SQM reported its third quarter 2017 results. The company saw higher revenues and gross profits compared to the third quarter of 2016, driven by increased volumes in iodine and industrial chemicals offsetting lower prices. Prices increased in lithium and potassium business lines. SQM expects continued demand growth for its lithium and specialty plant nutrients products. The company has several expansion projects planned between 2016-2022 to increase production capacities of various products, with over $1 billion in planned capital expenditures.
2. Statements in this presentation concerning the
Companyβs business outlook or future economic
performances, anticipated profitability, revenues,
expenses, or other financial items, anticipated cost
synergies and product or service line growth, together
with other statements that are not historical facts, are
βforward-looking statementsβ as that term is defined
under Federal Securities Laws.
Any forward-looking statements are estimates, reflecting
the best judgment of SQM 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.
Risks, uncertainties, and factors that could affect the
accuracy of such forward-looking statements are
identified in the public filing made with the Securities and
Exchange Commission, and forward-looking statements
should be considered in light of those factors.
SQM
Important Notice
2
3. 3
Potassium Specialty Plant
Nutrients
Iodine &
Derivatives
Lithium &
Derivatives
Industrial
Chemicals
FERTILIZERS
SQM at a Glance
R e v e nue LT M 1: US $2.1 billion | EBIT D A LT M : US $892 million | EBIT DA M a rgin LT M : ~ 4 2 %
NFD/EBITDA: .3 | MoodyΒ΄s: Baa1 | Standard and Poor Β΄s: BBB
SPECIALTY CHEMICALS
19%
32%
12%
29%
5%9%
17%
7%
61%
5%
Revenue Gross Profit
Contribution to Revenue vs. Gross Profit 9M20172
1 Twelve months ended September 30, 2017
2 Excluding βOthersβ
4. β’ High concentrations of potassium and lithium
β’ High evaporation rates
β’ Production rights are pursuant to a lease
agreement with CORFO until 2030
β’ Technology and experience to efficiently operate
Caliche Ore
Technology and experience to efficiently operate
β’ Caliche ore is only found in Chile
β’ The worldβs largest deposits of nitrates and
iodine
β’ Proprietary mining rights pursuant to
exploitation concessions
Salar Brines
Sodium nitrate + Potassium chloride =
Potassium nitrate + (Sodium chloride)
+
NaNO3
KCl = KNO3
Sustainable Operations in the North of Chile
4
Natural Resources and Experience
5. Review of Results
US$Million
US$Million
Revenue Contribution
9M2017/9M2016
Gross Profit Contribution
9M2017/9M2016
Impact of higher volumes outweighs lower prices in iodine and industrial chemical business
lines. Prices increased in lithium and potassium business lines.
5
1,386
1,583
24 16
127 38 5
(13)
1,100
1,300
1,500
1,700
406
385 385 394
511 525 546
546
0
(21)
9
117 14 21 0
200
300
400
500
600
700
6. Lithium and
Derivatives
27% Market Share1
51.0k MT LTM2 Sales Volumes
US$642 mm LTM Revenues
61% Contribution to LTM Gross Profit
SQM Lithium Projects
Argentina
Australia
β’ Minera Exar, 50/50 JV
β’ CaucharΓ-Olaroz, Jujuy
β’ Capacity 25,000 MT (I stage 2019) + 25,000 (II stage)
β’ Total CAPEX (stage I+II) ~US$675 million
β’ Mt. Holland integrated project, 50/50 JV
β’ Capacity 40,000 MT in 2022
β’ Initial investment US$110 million
Chile
LITHIUM CARBONATE
β’ Current capacity 48,000 MT
β’ Expansion to 63,000 in 2018
β’ CAPEX ~US$50 million
LITHIUM HYDROXIDE
β’ Current capacity 6,000 MT
β’ Expansion to 13,500 MT in 2018
β’ CAPEX ~US$30 million
Lithium Carbonate & Hydroxide
61 As of December 31, 2016
2 Twelve months ended September 30, 2017
οΆ Demand expected to double every 5 years
οΆ Demand growth is based on xEVs growth
7. Lithium Demand
E V O L U T I O N
Demand
expected to
double
every 5
years
Source: SQM
88 116 116 116
68
126 146 16852
280
400
540
0
100
200
300
400
500
600
700
800
900
2017 2025 Scenario 1 2025 Scenario 2 2025 Scenario 3
Demand forecast final application (kTM-LCE)
Electric
Vehicle (EV)
208
500
650
800
Demand
growth is
based on
EVs growth
Key assumptions 2025
Scenario 1
2025
Scenario 2
2025
Scenario 3
Total vehicles, million units 100 100 100
Electric Vehicle (EV), penetration 8% 10% 12%
Avg. LCE, kg/vehicle 35 40 45
Other batteries, % growth 8% 10% 12%
Others, % growth 3.5% 3.5% 3.5%
8. Lithium Supply
The largest
concentration of
new projects is in
Australia (11) and
Argentina (7)
Source: SQM (includes expansions of current producers)
Projects
Status
State Projects Total
capacity
(kTM
LCE)
Country N
Upcoming Start-up /
Construction
9 133 Australia
Chile
Canada
Argentina
Brazil
3
2
1
2
1
Advanced Plant pilot or
DFS
9 149 Argentina
Chile
Australia
Brazil
Bolivia
Other
1
1
4
1
1
1
Possible Announced or
PFS
20 325 Australia
Argentina
China
Serbia
Canada
Chile
Other
4
4
5
1
1
2
3
Total 38 607
(includes SQM
expansion)
Currentprojects
Upcomingprojects
Advancedprojects
Possibleprojects
N E W P R O J E C T S
9. Iodine and
Derivatives
β’ Lowest-cost producer
β’ Main uses: X-ray contrast media - 23%, pharmaceuticals β
13%, LCD - 12%.
β’ Expansion to 14,000 MT per year by end-2018
β’ Average prices in 9M2017 ~20 US$
β’ Expected sales volumes in 2017 ~12,500 MT
β’ Global demand in 2017 is expected to be ~34,900 MT (~3%
annual growth)
29% Market Share1
12.4k MT LTM2 Sales Volumes
US$247 mm LTM Revenues
6% Contribution to LTM Gross Profit
Iodine
9
1 As of December 31, 2016
2 Twelve months ended September 30, 2017
10. Specialty Plant
Nutrients
46% KNO3 Market Share1
902k MT LTM2 Sales Volumes
US$648 mm LTM Revenues
17% Contribution to LTM Gross Profit
β’ Potassium nitrate (KNO3) provides unique benefits: chlorine-free,
water soluble, and fast absorption
β’ Water soluble segment grows at ~5% per year
SQM competitive advantage:
β’ Access to reserves of both potassium and nitrates
β’ Developed distribution network and diverse customer base
β’ Current production capacity: 1 million MT/year, expansion
to 1.5 million MT/year in 2018
Potassium Nitrate (KNO3)
101 As of December 31, 2016
2 Twelve months ended September 30, 2017
11. Potassium Chloride & Sulfate
Potassium
<3% Market Share1
1.5 million MT LTM2 Sales Volumes
US$408 mm LTM Revenues
9% Contribution to LTM Gross Profit
β’ MOP is the most common used potassium based fertilizer
β’ 2017 market size estimate ~ 63 million MT
β’ Major players in Belarus, Canada and Russia
β’ Slight Price recovery seen in 1H2017, average prices in 9M2017 ~US$278/MT
SQM competitive advantage:
β’ Low-cost producer of MOP
β’ Flexibility to produce MOP, SOP and KNO3 depending on market needs
β’ Effective production capacity: 2 million MT/year (including KCL for
KNO3 production), expected sales in 2017 ~1.3 million MT
β’ Sintukola project in Republic of Congo (Kore Potash Ltd), US$20 million
investment for 18% ownership stake. Feasibility study results in 2018
11
1 As of December 31, 2016
2 Twelve months ended September 30, 2017
12. Solar Salts
Industrial
Chemicals
179k MT LTM1 Sales Volumes
US$142 mm LTM Revenues
7% Contribution to LTM Gross Profit
β’ Various traditional uses for industrial nitrates related to glass, metal treatment and
explosives
β’ Solar Salts:
β’ A 50MW parabolic CSP plant with 7.5 hours of indirect storage requires ~30k MT of
solar salts
β’ Solar salts expected installed capacity of Concentrated Solar Power (CSP) to reach
~20GW by 2020 and supply 12% of world electricity by 2050
β’ Project being developed in Europe, Northern and Southern Africa, Middle East, Chile,
China and Australia
β’ Prices remain flat in 2017 compared to 2016
β’ Sales volumes expected to be over 90k MT in 2017
SQM competitive advantage:
β’ Operational flexibility with certain industrial sodium and potassium nitrate products
β’ Production of both potassium nitrate and sodium nitrate, the two raw materials in
solar salts production
12
1 Twelve months ended September 30, 2017
13. 2016-2018: Lithium Hydroxide Expansion to 13.5k MT: ~US$30 million
2017-2018: Potassium Nitrate Expansion to 1.5m MT: ~US$100 million
2017-2018: Lithium Carbonate Expansion to 63k MT: ~US$50 million
2017-2018: Iodine capacity expansion to 14k MT: ~US$30 million
2016-2019 (first stage 25k MT): ChaucharΓ β Olaroz project in
Argentina - ~US$425 million + ~US$250 million (pre VAT) for stages I
and II, respectively. (50/50 JV: SQM will be responsible for 50% of the
investment).
2017-2022: Mt. Holland project in Australia (50/50 JV, 40k MT)
~US$110 million initial stage, total investment TBD
Historical Maintenance CAPEX: ~US$100 million
Capex
13
14. 14
Ownership Structure1
Other Relevant Topics
Dividend Policy2
2017 Net Income distribution in 3 interim & 1 final dividend
100% 80% 60%
(a)
πππ β+ππ‘βππ ππ’πππππ‘ πππππππππ ππ π ππ‘π
ππ’πππππ‘ πππππππππ ππππππππ‘πππ
β₯ 2.5 2.0 1.5
(b)
π‘ππ‘ππ ππππππππ‘πππ
π‘ππ‘ππ πππ’ππ‘π¦
β€ 1.1 1.2 1.3
If none of the above parameters is met: 50% of 2017 Net Income
1As of September 30, 2017
2Please see the full version on our website at www.sqm.com
21%
32%
32%
15%
Bank of New York (ADRS)
Potash Corp
Pampa Group and Kowa Group
Other Chile
15. SQM
C O N T A C T I N F O R M A T I O N :
β’ G e r a r d o I l l a n e s : V P o f F i n a n c e
g e r a r d o . i l l a n e s @ s q m . c o m
β’ K e l l y O β B r i e n : H e a d o f I n v e s t o r R e l a t i o n s
k e l l y . o b r i e n @ s q m . c o m
β’ I r i n a A x e n o v a : I n v e s t o r R e l a t i o n s
i r i n a . a x e n o v a @ s q m . c o m