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SQM(SQM) - 2024 Q4 - Annual Report
SQMSQM(SQM)2025-04-24 18:26
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Revenue and Financial Performance - For the year ended December 31, 2024, revenues from products originating from the Salar de Atacama represented 55% of the company's consolidated revenues[54]. - Revenues for the year ended December 31, 2024, were US4,528.8million,withagrossprofitofUS4,528.8 million, with a gross profit of US1,327.1 million and losses attributable to controlling interests of US685.1million[215].−In2024,lithiumanditsderivativesaccountedfor49685.1 million[215]. - In 2024, lithium and its derivatives accounted for 49% of total revenues, while specialty plant nutrition and iodine and derivatives each contributed 21%[225]. - Specialty plant nutrients revenues increased to US941.9 million in 2024, representing 20.8% of total revenues and a 3.1% increase from US913.9millionin2023[240].−Exportsaccountedfor96913.9 million in 2023[240]. - Exports accounted for 96% of the company's net revenues for the year ended December 31, 2024, exposing it to various external risks including trade barriers and exchange rate fluctuations[100]. Market and Industry Trends - Average lithium prices decreased from US30,467 per metric ton in 2023 to US10,936permetrictonduringtheyearendedDecember31,2024[58].−Thegrowthofthecompany′slithiumbusinessisdependentonthecontinuedadoptionofelectricvehiclesbyconsumers[70].−Thecompany′slithiumbusinessgrowthishighlydependentonconsumeradoptionofelectricvehicles,whichmaybeadverselyaffectedbypotentialreductionsingovernmentsubsidiesandincentives[74].−Thedevelopmentofnewbatterytechnologiesthatutilizesignificantlylesslithiumcouldmateriallyimpactthecompany′sfuturerevenuesandmarketposition[75].−Competitorsareadvancinginlithiumextractiontechnologies,whichmayleadtolowerproductioncostsandaffectthecompany′spricingcompetitiveness[76].InvestmentandExpansionPlans−ThecompanyhasaninvestmentplanforanestimatedrangeofUS10,936 per metric ton during the year ended December 31, 2024[58]. - The growth of the company's lithium business is dependent on the continued adoption of electric vehicles by consumers[70]. - The company's lithium business growth is highly dependent on consumer adoption of electric vehicles, which may be adversely affected by potential reductions in government subsidies and incentives[74]. - The development of new battery technologies that utilize significantly less lithium could materially impact the company's future revenues and market position[75]. - Competitors are advancing in lithium extraction technologies, which may lead to lower production costs and affect the company's pricing competitiveness[76]. Investment and Expansion Plans - The company has an investment plan for an estimated range of US3.1 to US3.8billionfortheyears2025−2027toexpandlithium,iodine,andnitrateoperations[63].−Thecompanyplanstoincreaseminingcapacitywhileprotectingtheenvironmentandreducingoperatingcosts[63].−Thecompanyplanstoexpandlithiumhydroxidecapacitytoreach100,000metrictonsbytheendof2025[206].−Thecompanyaimstomaintainitsleadingpositioninthelithium,potassiumnitrate,iodine,andthermo−solarsaltsmarketsthroughinnovationandtechnologicaldevelopment[226].−ThecompanyisinvestingintheMt.HollandlithiumprojectinWesternAustralia,withtheKwinanarefineryexpectedtobecompletedbymid−2025[208].RegulatoryandComplianceRisks−ThecompanyfacespotentialliabilitiesandincreasedcostsduetocompliancewithevolvinglaborlawsinChileandAustralia,whichmayimpactfinancialperformance[81][82].−EnvironmentalregulationsinChileandAustraliaarebecomingincreasinglystringent,whichcouldleadtohighercompliancecostsandoperationaldelays[90][91].−Thecompanyissubjecttosignificantenvironmentalfines,withpotentialpenaltiesuptoapproximately3.8 billion for the years 2025-2027 to expand lithium, iodine, and nitrate operations[63]. - The company plans to increase mining capacity while protecting the environment and reducing operating costs[63]. - The company plans to expand lithium hydroxide capacity to reach 100,000 metric tons by the end of 2025[206]. - The company aims to maintain its leading position in the lithium, potassium nitrate, iodine, and thermo-solar salts markets through innovation and technological development[226]. - The company is investing in the Mt. Holland lithium project in Western Australia, with the Kwinana refinery expected to be completed by mid-2025[208]. Regulatory and Compliance Risks - The company faces potential liabilities and increased costs due to compliance with evolving labor laws in Chile and Australia, which may impact financial performance[81][82]. - Environmental regulations in Chile and Australia are becoming increasingly stringent, which could lead to higher compliance costs and operational delays[90][91]. - The company is subject to significant environmental fines, with potential penalties up to approximately 9 million per infraction in Chile[88]. - The National Lithium Strategy announced by the Chilean government in April 2023 has created uncertainty in the lithium industry, potentially affecting business performance and share value[129]. - The Chilean Congress is discussing a bill that could declare lithium mining a national interest, which may enable the expropriation of the company's lithium assets[143]. Community and Labor Relations - As of December 31, 2024, approximately 87% of the company's employees are based in Chile, with 77% represented by labor unions, exposing the company to labor-related risks[80]. - The Chilean Congress approved pension fund reforms that will gradually increase employer contributions from 1.5% to 8.5% over nine years, potentially raising labor costs[83]. - The company is exposed to risks related to community relations, which may lead to interruptions in operations and increased costs[156]. - The company signed an agreement with Codelco and the Atacameños Indigenous Organization to include the Atacameños in discussions regarding lithium extraction in the Salar de Atacama beyond 2030[154]. - The blockade by a splinter group of the Atacameños Peoples Council resulted in a shutdown of operations at the Salar de Atacama facilities for one day[154]. Environmental and Sustainability Initiatives - The company aims to become carbon neutral by 2040 and reduce water usage by 65% and brine extraction by 50% of authorized limits as part of its sustainable development plan[119]. - The company achieved IRMA 75 level certification for operations in Salar de Atacama, supporting responsible mining practices[119]. - The Port of Tocopilla obtained Responsible Care certification and EcoPorts PERS Certification, enhancing sustainability credentials[119]. - The company is committed to sustainability, focusing on responsible management of natural resources and minimizing environmental impacts[228]. - The company completed the recertification of ISO 14001 and 45001 standards at its operations in 2023[204]. Economic and Political Risks - The company faces risks related to global shipping constraints, which may adversely affect operations and product delivery[59]. - Political and economic tensions, particularly between the U.S. and China, may limit investment opportunities and adversely impact business operations[115]. - The company is exposed to political risks in Chile, particularly with upcoming general and presidential elections in November 2025, which may impact business operations[134]. - Changes in regulations regarding mining licenses could adversely affect the company's mining concessions and operations[146]. - The company is subject to risks from fluctuations in the U.S. dollar/Chilean peso exchange rate, which may affect the value of ADRs and dividends[161]. Taxation and Financial Obligations - As of December 31, 2023, the company paid a total of US986.3millioninspecifictaxesonminingactivitiesrelatedtolithiumfortaxyears2012to2023[144].−ThecompanyrecognizedataxexpenseofUS986.3 million in specific taxes on mining activities related to lithium for tax years 2012 to 2023[144]. - The company recognized a tax expense of US1,106.2 million for the year ended December 31, 2023, reflecting potential impacts from ongoing tax claims[144]. - The effective withholding tax rate on dividends attributed to earnings in 2024 is 23.90411%[175]. - Changes in Chilean tax regulations could have adverse consequences for U.S. investors, particularly regarding capital gains tax and withholding tax on dividends[176]. Operational and Production Capacity - The company achieved a lithium carbonate production capacity of 180,000 metric tons and lithium hydroxide capacity of 30,000 metric tons in 2022[202]. - In 2023, the company expanded its lithium carbonate capacity to 210,000 metric tons, with plans to increase to 240,000 metric tons by 2026[206]. - The company plans to increase lithium carbonate production in Chile from 210,000 metric tons per year to 240,000 metric tons per year by the end of 2026 or early 2027, and expand lithium hydroxide production from 40,000 metric tons per year to 100,000 metric tons per year by 2025[208]. - Capital expenditures for 2024 totaled US1,388.3million,upfromUS1,388.3 million, up from US1,103.6 million in 2023 and US905.2millionin2022,reflectingasignificantincreaseininvestmentactivities[208].−Expectedcapitalexpendituresfor2025areapproximatelyUS905.2 million in 2022, reflecting a significant increase in investment activities[208]. - Expected capital expenditures for 2025 are approximately US1.1 billion, with US550millionallocatedfortheSQMLithiumChileDivisionandUS550 million allocated for the SQM Lithium Chile Division and US350 million for the SQM Iodine-Plant Nutrition Division[209].