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Corporate Presentation November 2017
- 1. SQM THIRD QUARTER 2017 RESULTS
- 2. Statements in this presentation concerning the Company’s 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 “forward-looking statements” 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 $892 million | EBIT DA M a rgin LT M : ~ 4 2 % NFD/EBITDA: .3 | Moody´s: Baa1 | Standard and Poor ´s: BBB SPECIALTY CHEMICALS 19% 32% 12% 29% 5%9% 17% 7% 61% 5% Revenue Gross Profit Contribution to Revenue vs. Gross Profit 9M20172 1 Twelve months ended September 30, 2017 2 Excluding “Others”
- 4. • High concentrations of potassium and lithium • High evaporation rates • Production rights are pursuant to a lease agreement with CORFO until 2030 • Technology and experience to efficiently operate Caliche Ore Technology and experience to efficiently operate • Caliche ore is only found in Chile • The world’s largest deposits of nitrates and iodine • Proprietary mining rights pursuant to exploitation concessions Salar Brines Sodium nitrate + Potassium chloride = Potassium nitrate + (Sodium chloride) + NaNO3 KCl = KNO3 Sustainable Operations in the North of Chile 4 Natural Resources and Experience
- 5. Review of Results US$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 • Minera Exar, 50/50 JV • Caucharí-Olaroz, Jujuy • Capacity 25,000 MT (I stage 2019) + 25,000 (II stage) • Total CAPEX (stage I+II) ~US$675 million • Mt. Holland integrated project, 50/50 JV • Capacity 40,000 MT in 2022 • Initial investment US$110 million Chile LITHIUM CARBONATE • Current capacity 48,000 MT • Expansion to 63,000 in 2018 • CAPEX ~US$50 million LITHIUM HYDROXIDE • Current capacity 6,000 MT • Expansion to 13,500 MT in 2018 • CAPEX ~US$30 million Lithium Carbonate & Hydroxide 61 As of December 31, 2016 2 Twelve months ended September 30, 2017 Demand expected to double every 5 years Demand growth is based on xEVs growth
- 7. Lithium Demand E V O L U T I O N Demand expected to double every 5 years Source: SQM 88 116 116 116 68 126 146 16852 280 400 540 0 100 200 300 400 500 600 700 800 900 2017 2025 Scenario 1 2025 Scenario 2 2025 Scenario 3 Demand forecast final application (kTM-LCE) Electric Vehicle (EV) 208 500 650 800 Demand growth is based on EVs growth Key assumptions 2025 Scenario 1 2025 Scenario 2 2025 Scenario 3 Total vehicles, million units 100 100 100 Electric Vehicle (EV), penetration 8% 10% 12% Avg. LCE, kg/vehicle 35 40 45 Other batteries, % growth 8% 10% 12% Others, % growth 3.5% 3.5% 3.5%
- 8. Lithium Supply The largest concentration of new projects is in Australia (11) and Argentina (7) Source: SQM (includes expansions of current producers) Projects Status State Projects Total capacity (kTM LCE) Country N Upcoming Start-up / Construction 9 133 Australia Chile Canada Argentina Brazil 3 2 1 2 1 Advanced Plant pilot or DFS 9 149 Argentina Chile Australia Brazil Bolivia Other 1 1 4 1 1 1 Possible Announced or PFS 20 325 Australia Argentina China Serbia Canada Chile Other 4 4 5 1 1 2 3 Total 38 607 (includes SQM expansion) Currentprojects Upcomingprojects Advancedprojects Possibleprojects N E W P R O J E C T S
- 9. Iodine and Derivatives • Lowest-cost producer • Main uses: X-ray contrast media - 23%, pharmaceuticals – 13%, LCD - 12%. • Expansion to 14,000 MT per year by end-2018 • Average prices in 9M2017 ~20 US$ • Expected sales volumes in 2017 ~12,500 MT • 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 • Potassium nitrate (KNO3) provides unique benefits: chlorine-free, water soluble, and fast absorption • Water soluble segment grows at ~5% per year SQM competitive advantage: • Access to reserves of both potassium and nitrates • Developed distribution network and diverse customer base • 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 • MOP is the most common used potassium based fertilizer • 2017 market size estimate ~ 63 million MT • Major players in Belarus, Canada and Russia • Slight Price recovery seen in 1H2017, average prices in 9M2017 ~US$278/MT SQM competitive advantage: • Low-cost producer of MOP • Flexibility to produce MOP, SOP and KNO3 depending on market needs • Effective production capacity: 2 million MT/year (including KCL for KNO3 production), expected sales in 2017 ~1.3 million MT • 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 • Various traditional uses for industrial nitrates related to glass, metal treatment and explosives • Solar Salts: • A 50MW parabolic CSP plant with 7.5 hours of indirect storage requires ~30k MT of solar salts • Solar salts expected installed capacity of Concentrated Solar Power (CSP) to reach ~20GW by 2020 and supply 12% of world electricity by 2050 • Project being developed in Europe, Northern and Southern Africa, Middle East, Chile, China and Australia • Prices remain flat in 2017 compared to 2016 • Sales volumes expected to be over 90k MT in 2017 SQM competitive advantage: • Operational flexibility with certain industrial sodium and potassium nitrate products • 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): Chaucharí – 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) 𝑐𝑎𝑠ℎ+𝑜𝑡ℎ𝑒𝑟 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑓𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝑎𝑠𝑠𝑒𝑡𝑠 𝑐𝑢𝑟𝑟𝑒𝑛𝑡 𝑓𝑖𝑛𝑎𝑛𝑐𝑖𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 ≥ 2.5 2.0 1.5 (b) 𝑡𝑜𝑡𝑎𝑙 𝑙𝑖𝑎𝑏𝑖𝑙𝑖𝑡𝑖𝑒𝑠 𝑡𝑜𝑡𝑎𝑙 𝑒𝑞𝑢𝑖𝑡𝑦 ≤ 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 : • 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 • K e l l y O ’ 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 • 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