26
Third Quarter Earnings Presentation / 2015
Third Quarter Earnings Presentation / 2015
2 Third Quarter Earnings/ 2015
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.
> Important Notice
3 Third Quarter Earnings / 2015
> Results
1.830
2.145 2.429
2.203 2.014
1.808
0
500
1.000
1.500
2.000
2.500
3.000
2010 2011 2012 2013 2014 LTM Sep-15
Revenues
382
546
649
467
296 247
0
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 LTM Sep-15
Net Income
Impact of US$56.3 million on third quarter 2015 net income due to restructuring of production facilities
4 Third Quarter Earnings / 2015
> Results
Revenues impacted by lower pricing in potash and iodine
Higher lithium prices
Positive effect on margins from cost savings
1522,8
1317
-31,4
-63,8
5,7
-3,8
-101,2 -11,3
1200
1300
1400
1500
1600
Revenue Contribution 9M15/9M14
442,6
424,8
29,2 -51,2
14,3 -9,7
-0,2 -0,2
400
420
440
460
480
Gross Margin Contribution 9M15/9M14
5 Third Quarter Earnings / 2015
> Results
EBITDA margin for nine months ended Sept. 30, 2015: 42%
EBITDA margin for nine months ended Sept. 30, 2014: 37%
30%
40%
50%
60%
70%
0
20
40
60
80
100
120
3Q13 4Q13 1Q14 2Q14 3Q14 4Q14 1Q15 2Q15 3Q15
EBITDA Margin %
Iodine Price (Base 100)
Potassium Price (Base 100)
Lineal (EBITDA Margin %)
Iodine and Potassium Prices vs. EBITDA Margin
6 Third Quarter Earnings / 2015
> Market Outlook
Potash Market: Global demand expected to be less in 2015 than in 2014; prices under pressure
Potassium Nitrate: Strong growth seen in water soluble (high margin) potassium nitrate; prices trending down
Iodine Market: Demand growth >3% in 2015; prices remain under pressure
Lithium Market: Strong market growth (~5%) and higher prices
Solar Salts: Higher sales in 2015; projecting volumes > 75k MT
7 Third Quarter Earnings / 2015
> Recent Announcements
Production facility restructuring Pedro de Valdivida/Nueva Victoria:
Optimize use of most efficient facilities
Costs recognized in 3Q (US$56.3 million)
Provisional dividend Dec. 10, 2015 (US$84 million)
Contact Information: > Gerardo Illanes: VP of Finance and IR, [email protected] > Kelly O’Brien: Head of Investor Relations, [email protected] > Carolyn McKenzie: Investor Relations, [email protected]
November 2015
10 Third Quarter Earnings/ 2015
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.
> Important Notice
1 > INVESTMENT HIGHLIGHTS
12 Third Quarter Earnings/ 2015
> SQM at a Glance
(1) LTM: Twelve-month period ended September 30, 2015 (2) EBITDA: gross profit – SGA + depreciation & amortization
FERTILIZERS SPECIALTY CHEMICALS
Specialty Plant Nutrition
Potassium Iodine & Derivatives
Lithium & Derivatives
Industrial Chemicals
Financial Profile Revenue LTM(1): US$1.8 billion EBITDA(2) LTM: US$740 million EBITDA Margin LTM: ~ 41%
Healthy Credit Metrics
Debt/Equity Ratio: 1.02 NFD/EBITDA 0.7 Current Ratio 3.4
Financially Stable: Credit Ratings Standard & Poor’s: BBB Moody’s: Baa1
Highly Liquid Shares
Listed on the Santiago Stock Exchange, and the NYSE since 1993 (Ticker: SQM)
Most liquid Chilean ADR by volume on the NYSE in 2014
World Leader in Specialty Businesses: Potassium Nitrate, Iodine, Lithium & Solar Salts
37% 27% 15% 12% 5%
OUR BUSINESSES
Revenue contribution LTM(1)
13 Third Quarter Earnings/ 2015
> Unique and Abundant Natural Resources
Sodium nitrate + Potassium chloride = Potassium nitrate + Sodium chloride
Caliche ore is only found in Chile
The world’s largest deposits of nitrates and iodine
Proprietary mining rights pursuant to exploitation concessions
Low processing costs due to its high concentrations of potassium and lithium
High evaporation rates
Production rights are pursuant to a lease agreement with CORFO until 2030
Caliche Ore
Salar Brines
+ NaNO3 KCl KNO3 NaCl
(Salt) = +
High-quality reserves low-cost operations
Sales to thousands of customers in over 110 countries.
> SQM Operations
110
20 Offices and commercial representation
Sales diversified by industry and region
No customer represents more than 3% of sales
North
America
25%
LatAm
29%
Europe
21%
Asia and
Others
25%
> CORE BUSINESSES 2
16 Third Quarter Earnings/ 2015
> Specialty Plant Nutrition Largest global producer of potassium nitrate
SQM Highlights
Access to reserves of potassium and nitrate
Developed distribution network and diverse customer base
Lower price elasticity relative to potassium chloride
Sales volumes in 2015 expected to be similar to 2014
Potassium Nitrate: Industry Dynamics
Fertilizer provides unique benefits: Chlorine-free, water soluble, and fast absorption.
Demand drivers: Higher cost of land, water scarcity, increased demand for higher quality crops
Expected demand growth in 2015: 3-4%(1)
Total market size ~1mm metric tons
(1) SQM estimates (2) LTM volumes correspond to twelve-month period ended June 30, 2015 (3) LTM revenues and gross profit contribution correspond to twelve-month period ended September 30, 2015
46%
842k MT LTM Volumes (2)
US$677 mm LTM Revenues(3)
31% LTM Contribution to Gross Profit(3)
Market Share (1)
17 Third Quarter Earnings/ 2015
> Potassium Chloride and Potassium Sulfate
Strategically located to supply major markets
SQM Highlights
Low-cost producer of potassium chloride
Approximately 1/3 of MOP sales to Brazil
Flexibility to produce potassium chloride, potassium sulfate, and potassium nitrate depending on market needs
Lower sales volumes expected for 2015 (~15%)
Potassium Chloride: Industry Dynamics
Potassium chloride is the most commonly used potassium-based fertilizer. Sold all over the world
Expected 2015 global demand: ~57 million MT(1)
Major players in Belarus, Canada, and Russia. Increased supply seen in market
Pricing under pressure
<3% Market Share (1)
1,296 MT
US$483 mm
29%
LTM Revenues(3)
LTM Contribution to Gross Profit(3)
LTM Volumes (2)
(1) SQM estimates (2) LTM volumes correspond to twelve-month period ended June 30, 2015 (3) LTM revenues and gross profit contribution correspond to twelve-month period ended September 30, 2015
18 Third Quarter Earnings/ 2015
> Iodine and Derivatives
Largest global producer of iodine
SQM Highlights
Low-cost producer
Developed distribution and sales network
Effective capacity ~10,000 MT per year
Prices have been decreasing. Average price for first 9 months 2015: ~US$28/kg
Industry Dynamics
Main uses: X-ray contrast media, LCD, pharmaceuticals and sanitizers
Global demand: CAGR of ~3% for the period 2004-2014(1)
Expected global demand 2015:
~33,000 MT(1)
Limited sources of iodine worldwide:
Chile 56% (SQM 26%)
Japan 18%
Recycling 17%
26%
9.0k MT
US$272 mm
16%
LTM Revenues(3)
LTM Contribution to Gross Profit(3)
Market Share (1)
LTM Volumes (2)
(1) SQM estimates (2) LTM volumes correspond to twelve-month period ended June 30, 2015 (3) LTM revenues and gross profit contribution correspond to twelve-month period ended September 30, 2015
19 Third Quarter Earnings/ 2015
> Lithium and Derivatives
Lowest cost global producer
SQM Highlights
A leading lithium chemical producer in the world and the lowest cost producer globally
Produce lithium carbonate, lithium hydroxide, and lithium chloride
Current lithium carbonate plant capacity stands at 48,000 MT per year
Higher average prices in 2015. Average price for first 9 months 2015: ~US$5,700/MT
Industry Dynamics
Global demand: Growth of over 5% in 2015(1)
Main uses: batteries, lubricant, glass, pharmaceuticals. Future potential related to batteries for e-cars
2015 global demand: ~150,000 MT (1)
Expect some new supply from Argentina in 2015
27%
38k MT
US$212 mm
18%
LTM Revenues(3)
LTM Contribution to Gross Profit(3)
Market Share (1)
LTM Volumes (2)
(1) SQM estimates (2) LTM volumes correspond to twelve-month period ended June 30, 2015 (3) LTM revenues and gross profit contribution correspond to twelve-month period ended September 30, 2015
20 Corporate Presentation / June 2015
> Industrial Chemicals Solar Salts: Dominant Player in a Niche Market
SQM Highlights
Solar Salts:
Leading producer with approximately 60% market share (4)
Expect significantly higher volumes in 2015 – 2017.
2015 volumes could exceed 75k MT
Industry Dynamics
Various traditional uses for industrial nitrates related to glass, metal treatment, water treatment, and explosives
Solar Salts:
IEA expects installed capacity of concentrated Solar Power (CSP) to double by 2020.
50 MW → approximately 30,000 MT of solar salts
Projects being developed globally
45% Market Share (1)
120k MT
US$98 mm
5%
LTM Revenues(3)
(1) SQM Estimate: 2014 Industrial Sodium Nitrate Market (2) LTM volumes correspond to twelve-month period ended June 30, 2015 (3) LTM revenues and gross profit contribution correspond to twelve-month period ended September 30, 2015 (4) SQM estimates: 2014 Solar Salt Market
LTM Contribution to Gross Profit(3)
LTM Volumes (2)
> OTHER INFORMATION 3
22 Third Quarter Earnings/ 2015
> Capital Expenditure & Cost Savings Programs
Capital Expenditure 2015: ~US$105M
After intense investment in recent years, investment decreased for 2014 and 2015
Various projects designed to maintain production capacity, increase yields, and reduce costs.
Metallic exploration: direct investment by SQM of ~US$5 million expected in 2015
Cost Savings Plan 2013-2015
Restructuring
Implementation of lean operations
US$130 mm in production cost savings in 2014, including approximately US$50 mm related to depreciation of Chilean peso
23 Third Quarter Earnings/ 2015
> Other Relevant Topics
Market conditions / pricing in iodine
Sales volumes / pricing in potassium chloride
Impact from production facilities restructuring
in 3rd quarter 2015
Arbitration with CORFO
Legal investigations by Chilean tax authority
and public prosecutor
Ownership Structure(1) Considerations
Dividends
2015 dividend policy: 50% of net income Provisional dividend to be paid in Dec. 2015:
US$84 million
SQM Business Opportunities
Increased solar salt sales volumes
Increased lithium prices
Metallic exploration
Cost reductions company-wide
(1) Shareholders as of September 30, 2015
Pampa Group +
Kowa Group; 32%
PotashCorp; 32%
Bank of New York
(ADRs); 23%
Others Chile; 13%
24 Third Quarter Earnings/ 2015
> Financial Performance
(1) Net income attributable to controlling interests (2) Net income for LTM September 2015 includes US$56.3 million effect related to stopping mines at Pedro de Valdivia facility (3) EBITDA: Gross Profit – administrative expenses + depreciation & amortization (4) Net Financial Debt: interest bearing debt net of cash and cash equivalents, considering the effects of derivatives
Revenues Net Income (1) (2)
EBITDA(3)/Revenues NFD(4)/EBITDA
1.830
2.145 2.429
2.203 2.014
1.808
0
500
1.000
1.500
2.000
2.500
3.000
2010 2011 2012 2013 2014 LTMSep-15
US$
mill
ion
382
546
649
467
296 247
0
100
200
300
400
500
600
700
2010 2011 2012 2013 2014 LTM Sep-15
US$
mill
ion
38%
45% 46%
38% 37% 41%
2010 2011 2012 2013 2014 LTM Sep-15
0,85x 0,79x 0,83x
1,06x 1,03x
0,66x
2010 2011 2012 2013 2014 LTM Sep-15
25 Third Quarter Earnings/ 2015
> Investment Highlights
Unique and abundant natural resources
Sales in diverse industries, sold globally
SPN: Largest global producer
Industrial Chemicals: Dominant player in a niche market
Potassium: Uniquely located to supply major markets
Lithium: Lowest-cost producer
Iodine: Leading player in strong market with diverse uses
Metallic Exploration: Exploration with low risk
Solid financial position and financial management
Contact Information: > Gerardo Illanes: VP of Finance and IR, [email protected] > Kelly O’Brien: Head of Investor Relations, [email protected] > Carolyn McKenzie: Investor Relations, [email protected]
