Q3 2020 Sociedad Quimica y Minera de Chile SA Earnings Call
Good day and welcome to the SQM third quarter 2020 earnings Conference call all participants will be in a listen only mode.
Should you need assistance. Please signal a conference specialist by pressing Star then zero after todays presentation, there will be an opportunity to ask questions to ask a question. You May Press Star then one on a touchtone phone to withdraw your question. Please press Star then two please note. This event is being recorded I would like now turn the conference over to Kay Leo Brian head up.
Investor Relations. Please go ahead.
Good morning, Thank you for joining us from third quarter 2020, <unk> earnings Conference call. This conference call will be recorded and is being webcast live.
Oh, you'll be able to access the webcast at our website www dot SQM Dot com our earnings press release, and the presentation with a summary of the results have been uploaded to our website joining the call today speakers on the call the Cardona <unk> CEO and our.
Seattle, and Pablo meta Vice president of lithium and iodine business it before we like the.
Before we begin let me remind you that statements in this conference concerning the company's business outlook future economic performance.
The weighted profitability revenues expenses and other financial items anticipated cost synergies and product or service line growth together with other statements that are non historical facts are forward looking statements as the term was defined under federal securities laws any forward looking statement.
Reflected lucky that's just one class based on currently available information and involve a number of risks uncertainties and other factors that could cause actual results to differ materially from those stated in such statements, including our ability to successfully implement the sustainable development.
Risks uncertainties and factors that could affect the accuracy of such forward looking statements are identified in our public filings made with the U.S. Securities and Exchange Commission and with our earnings release issued today and these forward looking statements should be considered like those doctors, we assume no obligation to update such statements whether as a result.
The new information future developments or otherwise, except as required by law I now leave you with our CEO.
Thank you Kelly with morning, Thank you for joining.
<unk> earnings call today with gross profit up you know probably 100 up 15 mediums seeming to average gross profit during the first Brett.
That's helpful. Then on our sales volume seemed to be some business line were up over 40% compared to the last quarter and almost 60% I guess, that's what we sold in the third quarter last year.
Recently, we have been very busy dedicated forward at sports related to assist unappealing.
We probably you know our sustainability development.
Switching gears voluntary expanding I wouldn't morningstar insistent promoting their did a more profound conversation neighboring communities and becoming cardboard neutral.
From what it by 65 per cent I'm, Brian its price like structural by 50%.
Barton. These flow we also made at all from pertaining to national certifications on price.
Beijing International spend to be linear business.
Yeah, Doug or we began to self assessment processing. This wasn't a GAAP there either.
The first day in the certification process for peace strict standard last week.
So that took a job with Jones sustainability, Chile, other though down so sort of anything index for me to think a lot [laughter].
We have always been committed to environmental protection social responsibility no free prepared I'm.
I'm proud to share where commitments and goals we book I.
I invite you to visit that would come from the website to learn more about this it's been a really good development.
I know one line moving toward insisted on I'd encourage you to read.
[noise] dropped from with any questions or concerns about these flow.
No the cool, but not to eat up.
Comment more on de I didn't know if you mark.
Good morning, everyone. Thanks, you always got to.
Good day.
We see a lot more negative.
Yeah, you're right, it's been expecting to be Greek a book.
What we aim for life per se, but it wouldn't be pretty quickly go quickly enough here.
From southern Cobi nicely.
You will see in diving Mckee cool, but mostly it's break book, just maybe I should say.
We believe that the mild weather was cooler when they.
They they wait.
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Oh no stopping.
Yeah, I would say from being gaining momentum.
We got to make sure I wouldn't even say voting so but.
That being said I haven't met dose.
Those into what day.
The big piece, its strong volume growth to continue into fourth quarter.
Yes, the growth you probably saw focus Toby methodically simple.
For the year.
A more people from de <unk>.
I mean people strength relationships with existing clients are not Y you got so much around the world.
Yeah, Hey book to be probably stop moving from Oh, I'm being paid to me Oh.
Got too much from quite a bit.
On y increasing efficiencies.
Well, that's a relative I mean should we I wouldn't know gross well solution.
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The smoking overeating in recent months, most of which was in Asia, where somebody so maybe we have seen an increase in business I know you fight it's called there's.
Computer.
You might walk you know each from talking maybe gotten squeezed and electric vehicle sales in Europe and Asia.
What we find to be a beep in December.
We believe this victory because you wouldn't see increasing Gina he tried it out.
Before we were say a new rule more than once a day.
50% year on year.
Oh no.
Before wrapping up on basic economy seems well the reason why do you think the near future. We remain optimistic about the long term growth [laughter] they will.
We expect to see somebody might roll into some sort of 21.
Uh huh.
Because at least we've baked in Greece, I wish they bought more than 30% into soaking up 21, when compared to over 62, so kind of putting sales volume, which.
Would you felt like we got what is taught me to growth I will lead to market share.
Well, it's free so we haven't laid out a robust cash fixed non oh, we take we set it up as young as our CFO to comment.
Thank you Pablo Thank you everyone for joining the call today.
All right you know what press release, we describe these sales so far were 2021 for anybody 40, best in class, which will require approximately $1.3 billion from today.
But I'm willing to do the completion.
Our lithium expansion plan that are currently on their way out of our facility.
Oh acquiring approximately $240 million.
Yesterday, the board approved an expansion plan to reach 180000 metric tons will become copper income 30000 metric ton completely from hydro capacity, you, putting 23, requiring an investment of approximately 115 de double it in short we will invest just under 400 me doing Dorothy please feel free.
Functions you pick up in two years.
I've mentioned last night, our plans to develop it won't hold at least in my book that probably to continue we have been working diligently with our partner finalizing some studies.
We'll make up I had a definitive investment decision in January 2021, any potential future topics related to this project is not included in day $1.3 billion topic outlined in the press release yesterday.
Moving on what history of maintaining a diverse portfolio. We are working to increase our production up my retirement as well.
We plan to increase how would I don't production offline creates value I by approximately 250000 or 3000 metric tons per year, respectively book.
<unk>, we will modify our operations doing to incorporate the use of sea water I'm not a day, our mining equipment operations centers.
I suspect that this investment a day mining site, a bump of PDP will require approximately $440 million.
Aside from flow give out if that's your EPS that he will be able to meet the future needs you de I'm pulled out from night solar sub markets.
He should maintain its 44 year period from 2021 through 2024 will be approximately $120 million per year, well depreciation and amortization should be between $200 million to $250 million per year.
We have a strong balance sheet, we have always been concerned about maybe an hour class an investment policies being always have strong basically the weighted company. They financing structure, you will be discussing December and relevant information, we'll be sure. We did market you know talking about or.
Thank you operator, I'm now we can growth to the Q and a session.
We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up your handset before pressing the keys if at any time. Your question has been interesting he would like to withdraw. Your question. Please press Star then two at this time, we will pause momentarily to assemble our roster.
Our first question comes from Joel Jackson with BMO capital Mark markets. Please go ahead.
Hi, Good morning, everyone I have a few questions I'll ask them one by one.
So I guess I'd like to know that you finally, now true butyllithium expansions to 180000 tons carbonate how do you expect to place those tons in the market I know because of the I Don experience you have not light contracts.
I mean, one of your larger but your competitors seems to be doing quite well in their price realizations versus you with contracts would you seek to go out to get longer term contracts to be able to making sure you can sell optometry thousand tonne a tractor prices.
Okay [noise] photo.
I would have been needed the speaking regarding to lump. It contract. Yes, you are right. We have been cycle. They don't stuff do they have stepped up their contract.
Yes, the way.
We are working on but that's where we are trying to have low pick on truck well today that we believe that I work, we'll see strength better be growth exactly what we are doing expanding capacity I'm, losing more borders we believe that.
And if they like the actual we love, we low to who secured loans that contract. It for sure. We are working hard in order to.
Moving to build up yeah, we've gotten to your question on price, yes, two eight maybe we have some de France, we've gotten into price is in the past when we have to if we're not really from demand you would you feel about the price war, so kind of how much if any of you have I don't have gone from well the price of do a contract what different Lewis book right that's happened with <unk>.
But up here and I would customers what they want to secure the supply.
I like that and that's why when we could be neutral to secure some looked at contracting Lydia good.
Okay, and how did you triple sales volumes over the next five years from its going to be.
Can you talk about how your cost of net assuming kind of you know, let's take the price of lithium out and just talk about kind of like a non royalty non controlled just non to independents just cash cost from ftn.
You're going to Triple your volume over five years, let's say.
We also have a lot more things going on for sustainability, reducing Brian you're changing you know how you do things are changing the potash you produce what well costs look like as you ramp your volume a lot, but not a lot more sustainability cost and network.
Network changes.
Yeah.
Hi, Charles de should I don't know what spacing well you have seen on our financial statements. We have been lowering our production costs hopefully if you it quarter after quarter from base when we finish our ramp up expansion to reach a $70 per metric don't of course, I'm, excluding portable effects in there.
I do see that the price is sort of the costs. We reported in the third quarter were eggs in quarter, four where other force health and daughters.
Yes, we are working in de set of projects that will expand our coffee significantly I'd be six sponsored of capacity. It will also come.
With more efficiency from production that will let us keep on low Weve got were closed now regarding your question about its sustainability and how that may impact our growth what we have been working on sustainability initiatives for a long time on part of these costs are already included in the cost of what were doing a big challenge for us how the Chinese for every one of de industry.
I used to be able to produce sustainable way it without it having a strong E book other girls.
Okay, and just finally, you've done really well in Ida you have really done while the last several years to push up the price of iodine every quarter.
Cobot happened this year.
You took a step back in the third quarter on sequential pricing.
How do you see.
When do you think I don't price it can get back to $35 a t. low what's the you know say with volume like when do you see kind of back to the level you achieved not that long ago. It was going to be two years three years, one year, what's your base case.
[laughter].
Okay, well if you don't have the money was actually bike COVID-19, but the first thing, but it's important to say that we believe that because he's asking right. We cheese non related we did from them and that's the mark.
We believe the fundamentals, we don't see any big change in the fundamental so because of that.
I'm actually remember that we had price it's stuck it to go up because of the growth of the multiple speakers on the growth. The book this would like.
Regarding to the supply chain, we have not seen any any big change. So what we're doing today, we'd be left with inventories.
It will allow us to we shouldnt be let me walk through the month free Corebody are right and we got into it was globally well we are optimistic because of the news. So we've been studying beneath a few channel and we believe that we shopping in the next year, we see other globally on does the Y leveraged to reach female levers to subs.
And then I might be.
Thank you just one more question, we talked a long term lithium contracts you might think would you be seeking fixed contracts.
Gross price contracts are floating price contracts.
Well you know that.
It's important to try to get good contracts and when I say from contract gets from big customers. But also from this is not just a point of view I think that we got the need. So do you think customers are different so depending on the customers depending on the study that you have we'd be just to see the customer we do different things. So we've helped them now.
Which is related to what we de pricing volume. So I would say that is it.
It's easy to do for every every GAAP every day every customer.
Thank you very much.
Our next question comes from P.J. Juvekar with Citigroup. Please go ahead.
Yes, good morning.
I'm going to talk about how much inventory do you are you caddying either in terms of months up supply or income some dollars and when do you think inventories will return to normal and what is normal for you.
Huh.
Okay. So regarding to mid threes. After you know we have to be producing at a very good production breaking the last mile which used to be in a low we not do we go with that we've been doing facetious you noted to fade.
It is important day sales forecast that we have today, we announced that we want to do it.
They are 50 per cent more nics jakubik <unk>, yeah, I will recap the day, we have enough inventory to go up here, we need from them. So we don't see any issue regarding to our inventories.
Oh, its you know I think last quarter, you mentioned Oh, it was close to a billion dollars of inventory that you had sort of not built into that mid $100 million up in rent are you had can you just sort of talk about you know how much in rent or do you happen to him.
I appreciate it if you don't know yet if yes, we do have a bit more than one day you didn't do not documentaries across the board you can see that did not work in our financial statement that includes you've been doing so free I you lie at least you have nitrates day basis about the real time, and so one of the force it regarding to see.
You never know if he'd been three that we have and he'd been in each particular business line, we don't disclose that information.
But oh, let's see it we have to eat healthy batteries to be able to comply with day with the growth we are projecting for next year.
Okay and my second question is you know other companies are talking about it.
Trentwoods regionalization enough supply chain, we GAAP to covert.
So I'm wondering if you live Tim exports go to China, and you know, let's say Europe is certainly kicking into high gear you'd be sales are high and as the European market develops what just strategy towards selling into your operating how about your position there. Thank you.
Well you know about industry I'm afraid you could produce it if we have any needs from cheap for many many years. So that means that we supply to many many customers. So rounded war, but where you are right I would expect.
He shouldn't eat exposure from China might be I would say that more than 40% of our sixth grade archetype net but because he's excited because you know the more about 50 per cent up really couldn't imagine easy China I'm Buddies explained because of the east Revolution embodiment of factors I'm I'm I'm cabinet manufacturers.
Ah, but our study we continue to be for all the customers remember that we're talking about here not only you might not be feel for electric vehicles somebody we have industrial applications for Pcs important to remain relationship with those customers and to support those customers and also they expect from class.
Thank you.
Our next question comes from Isabella Simonato with Bank of America. Please go ahead.
Hi, Good morning is it Gotta go ahead I know.
Before the call important question first of all I would like to ask about iodine you also mentioned I never de striking out.
You're ready to with the expansion plans by 3000 accounts I just like to get more details of the timeframe for that and when you think about sales writing the long term that the street Calvin comes additional should share yield about 16000 pounds, but actually up sales.
When do you expect from his body just wanted to pick up from that.
Right and and also I would like to know how what's your outlook for price is a water share and that's yeah. We understand that the man Frac sand is actually quite like resilience, but prices have been coming down or how you're thinking about pricing in 2021. Thank you.
Hi, I was speaking about flow topics from valued in business. We are working very hard to see Judean day $1.3 billion already mentioned by kit article we expect to be hike is empty seats also magic Johnson value that at the end of 2024, that's that's very important for us to be.
Yeah that level and we are more than ready all day, you could pursue all day.
Mike Van de man, we cooperate that.
Specs next year, we haven't venture resale value that today on Oh, I'm, hoping that that market will be covered I will have more capacity.
You did and the topic studies already mentioned, it and I think he's going to be ready to sell from 23 2024.
Oh, that's where I think.
Oh, sorry, sorry.
Oh price [laughter], Turkey like to first in order to thoughts are good question you have to go see their first that the demand some weight de see yard was has been low which I noticed you didn't expect it to.
So the effect of day, providing some specific markets.
Take on the low price of MLP MLP means bullet that's pricing de few years low with a lucky here you have conceded MPT makes the main role much you know you'll see like I would compare to yours noted to produce but that's a nice <unk>.
He had some you to decide that the mine was low when we yet we face more competition in some markets.
My short term out from here, you've got the price it doesn't whereas there we are.
Having two day is reasonable to expect to have some price recovery, maybe next year, that's compared to what we are happening every day.
From fourth quarter de she or on certainly we think that all the signals are going in the direction, but the de monthly increase.
Some of the demand that was not they are de feared would be yeah recall beginning next year.
Your next question next question anything.
No just wanted to come from what he kind of looked at about that iodine volume so should be more even more than 16000 accounts when yeah expenses down in 2010 from a REIT.
Yes, Yes of course were working very hard to know any blob, okay. That's for sure.
Okay.
Thank you.
As a reminder, if you have a question. Please press star then one to be joined into the queue. Our next question comes from Cesar Perez Novoa with BTG pack Pactual. Please go ahead.
Oh, Thank you figure really much on how you cut out a little bit credible Pablo Kelly on your on your my I have two questions on your from your recently announced investment program for iodine and lithium could you. Please provide more color on what steps need to be taken from under environmental and regulatory standpoint to meet that.
Effective Oh, sorry, if I heard correctly are you sure you you just mentioned that details from funding for this program.
Will be delivered next month, but perhaps understand if this would be mostly Dab tour or a combination of of equity index and my second and last question actually relates to Mount Holland or were you note in the press release that a decision we'll be taking our next January I understand that Youre ready.
Have a definitive feasibility study however, if you could please.
Remind us what you want to achieve from this joint review is this a especially just just saw enhancing the value of the asset or is just a combination of a perhaps a building a larger facility there and any color would be appreciated. Thank you.
Hi, just had the first question was so let me try to channel remained about Capex I'm about to make a pretty hot.
The permits we have been working very hard in the last I think.
Pain de risking already to be ready for an environment across from environmental <unk>, Yeah neat net mid single project. We yeah. We are expert at all Dod. So far that's you know in every single mining project your need department that from inside of all the different departments in the channel indicates.
Indicates a free feel we have free bear with the permits for the hundred an aging in standard I need to tell somebody that's already inked beauty pardon me that we have two day working day after that point and that's why we don't expect any de lay nishu regarding moving to the how did anything that wasn't much at all in <unk> you only had seen that thing you didn't actually Tonight.
But we are working we have been working in the permits in the last three years, where almost ready we're working day seat in a water seawater pipeline, that's very important markets. It for you from we'd have departments now I'm working on it and de Janeiro, everything and we have so it's all departments in the mine site some of the permits update.
Construction I do expect to have all the from its ready to any price half next year and were working in that financing to translate that from its on environment to follow them. We don't foresee any big issue there it's going to be a block to know what did that we think we can go in with a weapon to be something that would have been healthy day, because environmental this cyclical.
One was get edible <unk> financing all day financing.
Informed view before we expect to have the board meeting in December I wouldn't commit many of the percentage of the board did he from not trying I think something else you know, it's not a secret you have many I try to de sign on a force incentives that you mentioned before the art Barkley alternatives does what percentage of the board and you have my word that due to the press release on December one.
We'll be very together what after the board meeting, we we are going to be very open about what he's the decision of the board Oh, Oh about moving for winning that that day, but let me remind you what he does said before that we have a very conservative we are very concerned about the company uses have been holdaway scandalous.
I don't know 30 years 25 years, whatever you know Oh, we have a strong balance sheet today, we've continued to have a strong non.
Starting with low you do you can imagine that we aren't going to be very strong I'm very comfortable keeping that we punish the plan for the future.
Finally, non call on some old coal [laughter] most want to just mention one point, we are waiting for the fine.
Hey, feasibility study flow and engineering company, we expect to receive the final they'll come in the next 30 day, we expect to have the meetings. We thought what part is in the next 60 day notice class hormone you know every announcement needed for I think you said joint announcement, because we are a great partner. We are very proud of department, we have in Australia, we're working together.
I think this idea we thing we strongly believe that we have a very good pricing enough to drive yep I expect to be announcing the day fighting doing generally you have to be meeting, where you're gonna have with with farmers. We all the pay per cent they'll come in from in front office and you will be informed.
Thank you Ricardo <unk> and everyone. Congratulations thank you.
Our next question comes from Ben Isaacson with Scotia Bank. Please go ahead.
Hi, Good morning, I missed the first few minutes of the call. So just let me know if I'm asking something that was already asked.
So the first question is on the Constitution, that's coming next year at some point.
Is there any discussion.
The government level or just the general public domain.
The lithium industry as it relates to two the new constitution in terms of opening up access to two to more players or rethinking. The royalties is there any risk SQM sees for.
You know with him space as it relates to the new Constitution.
[laughter] two glasses that exceed your question I think.
I I going I'm not de now I'm not aware of any specifics that Sean.
These are the only thing accounts to dish and that's when the first volume.
Yeah, I'm, a personal opinion I'm very optimistic about the future of Chile today.
After the last long decision to move ahead with the new Constitution everything is back from the hormones are working very hard to know where we work force Pro TV de every single company and my.
Personal opinion I didn't suffer so uh huh, it's nothing roster of music adjusted your shiny ignoring all that happen from time to time in any different countries.
I wanted to just kind of cautious before where do you notice to go ahead with these changeable day changes to class due on its starting to believe nothing changes with de what better [laughter] anyway at the end I.
I think everyone agreed that growing economy, it's probably the best way to solve all day needs that the people want and.
It means that the main discussions about class distinction just talking about with Acacia and still get home health care no reasonable things from flat.
You know what it too.
The non that sounds reasonable to us spending more money on you know what it's a lot more money you need that book when it kind of it I think it'd be one area. Both data that's why I'm not and then they got inside Oh, Yeah, no doubt about de a discussion of the nuclear power solutions.
My second question is.
In terms of the cost of lithium I understand when prices are lower your your royalty payments from lower but in terms of the actual.
Cost to produce a ton is standard work that you see where you can lower your cost overtime and if so can you talk about timing and magnitude of that.
Yes of course, we have many initiatives in order to reduce paulson input from CBD age group the bloody.
And we're working with some of them are critical today, showing any trying not to do how high.
Yes of course were doing so the most important ones that we announced today.
I was going to be very effective into price [laughter], increasing capacity do you consider the amount of investment you noted from I didn't want to be 260000 metric ton.
Really really low it means that we have or don't be afraid to be toward the United Kingdom.
Mike you got from the ending but many cycle.
Good day for it and that's why when we talk about coffee net net we took out about 12 times call I wouldn't talk about cost because the market value best many so low.
You asked a.
Very good new loans totaling some you look a bit de de out that's not just the company then income.
I think the best man, we expect to continue to see us investment that makes enough, but we have a lot of can you share takes you noted it was because in <unk> you know what process and if you have any view these jail I wouldn't.
So sales every quarter.
Well you you will have to non but that that would close it's going to be careful that the day to day. They they're all young people they pay men's rent payments well always seem to do anything to call. That's why do you need to be careful when you die because the cost price authentic coffee south profit sharing process. We have we of course are we pay and Bob leagues.
And with many person they chose the price I think the price of the lithium but putting these outside that just a minute share profit order book, what total cost of production in student loans, you shouldn't read into cash flow is going down and I expect day school wins and it will have a big big news in the future.
Working very hard to not get to do it.
Are you willing to share some.
Guidelines are kind of goalpost in terms of what you want to achieve like do you want to save $200 by 2023 per ton, excluding profit sharing or or do you don't want to give targets yet.
Sorry, I don't want to share no I, we are working with Aaron Department de to maybe every every week, we have I mean, obviously no where to go wings wasn't there next day.
I hope we are going to have to fight back in did you spend projects where.
I want to know one fell on absolutely doesn't do you have a standard.
I don't think the potential project from the phase two Ole force, we're going to be talking about that.
Okay and my last question is.
If you go back a quarter ago, I think you realized about six to $800 per ton and now you've realized about $5400 per tonne and of course that was the average price for the quarter. So when you think about where you ended September I'm guessing it must have been a little bit lower so in order to have the same average price in Q4 do you see price.
This is rising a little bit.
Well then relative meter speaking.
Well you know when you don't price, it's David because of the lack of the mass.
I think let me before I would like to be able to United well see these.
However, we got into the supply side, Okay production degree. So some some please we have seen some subsiding been from somebody must get that potentially.
Basically computer systems pressure from nicely coatings.
[laughter], we have been seeing in China, which is a sports I must get every cooling the price list, which could mean that we have already flow before.
Therefore from.
Yeah, Yeah, we believe that will be going in the U.S. So eventually we should see better price do.
Even if the trends in New York.
Thank you very much I appreciate it.
This concludes our question and answer session I would like to turn the conference back over to Kay Leo Brian head of Investor Relations for any closing remarks.
[noise] free thank you for joining today, we'll see you at our next quarter call.
Right.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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Mm [noise].
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