Sociedad Quimica Y Minera De Chile SA ADR SQM
Q1 2012 Earnings Call Transcript

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Q&A
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Transcript Call Date 05/31/2012

Operator: Good day, ladies and gentlemen, and welcome to the First Quarter 2012 SQM Earnings Conference Call. My name is Jeff, and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. Later, we will facilitate a question-and-answer session. As a reminder, this conference is being recorded for replay purposes.

I would now like to turn the conference over to your host for today, Mr. Mark Fones, Vice President of Finance and Investor Relations. You have the floor, sir.

Mark Fones - IR: Good afternoon, everyone and welcome to SQM's first quarter 2012 earnings conference call. For your information this conference will be recorded and is being webcast live. You may access the webcast later on at our website www.sqm.com. Joining me today our speakers are; Patricio Contesse, Chief Executive Officer; Patricio Solminihac, Executive Vice President and Chief Operating Officer; and Ricardo Ramos, CFO.

Before we begin, let me remind you that statements in this conference concerning the Company's business outlook, 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 the Federal Securities Laws.

Any forward-looking statements or 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 filings made with the Securities and Exchange Commission, and forward-looking statements should be considered in light of those factors.

I'll now leave you with our CEO, Patricio Contesse for brief comments before we move to Q&A.

Patricio Contesse G. - CEO: Good morning, and thank you for joining us. We posted strong earnings during the first quarter of 2012 and we're pleased to be able to discuss them with you this morning. Our positive start to the year and strong results were a result of increased average prices in all business lines when compared to the first quarter of 2011, and increase in gross margin.

In our iodine business line the market has remained tight and pricing were up 10% when compared to the fourth quarter of 2011, while cost pressure has remained relatively stable. We continue to see strong demand from all users of iodine. In this (strengthened) market demand continues to grow, as a result of which we see our sales volumes for lithium and derivatives increase over 10% compared to the sales volume in 2011.

In terms of (indiscernible) revenue in our Potassium business line we are up compared to the first quarter of last year. Recently, we have seen signs of improvement in global potash demand and we (indiscernible) in countries like Brazil, etcetera. In SPN volumes were down as a result of increased supply and demand was lower than expected. We remain confident that this market will recover during the remainder of 2012.

Transcript Call Date 05/31/2012

Operator: Ben Isaacson, Scotiabank.

Ben Isaacson - Scotiabank: Just one question on potash and then I want to turn to the iodine market. Can you talk a little bit about the shift in mix in terms of where your potash was sold this quarter versus last year and how you see that evolving over the next year or two?

Patricio Contesse G. - CEO: Basically, last year where we ended up at the granular and compacting plan for last year that is permitting us to sell more in the (indiscernible) this quarter that we used to sell last year. There has been the most significant change.

Ben Isaacson - Scotiabank: How much potash do you sell in Latin America, not including the Brazilian market?

Patricio Contesse G. - CEO: We sell not too much. We sell by region in Argentina, Chile, Peru, Ecuador and Colombia. And at the end all those volumes should be in the range of 100,000 metric ton of (indiscernible).

Ben Isaacson - Scotiabank: Maybe I will just ask couple of questions on the iodine market. If I remember correctly, you closed down – I think it was one or two iodine plants a couple of years ago. Now, I don’t know if those are still shut down or not, but obviously, the market is starting to tighten up a little bit. Do you think you would open those up again soon?

Patricio Contesse G. - CEO: This year we are considering to sell slight lesser than last year. So, still (indiscernible) there our total capacity in the range of 25,000, but we are selling less than that, but even though we are increasing our capacity to 50,000. So, we expect to be used some in future and not the (indiscernible) today, but clearly this year those capacity are not open – we're not producing our total capacity.

Ben Isaacson - Scotiabank: The iodine prices that have increased quite recently is that entirely due to demand growth or are there some supply challenges globally?

Patricio Contesse G. - CEO: It's a mixture of both, demand has increased, but also there is some slower supply from our two (indiscernible).

Ben Isaacson - Scotiabank: Then just my last question on iodine, can you talk about your costs and how you see those costs changing, I think you mentioned in your initial comments you see the cost being relatively stable, can you provide a little bit more color in terms of costs and therefore margins?

Patricio Contesse G. - CEO: Well, I would say that (indiscernible) our cost in iodine and I apologize to that.

Ben Isaacson - Scotiabank: So, in a flat iodine price enterprise environment, you expect your margins to stay relatively flat?

Patricio Contesse G. - CEO: yes.

Operator: Rodrigo Ordonez, Santander.

Rodrigo Ordonez - Santander: I have two questions, first regarding the SPN division where you saw increasing competition and disaffected sales. Can you talk a little bit more about this, you were affected in prices or volumes? The second question is about the global market in the press release, you showed that a European consolidated sales decreased more than 40% compared to last year first quarter, is this a consequence of the economic slowdown in Europe? In line with this, how it is affecting the economic scenario to SQM operations regarding the situation in Europe and a chance of a slowdown in China?

Patricio Contesse G. - CEO: I’d just say related to SPN we saw again the fertilizer market was little bit weaker in the last quarter of 2011 and the first quarter 2012, not only for us (indiscernible). We see that is now changing significantly, so our forecast for the year is reasonably– as we had thought in the budget for the year. Of course, there are some less sales in SPN, seeing that Haifa has normalized their operation, but we see the next quarter, second, third and four would be much better than the first quarter that you have and we have.

Executives

Patricio Contesse G. : CEO
Mark Fones : IR

Analysts

Rodrigo Ordonez : Santander
Giovanna Ro : Itau
Wesley Brooks : Morgan Stanley
Hillary Brown : Lenin Partners
Ben Isaacson : Scotiabank
Lee Baco : Citigroup
Fernando Ferreira : Merrill Lynch
Tim Tiberio : Miller Tabak

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Sociedad Quimica Y Minera De Chile SA ADR SQMQ1 2012 Earnings Call Transcript

Sociedad Quimica Y Minera De Chile SA ADR SQM
Q1 2012 Earnings Call Transcript