sqm corporate presentation may
DESCRIPTION
TRANSCRIPT
May 2013
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.
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Important Notice
Overview
Fertilizers
Specialty Chemicals
Financial Information
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Agenda
Photo: Evaporation Pond - Salar de Atacama, from which we produce potassium & lithium products
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SQM at a Glance • World Leader in Specialty Businesses: Potassium Nitrate, Iodine, lithium & Solar Salts • Global Company: Based in Santiago, Chile with over 20 offices on 6 continents • Strong Financial Profile
2012 Revenue: US$ 2.4 Billion (+13%) 2012 EBITDA†: US$ 1.1 Billion 2012 EBITDA Margin: > 46% Revenue growth: > 69 % since 2009
• Highest liquidity in Chile Listed on the Santiago Stock Exchange, and the NYSE since 1993 Most liquid Chilean ADR on the NYSE in 2012 One of the five most liquid companies traded in the Chilean Stock Market in 2012
• Responsible growth
Specialty Business World Leadership Growth Opportunities 4
† EBITDA: gross profit – SGA + depreciation & amortization
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SQM at a Glance
Specialty Business World Leadership Growth Opportunities
SQM: Proud to be the world’s largest producer of lithium, iodine, potassium nitrate and solar salts
Fertilizers Specialty Chemicals
Potassium
24%*
Specialty Plant Nutrients
21%*
Iodine
35%*
Lithium
11%*
Industrial Chemicals
8%*
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* Contribution to SQM Consolidated Gross Profit of 2012
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Unique Natural Resources
Caliche Ore Salar Brines
Nitrates
Iodine Iodine
Potassium
Lithium
Potassium
NaNO3 + KCl = KNO3 + NaCl (salt)
Sodium nitrate + Potassium chloride = Potassium nitrate + Sodium chloride
Specialty Business World Leadership Growth Opportunities 6
Operational Synergies and a low-cost structure
Caliche Ore
Salar Brines
Operational synergies and low-cost structure
• Similar processes and industrial technologies are used across our operations: solar ponds, evaporation, salt harvesting, crystalllizing, drying, among others
• Raw materials are used in the production of several different products, reducing costs significantly
• Specialty Plant Nutrients, Potassium Chloride and Industrial Chemicals volumes create logistics efficiencies
Commercial flexibility according to market conditions
• Nitrates in different qualities are used for industrial applications or for the fertilizer industry
• Potassium can be sold as potassium chloride or used as raw material in the production of potassium nitrate
• Potassium chloride/sulfate allocation
Iodine
Nitrates
Potassium chloride
Potassium sulfate
Lithium
Potassium nitrate
Specialty Business World Leadership Growth Opportunities 7
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Overview
Fertilizers
Specialty Chemicals
Financial Information
Agenda
Photo: Potassium Nitrate Plant in Coya Sur
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†Market share figures are based on 2012 SQM estimates.
*Figures are based on IFRS
Specialty Business World Leadership Growth Opportunities
Fertilizers: Uniquely Positioned
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Specialty Plant Nutrition
46% world market share KNO3†
2012 Revenues* US$675M (28%)
21% of total 2012 gross margin*
Potassium
2012 Revenues* US$605M (25%)
24% of total 2012 gross margin*
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Potassium Nitrate
Niche Market Demand Drivers
• Chlorine free
• Fully water soluble
• 100% Natural origin
• Fast absorption
• High cost of land
• Water scarcity
• Demand for premium crops
• North America and European vegetable and tomato markets
Modern Agricultural Techniques
Fertilizers: Specialty Plant Nutrition 21% of Total 2012 Gross Margin
Vegetables 41%
Fruits 22%
Industrial Crops 28%
Others 9%
Main uses: Premium crops*
*SQM estimates 2012
Specialty Business World Leadership Growth Opportunities 10
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Fertilizers: Specialty Plant Nutrition 21% of Total 2012 Gross Margin
SQM & SPN: World Leader • Completion of new potassium nitrate facility in Coya Sur (300,000 tons/year) • Developed distribution network: Proximity to customers allows for us to meet changing needs and new market tendencies • Largest Producer: 46% World Market Share Other producers: Haifa, Kemapco* • Prices are expected to decrease in 2013 as a result of the new potash price environment
Specialty Business World Leadership Growth Opportunities 11
* Figures are based on 2012 SQM estimates. Market estimates do not include imports/exports from China
600
800
1.000
0
200
400
600
800
1.000
2009 2010 2011 2012
SQ
M A
vg. Price
for SP
N b
usin
ess lin
e
Th M
T
Year
World Potassium Nitrate Market*
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Fertilizers: Potassium 24% of Total 2012 Gross Margin
Potassium Chloride
Market Demand Drivers
• Commodity Fertilizer • ~50 million ton market (2012) • Largest Global Producers:
• Potash Corp • Uralkali
• Global crop supply pressure should have a positive impact on fertilizer prices
• Contracts with China for
the first half of 2013 closed at $70 under prices seen in 2012
• Main Uses:
•Fruits/Vegetables •Corn •Rice
• Demand growth still being seen in Brazil
• Population Growth • Farmer economics &
yield optimization
Specialty Business World Leadership Growth Opportunities
*SQM estimates **Price as of December for respective years
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0
100
200
300
400
500
600
0
10
20
30
40
50
60
2009 2010 2011 2012
Pre
cio FO
B V
anco
uve
r US$
/ton
**
mill
on
es
de
TM
Año
Mercado MOP
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SQM & Potassium: Growth Opportunities • Expansion of potassium-based products:
• Installed capacity of approximately 2 million MT in 2012 • 2013 production volumes to be similar to 2012 • 2014 effective capacity expected to be between 2.2 – 2.3 million MT
• Three main sources of potassium that exist in market today: SQM is the only company that produces all three sources • Internal development of production technologies has allowed for a better utilization of natural resources and for higher yields through increased efficiencies
Fertilizers: Potassium 24% of Total 2012 Gross Margin
• MOP is potassium chloride (KCl), also known as potash • SOP is potassium sulfate (K2SO4)
Specialty Business World Leadership Growth Opportunities 13
0
400
800
1200
1600
2000
2006 2007 2008 2009 2010 2011 2012 2013E
Th. M
T
Year
SQM Production Volumes MOP + SOP
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Overview
Fertilizers
Specialty Chemicals
Financial Information
Agenda
Photo: Salar de Atacama
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Specialty Chemicals: World Leadership
†Market share figures are based on 2012 SQM estimates
⁰ Considering the lithium chemicals market, excluding concentrated minerals
*Figures are based on IFRS
Specialty Business World Leadership Growth Opportunities 15
Iodine & Derivatives
34% world market share†
2012 Revenues* US$578M (24%)
35% of total 2012 gross margin*
Lithium & Derivatives
35% world market share†⁰
2012 Revenues *US$222M (9%)
11% of total 2012 gross margin*
Industrial Chemicals
2012 Revenues *US$245M (10%)
8% of total 2012 gross margin*
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Specialty Chemicals: Iodine 35% of Total 2012 Gross Margin
* Market participation based on SQM 2012 estimates Market supply estimates for Japan include supply from traditional production and recycling in Japan
Iodine
Niche Market Main Uses
• SQM is the leading iodine producer in the world
• Global Demand: CAGR
2002-2012: 4% • Additional capacity from
Chilean competitors started production in 2012, aiming to reach projected capacity in 2013
• X-Ray Contrast Media • LCD • Pharmaceuticals • Iodophors
• Approximately 40% of uses related to human health and nutrition
Specialty Business World Leadership Growth Opportunities 16
SQM 34%
Japan 31%
Others Chile 24%
Others Recycling 5%
USA 4%
Others 2%
2012 Market Size Estimates: ~31 kMT*
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Specialty Chemicals: Iodine 35% of Total 2012 Gross Margin
SQM & Iodine: World Leader • Current Capacity 12,500 MT • Future demand growth expected to
maintain a positive trend • Significant Price Growth 2010-2012
Specialty Business World Leadership Growth Opportunities
*SQM estimates
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0510152025303540455055
0
5
10
15
20
25
30
35
2008 2009 2010 2011 2012
Iod
ine
BL P
rice U
S$/kg
TTh
ou
san
d M
T
Year
Iodine Market*
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Specialty Chemicals: Lithium 11% of Total 2012 Gross Margin
*SQM estimates: Lithium chemicals market
Specialty Business World Leadership Growth Opportunities
Lithium
Market Main Uses
• SQM is the leading lithium chemical producer in the world
• Global demand: CAGR (2002-
2012): ~ 8% • Expected growth for 2012: ~
9% • Global lithium chemical
demand has increased over 25% between 2010-2012, with batteries being the primary demand driver
• Battery technology historically been the demand driver.
•Batteries (over 41%) • Glass • Lubricating Greases • Glazes/Frits
Li2CO3
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SQM 35%
China 10% Talison 22%
Others Chile 19%
FMC 11% Others 3%
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Lithium & SQM: Growth Opportunities • Current lithium carbonate plant capacity 48,000 MT/year • We believe SQM is one of the lowest cost producer in the world • New production capacity is expected from Australia & China during 2013
Lithium & Electric Cars: Outlook • Total production of e-cars (HEV-PHEV-EV) using lithium-ion batteries (LIB) is expected to reach 1.5-3.0 million (2015), 5.0-10.0 million (2020) • Total lithium demand is expected to reach 250- 300 KMT-LCE (2020)
Specialty Chemicals: Lithium 11% of Total 2012 Gross Margin
*SQM estimates: Lithium chemicals market
Specialty Business World Leadership Growth Opportunities 19
0
2.000
4.000
6.000
40
60
80
100
120
140
2008 2009 2010 2011 2012
Lithiu
m A
verage
Price
US$
/ton
TH.
MT
- LC
E
Year
Lithium Chemicals Market*
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Solar Salts: New demand for industrial nitrates for thermal energy storage in solar power plants means increasing our nitrate consumption
• Mixture of 60% sodium nitrate and 40% potassium nitrate
• Main projects: ACS Cobra-Sener, Aries, Rocketdyne, Abengoa, SAMCA, Solar Reserves
• 50 MW → ~30,000 MT of salts • 2012 solar salts are expected to reach ~ 180,000 MT . • 2013 sales expected to drop below
100,000 MT due to a delay of most projects until 2014 as a result of the financial situation in Europe
Specialty Chemicals: Industrial 8% of Total 2012 Gross Margin
Traditional Industrial Chemical applications include: metal treatment, water treatment, pyrotechnics, explosives, glass manufacturing, among others
Specialty Business World Leadership Growth Opportunities 20
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Overview
Fertilizers
Specialty Chemicals
Financial Information
Agenda
Photo: SQM offices in Santiago
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1. Capacity expansion for potassium-based products in the Salar de Atacama
2. Increased capacity in iodine and nitrates facilities in first region, with increased plant efficiencies and higher quality products
3. Optimization railroad system, other projects aimed at improving yields and reducing costs
Capital Expenditure Program Approximately US$500 million for 2013
*Approximately 70% of capital expenditures will be related to expansion projects
Specialty Business World Leadership Growth Opportunities 22
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Financial Performance
* 2008 figures prepared according to Chilean GAAP; 2009-2012 figures are based on IFRS numbers.
Specialty Business World Leadership Growth Opportunities 23
1774
1438
1830
2145
2429
0
500
1000
1500
2000
2500
3000
2008 2009 2010* 2011* 2012*
US$
Mill
ion
Revenues*
501
340 382
546
649
0
100
200
300
400
500
600
700
2008 2009 2010 2011 2012
US$
Mill
ion
Net Income*
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Financial Performance*
NFD: interest bearing debt net of cash and cash equivalents, considering the effects of derivatives
* 2008 figures prepared according to Chilean GAAP; 2009-2011 figures are based on IFRS numbers.
Specialty Business World Leadership Growth Opportunities 24
42% 41% 38%
45% 46%
0%
10%
20%
30%
40%
50%
2008 2009 2010 2011 2012
EBITDA/Revenues
0
1
2
2008 2009 2010 2011 2012
NFD/EBITDA
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Key Conclusions
Business flexibility according to market conditions
• Largest global producer, lowest cost producer, market growth.
• Specialty Plant Nutrition
• Iodine
• Lithium
• Solar Salts
• Growth opportunities and a low cost producer.
• Potassium
• Industrial Chemicals
• Solid financial position
• Focused on long-term growth
25 Specialty Business World Leadership Growth Opportunities
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