SQM REPORTS EARNINGS FOR THE THREE MONTHS ENDED MARCH 31, 2024|

Rhea-AI Summary

SQM reported earnings for Q1 2024, revealing a net loss of $869.5 million ($3.04 per share), starkly down from a net income of $749.9 million ($2.63 per share) in Q1 2023. Total revenues plummeted 52.1% year-on-year to $1,084.5 million. Excluding one-time adjustments, net income was $228.1 million, showing a 69.6% decline. Despite revenue drops, SQM saw over 30% year-on-year growth in lithium sales volumes, hitting over 43,000 metric tons in Q1 2024. The company also reported record-high iodine sales of 3,700 metric tons. Key developments include the acquisition of the Andover lithium project in Australia and the completion of the Dixin lithium hydroxide facility ramp-up in China. The company has revised its FY2024 lithium sales volumes guidance upward.

Positive

• Over 30% year-on-year growth in lithium sales volumes, surpassing 43,000 metric tons in Q1 2024.
• Record-high quarterly sales volumes in the iodine business, over 3,700 metric tons.
• Revised and increased FY2024 lithium sales volumes guidance.
• Acquisition of Andover lithium project in Western Australia for approximately $350 million.
• Completion of the ramp-up of the Dixin lithium hydroxide facility in China with a capacity of 20,000 metric tons.
• Net income of $228.1 million excluding one-time adjustments, despite significant revenue decline.

Negative

• Net loss of $869.5 million, down from a net income of $749.9 million year-on-year.
• Total revenues decreased by 52.1% to $1,084.5 million compared to Q1 2023.
• Gross profit dropped to $368.5 million, representing 34.0% of revenues, down from $1,065.6 million (47.1%) in Q1 2023.
• Decline in realized average sales prices due to lower market prices in Q1 2024.
• Significant decrease (69.6%) in net income excluding one-time adjustments.

Insights

Financial Analyst

The financial results for SQM reveal a significant decline in revenue and net income compared to the same period last year, which is a clear cause for concern for investors. The reported total revenues for Q1 2024 were US$1,084.5 million, down approximately 52.1 from US$2,263.9 million in Q1 2023. Furthermore, the company reported a net loss of (US$869.5) million, a drastic change from a net income of US$749.9 million in Q1 2023. These figures represent a substantial decrease in profitability, with a 69.6% drop in net income when accounting for specific tax adjustments.

The decrease in revenues and profitability can be partly attributed to the lower market prices, as mentioned for their lithium business despite higher sales volumes. This indicates that while the demand for lithium remains strong, pricing pressures are negatively impacting financial performance. Investors should closely monitor how the company manages these pricing pressures in the coming quarters.

Critical factors to watch include the company's ability to stabilize market prices and whether their expanded capacities will translate to improved financial performance in the upcoming quarters. Given the downward trend in both revenues and net income, the short-term outlook appears challenging.

Market Research Analyst

From a market perspective, it’s worth noting that SQM has achieved significant growth in sales volumes across its major businesses, particularly in the lithium, iodine and potassium sectors. The company reported a 30% year-on-year increase in lithium sales volumes, surpassing 43,000 metric tons in Q1 2024. Additionally, they recorded a 9% increase in iodine sales volumes and a 20% increase in specialty nutrition and potassium sales volumes.

Despite these positive volume metrics, the impact of lower market prices cannot be ignored. Market analysts should consider the broader economic factors affecting pricing trends in the lithium market, including supply chain dynamics, geopolitical influences and demand fluctuations. The revised guidance for higher lithium sales volumes in FY2024 indicates optimism about future demand, especially in China, but whether this optimism translates to financial recovery will depend on market conditions and the company's pricing strategy.

In the long-term, the strategic acquisitions and expansion projects, such as the Andover lithium project in Australia and the Dixin lithium hydroxide conversion facility in China, are positive signals of growth potential. These initiatives align with the increasing global demand for lithium, driven by the electric vehicle market and renewable energy storage solutions. However, investors should be cautious of the near-term financial strain and ensure the long-term potential is not overshadowed by immediate financial concerns.

Tech Expert

SQM’s technological advancements and capacity expansions are critical for staying competitive in the evolving lithium market. The completion of the Dixin lithium hydroxide conversion facility in Sichuan, China, with a nominal capacity of 20,000 metric tons, marks a significant milestone. This facility enables SQM to convert lithium sulfate into battery-grade lithium hydroxide, a key component for electric vehicle batteries.

The company's focus on improving efficiency, quality and process improvements can enhance their production capabilities and potentially lower operating costs in the long run. Their lithium carbonate facility in Chile reaching 210,000 metric tons per year and the planned expansion to 240,000 metric tons by 2025 further underscores their commitment to increasing production capacity.

The strategic acquisition of the Andover lithium project in Australia, through a 50/50 joint venture with Hancock Prospecting, highlights SQM's proactive approach to securing valuable resources and reinforcing their market position. This acquisition could provide a significant boost to their lithium production capacity, aligning with the growing global demand for lithium.

While these technological and capacity expansions are promising, investors should consider the associated capital expenditures and the time required for these initiatives to positively impact financial performance. The cumulative capital expenses of US$1.3 billion for 2024 pose a substantial investment and the return on this investment will be critical to evaluate in the coming years.

Highlights

•          SQM reported total revenues for the three months ended March 31, 2024 of US$1,084.5 million compared to total revenues of  US$2,263.9 million for the same period last year.

•          Net loss(1) for the three months ended March 31, 2024 of (US$869.5) million or (US$3.04) per share, compared to net income of  US$749.9 million, US$2.63 per share for the same period last year.

•          Over 30% year-on-year higher sales volumes in lithium business, surpassing 43,000 metric tons in 1Q2024.

•          Revised and increased FY2024 lithium sales volumes guidance.

•          Record-high quarterly sales volumes in iodine business, over 3,700 metric tons in 1Q2024.

•          Concluded the acquisition of Andover lithium project in Western Australia.

•          Successfully completed the ramp-up of the Dixin lithium hydroxide conversion facility in Sichuan, China, with a nominal capacity of 20,000 metric tons.

SQM will hold a conference call to discuss these results on Thursday, May 23, 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=qmUdFzpU

SANTIAGO, Chile, May 22, 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 three months ended March 31, 2024, of (US$869.5) million, (US$3.04) per share. Excluding the net effect of accounting adjustments for the payments of the specific tax on mining activities for the exploitation of lithium, the net income for the three months ended March 31, 2024, totaled US$228.1 million (US$0.80 per share), representing a decrease of approximately 69.6% compared to US$749.9 million (US$2.63 per share). 

Gross profit reached US$368.5 million (34.0% of revenues) for the three months ended March 31, 2024, lower than US$1,065.6 million (47.1% of revenues) recorded for the three months ended March 31, 2023. Revenues totaled US$1,084.5 million for the three months ended March 31, 2024, representing a decrease of approximately 52.1% compared to US$2,263.9 million reported for the three months ended March 31, 2023.

SQM's Chief Executive Officer, Ricardo Ramos, stated, "We are pleased with the positive year-on-year growth in sales volumes across all of our major businesses. During the first quarter of 2024, we delivered record-high quarterly sales volumes in the iodine business, almost 9% higher when compared to the same period last year. Sales volumes in our specialty nutrition and potassium business lines were approximately 20% higher year-on-year, while lithium sales volumes were over 30% higher during the first quarter of 2024 compared to the same period last year. This growth was offset by lower year-on-year realized average sales prices in these business lines as a result of lower market prices during the first quarter of 2024."

He continued by saying, "We believe that the strong demand growth in lithium market seen since the beginning of the year could continue for the remainder of the year, with total lithium demand surpassing 1.1 million metric tons during 2024. Given this positive trend in demand growth, especially in China which accounts for almost 75% of global lithium demand, and our updated sales volumes outlook for the year, we believe that our sales volumes could reach 200,000 metric tons in 2024." 

Mr. Ramos added, "We continue with our growth plans in Chile and abroad. Our iodine and nitrates expansion project in Pampa Blanca is progressing successfully and we expect to deliver 1,300 metric tons of iodine from this new operation in 2024. In the recent months, we began the construction of a seawater pipeline which will deliver seawater to our operations, allowing us to expand our production capacity and supply freshwater to our neighboring communities.

In lithium business, as detailed below, we have completed the new expansion of our lithium carbonate facility in Chile, reaching 210,000 metric tons per year, and continued to work on a series of initiatives related to efficiency, quality and process improvements to expand this production capacity to 240,000 metric tons per year in 2025, thus adding incremental 30,000 metric tons per year of lithium carbonate capacity. Our lithium hydroxide capacity (conversion from lithium carbonate) has reached 40,000 metric tons per year and we remain on track to increase our total lithium hydroxide capacity in Chile to 100,000 metric tons per year in 2025.

After signing a non-binding Memorandum of Understanding with Codelco at the end of last year, we continued with the negotiations to define the definitive conditions and documents for a joint operation in the Salar de Atacama, which we expect to deliver by the end of this month."

He closed by saying, "In China, after several years of developing lithium sulfate refinery project, which consisted of redesigning and modifying of the Dixin chemical plant to convert lithium sulfate product from the Salar de Atacama into battery grade lithium hydroxide, we are proud to announce that this process concluded this month by SQM acquiring 100% of the plant. With a design capacity of 20,000 metric tons per year and the first production archived at the end of last year, Dixin plant is fundamental to our strategy to at least double our lithium hydroxide production from lithium sulfate in the coming years.

Finally, in Australia, through a 50/50 joint venture with Hancock Prospecting Pty (Hancock), we completed the acquisition of 60% of the Andover lithium project by acquiring 100% of the shares of Azure Minerals Limited for a total amount of approximately US$350 million (SQM's share). We look forward to working with Hancock on what we believe will be a  significant lithium project on a global scale. By combining our mining and lithium expertise with Hancock's experience in project development and mining operations in Australia, we expect to build a strong and mutually beneficial partnership."

The total capex for 2024 is expected to reach US$1.3 billion, including the capex associated with the abovementioned initiatives for our lithium carbonate capacity expansions of approximately US$70 million, Dixin plant acquisition of approximately US$140 million, and maintenance of approximately US$150 million. The total capex amount does not include the amount of approximately US$350 million paid for the acquisition of Andover lithium project.

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 implementation of the MoU and potential 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, 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.

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^([1]) Includes the net effect of accounting adjustments for the payments of the specific tax on mining activities for the exploitation of lithium as of March 31, 2024, in a total amount of US$1,097.6 million. For more detail, please refer to Note (1) to the 1Q2024 Earnings release.

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

FAQ

What were SQM's total revenues for Q1 2024?

SQM reported total revenues of $1,084.5 million for Q1 2024.

How did SQM's net income for Q1 2024 compare to Q1 2023?

SQM reported a net loss of $869.5 million for Q1 2024, compared to a net income of $749.9 million in Q1 2023.

What was SQM's net income excluding one-time adjustments for Q1 2024?

Excluding one-time adjustments, SQM's net income was $228.1 million in Q1 2024.

How much did SQM's lithium sales volumes increase in Q1 2024?

SQM's lithium sales volumes increased by over 30% year-on-year, surpassing 43,000 metric tons in Q1 2024.

What was SQM's gross profit for Q1 2024?

SQM's gross profit was $368.5 million for Q1 2024.

What were the highlights in SQM's iodine business for Q1 2024?

SQM reported record-high quarterly sales volumes in the iodine business, over 3,700 metric tons in Q1 2024.

What major acquisition did SQM complete in Q1 2024?

SQM completed the acquisition of the Andover lithium project in Western Australia for approximately $350 million.

What is the capacity of SQM's newly ramped-up Dixin lithium hydroxide facility?

The Dixin lithium hydroxide facility in China has a nominal capacity of 20,000 metric tons per year.

What is SQM's revised FY2024 guidance for lithium sales volumes?

SQM has revised and increased its FY2024 lithium sales volumes guidance.

What was SQM's total capex forecast for 2024?

SQM's total capex for 2024 is expected to reach $1.3 billion, excluding the $350 million spent on the Andover lithium project acquisition.