CORPORATE PRESENTATION 2019

Transcription

1 CORPORATE PRESENTATION

2 CUSTOMARY NOTE REGARDING FORWARD-LOOKING STATEMENTS SQM (NYSE: SQM, Santiago Stock Exchange: SQM-A, SQM-B) is a global company engaged in strategic industries for human development, such as health, food, clean energy and the technology that moves the world. This presentation and the material within the presentation, is meant to be given in conjunction with an oral presentation and should not be taken out of context. Statements in this presentation concerning SQM s business outlook, future economic performance, 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 U.S. Private Securities Litigation Reform Act of Any forward-looking statements are estimates, reflecting the best judgment of SQM management based on currently available information and involve a number of risks, uncertainties and other factors that are outside SQM s control 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 SQM s public filing made with the U.S. Securities and Exchange Commission, specifically SQM s most recent annual report on Form 20-F. 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. 2

3 CORPORATE STRATEGY Safety, Efficiency, Integrity Be a global company with people committed to excellence, dedicated to the extraction of minerals and selectively integrated in the production and sale of products for the industries essential for human development Ensure availability of key resources required to support current goals for medium and long-term business growth Consolidate a culture of lean operations (M1 excellence) throughout the organization, including operations, sales and support areas Significantly increase nitrate sales for all its applications, and ensure consistency with the iodine sales strategy Maximize the margins of each business line through appropriate pricing strategy Successfully develop and implement all lithium expansion projects, acquire more assets to complement our current portfolio Strengthen the organizational structure to support the development of the strategic plan, focusing on the development of critical capabilities and the application of the corporate values of excellence, integrity and safety Improve our stakeholder management to establish links with the community, and communicate to Chile and the world our contribution to industries essential for human development Strengthen the organizational structure to support the development of the strategic plan, focusing on the development of critical capabilities and the application of the corporate values of excellence, integrity and safety 3

4 SQM AT A GLANCE: Reserves, Products & Capacities Caliche Ore Salar Brines Spodumene Nueva Victoria Coya Sur Salar de Atacama Antofagasta (Salar del Carmen) Mt. Holland, 50/50 JV Western Australia I 2 NaNO 3 KCL Li 2 CO 3 LiOH LiOH KNO 3 14k MT/year 1.3 million MT/year 2 million MT/year 70k MT/year 13.5k MT/year 45k MT/year in 2021 I 2 iodine, NaNO 3 sodium nitrate, KCL potassium chloride, KNO 3 potassium nitrate, Li 2 CO 3 lithium carbonate, LiOH lithium hydroxide 4

5 SQM: Well-balanced product portfolio 2018 LTM 1 Market Share 2 54% 23% 35% <3% >30% 3 Sales Volumes 1,099 kmt 43.6 kmt 13.1 kmt 964 kmt 182 kmt Revenues US$793 mm US$680 mm US$304 mm US$298 mm US$149 mm Contribution to LTM Gross Profit 22% 55% 12% 5% 6% 2018 LTM Revenues: US$2.3 billion 2018 LTM Adjusted EBITDA 4 : US$911 million Adjusted EBITDA Margin LTM: 40% NFD/EBITDA: 0.5 Moody s: Baa1 Standard and Poor s: BBB+ 1 Twelve months ended September 30, As of December 31, In industrial sodium and potassium nitrate markets 4 Adjusted EBITDA = gross profit - administrative expenses + depreciation and amortization. Adjusted EBITDA margin = Adjusted EBITDA/revenues 5

6 Gross Profit, US$ million SQM Evolution: Lithium represents more than 50% of the Company Gross profit evolution 1,200 1, LTM 1 Contribution to gross profit Potassium, 5% SPN, 22% Industrial Chemicals, 6% Fertilizers (SPN+KCL) Iodine Lithium Industrial Chemicals Lithium, 55% Iodine, 12% Uniquely positioned for various product cycles. Today, lithium represents over 50% of gross profit. 1 Twelve months ended September 30,

7 kmt Lithium demand: SQM well-positioned to capture future LiOH growth 1000 Lithium Demand Evolution and Expected Growth Others, 17% 2017 Li2CO3, 60% CAGR 12% LiOH, 23% Energy Storage (kmt-lce) Other applications CAGR 16-20% SQM estimates that lithium hydroxide surpasses lithium carbonate by Key assumptions ( ) Others, 5% Li2CO3, 44% Annual vehicle growth rate ~2% EV 1 penetration from ~3% to 12% Average batter size from ~40 to 50 kwh (~ kg LCE/kWh) Other batteries CAGR ~9-13% Other uses CAGR ~2-6% LiOH, 51% 7 1 EV = PHEV + BEV

8 Lithium demand assumptions: Lithium price is not a barrier for growth Lithium content in each device in LCE Lithium battery materials breakdown Other Copper Graphite Manganese Cobalt Nickel Lithium Electric vehicle kg Hybrid vehicle 1-2 kg Power tool g Laptop g Smartphone 2-3 g 8% 9% 11% 10% 23% 36% 61% 45% 27% 2% 2% 1% NMC111 NMC622 NMC811 Norway by 2025 UK & France by EV models EV >50% of fleet Government policies: 100% EV sales Germany by 2030 China by 2030 Various OEMs announcements 40 EV models >US$11 billion 12 EV models USA sales tax relief Netherlands by million EVs >US$50 billion 8 EV models 8

9 SQM Lithium: Sustainable Operations in the Salar de Atacama Production rights are pursuant to a rental agreement with CORFO until Total amount of lithium production allowance is 2.2 million MT of LCE. Current annual capacity: 70k MT of lithium carbonate and 13.5k MT of lithium hydroxide. Continued work on lithium carbonate capacity expansion. 40% 35% 30% 25% 20% 15% 10% 5% 0% LITHIUM CARBONATE PRICE, US$/KG Rental Fee, contract percentage of price Contribution to the development and communities CORFO Agreement, rental fees Rental Fee, weighted average percentage Annual contribution of US$11-19 million for R&D efforts Annual contribution of US$10-15 million for neighboring communities of the Salar de Atacama Annual contribution of 1.7% of SQM Salar s sales per year for regional development 95.8% of the energy required for our operations is solar 442k m 3 of water from treated domestic liquid waste was reused in our operation in 2017 In 2017, SQM and the Ayllu Wine Program worked with farmers and the Indigenous Association to produce over 7,500 bottles of wine in the Salar de Atacama Environmental management systems at all production sites 9 SUSTAINABILITY & INNOVATION in Chile and abroad Best safety record over the last 12 months Will be able to almost quadruple lithium production without extracting more brine from the Salar de Atacama Approximately 15% of our employees are women, more than double the average in the Chilean mining industry Continued development of large-scale lithium projects Salar del Carmen operates with 100% reused water

10 SQM lithium: Mt. Holland project in Australia Mt. Holland, 50/50 JV with Kidman Resources Estimated to contain 189 million tons of 1.50% Li 2 O or 7.03 million tons of LCE (according to JORC Code* standards) One of the world s most significant hard rock lithium deposits. Expected to be at the low end of the global hard rock cost curve Exclusive option to lease a premier site in Kwinana, Western Australia to build a refinery and produce battery-grade refined lithium Production focus on lithium hydroxide Capacity: 45k MT of LiOH/year Estimated commission date: spodumene concentrate, LiOH Current status: advancing on feasibility studies for mine, concentrator and refinery 10 *The Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves ( the JORC Code )

11 SQM focus: Meeting customers evolving product requirements High complexity industry: product specifications change as the applications technology evolves Rapid growth of EV market means significantly increased demand and stricter requirements for high quality battery grade lithium High level of operational flexibility to meet the needs & requirements of each customer More than 35 different product specifications of lithium produced at Salar del Carmen Long-term relationships with large customers Global distribution network reaching >110 countries with product stock and comercial offices on each continent 11

12 SQM Fertilizers Businesses: SPN & MOP Specialty Plant Nutrients Potassium nitrate (KNO3) provides unique benefits: chlorine-free, water soluble, and fast absorption Water soluble segment grows at ~10% per year, KNO3 ~6% SQM competitive advantage Access to reserves of both potassium and nitrates Developed distribution network and diverse customer base 16 NPK plants around the world Current production capacity: 1.3 million MT/year, expansion to 1.5 million MT/year in 2018 Gross profit Revenues Potassium MOP is the most common used potassium based fertilizer 2018 market size ~ 62 million MT Major players in Belarus, Canada and Russia SQM s expected sales in 2018 ~<1 million MT, lower sales volumes expected in 2019 SQM competitive advantage Low-cost producer of MOP Flexibility to produce MOP, SOP and KNO3 depending on market needs LTM CONTRIBUTION TO: Gross profit Revenues LTM CONTRIBUTION TO: 22% 36% 12 5% 13%

13 SQM Specialty Chemicals Businesses: Iodine & Solar Salts Iodine and Derivatives Iodine main uses: X-ray contrast media - 23%, pharmaceuticals 13%, LCD - 12%. Average prices in 3Q2018 ~US$25/kg Global demand in 2018 ~37k MT (~3% annual growth) SQM competitive advantage Lowest-cost producer Extensive market knowledge and longterm relationships with our largest customers Developed distribution network to respond rapidly to market needs Quality of mining reserves and available production capacity of 14k MT per year Gross profit Revenues Industrial Chemicals Various traditional uses for industrial nitrates related to glass, metal treatment and explosives Solar Salts: A 50MW parabolic CSP plant with 7.5 hours of indirect storage requires ~30k MT of solar salts Project being developed in Europe, Northern and Southern Africa, Middle East, Chile, China and Australia Prices remain flat in 2018 Sales volumes ~ 48k MT in 2018 SQM competitive advantage Low-cost producer Operational flexibility with certain industrial sodium and potassium nitrate products Production of both potassium nitrate and sodium nitrate, the two raw materials in solar salts production LTM CONTRIBUTION TO: Gross profit Revenues LTM CONTRIBUTION TO: 13% 14% 13 5% 6%

14 Other Relevant Information Ownership Structure 1 22% 15% Bank of New York Mellon (ADRS) Tianqi 2018 Daily average trading volume New York Stock Exchange: US$40 million Santiago Stock Exchange: US$25 million 5% 2% 24% Pampa Group Kowa Group 32% Chilean Pension Funds Others Chile 2018 Net Income distribution in 3 interim & 1 final dividend Sep 30, 100% 80% 60% 2018 (a) cash+other current financial assets current financial liabilities (b) Dividend Policy total liabilities total equity If none of the above parameters is met: 50% of 2018 Net Income Dividends announced and paid in 2018 May 2018 US$110 million Final dividend 4Q2017 May 2018 US$100 million Special dividend June 2018 US$114 million Interim dividend 1Q2018 September 2018 US$134 million Interim dividend 2Q2018 December 2018 US$84 million Interim dividend 3Q2018 Total US$542 million 1 Registered shareholders as of November 20, Please see the full version on our website at 14

15 CAPEX Sustainable organic growth and M&A Historical Maintenance CAPEX: ~US$100 million : Lithium Hydroxide Expansion to 13.5k MT: ~US$30 million : Potassium Nitrate Expansion to 1.5m MT: ~US$50 million : Lithium Carbonate Expansion to 180k MT: ~US$525 million : Iodine capacity expansion to 14k MT: ~US$30 million 2018 CAPEX in Chile: ~US$360 million Annual D&A expenses: ~US$250 million 15

16 Appendix 16

17 US$ Million US$ Million Review of Results SPN Lithium Iodine Potassium Industrial Chemicals P Q Revenue Contribution 3Q2018/3Q2017 Gross Profit Contribution 3Q2018/3Q2017 Prices increased in all business lines except SPN in the 3Q2018 compared to the same period of (15) (33) (2) (40) (10) Significantly higher iodine prices and SPN sales volumes outweighed the impact of lower lithium and potassium sales volumes in the 3Q2018.

18 Strong Financial Position Accounts Receivables (Months of Sales) Inventory (Months of Sales) Sep 17 Dec 17 Jun 18 Sep Sep 17 Dec 17 Jun 18 Sep 18 Debt Maturity 1 Liquidity (Current Assets/Current Liabilities) Sep 17 Dec 17 Jun 18 Sep 18 Net Financial Debt/ EBITDA Cash / Short-Term Financial Debt Sep 17 Dec 17 Jun 18 Sep 18 Leverage Sep 17 Dec 17 Jun 18 Sep Jun 17 Dec 17 Mar 18 Jun 18 1 As of September 30, 2018 total debt didn t include the bond issued on November 8, 2018, total amount ~US$124 million with maturity in 2038.

19 Agreement with CORFO Payments 1 Li 2 CO 3 LiOH US$/MT % US$/MT % <4, % <5, % 4,000-5, % 5,000-6, % 5,000-6, % 6,000-7, % 6,000-7, % 7,000-10, % 7,000-10, % 10,000-12, % >10, % >12, % 1 Effective as of April 10, Avg. price lithium: US$16,000/MT, potassium: US$320/MT Example 2 Original Agreement % US$/MT Li 2 CO 3, LiOH 6.80% 884 KCL 1.80% 5.04 New Agreement Li 2 CO % 3,772 LiOH 19.56% 3,130 KCL 3.00% 9.60 Production allowance Total production quota until 2030: 349,553 MT of LME: New quota: 185,767 Additional quota: 112,723 Efficiency quota: 51,063 Reminder original quota: 64,816 Total 2.2 million MT of LCE Capacity Expansion Options Expansion 1: 50,000 MT by 2023 Expansion 2: 100,000 MT (in 4 stages of 25k MT) SQM Capacity Expansions in Chile Li 2 CO 3 : 70,000 MT to 120,000 MT in ,000 MT to 180,000 MT in 2021 LiOH: 13,500 MT in 2018

20 Gerardo Illanes: CFO & VP of Corporate Finance Kelly O Brien: Head of Investor Relations kelly.obrien@sqm.com Contact information Irina Axenova: Investor Relations irina.axenova@sqm.com 20