SQM REPORTS EARNINGS FOR THE SIX MONTHS ENDED JUNE 30, 2024

Rhea-AI Summary

SQM reported net loss of US$655.9 million for the six months ended June 30, 2024, compared to net income of US$1,330.1 million in the same period last year. Total revenues decreased 44.9% to US$2,378.1 million. The company saw strong sales volume growth in lithium, iodine, and fertilizer businesses, with record-high quarterly sales volumes in lithium and iodine. However, significantly lower average realized lithium prices offset the volume growth. SQM signed a partnership agreement with Codelco for lithium operations in Salar de Atacama until 2060 and launched SQM International Lithium to develop business outside Chile. The company expects the downward pricing trend to continue in the second half of 2024, potentially impacting realized prices.

Positive

• Record-high quarterly sales volumes in lithium (52,000+ metric tons) and iodine (4,000+ metric tons)
• Strong sales volume growth in lithium, iodine, and fertilizer businesses
• Partnership agreement with Codelco for lithium operations in Salar de Atacama until 2060
• Launch of SQM International Lithium to expand production outside Chile
• Long-term agreement signed with Hyundai Motors Co. and Kia

Negative

• Net loss of US$655.9 million for the six months ended June 30, 2024
• Total revenues decreased 44.9% to US$2,378.1 million
• Significantly lower average realized lithium prices
• Expected continuation of downward lithium pricing trend in second half of 2024
• Potential reduction in output by some lithium producers due to current price levels

Insights

Financial Analyst

SQM's financial results for H1 2024 paint a concerning picture. The company reported a substantial net loss of $655.9 million, a stark contrast to the $1.33 billion profit in H1 2023. This dramatic shift is primarily due to a 44.9% decrease in revenues, falling from $4.32 billion to $2.38 billion.

The main culprit appears to be the significant drop in lithium prices. Despite record-high sales volumes in lithium and iodine, the revenue decline suggests a severe price compression. This trend is expected to continue, with lithium price indices in China already 20% lower than Q2 2024 averages.

On a positive note, SQM's partnership with Codelco and the launch of SQM International Lithium demonstrate strategic moves for long-term growth. However, the immediate financial outlook remains challenging and investors should brace for potential further declines in profitability in the near term.

Market Research Analyst

The lithium market is experiencing significant turbulence, as evidenced by SQM's results. The record-high sales volumes juxtaposed against plummeting revenues indicate a severe oversupply situation in the lithium market. This oversupply is driving prices down to levels where many projects may become economically unviable.

SQM's reevaluation of specific markets and initiatives suggests a potential industry-wide slowdown in capacity expansion. This could lead to a more balanced market in the medium term, but short-term pain for producers is likely.

The company's focus on international expansion through SQM International Lithium is a strategic move to diversify geographically and potentially access lower-cost production sites. However, the success of this strategy will depend on how quickly the global lithium market can rebalance supply and demand.

Tech Expert

The partnership between SQM and Hyundai Motors Co. and Kia is a significant development in the electric vehicle (EV) supply chain. This long-term agreement likely secures a stable lithium supply for these major automakers, important for their EV production plans.

However, the current lithium price collapse could have far-reaching implications for the EV industry. While lower lithium prices could potentially reduce EV battery costs, they may also slow down investments in new lithium projects. This could lead to future supply constraints as EV adoption accelerates.

SQM's commitment to increasing production by 100,000 metric tons of LCE per year by 2030 through SQM International Lithium is ambitious. It reflects confidence in long-term demand growth but may face challenges if current market conditions persist. The success of this expansion will be closely tied to the pace of global EV adoption and energy storage deployment.

Highlights

•          SQM reported total revenues for the six months ended June 30, 2024 of US$2,378.1 million compared to total revenues of US$4,315.6 million for the same period last year.

•          Net loss for the six months ended June 30, 2024 of (US$655.9) million or (US$2.30) per share, compared to net income of  US$1,330.1 million or US$4.66 per share for the same period last year.

•          Strong sales volumes growth in lithium, iodine and fertilizer businesses.

•          Record-high quarterly sales volumes in lithium and iodine businesses, surpassing 52,000 metric tons and 4,000 metric tons, respectively.

•          Signed definitive partnership agreement with Codelco to jointly develop and operate lithium assets in the Salar de Atacama until 2060.

•          Signed a long-term agreement with Hyundai Motors Co. Ltd. and Kia Corporation.

•          Launched SQM International Lithium to develop our lithium business outside of Chile.

SQM will hold a conference call to discuss these results on Wednesday, August 21, 2024 at 12:00pm ET (12:00pm Chile time).

Participant Dial-In (Toll Free): 1-844-282-4852

Participant International Dial-In: 1-412-317-5626

Webcast: https://event.choruscall.com/mediaframe/webcast.html?webcastid=FRfGBEBZ

SANTIAGO, Chile, Aug. 21, 2024 /PRNewswire/ -- Sociedad Química y Minera de Chile S.A. (SQM) (NYSE: SQM; Santiago Stock Exchange: SQM-B, SQM-A) reported today net loss⁽¹⁾ for the six months ended June 30, 2024, of (US$655.9) million or (US$2.30) per share, compared to US$1,330.1 million or US$4.66 per share reported for the same period last year. 

Gross profit reached US$752.5 million (31.6% of revenues) for the six months ended June 30, 2024, lower than US$1,920.7 million (44.5% of revenues) recorded for the six months ended June 30, 2023. Revenues totaled US$2,378.1 million for the six months ended June 30, 2024, representing a decrease of 44.9% compared to US$4,315.6 million reported for the six months ended June 30, 2023.

The Company also announced net income for the second quarter of 2024 of US$213.6 million or US$0.75 per share, a decrease of 63.2% compared to US$580.2 million or US$2.03 per share for the second quarter of 2023. Gross profit for the second quarter of 2024 reached US$383.9 million, 55.1% lower than the US$855.1 million reported for the second quarter of 2023. Revenues totaled US$1,293.6 million for the second quarter of 2024, a decrease of 37.0% compared to US$2,051.7 million for the second quarter of 2023.

SQM's Chief Executive Officer, Ricardo Ramos, stated, "We are very pleased to highlight that during the second quarter, we entered into a partnership agreement with Codelco to extend our operations in the Salar de Atacama until 2060. Together with Codelco, we are working to fulfill the remaining conditions for the partnership to take effect in 2025. The most pivotal of these is the consultation process with the communities surrounding the Salar de Atacama. We are committed to reaching a mutually beneficial agreement with the Atacameño communities founded upon the most rigorous standards, transparency and promotion of the human rights of these communities."

He continued by saying, "In the second quarter, we continued to see positive sales volumes growth in the lithium, iodine and fertilizer businesses. While sales volumes in the lithium and iodine businesses again reached record levels, increasing by more than 20% and 11%, respectively, compared to the same period last year, sales volumes in the fertilizer business confirmed the strong demand recovery trends anticipated since the beginning of the year, increasing by more than 20% compared to the same period last year."    

Mr. Ramos further stated, "The strong sales volumes growth in the lithium business in the second quarter was offset by significantly lower average realized lithium prices, as a result of lower market prices when compared to the same period last year. We see this pricing trend continuing in the second half of this year, with current lithium price indices in China nearly 20% lower than the average lithium price indices in the second quarter of 2024. This trend could have a negative impact on our realized prices, which reflect the prevailing market price trends, in the second half of the year. Given current price levels, we anticipate that some lithium producers may reduce their output, as many projects, especially greenfield, are not economically viable at these prices. In our situation, while we continue to advance our previously announced expansions, we are currently reevaluating specific markets and initiatives that may be less attractive in the near term under these conditions."

Mr. Ramos closed by saying, "In light of our confidence in the long-term growth of the lithium industry, we launched SQM International Lithium to focus on developing SQM's lithium business outside of Chile. Leveraging our expertise in exploration, project development, M&A and innovation, SQM International Lithium's objective is to expand the portfolio of lithium assets we have with various partners outside of Chile, allowing us to increase SQM's production volumes by at least 100,000 metric tons of LCE per year by the end of this decade."

About SQM

SQM is a global company that is listed on the New York Stock Exchange and the Santiago Stock Exchange (NYSE: SQM; Santiago Stock Exchange: SQM-B, SQM-A). SQM develops and produces diverse products for several industries essential for human progress, such as health, nutrition, renewable energy and technology through innovation and technological development. We aim to maintain our leading world position in the lithium, potassium nitrate, iodine and thermo-solar salts markets.

For further information, contact:

Gerardo Illanes / gerardo.illanes@sqm.com
Irina Axenova  / irina.axenova@sqm.com
Isabel Bendeck / isabel.bendeck@sqm.com

For media inquiries, contact:

Maria Ignacia Lopez / ignacia.lopez@sqm.com
Pablo Pisani / pablo.pisani@sqm.com

Cautionary Note Regarding Forward-Looking Statements

This news release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "plan," "believe," "estimate," "expect," "strategy," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make concerning the completion and implementation of the proposed partnership with Codelco, the development of Salar Futuro Project, Company's capital expenditures, financing sources, Sustainable Development Plan, business and demand outlook, future economic performance, anticipated sales volumes and sales prices, profitability, revenues, expenses, or other financial items, anticipated cost synergies and product or service line growth.

Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are estimates that reflect the best judgment of SQM management based on currently available information. Because forward-looking statements relate to the future, they involve a number of risks, uncertainties and other factors that are outside of our control and could cause actual results to differ materially from those stated in such statements, including our ability to successfully implement the Sustainable Development Plan. Therefore, you should not rely on any of these forward-looking statements. Readers are referred to the documents filed by SQM with the United States Securities and Exchange Commission, including the most recent annual report on Form 20-F, which identifies other important risk factors that could cause actual results to differ from those contained in the forward-looking statements. All forward-looking statements are based on information available to SQM on the date hereof and SQM assumes no obligation to update such statements, whether as a result of new information, future developments or otherwise, except as required by law.

⁽¹⁾ Includes the net effect of accounting adjustments for the payments of the specific tax on mining activities for the exploitation of lithium for the six months ended June 30, 2024, in a total amount of US$1,106.9 million. For more detail, please refer to Note (1) to this Earnings release.

 

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SOURCE Sociedad Quimica y Minera de Chile, S.A. (SQM)

FAQ

What were SQM's financial results for the first half of 2024?

SQM reported a net loss of US$655.9 million and total revenues of US$2,378.1 million for the six months ended June 30, 2024, representing a significant decrease compared to the same period in 2023.

How did SQM's lithium sales volumes perform in Q2 2024?

SQM achieved record-high quarterly sales volumes in lithium, surpassing 52,000 metric tons, which represents an increase of more than 20% compared to the same period last year.

What is the outlook for lithium prices in the second half of 2024 for SQM?

SQM expects the downward lithium pricing trend to continue in the second half of 2024, with current price indices in China nearly 20% lower than the average in Q2 2024, potentially impacting realized prices.

What strategic partnerships did SQM announce in 2024?

SQM signed a definitive partnership agreement with Codelco to jointly develop and operate lithium assets in the Salar de Atacama until 2060, and a long-term agreement with Hyundai Motors Co. and Kia

What is SQM International Lithium and what are its objectives?

SQM International Lithium is a new initiative launched by SQM to develop its lithium business outside of Chile. Its objective is to expand SQM's lithium asset portfolio and increase production volumes by at least 100,000 metric tons of LCE per year by the end of the decade.