Q1 2021 Sociedad Quimica y Minera de Chile SA Earnings Call
Good day and welcome to the SQL on first quarter 2021 earnings Conference call. All participants will be in listen only mode share do you need assistance. Please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions to ask a question you May Press Star then.
1 on your Touchtone phone to withdraw your question. Please press Star then 2 please note this event and is being recorded.
I'd now like to turn the conference over to Kelly O'brien head of Investor Relations. Please go ahead.
Good morning, Thank you for joining us Jim first quarter, 2020.1 earnings conference call. This company for all of you reported an and is being webcast live on the call and you'll be able to access the website. The webcast at our website www dot SCR on Dot Com and our earnings press release, and a presentation with a <unk>.
And if the results have been uploaded to our website, where you can also find a link to the webcast speaking on our call today and will be re class Ricardo Ramos, Chief Executive Officer, and on Oems CFO and Pablo of Nida Senior Vice President of the lithium and iodine business will also be available to help answer any questions. Following the prepared remarks.
Before we begin let me and Ryan you that statements on this conference confer concerning the company's business outlook future economic performance and anticipated profitability revenue expenses or other financial items anticipated cost synergies and product or service line growth together with other statements that are not historical facts are forward looking.
These statements as that term is defined under federal securities laws and any forward looking statements are estimates, reflecting the best judgment of SQL and based on currently available information and involve a number of risks and uncertainties and other factors that could cause actual results to differ materially from those stated in such statements.
And our ability to successfully implement for sustainable development class risks uncertainties and factors that could affect the accuracy of such forward looking statements are identified and our public filings made with the U S. SEC and our earnings release issued yesterday and these forward looking statements should be.
And centered and latest those factors, we assume no obligation to update such statements whether as a result of new information future developments or otherwise, except as required by law I now leave you with our CEO for further.
Yes.
Thank you.
Good morning, we thank you for joining the call today and where are you.
During the first quarter this year and increase of around 60% when compared for the same period last year for a sort of higher sales volumes normal all our business line.
We are seeing positive price trends and our fertilizer markets on ice.
But on increasing average prices and the lithium market since the inflection point and we saw in the fourth quarter last year.
Diverse portfolio on a strong production for 4 months to continue to have a very positive impact on our results throughout the year as we mentioned last night global fertilizer markets.
Stronger demand for solar with our average price and both SPN and potash and business lines to be higher than average price is reported in 2020, yes.
Yeah, you mean market is recovering and our sales volumes increased 30% compared to the fourth quarter last year the expense.
This momentum to continue leading to an increase of sales volume in 2021.
10% to 15% compared to last year, finally, lithium market indicators and being very positive over the past few months and.
Growth for electric vehicles and in the first quarter of the year was more than double what we saw last year as a result, we believe that.
And while demand for lithium chemicals growth more than 30% more than previously expected and we also expect sales volume will increase to at least 85000 metric tons. This year, increasing our market share as anticipated prices during the first quarter increased when comparing for the fourth quarter last year, we believe.
The prices will continue to increase in each quarter throughout the year.
As we mentioned last night, our Capex plant remains on or ahead of schedule.
And clearly our plans to reach 120000 metric tons of lithium carbonate and.
21 for 5000 metric tons of decent micro site.
And the end of this year and remain on our skin. However, our plans to reach the 180000 metric tons of lithium carbonate and 30000 metric tons for the lithium micro site and bill.
For.
And so on operating by the end 2002 thousand.
Our Motorola and lithium project in Australia and remains on track on Fabry.
As a reminder, the board the board has approved close to 500 million BOE and total Capex line for 2051 related to.
Our business line.
Thank you for later.
No go to the Q&A session.
We will now begin the question and answer session to ask a question you May Press Star then 1 on your Touchtone phone.
If youre using a speakerphone please pick up your handset before pressing the keys to withdraw your question. Please press Star then 2.
This time, we will pause momentarily to assemble our roster.
The first question will be from Corinne Blanchard of Deutsche Bank. Please go ahead.
Hey, good morning, Tim and thank you for taking my question on this this morning.
I think Chris and I would like to get your view on NIM class capacity. That's its sales volume for Oh, Yeah, and also maybe for 2020.2 with both ex expansion for hydroxide and carbonate knowledge, you next year and a window and then 2020.3.
How do you view yours say.
On a full capacity and and do you anticipate and inventory piling up.
Hello, as you May know, we are increasing now total 130000 metric tons at the end of this year.
Continue the good performance on our work for <unk>.
During the second half of last year, I think that it's reasonable to expect to have a total production for this year close to 90 to 95 tell somebody comes Thats My target for this year next year is going to be on average because we will start with a 100 and clay and at the end of the year, we expect to go to the Hanjin and Nathan that's y.
And <unk> have been on production.
Total production for next year closer to 140000 metric tons makes sense something and our plan we have today.
Okay, and that's very I'm for so yeah, I'm, assuming you guys I was just.
Trying to say whatever your projects and that's very interesting and the second question is on lithium pricing and Oh, we see I think we all agree you're watching the ball time and in full queue and you know pricing and started to improve in <unk> and you should look on Shinies class same since.
Led all goes on 'twenty, 'twenty and seaborne pricing and as were in the past few months, we always see like on a positive trend on how I just wanted to try to get your view on you know where.
Where do you see pricing going to all the end of the G and do you see it.
And by close to 10 tall and catch on Juicy, it's 2 and below our book is lovely.
Right.
Well, Joe Greg and thanks to balance the meet up to speed.
And as you know right total weight.
We said look the supply and demand.
On the demand side, we have been seeing a very positive trend for the demand actually we are increasing our <unk>.
You mentioned for this year.
So and that we already see that the positive trend.
Yes.
So I.
And so youre right and we've got DC, the policy to try and keep it Brian.
However, the price on the way he is not on unique price you need to consider and we have different qualities different customers defect and volumes that do commercial ex we've been and different information and studies. So we don't we don't have 1 price that can replace the total reality of the market, but having said that because.
The positive trend on the demand and kept saying today, we have been seeing price has seen a double digit.
In the future.
And we think will be banned all supply and demand and solid.
Yes.
The next question will be from Joel Jackson of BMO.
Hi, This is robin on for Joel.
I have a few questions I'll just ask them 1 at a time I just had a follow up on that on the pricing discussion.
And you know I appreciate there are legs to the spot market, but even so the April export data from Chile.
Didn't reflect higher pricing yet so.
I I I guess I'm, just trying to get a sense of when exactly we can start to see that maybe on a monthly basis even.
And by how much you mentioned quality 1 of your Argentina, and peers, who has struggled and quality in the past have you been guided to like 7 to $8000 and time for the June quarter. So is that like a floor expectation for Q2 is that reasonable.
Yeah.
Well I mean first of all.
Export pricing.
And do not capture all the formation of the of the market. So that's 1 thing that we need to be careful when we dig into those and.
Prices so that's 1.
Go ahead Ian.
Regarding <unk> strategy I can't say that.
And in the first what do the majority of our sales were agreed.
And during 2020, so thats explained and we some of the price for Q1.
However, the reality for the simple cost is different and more than 50 per cent of the SA. We did close on that day.
<unk> prices rallied at the moment.
So that's the studies and we have flu.
Okay and.
On my second question is on the proposed copper royalty changes and Chile. So is the lithium structure.
<unk> as a model for this or are there changes that could be expected and the lithium royalty structure as well.
Hi, yes.
Yes. This is <unk>.
Discussion about some royalties or taxes in Chile as you May know, we have no inflammation northward on what has appeared and depressed as you may know the gas being preliminary to discuss on either has to be analyzed by the <unk> financed by the government.
And the way, we sent our preliminary opinion for the different industrial and mining groups and which we participate are finally, the ones who raised the opinion of the mining industry regarding decisions.
And we definitely want to add that SK and contribute significantly to the development of the country throughout and important practice and all the contributions for the country and communities.
Yes, so for.
Sure. There is no order economic activity and clearly that contributes more resources both in absolute terms on a journey for the cash.
Yes.
Yeah.
Maybe just 1 last quick follow up to that given the the recent political changes and Chile as well do you foresee any potential and <unk>.
<unk> spending for environmental reasons.
The tax structure or anything like that or.
Is it a business as usual on your side no matter, what the the political climates like.
Okay and continues to be and very excited about our business strategy and our significant Capex program.
We continue of course, advancing our sustainability agenda.
And when pardon me Heath, our sustainability agenda last year, we will continue to do so we think we are perfectly aligned with the demand of the community Chile on new world demand and changes are being very active and in terms of their environmental activities. That's why we think that these yes, we confirm our ROE.
<unk> and change so implement all over again and gentle sustainability.
All of those expenses or invest men regarding thesis on sustainability agenda.
Made public last year are already included in the Capex program for the next for year.
Thank you.
And next question comes from P. J G for car of Citigroup.
Yes, hi, good morning.
You know I look at your.
Lithium contracts and the.
They have tended to be shorter term in nature. Then you look at 1 of your larger competitors, who are also trying to get some index pricing and their contracts.
How do you see the market evolving.
In terms of contracts do you think the market and the big buyers. The battery companies. The EV companies are likely to go towards more index based pricing to some extent.
Yeah.
Okay. Thanks, Paul for the question.
Let me give you on right I mean some customers.
<unk>.
Prices. So we have seen many new SKU and works.
And we are looking net but the thesis delever and development. So that means that depending on the customers different customers and wants to believe and different ways relating to pricing. So EPS, we are flexible and so in some cases, we are considering to negotiate contracts under the indexes and other loan because the substitute customers, but it would be <unk>.
And that we are following for sure.
Okay.
And then you had a good topline growth and lithium as well as and potash and SPN.
But are your costs were also higher and so the leverage did not come to the bottom line and on.
I was wondering if there any special costs are that.
That were.
During the quarter coming out of the pandemic and you can you talk about the leverage going forward as you get more pricing and the second half.
Yes.
And 1 clear message that the costs are high you will have some product line to where it caused a lowered some of it for us.
And that's where costs are slightly higher and some product lines, where costs are higher at the same level.
We don't foresee any growth situation nowadays of course with monetary and all were located in Chile and module for us Golar and its very important for us. That's why we did notice for southern food for us and if the dollar goes down and the bad because we have a lot of expense with the Chilean peso Nowadays the Dol are you supporting our original predictions and Thats why.
And it's not a big Big news on that I think we can continue with our original cost line.
Force, how do we use ex price of corporate and the note that it's very hard and the new corporate price means that the pressure of the labor force in the north of TD is going up.
Same with the contractors and something we are working very hard in order to improve our per day.
Brito for productivity in order to avoid any additional costs, but.
At the bottom line and we don't foresee any cost issue or significant issues. During this year as compared to the previous year.
Thank you and just a quick housekeeping question you had built up inventory last year that you are selling now how much of that inventory still left thank you very much.
Depending on the business lines used inventory, where we have we have a brief affordable with the level of investment we would have today, even though we.
We are under the increasing sales volume this year, that's really good news that having inventory allow us to be have the flexibility. If we have additional volume sales I think that volume is starting in the inventory volume and studies a very good 1 we continue to be very good for the company in order to perform our business has started.
I don't foresee any big moves and the total inventory during this year.
Okay.
The next question will be from Isabella Simon Auto of Bank of America.
Okay.
Thank you and good afternoon, everyone. He caterpillar and advil my questions on them.
D S P N and the potash business line on the bottom side, we are seeing.
Prices rallying.
Especially in the last couple of months.
Your prices are going up, but maybe not as much as we're seeing.
On the spot prices can you can you provide us and outlook.
Oh for the next couple of quarters, and how you're seeing Y potash prices perform.
And the similar questions to S. P and I mean, you are guiding for a volume recovery. This year and of course high grain prices are supportive for prices, but what sort of.
Acceleration do you anticipate.
And that coming quarters. Thank you.
Yeah.
Hi, Isabella, yes, youre right in terms of the potash prices growing it's going up we had some agreements previously to this new brand and Brian Chin.
Certainly anything that prices will be higher during second quarter and on.
Very positive for oil pricing and bought that students take on half of the year I think second half of the year prices will be.
Recently hired on the prices that we're seeing and our sales for the first quarter.
As you know and the SPN and specialty plant nutrition business the relation between both us price and production and I think not so directly and moves that when they go down we don't go down the same level and when they go out and we don't go out and to stay level any way, having that very potash environment and it's a very good news on <unk>.
And I foresee that if price is not at the level of the bullet actually in terms of the percentage increase but we think that price is due to take avoided this year.
Actually second half this year will be better and Thats, what we observed during the first quarter.
That's clear thank you.
The next question comes from Ben Isaacson of Scotia Bank.
And.
Thank you very much.
I guess my first question is on the election that took place over the weekend, obviously the stock market didn't like what happened at least as it relates to SQL and so I guess Ricardo and your opinion.
1 of the reasons why the stock market is nervous about SQL is it only to do with the potential of increasing royalties on.
Or could it also has to do with issues related to water or.
Extraction rates or maybe getting more resources to indigenous population is.
Is the market wrong to be this nervous right now.
Hi, Ben.
And if you review that price of as Ken shared and the last 4 days and this Monday Tuesday Wednesday and today, we have total loan did churn some way of the Chinas stock market and if there is no big difference between where it is Chile installed market as Goldman on awareness and go in and the last few days.
You know I am not on market on at least on and even less political and others.
But the main bits and bank Helios, you may know have issue business and very good analysis of the factors that may have affected the chinas stock market.
And thank each new testing to be able to read them I think Jason may differ or being on another non all the premiums are the same best way to plant the different analyses, but of course, there is a lot of volatility today some on.
Certainty.
I think it's important to wait and see.
It's too early to have a <unk> opinion about where the moving whereas the stock market is moving.
But of course, when you had the big move that we had and the last 3 or 4 day daily.
Of course, we followed that.
There's no way, we're going to be independent of what's going on and the GM market and again I think the last 2 days.
I had the book can easily different reports from investment banks, local til and investment banks and and I think a very good in order to have on deferred.
Factors that may or may not affect the stock market today.
So that's a good segue to my next question, which is can you just talk a little bit about diversifying outside of Chile, obviously.
Alcohol and project is front and center, but are there other opportunities that youre looking at and are those and lithium what kind of regions are those and are they and potash et cetera.
Yeah, we are open for doing business not only because we book we want to have diversification on Chile.
And maybe positive about what we're doing in Chile, we are great investments and Chile.
But anyway, our M&A activity is open for opportunities for us.
As you know we thank you for being a very important decision for US to go ahead and with the project in Australia is going to be a big broadly and I hope he is going to be the first big project in Australia. As you know we have the puts and needed to move forward instead of being a 50000 metric tons total cabo and local and yourselves and the future, we've decided with with far east and Denise.
A couple of years, probably moving forward to maybe 100000.
Well tied to look for opportunities on the lithium business on slide PTO of course, yet where needed and Australia, we have on Abu Dhabi opportunity opportunity does that create value and we will do it again.
Well it actually is a very difficult market to be to getting and the market Nowadays but of course, we're open to review on Trinity and.
So that's a nice and where we are also open for opportunity seems like it's difficult to kind of a T cell titanium, but always open for opportunities on <unk>.
And at the same meaning.
It's not like we want to run out of Chile, We are very happy with what we're doing here, but you can find on political <unk>, Australia with Louis.
Just 2 more quick ones for me first as copper prices I think are now over $4.50, a pound I remember in the past you had interest from from outsiders and wanted to come and look at what the potential was on your land or are you seeing a pick up and that activity. I think you had that as a revenue source several years.
[noise] ago, and I haven't heard much and the past few years is that something that's new or coming back at least.
Yes, Youre right. There is a lot of interest and cooperating in the last.
A few months it means corporate is going day in the right direction in terms of price. It seems like it's going to be a long term trend I hope so.
Yes, we do some internal activity and order to 2 geological activity to find some potential Cooper and resources and nowhere line.
And of course, we have some agreements with third parties that they are looking for Cooper.
And it will continue I think it will be more effectively and the next 6 months, considering what's going on with the pricing.
You are right and it needs to be something very important and the future needs and we find out but yes. We are quite active about this idea.
Okay, and very last 1 for me.
Guidance of greater than 85000 tons for the year you just did 24000. So the math would suggest that's about 20 per quarter going forward. But then you also came out and said.
And your expectations for demand is 30% higher than what you originally expected. So it just seems not to match ups.
With respect to selling less and an environment, where demand is better than expected can you just kind of triangulate those those 2 comments.
Yes, Ben on the speaking.
Thanks for the question.
First off on I think that is important to remark that will be spent what.
We sold almost 3 times compared to the same pointed of lithium so I think that it's important to remark that.
The biggest thing that is important to remind us that this year with growth more than the global demand growth. So that means that we are increasing our market share.
We got and give the split among the quarters. It is important to both build cash.
Customers.
And as throughout the east to buy the total sometimes they buy more or less and sometimes not.
So that may sometimes explains the strength.
Among quarters, but having said that is important and again towards led us to say that and we say and we said at least 85000 moving dose bother with patients to sell.
And more if the market is there.
Thank you very much.
Yeah.
And the last question today will be from CSR Perez Novoa of BTG Pactual.
Good morning, or good afternoon, gentlemen, and congratulations for the results and the first quarter.
Regarding the accelerated rollout of your carbonate and hydroxide line and 2022 could you could.
Could you give us some added color on why you're Frontloading, the investment and I understand it's clearly demand, but perhaps a little bit more and more color on the specifics and of course, along these lines what should we think of the Capex figure for for 2021 is a free.
$500 million still good.
Yeah, we're not talking a huge differences anyway good afternoon.
You can see yes, we're doing okay, the project zinc and lead.
And the right direction.
On tank projects, you have delayed projects and sometimes you have the good news that pretty targeting.
I think there is good and this is the case, we're not talking about 1 year with CMS a month before expected.
We will not change our total capex for 2021.
And 2022 is going to be and $500 million as we explained before.
And yes, the good news on on <unk>.
Of course, it's simple it's a very good news concern that the market is very good on <unk>.
Be more volumes available total lease having this flexibility and these market is a very good news for us.
That's why we are pushing very hard in order to do it right, but to do he does so and as we can.
Okay. No. Thank you very much for Karla and just a final 1 on my and on iodine and you call for a thousand tonnes and incremental volume for for this year. What can you tell us about this market in terms of demand recovery and pricing as well.
Thank you.
And also I suppose speaking.
And we'll FMC debate on as we anticipated before we have been seen a recovery and being in <unk>.
Demand our expectation for this year and <unk>.
And at 9%, which is good.
Steve will be low and the demand that we saw in 2000 and Pete.
But for next year, and when we see it and tight recoveries on the demand will be in the normal growth rates.
Regarding to Brian says, we have been seeing.
We see stability is stability.
And maybe.
Because the demand growth as I said before and also we have not seen most of the black and so we expect capex.
Sales prices for day for the rest of the year.
Alright, Thank you gentlemen.
Right.
And this concludes our question and answer session I would now like to turn it back to Kelly O'brien for any closing remarks.
Great. Thank you and thank you for all for question, we look forward to seeing you next quarter.
Have a nice weekend.
The conference has now concluded. Thank you all for attending today's presentation. You may now disconnect your lines have a great day.
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