Q2 2022 Sociedad Quimica y Minera de Chile SA Earnings Call

Good day and welcome to the SQL second quarter 2022 earnings Conference call. All participants will be in a listen only mode. So 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 one on your Touchtone phone and Swift.

All your question. Please press Star then two please note. This event is being recorded I would now like to turn the conference over to MS. Kelly O'brien head of Investor Relations. Please go ahead ma'am.

Good morning, Thank you for that.

Yes.

No.

Thank you.

Call will be recorded and webcast.

No problem.

Yes.

W. W. S.

Our earnings press release.

Presentation.

Well, thank you very much.

With me on the call today will be required.

Yeah, Yeah yeah.

Yeah.

Smith, Vice President lithium and iodine Asia.

Before we begin let me remind you.

Yeah.

Anthony.

Is your economics.

This is a good profitability.

Our other.

We just made and complementary products.

Together with other things.

Our forward looking statements are not true.

Security posture.

Forward looking statements estimates.

Yeah.

Eric.

Information.

A number of risks.

Other factors that could cause.

Actual results may differ materially from those in such.

It is encouraging.

That's pretty good.

Okay.

Yes.

I'm, sorry and factors.

Yeah.

Okay Alright.

Our public filings made with the U S Securities and Exchange Commission.

Yeah.

Issued last night and these forward looking statements should be considered.

In light of those factors.

No.

Any such statements whether as a result of new information you just asked.

Or otherwise.

To clarify that.

I leave you with.

Yeah.

Uh huh.

Yeah, Dave maybe you want to.

Extra clarification that also so he could be arqiva, who is the head of dividends is joining the call sure.

Okay. Thank you Philippe and thank you Gary Good morning, and thank you for joining the call today, we're very pleased with the results.

These results were eclipsed by positive market conditions.

Oh, yes.

Yeah.

Where we saw a surgical high prices you need the first six months.

Lithium represented 73% of our gross profit.

Have a great model.

Yeah, we are celebrating 25 years with <unk>.

David Bob and Brian <unk> with Alliance.

Both parties alone.

Oh are enjoying the benefits of our investments.

And how that reward.

The eastern industry, we continue to see strong indicators.

Demand growth.

In China.

Reported that in electric vehicle sales were over double the first half 2032.

113% when compared with the same period last year recent boat shows that these challenge remain electric vehicle sales in China.

I did actually.

2% target.

2022 compared to 2020.

What we see the demand for the year with robust, 35% benzene there or no.

The news related to that.

Where I grew up with dish EBIT.

Even though it.

It seems likely that prices will remain relatively stable due to the reminder of 2015.

While the financial contribution of $2 2 billion will be baked Bobby.

Hum.

In operations.

A year or even.

EBIT more brown.

The ease of use evolution.

Auction samsonite.

Our state of the <unk> plant is producing lithium.

You'd be battery.

<unk> technology throughout the World most of the supporting our global C O two reduction.

Jesse.

Chuck we are now ready to open the lines for questions.

Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone if youre using a speakerphone. Please pick up your handset before pressing the keys and to withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

And the first question will come from Corrine Blanchard with Deutsche Bank. Please go ahead.

Hey, Hey, Oh, and thank you for taking my question and congratulation on the good quiet, though I have two question. The first one would be on pricing.

It seems you have renegotiated some of the contracts.

No way, even further from from the long term contracts, which have moved to the shorter term contracts and can we expect further contract negotiation and strikes you in for Q, meaning could we see even from their true Nike for St. Joe a 95% of benchmark index pricing and then my second question would be on that.

It seems like there was a significant cost increase is quite there. So I would actually go into the detail.

I don't believe this is Anthony with Mizuho.

We are indeed.

Yes.

Without the.

The customers with whom we have a.

Perfect.

We're restricted in terms of moving to the market right.

We hope that in the coming weekend.

Improved off of integration, we have already successfully.

We need to modify those contacts.

We appreciate it.

So the openness of our customers when they stand up it makes more commercial to.

To be able to follow the market so yes.

I would say that hopefully we can improve.

Yeah that provisions in the coming months.

Great. Thanks.

Yeah.

Yes.

Goodbye.

Yeah, I wish I had just maybe following up on that.

Would you like to think like going into 'twenty two.

Great.

Are you still going to have any of those may get here like long term contracting.

Yeah.

I would say that first of all that.

We will try of course to have.

The maximum possible amount was from that.

The market.

Hi.

A very good position in terms of cost so for us. It makes a lot of sense to have cost or is that.

Contact us kind of below the market. This is also.

It gives us flexibility and we feel comfortable with.

Our market index.

Right.

I think it makes sense also again to our customers to have some feedback.

Offer bustle CBD.

Now south.

Some of these contracts of course, we have seen.

Hey.

Yes.

We'll probably remain over the next year, but it would be a very small part.

Thank you.

Regarding your question about.

Well the main contributor to the account.

Both UMC.

You bet.

Indeed.

We're taking care of all the function of our exports from Chile.

Those products include Florida.

As we keep wanting to just go back to the end of April .

We're exporting more volumes from Chile, that's cute.

We spoke with customers.

Broad region with decent margins.

Remember now that we're integrating operations of Baidu, obviously to close on the <unk>.

One of the main parties already.

Sure.

Uh huh.

Thanks Waqar.

What's particularly this quarter we exported.

While our sales were approximately 34, 5%.

All of this coupled with other phases contribution we make on the deposit side with <unk>.

We quoted cool.

On a reported cost of goods sold.

But bear in mind.

Part of the Wahoo.

The decrease.

Okay.

If prices keep on increasing it from obviously, we saw the first couple of years or duration.

Each quarter from Gs.

The impact.

Anyway.

Our oldest coal that is cash passport depreciation is around 345 months ago.

Slightly higher than last year, but.

Bye bye.

Thank you I appreciate that.

It's quite a bit.

Ill review our production.

Yes.

Okay.

Great. Thank you I appreciate the color.

The next question will come from Joel Jackson with BMO capital markets. Please go ahead.

Hi, good morning, or good morning, or good afternoon.

A few questions. These questions you sort of touch on a little bit right.

How much visibility do you have in the first half of 'twenty three pricing right. Now so you have a little bit of fixed pricing that sticks around.

Otherwise the rest is all going to be market base. So you don't really have visibility or do you have some visibility into the first half of the year. Thank you alethia.

On lithium pricing.

Hello.

Well look.

First of all I would like to comment that.

The demand this year has shown to be very strong.

We are estimating that demand will be 30% higher than last year, which is a little bit above our previous destination at the same time, we have seen some delay in the supply of lithium.

If you look back at this time.

So that is what is explaining today the upward pressure on that right now it is of course.

I could speak maybe for the coming months of BC here.

That we believe that these pressure could broadly.

Remain.

Im extent, but it's difficult to predict what will happen next year, one thing for sure.

Demand will remain strong.

A matter of fact.

If we look at 2025, we are expecting that the money will be well above 1 million metric tons.

And by June 30.

$2 5 million pumps. So this is something we cannot deny the market's very strong.

It will depend on how the supply to catch up with the demand what will be different.

Maybe one additional piece of information.

We are estimating that by 2035.

Around 40% of the supply will need to come probably from Juilliard are newcomers.

Represent of course.

Summary.

Due to the supply.

Ricardo Thank you for that so my next question would be.

So you got some customers.

Some Oems the guys to agree to.

Reprice up lithium pricing had already been settled in a fixed contract and I guess it was really low below 10000 ton wherever you want to tell us if you've got them to do that what did what did you give them.

In return for them paying a higher price right now did you commit to some volume next year at a certain price did you commit to some volume maybe not at a price, but guaranteed volume over a few years what did you what did.

Where did they get what are the customer customers got.

We're paying more now.

Well first of all I would like to comment.

These contacts.

You are asking for represent a small portion of our business.

Yeah.

You saw in our release most of our comments today are following.

Got it.

But okay.

You can imagine we are seeing a tight at times.

Market conditions in the coming months. There are some risks you can look at the long term. So volume is probably the most important asset or any customer today.

Customers need volume to grow so the way we got a good understanding.

Our solution with these customers.

Operating more bottom. This is the best way we have been.

Able to renegotiate these contracts.

Okay.

That's helpful and my next question would be.

It would be best so.

It would seem that.

Lithium demand can't be any tighter than it is right now you have Oems now running around making deals with lithium companies. Some are nonbinding Mou as you know summer look more legit and.

And have some upfront payment.

So can you talk about a couple of things.

The leverage that you now have with Oems and customers that maybe you never had before and then.

Is there anything it would be enough lithium in the short term to satisfy demand. Therefore E D forecasts over the short term need to go down.

Well.

Sure.

I think that my.

My first comment would be that.

Kim has been successfully increasing our production capacity, we are reaching 190000 metric ton per year capacity now and then.

Yeah.

Matt.

And we are going to start our next stage of expansion to reach 200, I'm, saying next year.

If you Havent said, we are also reaching 21.

In G&A and we're also going to start the next phase and then start commencing new FICO XD.

There has been one of the few players in the market that have been able to deliver a more leasing.

This is of course talking about all of the customers.

Big medium and small customers are wanting from us so our value proposition today.

Okay.

This is the way we are.

Starting with our customers.

Because we can.

I commit to volume and the scale that we can deliver.

Thank you.

Okay.

The next question will come from Jill Hermie Cal Here's with Bank of America. Please go ahead.

Hello, everyone. Thank you for taking my question just one quick question on S. P M and you sat on the press release.

Expect volumes to full bite.

10% this year right so.

But at the same time, we see volumes appointing down more than that.

In the first half of the year. So if you could explore a bit.

What is the outlook for the second half are you expecting some pickup in terms of <unk>.

Williams or do you expect peaking in terms of the market share that the company has in that division.

Thank you.

Okay. Thank you of any type of give you a global view of all the FERC the Arctic weather repeat today.

As you May know.

And the whole ESG has been affected by the war Ukraine.

The one the one we had a lot of that in Europe .

If you look at production of fertilizers.

And of course that innovation for all of us exports from Russia, Russia.

Russia.

The market for those assets worldwide.

Okay, Bob It is very difficult because our very unique solutions to have a prediction of the churn of the industry.

Yes, Jay.

If you go to that both us first.

We sell.

With a more positive note we are very small in the market in the last months, we have observed a lower demand for potash.

Likely that prices for the second semester, we lowered the prices of the second quarter of this year, that's what we expect but in the case of the specialty fertilizer Euro.

<unk> is one of our main markets.

Current price environment.

That said the demand growth.

That's our situation.

It grows to be affected by this today's price environment again very difficult to have a medium term creation. However.

We think that the situation with especially different languages different thus far.

We believe that prices are likely to remain relatively constant.

In the second half of the year.

Volumes, we've seen would be similar to those we've seen during the first half of the year.

Okay.

That's very clear thank you.

The next question will come from Cesar Perez Novoa with BTG Pactual BTG Pactual I'm sorry go ahead.

Yes, good afternoon to everyone and again congratulations for your results just a basic question here on your ongoing capital investments.

When will the 180000 metric ton lithium carbonate capacity would be completed and what specific jobs.

Milestones do you require for final tie in and would this maybe perhaps some strange some production into the third quarter and then on the incremental 30000 a month.

Tons that you're expecting to deliver has there been any alteration to the.

200, <unk> T a million dollar costs associated with this expansion and perhaps provide a timeline for final completion.

That would be my questions. Thank you.

Okay.

Hi.

First is about the recent.

Milestones for the 180000 Isa continuous increase in production capacity every month because.

We are improving the production the Navy's therefore the process. That's why it is not a key milestone that we are expecting in order to be industry.

And then <unk> as you would expect that it will be a convenience production closer to the 808 hundred 80000 metric tons of all property.

Timber or.

Keep in mind that some months, we reached <unk> hundred 80000 metric tons capacity amongst different lower because we're going to fine tune any noise.

And that's why my best guess is that we would be.

Close to the 100 AMC.

The system there.

Second half of certain minimum or above the 210000 and we normally see.

He is a capex program you have in celebrating muted investment in order to reach the 230000.

We announced the deal.

First half next year.

Anyway, we are working on a new three year Capex program.

We're working on so to speak.

Next conference call.

Informed the market was going to be the capex for the next three year because once we haven't studied what really drove the wrong.

Sure.

We will have the new update probably update the results of September results.

Again, it's where we'll be in that.

<unk> way expenses this capacity broadly speaking.

While the decrease in.

Goodbye.

The macro side.

A lot of initiatives, we expect to.

To announce in the next.

Capex, Florida law, we are in the final step in order to have.

Thanks.

Order to move forward in Australia.

<unk> thousand 200 customer default.

We will.

Together with farmers Ethernet DC Kris <unk>.

This year anyway.

Okay.

Alright, Thank you very much oh, thank god for for sharing that information. Thank you.

This concludes our question and answer session I would like to turn the conference back over to MS. Kelly O'brien for any closing remarks. Please go ahead.

Thank you everyone for joining me and before I close I want to remind you that we want.

Yesterday.

So please visit our website or contact us for more detail Hello, Good day.

The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

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