SQM(SQM) - 2019 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue for the nine months ended September 30, 2019, reached almost $1.5 billion, with net income just over $211 million, down from $331 million during the same period last year [7] - Adjusted EBITDA margin for the quarter was 33%, slightly lower compared to previous quarters [8] Business Line Data and Key Metrics Changes - The lithium business line reported lower average prices in Q3 compared to the first half of the year, primarily due to changes in Chinese government subsidies and high inventory levels [8] - The iodine business line saw higher average prices, partially offsetting lower margins in other segments [8] - Potassium nitrate market growth is expected to be only 1% this year due to increased competition and unfavorable weather conditions, with a return to 4% to 5% growth anticipated next year [12] Market Data and Key Metrics Changes - The lithium market is experiencing delayed demand growth due to lower electric vehicle sales volumes and new supply entering the market [9] - Potassium chloride sales volumes are expected to increase next year, reaching approximately 800,000 to 900,000 metric tons [13] Company Strategy and Development Direction - The company is advancing its lithium capacity expansion in Chile, aiming to reach 120,000 metric tons by the second half of 2021, with plans to expand to 160,000 metric tons by the end of 2023 [10][11] - The company is optimistic about the potassium nitrate market returning to normal growth rates next year and is also increasing nitrate capacity to support growth in both fertilizer and solar salts markets [12] Management Comments on Operating Environment and Future Outlook - Management expects fourth-quarter average lithium prices to be lower than in Q3, but maintains a positive long-term outlook for the lithium market [10] - The company has faced some operational disruptions due to social unrest in Chile but has maintained its sales forecasts for Q4 [39] - Management is optimistic about the resolution of social issues in Chile and does not foresee significant long-term impacts on business goals [39] Other Important Information - The company has a conservative balance sheet and aims to maintain strong cash flow efficiency despite upcoming capital expenditures [42] - The Chilean peso's depreciation may positively impact results in Q4, but the company has hedged its exposure [51] Q&A Session Summary Question: Lithium inventory outlook - Management does not foresee customers increasing lithium inventory in the short term, expecting them to reduce inventory instead [16] Question: Pricing expectations for lithium - Management refrained from commenting on specific pricing but indicated that average prices next year will be lower than this year [19] Question: Potassium nitrate demand growth - Management expects demand growth to return to 4% to 5% next year due to improved weather conditions and market recovery [20][21] Question: Iodine pricing and capacity expansion - Iodine prices are expected to be higher next year, with production forecasts slightly above this year [27][30] Question: Impact of social unrest in Chile - Management reported some transit issues but maintained sales forecasts and expressed optimism about resolving social issues [39][50]