modules. Is there going to be a capex increase because of that?
No, we don't expect that. We think that the idea of going to Stage is very for the total Topic in in order to have in an older schedule of investment.
Okay. Thank you.
The next question comes from Andrew McCarthy of City, please. Go ahead.
Hi, good morning, and good afternoon everyone. Thanks so much for taking my questions. My first one is with regard to the final lithium sales volumes for 2019. If I remember correctly you you had hoped to get close to forty seven but in the end only did around about 45 on a shortfall there and then on the the 55 to 60 Target for twenty twenty, you know, how much of that is sort of already secured you feel and I connected with our you know, in terms of that number, you know, have you got any sort of expectation baked into that on already on sort of Chinese stimulus helpful to get some some color around that thanks much.
Okay. So regarding to the sales of last year, yes. I mean our Arena Target was to reach 47 South America. However long the decrease of the month for for the last quarter was more than expected. You know that the main reason is because of the changes in the Chinese subsidies that finally affected the sales of electric bulb is mainly in the last quarter of the last of the last year's that mailed that battery manufacturers. I got the manufacturer, you know reviews the amount of of of living requirements. So that was finally off safety. Our our I would say and on top of that conventional engine producing we are more aggressive to try to allocate all models in a market. So also this affected, you know, the TV sales in the last part so that affect our our stays so regarding to the Target for this year wage.
Yes, I mean I would you know, like via was to say.
No more than what we said today. And the reason is that exactly because of the same explanation of what happened with the demand and the Chinese subsidies. We see today some delay. In fact that finally will you know, uh affect, you know, the the sales for this year. However, we still, you know want to remain the same market share. That was the original plan from last year. So that means that finally we anyhow, we'll pretend to grow significantly compared to the to the 45,000 metric tons of lithium of this year.
Okay, great, and just one follow-up if I met on the SPN business, you know, you know potash prices have been a sort of a little bit more challenged in in in the recent times. How do you see that sort of affecting SPN prices given that, you know, you're you're seeing strong demand conditions, but these lower potash prices. Maybe could it could have an impact just any color you could provide around that be really helpful. Thank you.
Yes, so sorry, but I think that probably has something to ask the previous. Do you? Okay? No, I'm okay and your expectation about second happy here. I think in something about the mark-up. No, yes. I mean as we we say we we see some effect, you know because of this coronavirus in the first quarter, but then because of the recent diary explain we see the recovery. So we believe that fine with the demand for the second semester of this year will be around 15% which means that we will start seeing a regarding the market in always. Yes, M price is your writing means that the porters prices are under big pressure and then and the brake pressure last year and continue to be under big pressure. But we review our study for a year with pricing strategy and they put us in lighted. We maintain our output. Our prices were affected last year as you can see it means prices of potassium nitrate average wage.
You didn't mm.
Gena's compared to eighteen we're lower fourth-quarter lowered also on the average of the year, but we think that the average pricing for potassium nitrate this year 2020 will be slightly better off down the last year means. It depends what's going on in D photos Market, but considering today situation of the potash industry. We still believe that we can be we can deliver a slightly better price and pricing in the potassium nitrate for this year's compared to be used one.
Okay, that's great. Thanks a lot.
The next question comes from Joel Jackson a BMO, please go ahead. Hi. Good morning. Everyone. I'm going to have three questions one at a time. So in lithium you had talked about to hit a 65,000 sales Target for this year. You mentioned about 2,000 ton reduction in China. That doesn't fully described reducing your sales Target 5 to 10 will still produce pretty much pull out. So can you just talk about the decision to keep running Fallout build inventory? And we're the lower volume is coming Beyond just the two thousand and China things.
Yeah, no, you know that the the the the reason why we degrees, you know, our original Target for this year from 65000 to between 55 or 60 is because of that we see lower demand that the demand that we saw, you know before because of the Chinese subsidies and the things that we already discussed. So these mm actually is not something related to that. This is pure related to the current situation that we have been seen in the first quarter because of the virus. But as I said before we believe that faith, we will surpass that situation and the recovery of the market will come in Q2 and that's where we leave that we have a much better demand that will allow us to fulfil the Target of between fifty and sixty.
And and why?
inventory
We are building battery. I mean because we will increase a lot of our our exported to China as we said before today our bases of Total Safety is bigger. And also I would venture will be good. We will jump from 30% to 40% So that means that we will need more twelve finally to face the sales that we have there.
Okay, that's helpful. And in iodine the gross margin in absolute dollars have been very similar for five consecutive quarters 34 35 36 million bucks go into twenty-twenty and you've seeing a little bit lower volume, but a little bit better pricing. I mean should we expect gross margin per quarter there to Trend in the same kind of range. We've seen or life expectancy twenty-twenty a large Step Up in quality gross margin things.
Hi Ricardo, Ramos speaking. We think we think that we will we expect that the gross margin in the area would be better 2021 2020s compared to 2018. We expect every single quarter better than the previous quarter. Just keep in mind. You have to keep in mind in the gross margin the total cost of iodine and you can explain why the cost of the I didn't change recorder that I think it's important to consider in your model. Yeah. Basically what happens is that as you know, we produce are you from the same as the maple syrup are included which is including the the industrial chemical business line. So our costing of the initial process of the birth process is allocated basically based on IFRS guidance to the product that is driving the production. This case is because of the significant wage
higher it probably
So do you see the trend over the last few quarters you would see a significantly higher price evaluate but consequently a higher cost in Iron Chef again. We're allocating more of these common cost from SPN and a doctor chemicals to to iOS. But as Ricardo was saying we expect the price will continue its upward Trend going forward and with relatively similar volumes, then that last year the impact of the gross margin of page. It should be higher a quarter after quarter over the next few quarters. Okay, that's very helpful. Now, my last question would be very broad, which would be if you take all the puts and takes you talked on this call and your release.
Well 2020 earnings in terms of gross margin and it didn't come anyway, you want to talk about it? It looks like 20 20 earnings might not be as high as 2019. If you talk about just generally speaking directly with having you know, you expect 2020 earnings to be higher lower or similar 2019.
Okay about we're not even now a guidance about 2020 gross. Margin. I think it's too early expect to have posted information expect to give a guidelines after you want when we are going to have better information but considering today information and think is reasonable to expect a similar gross. Margin for 2018-2019. You have the negative trend of the pricing of the detail that is is it's a fact that means price average price of lithium during this year 2018 will be lower than 2018 you have the positive issue of the volumes of lithium. You have the better pricing of value line and putting everything together within that having similar gross. Margin is a reasonable expectation for this year. But again, I'm going to be very clear that I prefer to have 1/4. I mean to wait another couple of months.
in order to have a
I don't have been 1/4 finished in order to have better numbers.
Thank you very much.
The next question comes from Cesar Perez Navarro a btg pactual, please. Go ahead.
Yes, good afternoon. Johns. Can you please provide an update on your expansion program? Perhaps starting from the broader identity light bulb to project. It seems your operating somewhat near higher than capacity, but prices seem to be consistently going up in an environment of strong a global Dimension. Thank you.
They we mentioned before, you know, when expansion in in in the island business were working in order to be close to the eighteen point five thousand metric tons of hiring capacity at the end of the year 1023 where no just below fifteen thousand metric tons of so total capacity. We want to go to the night 18.5 and we're working very hard on it we month. We're we're digital it schedule off investment in order to go there.
All right. Thank you.
The next question comes from Isabella simionato a Bank of America, please. Go ahead.
Missy Minado your line is opened a please go ahead with your question.
Okay, there seems to be some trouble there at her location. So we'll go to the next questioner. Who is Chris Terry of Deutsche Bank, please go ahead.
Hi guys, a market-based question for me on on on lithium. You talked about some oversupply in 2019 and that situation potentially continuing in 2020. I just wondered if you could comment on whether you see the biggest issue being existing inventory or whether or not it's it's it's from continued production that you expect to occur in in 2020, and then just as part of that answer. Maybe you could talk a little bit about the cost curve and how much money you expect prices to have to fall before we get some some support level from from the industry and maybe cutbacks from some of your competitors. Thanks.
Okay, we know that last year, you know the industry finish, you know with some levels of inventory of lithium. Okay, this is because of you know last year, you know, we are not production that the finally, you know actual consumption of the field. So that means that we have inventory and of course that does we know that this is affecting you know that the the price is limits. So regarded to the effect on the cost of lithium. We'll of course that in the current environment we see that potentially some money I get goes, you know producers could be affected by this situation. I would say that today is too early to say what what will happen. So we have we will of course that we pay attention paying the rest of the year about the response of this kind of a place.
Okay. Thank thank thanks a lot you over to.
Just a little bit about it some more details around the the inventories that you pick up from your customers. And where where those inventories are and how long you think they'll take to work through things off.
Well, according to the information that we have today, they are inventories, you know in the in the whole chain of production. So that means not only live film but also, you know at least and so on Monday, so the industry will need to get away from this inventory. But again, we see with our eyes, you know what we have in in from future, you know to the rest of the month of the year. So in that regard we see that finally we have a much better demand than this first quarter.
This concludes our question-and-answer session. I would like to turn the conference back over to Geraldo Jonas for any closing remarks.
Thank you all very much for joining us today, and we hope to have you with us the next quarter. So goodbye.
Included thank you for attending today's presentation. You may now disconnect.
Yes.