Sociedad Quimica y Minera S.A.

Good day and welcome to the SQM first quarter 2023 earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Irina Axnova, Head of Investor Relations.

Please go ahead. Thank you, Sarah. Good morning. Thank you for joining SQM's Earnings Conference Call for the first quarter of 2023. This conference call will be recorded and is being webcast live. Our earnings press release and a presentation with a summary of the results have been uploaded to our website, where you can also find a link to the webcast. Speaking on the call today will be Ricardo Ramos, Chief Executive Officer, and Gerardo Yanez, Chief Financial Officer. Carlos Diaz, Executive Vice President of Lithium, Philip Smith, Commercial Vice President of Lithium, and Juan Pablo Belolio, Commercial Vice President of Iodine, will also be available to answer any questions. Before we begin, I would like to remind you that statements made in this conference call regarding our business outlook, future economic performance, anticipated profitability, revenues, expenses, and other financial items, along with expected cost synergies and product or service line growth, are considered forward-looking statements under federal securities laws. These statements are not historical facts and may be subject to changes due to new information, future developments, or other factors. We assume no obligation to update these statements, except as required by law. For a complete forward-looking statement, please refer to our earnings press release and presentations. I now leave you with our Chief Executive Officer, Ricardo Ramos.

Good morning and thank you for joining the call today. Yesterday, we reported our earnings for the first quarter of 2023. The results were affected by lower sales volumes in lithium and specialty plant nutrition business lines, partially offset by higher average prices when compared to the same period last year. We saw a decline in lithium demand in the beginning of the year, especially in China, which affected our sales volumes. High inventory levels across supply chain accumulated in the previous quarter and reduced capital production volumes resulted in low customer purchasing activity and put pressure on market prices. Coming out of the first quarter, we have seen an increase in market activity with customers looking for more volume to buy, which signals the end of the stocking period and is also being reflected in the spot prices trending upwards in the recent weeks. We believe that the lithium market foundations are intact and have not changed our expectation for the lithium demand growth this year. During the first quarter of the year, the global electric vehicle sales continued to increase when compared to the same period last year, achieving almost 30% growth worldwide, with sales in China increasing almost 22%, in Europe almost 19% and over 50% in the U.S., We expect this growth to continue throughout the year, with the total electric vehicle sales increasing over 2.5 million units in 2023. While we see new supply coming to the market this year, we believe that the softer price conditions and the stricter environmental requirements for mining operations have affected the economics of some of the high-cost suppliers, as well as impacted the timing of new projects. Consequently, we expect that the lithium market will remain tight throughout the year. We will continue to focus on expanding our production capacity and fostering a strong relationship with our strategic customers. We're committed to investing in these areas to drive growth and maximize our sales volumes. With the reconfirmation of volumes from all our major customers for this year, we anticipate a steady increase in sales volume throughout the year, quarter over quarter. Since last year, we have made significant progress in transforming the majority of our contracts into flexible pricing conditions, utilizing indexed reference prices with a lag between. We believe this approach allows us to respond swiftly to changes in the industry and provides greater flexibility to our customers. As I mentioned yesterday, we are very proud of the results in our Caliche operations. and specifically iodine business, which allow us to increase our sales volumes and ensure the supply of iodine to meet the growing demand of the X-ray contrast media segment. While global iodine demand is expected to be flat on the year as a result of the reduced demand in some of the iodine applications, we believe that contrast media segment will grow close to 7% a year. SKM is the only producer that has been able to increase materially its production volumes in the recent year. Sustainability remains at the core of our operations as we continue to focus on reducing the carbon and water intensity of our products. I am pleased to announce that our 2022 Sustainability Report will be published next week and invite you to explore and progress throughout the past year. We take pride in the achievement we have made and remain committed to advancing our sustainability development plan even further.