Q4 2024 Sociedad Química y Minera de Chile SA Earnings Call
C. C. C. C. C. C.
Speaker Change: Good day, and thank you for standing by. Welcome to the SQM 4th quarter, 2024 earnings conference call. At this time all participants are in a listen only mode.
Please be advised that today's conference is being recorded.
Speaker Change: After the speaker's presentation, there will be a question and answer session.
Speaker Change: To ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. I would not like to hand the conference over to your speaker today, Isabella Vendek, investor relations officer.
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Isabel Bendek: Thank you very much. Good morning. Thank you for joining SQM Earnings Conference call for the fourth quarter on full year 2024.
Speaker Change: This conference call will be recorded and is being webcast live. Our earnings press release and a presentation with the summary of the results have been uploaded at our website where you can also find a link to the webcast.
Gerardo Llanes: Today's speakers include Gerardo Illanes, Chief Financial Officer, Carlos Diaz, CEO , Lithium Chile Division, Pablo Altimiras, CEO of IADN and Plant Nutrition Division, Mark Fones, CEO of International Division.
Speaker Change: Also from our commercial team, we are joined by Felipe Smith, commercial vice-president of Lisbon, Juan Pablo Bellolio, commercial vice-president of iodine and industrial chemicals. Thank you very much.
Speaker Change: Also, additional for lithium-market related questions, Pablo Hernandez, VP of Strategy and Development will be also available.
Speaker Change: Before we begin, I would like to remind you that statements made in this conference call regarding our business outlook.
Speaker Change: Feature Economic Performance, Participated Profitability, Revenues, Expenses, and other financial items along with expected cost energies and products.
Speaker Change: or Service Line Growth are considered forward-looking statements under federal security's laws.
Speaker Change: These statements are not historical facts and may be subject to changes due to new information, future development, or other factors.
Speaker Change: We assume no obligation to update these statements except as required by law. For a complete forward-looking statement, please refer to our earnings press release and presentation. Thank you very much.
Speaker Change: I am now leaving you with our Chief Financial Officer, Mr. Gerardo Illanes.
Carlos Ortiz
Take care, sir.
Good morning and thank you all for joining today's course.
Speaker Change: Our net income for 2024 was impacted by a one-time charge of approximately 1.1 billion U.S. dollars recorded early in the year. This charge portrays to an ongoing dispute regarding the tax treatment of mining activities at SQM Salar.
Thank you.
Speaker Change: We estimate that the lithium market grew around 25% in 2024 compared to 2023, primarily driven by the strong growth of electric vehicles in China and other markets, as well as the rapid growth in the demand for lithium in energy storage systems. We estimate that the lithium market grew around 25% compared to the strong growth in the demand for lithium in energy storage systems.
Irina Axenova
Speaker Change: With this search, in demand, combine with our successful capacity expansion efforts in Chile.
Speaker Change: We achieved record sales volumes in 2024, reaching nearly 205,000 metric tons of lithium, which includes almost 4,000 metric tons of lithium cover at equivalent, coming from Moon Holland, making a milestone in our successful partnership with West farmers.
Speaker Change: Although we observe a decline in prices quarter over quarter in 2024, this downward trend softening during the fourth quarter and we expect relatively stable prices during 2025.
Speaker Change: Additionally, we estimate that demand could grow approximately 17% this year and expect our sales volume to grow at a similar rate.
Speaker Change: Moving to our line, we have an exceptional year in 2024, achieving record volumes and benefiting from strong price growth, largely driven by the recovery in demand particularly in the X-ray contrast media application.
For 2025, we expect continued demand growth.
Aldo at a slower pace.
Speaker Change: We expect ourselves volumes of ION 2025 to reach similar or slightly lower levels than they once reported in 2024. We're working on bringing more capacity to the market.
Speaker Change: Working on Summit Efficiency Initiative, along with adding Maria Elena as a production site on top of Neura Victoria and Pampa Blanc.
Speaker Change: In the fertilizers segment, we believe their market has fully recovered from the challenges of the past few years, with prices stabilizing at levels seen in the second half of 2024. [inaudible]
F.A.
Speaker Change: Looking beyond 2025, we remain committed to investing in expansion of our core business.
Speaker Change: In 2024, we invest over 1.6 billion U.S. dollars and will continue to invest in increasing capacity, particularly in lithium where in 2025, we plan to allocate approximately 750 million U.S. dollars for capacity expansion both in Chile and abroad. [inaudible]
Speaker Change: Additionally, we intend to invest close to $350 million US dollars this year in the Calitio operation to keep on increasing our production capacity aiming to add approximately 4,000 metric tons of IOI capacity in the coming years.
Speaker Change: All of these investments are supported by the company's strong financial position, which provide us with a flexibility to seize new opportunities as they arise. [inaudible]
Operator, we now...
We can move now to Q&A session.
Speaker Change: Thank you. As a reminder to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. One moment for questions.
Speaker Change: Our first question comes from Ben Isaacson with Scotia Bank, you may proceed.
Ben Isaacson: Good morning and thank you for taking my questions. I have three questions.
The first question is on Potash. [inaudible]
Ben Isaacson: So your guidance is that production will be down 50% this year.
Speaker Change: Is this a combination of growth in SPN and more efficient production at the SLR? And is there a possibility that you could be a net buyer of Paudache in the future? Where is the Paudache going? Thanks.
Speaker Change: Hi, Ben. This is Carlos Diaz. Yeah, you're right. We have been producing Les Portas in the last
Speaker Change: And what I said before, we have been focused more lithium and productivity on those and so on. And obviously that affects the mainly the sale of potash because primarily we produce for the conversion to potassium nitrate and later for the sales in the market. Thank you very much.
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Great, thank you. Gerardo, a question for you. Thank you.
Speaker Change: It's looking like, given where lithium prices are right now, funding those capital requirements of operating cash flow will need to be, there's going to be a gap that will need to be filled by raising capital. Can you talk about.
Speaker Change: What those parameters are of raising capital, anything that you're comfortable with in terms of type of capital timing size, what should we be thinking about? What?
Speaker Change: Olicium. But despite that, you can see that we have a strong balance sheet. We have had a strong balance sheet for a long time and our plan is to keep on having this strong balance sheet that let us react and invest when the when the opportunities arise. [inaudible]
Speaker Change: Now we're focusing on keeping investing, expanding our capacity in lithium and Chile, also investing in the production capacity in Australia, along with the Gallic opportunities that we have here mainly related to AIM. Thank you very much for your time.
to get more financing to finance these projects.
assessing or reviewing the dividend policy.
Speaker Change: And the most relevant one, which was the one that we did in 2021, was to raise capital. We're not planning on doing that at this moment, but we're closely monitoring that to make sure that we keep on having a strong balance, which is quite relevant for us. [inaudible]
Speaker Change: Great, thank you. And then my last question is just on the iodine business.
Speaker Change: When we look at your share price, it's very clear that the market is focusing on lithium prices and not really on what I think is a crown jewel, which is the iodine business.
Speaker Change: It's not possible and it's not something that you're thinking about right now. What are the pros and cons of that? Thank you.
Ben Isaacson: Hi Ben, you're right, are you any quite relevant business for us?
Speaker Change: Not just because of the current market conditions, but also because of our expertise and our capacity.
Speaker Change: to deliver our ability, to deliver on bringing new projects and new capacity.
Speaker Change: It's a key component of the SKM portfolio, and at this moment we are not planning on doing anything.
Speaker Change: in the lines of what you're saying. We are allocating resources to expand the Arionan capacity, trying to take advantage of the strong position we're in, in the same way we're doing it in Lithium. [inaudible]
Thank you very much, appreciate it.
Thank you.
Speaker Change: Our next question goes from Joel Jackson with BMO Capital Markets, he may proceed.
Joel Jackson: Good morning. Thanks for taking my questions. I'll go one by one. Ricardo, I think in the, um...
Speaker Change: Press release your quota saying, you're optimistic on Lithium, because of the demand growth, though you do expect prices to be stable for the year. [inaudible]
F.A.S.
Speaker Change: Hey Joel, this is Gerardo. Just to clarify something, Ricardo unfortunately couldn't make it today but Pablo Nandz is going to help you with that question.
Thank you, thank you.
Hey Joel, this is Pablo [inaudible]
Speaker Change: and globally the sales reach almost 18 million units, marking roughly 26% year-to-year growth.
Speaker Change: That's a close to a 20% year-over-year growth with EVs remaining as a primer driver.
Speaker Change: and China remains dominant in market in the EV. Well, of course, the US and European face policy uncertainties that could potentially impact their demand.
Altim the market should continue to ship.
Speaker Change: Slided towards LCE production as LSP capital demand continues to gain more relevance, particularly in China.
Speaker Change: But in 2025, surprisingly, you continue to grow close to 10% but of course subject to supporting price levels. [inaudible]
Speaker Change: reaching to close to 1.5 million metric tons. New projects in Africa, Argentina, China, expansions in Australia and of course Australia as well from SCM. We'll start production this year and refining in China's remains with some over-capacity.
Speaker Change: and this oversupply in 2025 is expected to be lower than last year, which may have an impact on prices with a potential upside in 2026 as it was mentioned.
Speaker Change: Okay, so your demand growing 15 are said, I'm sorry.
Speaker Change: Oh, you demand growing 15 or 70 percent this year, supply growing 10 percent, that's the reason to stop the message if I summarize it correct.
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Speaker Change: It looks like you're maybe under producing what you could produce, like you're holding back a little bit. I'm not sure, but maybe I like some color, some elaboration on that. If demand was better than thought, do you have more capability this year that you can push and get more production out than what you're guiding to?
A.
Irina Axenova: Classia will reach $200,000 metric ton and this year we expect to reach $230. That is that combination of what we produce about everything that is coming from the Salad Agama and just talking about the Chilean production.
Irina Axenova: And this is what I say with respect to Bruce 230 and we have to differentiate between capacity and actual production. We have been expanding our capacity and we're still working to reach 240 as
Irina Axenova: We do everything together at the production this year. We're going to be in 2013, next year we expect to grow it again. And what I say, we have been increasing capacity and this year it's going to be the rampage of the new expansion. Thank you very much.
I don't know if this answer your question. [inaudible]
Yeah.
Speaker Change: My final question is just on the cadalco J.V., so of course we know that it's all retroactive January 1st, so Circarado for all the counting good afternoon when this finally closes. But more seriously, what is going on behind the scenes here? Like what are the next milestones, catalysts? [inaudible]
Speaker Change: What do we need to see for all the conditions, for the chance to be satisfied, for this J.V. to close, and for S.Q. to move on to the next phase of your history here.
or Future.
Speaker Change: Hey, Joel. Well, as you know, when we signed the Association Agreement with Covelco, a set of conditions presents were established, all of which must be met for the June Bencher to commence operations.
Speaker Change: Today, we have not encountered any significant obstacle in this process.
Speaker Change: And we're currently expecting that this condition presence will be met in the second half of this year. As you can imagine, there is a lot of things that needs to be done and that's why it's a process that takes a relatively long time.
Thank you very much [inaudible]
Irina Axenova
Thank you.
Speaker Change: Our next question comes from Rafael Barcelos with Bridesco BVI, you may proceed.
Good morning and thanks for for taking my questions.
Speaker Change: Just one question on your catholic systemates. So, you provided a guidance for the 2012-25 catholic for each division, right? So, but could it please be more specific on each product you are considering here and how much could be considered as a maintenance catholic? [inaudible]
Speaker Change: In modern and data like a second question here in the Catholics, it would be very helpful if you could discuss your Catholics' requirements for the coming years. Thank you.
Speaker Change: Hey, Rafael, this is Gerardo. Yes, for 2025, we announced total capex in the neighborhood of $1.1 billion, which includes approximately $550 million of capex associated with our lithium operations in Chile. Thank you.
Speaker Change: $200 million associated with lithium operations abroad, and approximately $350 million associated with decalitio operations in Chile.
Speaker Change: For the next three years, including 2025, so 2025, 2026, and 2027,
Speaker Change: We are estimating that the total copies will be somewhere in the neighborhood of it. [inaudible]
Speaker Change: $3.1 to $3.8 billion. Mainly or, yeah, mainly evenly distributed throughout these years.
Speaker Change: where approximately 1.5 to 1.8 billion dollars will be allocated to lithium expansions in Chile.
Speaker Change: Approximately 700 to $1 billion associated with the International Lithium Initiatives and from 900 to $1 billion associated with Cali Chogration.
Speaker Change: You know, in order for you to to understand a little bit more what's included in each of these projects will go one by one on on on each of these issues so Carlos if you can start. [inaudible]
Carlos Diaz: Yeah, for this year we respect to produce a total of 250 million dollars and the remaining that I already mentioned.
according to our long-term contract.
Carlos Diaz: during the following year. So the cap is according to that, according to, for some points, increased quality, productivity, and other. Thank you very much.
Anode de Iches.
That is our main goals. Pablo, you will follow? No.
Irina Axenova
F.A. Sponsored ADR
Thank you very much.
Okay, thanks Carlos, Jelor Rafael, Pablo Altimiras speaking. Thank you.
Speaker Change: Yes, in the case of the iodine and nitrate business, also we are with an important CAPEXA program. For this year, we expect to expand.
Speaker Change: $350 million, and if you consider the Tusa Zona 25, 6 and 7, the total amount is close to $900 million. $200 million.
Speaker Change: The main projects are to continue rolling in iodine, especially, also in nitrate or especially in iodine, where maybe what is important project is all the expansions that we are doing in wineryctoria, the project that we call Centenelaire, that includes...
Speaker Change: The CWR pipeline with a high capacity of 900 liters per second, which allow us to continue expanding our operations.
Speaker Change: But together with that, you need embeds in new solar ponds, new iodide plants capacity, iodine, so all our projects are today we are moving forward. And at the same time, as we commend in the press release, also we expect...
to open a guideline operation in Marielena.
Speaker Change: that will support what we are doing in Victoria and Pampolanka. And if everything is going well, we expect a.
Speaker Change: to start with this project. Well, we already started but we spent with the mining and leaching activities by the quarter of this year.
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What?
Marc Phones: Okay, thanks a name. Inter, please. Rafael, this is Mark Fones speaking on international lithium sites.
Gerardo Llanes: Gerardo commented, we are aiming to almost $200 million investment this year, which is pretty straightforward. Almost half of it, it's related to finishing the Monjonan Queen Anna Refinery construction. So, thank you very much for your time.
Gerardo Llanes: and then the other half would be split amongst the developing and over-project and our own exploration program we have in Australia and now in Namibia.
Gerardo Llanes: In the following years, 26 and 27, there's of course a range of uncertainty between 500 and 800 million . . . . . . . . . . . .
Gerardo Llanes: That will depend particularly on the final investment decisions to be made. [inaudible]
Gerardo Llanes: First, within this year for the expansion of Mon Holden, with our partner, West Farmers, and then following a feasibility study to be delivered by the end of next year, on the decision of investment in and over together with Hancock prospecting. [inaudible]
A.L.A.P.
Gerardo Llanes: Profile, Gerardo again regarding your question about maintenance, our maintenance graphics across all divisions is somewhere around $250 to $280 million per year.
Okay, perfect, thank you.
Thank you
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Speaker Change: Our next question goes from Corinne Blanchard with Deutsche Bank, you may proceed. Thank you very much.
Hey, good morning, thank you for that to make questions. [inaudible]
Speaker Change: The third question, folks you feel very highly in volume. I think this is your highest quarter, like a record quarter. Thank you.
Speaker Change: Can you comment on why do you think this is happening? I think there has been some talks around in the industry of Shana, maybe stock timing and trying to buy as much volume at the low price. I would be curious to hear your opinion on this. Thank you very much.
C.A.
Hello Corinne, this is Felipe Smith, how are you? [inaudible]
Good evening.
Good to hear.
So, regarding the volumes, first, I just want to...
explain that China concentrates
Speaker Change: Close to 80% of our sales in 2024 in line with a global demand.
Speaker Change: The Chinese market experience is strong growth in 24, more than 35% compared to the previous year, gaining share against U.S. and Europe who have been growing lower than our expectations.
Speaker Change: We are not building inventories in China, there is an actual demand there, and we are working with reasonable inventors. As a matter of fact, anyway, we have warehouses over there, we are well prepared to supply the Chinese market, we have a large commercial office in Shanghai. Bye.
Speaker Change: And, as you know, we are also refining carbonate and hydroxide at our planting machine and with third part. I don't know if this is answering your question. [inaudible]
Speaker Change: Now, I'm not talking about shoe stock, darling. I'm talking more about Chinese customer.
Trying to buy as much volume maybe as they can. [inaudible]
Speaker Change: And I'm trying to understand why you're seeing a 58-year-old tone in FOCU, which is normally not what we're seeing, and we have heard as well from other industry that customer on one volume as soon as possible. So I was just curious to hear if you have an idea or a theory of what's going on there.
Speaker Change: We do not see any price speculation, Corinne, an extraordinary building of inventories in the supply chain. Just the reasonable inventories that you need to sustain this demand growth. [inaudible]
F.A.
Speaker Change: Okay, second question would be on Africa in Australia. I think we saw some press release last night, but you got the latest. Thank you very much.
Speaker Change: The last regulation approved for the project in Africa. Can you just try to tell us?
Speaker Change: What could be a potential mine plan or like what the plan for that asset in Africa and then if you can give a very quick update on the month or ending in Australia as well. Thank you.
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Thank you, Corinne, this is Mark Fones.
Speaker Change: Yes, the protein in Africa which actually it's in Namibia, it's part of our early exploration investment portfolio. So, what we have and the value we add is we have an extremely knowledgeable team of geologies and exploration team in Australia. Thank you.
Speaker Change: And we leverage on that expertise and we have built a very interesting portfolio of, as I mentioned, early exploration investments. We have...
Speaker Change: 20 different projects in Australia, as well as we now have these new projects in America, and we expect to soon have one in Sweden as well subject to conditions present.
Speaker Change: But these are very early stage exploration projects. We invest in them as portfolio. We have advanced in explorations. We have advanced in the ones that actually overcome certain barriers and certain key internal parameters. [inaudible]
Speaker Change: And it's too early to say what is going to be the mining plan on those projects. This is probably three years of exploration projects in some of them two years in others. And that's how we continue building their portfolio.
Speaker Change: to your second question regarding Mon Juan. Well, Mon Juan had a very good 2024 run.
Speaker Change: During the year we continued ramping up the production of the concentrator. Thank you.
Speaker Change: Between the first quarter of the year and the last quarter of the year, we actually have unitary production costs. [inaudible]
Speaker Change: and we ended up in the last quarter, almost in 80% capacity production.
Speaker Change: So it was a very good year for him on a constant crater. [inaudible]
Speaker Change: And on the refinery side, we ended up the year above 95% construction, above 50% of commissioning, which actually today currently commissioning stands at two-thirds of the refinery Queenana. [inaudible]
Speaker Change: So, we're pretty happy, things continue in shadow and we expect fresh product for mid this year.
Alright, thank you.
Thank you.
Speaker Change: Our next question comes from Andres Castano Molo, with Bernberg, you may proceed.
Speaker Change: Hello, thank you for the detail on topics. I have a follow-up on the 2024 expenditure of 1.6 billion. Can you break that for me? I would like to know what is M&A, what was organic and what was maintenance?
Speaker Change: Hi, Andreas. Approximately 350 million dollars were related to the acquisition of a assure, that once announced at the beginning of last year. [inaudible]
Speaker Change: and the rest was mainly associated with expansions of lithium in Chile and more coal in Australia.
Speaker Change: Thank you. Can you give some indication about the volume distribution expected for 2020-25, at least in the first and second quarter, versus the second half? What is the profile of the sales that you expect? Even through the year or accelerated towards the second end, higher in the warm summers right now?
Speaker Change: Adres, I'll assume you're asking about the lithium volumes. Felipe? That's right, you can comment.
A.L.A.L.A.S.
Irina Axenova: Yes, hello, Andreas. First of all, regarding Q1 2025, we are estimating that our safe volume could reach at least 50,000 ton LCE, which is 15% higher than Q1 2024.
Irina Axenova: And to this, you also have to add some sense of lithium from Australia.
Irina Axenova: And we expect that over the coming quarters, let's say Q2 to Q4 of 25, those volumes will be increasing, reaching the highest number in Q4. But this is our expectation today.
That is great. Thank you very much.
Irina Axenova
Speaker Change: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone. Our next question comes from Gerardo Demichel with Colorate and Vile, you may proceed. Thank you very much.
Hello, good evening. Thanks for the presentation.
Gerard Domic: I had two questions. The first one, we saw some articles regarding potential impact on the construction of the Quimali or the Confucian line.
Speaker Change: Could you comment on any potential effects on either production or projects or if any?
and my second question regarding iodine costs, iodine cascosis. [inaudible]
Speaker Change: Apparently, we saw some increases in the fourth process, any events that could explain and disincrease and what should be expected for 2021. Thank you.
Thank you.
Speaker Change: First of all, to say that because of the Calitio nature you know that we have a lot of mining properties.
Speaker Change: So it's normal for us that sometimes you have together mining projects with electrical projects or other things, so for us it's normal. Thank you very much.
Speaker Change: So regarding to the specific project we are reviewing how could potentially affect our mining properties, we are under analysis and then we will decide how to proceed. That's the third thing.
regarding to the second question from Ayuan Coste.
Speaker Change: Yes, I mean if you see the abreast of the second semester of last year compared to the first semester. Yes, there.
Speaker Change: It's true that the cost is higher, especially in Q4 of last year. However, it's important to say that this cost is not represented at all of our current cost. [inaudible]
However, having said that is important to say that...
Speaker Change: being appreciated a little bit because we are a maximum production. Today we are driven to put all the products that we can put on the market because of the market reality. So the margin and cost it's been higher than before.
Okay, perfect, thank you.
Irina Axenova
Speaker Change: Thank you. I would now like to turn the call back over to Isabella Bendec for any closing remarks.
Thank you all for joining and have a nice day.
Speaker Change: Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.
Thank you for watching!