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Sqm corp pres 4q17_long final
- 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 2 0 1 7 R e v e n u e s : U S $ 2 . 2 b i l l i o n | 2 0 1 7 E B I T D A : U S $ 8 9 4 m i l l i o n | E B I T D A M a r g i n L T M : ~ 4 1 % N F D / E B I T D A : . 3 | M o o d y Β΄ s : B a a 1 | S t a n d a r d a n d P o o r Β΄ s : B B B SPECIALTY CHEMICALS 18% 32% 12% 30% 6%9% 19% 7% 60% 6% Revenue Gross Profit Contribution to Revenue vs. Gross Profit 20171 1 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 611 607 607 620 736 743 763 763 0 (4) 12 116 7 22 (2) 400 500 600 700 800 900 Revenue Contribution 2017/2016 Gross Profit Contribution 2017/2016 Prices increased significantly in lithium business line. Impact of higher volumes outweighs lower prices in iodine and industrial chemical business lines. Higher prices in potassium business line compensated for lower sales volumes. 5 SPN Iodine Lithium I.Chem. Potassium P Q 1939 1939 2013 2034 2164 2171 2157 2157 0 73 21 130 31 (24) (14) 1600 1900 2200 2500
- 6. Payments Production allowance New Agreement CORFO Example1 Capacity Expansion Options SQM Capacity Expansions in Chile Li2CO3: 48,000 MT to 70,000 MT in 2018 70,000 MT to 100,000 in 2019 LiHO: 6,000 MT to 13,500 MT in 2018 Li2CO3 LiHO US$/MT % US$/MT % <4,000 6.80% <5,000 6.80% 4,000-5,000 8.00% 5,000-6,000 8.00% 5,000-6,000 10.00% 6,000-7,000 10.00% 6,000-7,000 17.00% 7,000-10,000 17.00% 7,000-10,000 25.00% 10,000-12,000 25.00% >10,000 40.00% >12,000 40.00% Original Agreement % US$/MT Li2CO3, LiHO 6.80% 884 KCL 1.80% 5.04 New Agreement Li2CO3 19.78% 2,572 LiHO 14.85% 1,930 KCL 3.00% 8.40 1Avg. price lithium: US$13,000/MT, potassium: US$280/MT Total production quota until 2030: 349,553 MT of LME: Reminder original quota: 64,816 New quota: 185,767 Additional quota: 112,723 Efficiency quota: 51,063 Total 2.2 million MT of LCE Expansion 1: 50,000 MT by 2023 Expansion 2: 100,000 MT (in 4 stages of 25k MT) 6
- 7. Lithium and Derivatives 2017: 23% Market Share 49.7k MT Sales Volumes US$645 mm Revenues 60% Contribution to Gross Profit SQM Lithium Projects Argentina Australia β’ Minera Exar, 50/50 JV β’ CaucharΓ-Olaroz, Jujuy β’ Capacity 25,000 MT - I stage in 2020 β’ Mt. Holland integrated project, 50/50 JV β’ Capacity 40,000 MT in 2021 Chile LITHIUM CARBONATE β’ Current capacity 48,000 MT β’ Expansion to 70,000 MT in 2018 β’ Expansion to 100,000 MT in 2019 LITHIUM HYDROXIDE β’ Current capacity 6,000 MT β’ Expansion to 13,500 MT in 2018 Lithium Carbonate & Hydroxide 7
- 8. 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 4Q2017 ~US$20 β’ Global demand in 2017 ~35,300 MT (~3% annual growth) 2017: 35% Market Share 12.7k Sales Volumes US$252 mm Revenues 7% Contribution to Gross Profit Iodine 8
- 9. Specialty Plant Nutrients 2017: 54% KNO3 Market Share 966.2k MT Sales Volumes US$697 mm Revenues 19% Contribution to 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: 1.3 million MT/year, expansion to 1.5 million MT/year in 2018 Potassium Nitrate (KNO3) 9
- 10. Potassium Chloride & Sulfate Potassium 2017: <3% Market Share 1.3 million MT Sales Volumes US$379 mm Revenues 9% Contribution to LTM Gross Profit β’ MOP is the most common used potassium based fertilizer β’ 2017 market size ~ 63 million MT β’ Major players in Belarus, Canada and Russia β’ Slight price recovery seen in 2017, average prices in 2017 ~US$282/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 2018 ~1 million MT 10
- 11. Solar Salts Industrial Chemicals 2017: 167.6k MT Sales Volumes US$136 mm Revenues 6% Contribution to 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’ Project being developed in Europe, Northern and Southern Africa, Middle East, Chile, China and Australia β’ Prices remained flat in 2017 compared to 2016 β’ Sales volumes ~ 88k 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 11
- 12. Historical Maintenance CAPEX: ~US$100 million 2016-2018: Lithium Hydroxide Expansion to 13.5k MT: ~US$30 million 2017-2018: Potassium Nitrate Expansion to 1.5m MT: ~US$50 million 2017-2019: Lithium Carbonate Expansion to 100k MT: ~US$170 million 2017-2018: Iodine capacity expansion to 14k MT: ~US$30 million CAPEX Framework 2018: ~US$517 million, including ~US$157 investments in projects outside Chile Capex 12
- 13. 13 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 December 31, 2017 2Please see the full version on our website at www.sqm.com 21% 32% 32% 15% Bank of New York (ADRS) Nutrien Pampa Group and Kowa Group Other Chile Ownership Structure1 DividendPolicy2
- 14. 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