Sociedad Quimica y Minera S.A.

Good day, and welcome to the SQM fourth quarter 2023 earnings conference call. Today, all participants will be in a listen-only mode. Should you need assistance during today's call, please signal for 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. If you would like to withdraw your question, please press star then two. Please note that today's event is being recorded. I would now like to turn the conference over to Irina Aksanova, Head of Investor Relations. Please go ahead.

Thank you, Chris. Good morning. Thank you for joining SQM's earnings conference call for the fourth 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. We can also find a link to the webcast. Ricardo Ramos, our chief executive officer, will be speaking on the call today. Gerardo Yannis, our chief financial officer. Carlos Diaz, executive vice president of lithium. Felipe Smith, commercial vice president of lithium. Juan Pablo Bilolio, commercial vice president of iodine and industrial chemicals. And Gonzalo Gil, business intelligence director, will be also available to answer any questions later in the Q&A. Before we begin, I would like to remind you the 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 obligations to update these statements except as required by law. For a complete forward-looking statement, please refer to our earnings press release and presentation. I now leave you with our Chief Executive Officer, Ricardo Ramos.

Thank you, Dina, and good morning, and thank you for joining the call today. We reported our full year 2023 earnings yesterday, with our net income reaching over $2 billion, delivering over $7 in earnings per share. I would like to focus on key performance drivers observed during the last year, and our first impression on how this year should improve. cool on fall for SQM. Starting with lithium business, our full year revenues were over $5 billion, approximately 36% lower when compared to the previous year, partially offset by record high sales volumes, 170,000 metric tons, almost 10% higher when compared to the previous year. The sales volumes during the fourth quarter were over 51,000 metric tons, record quarterly sales volumes for SQM, Their revenues were affected by lower sales prices, which were decreasing quarter over quarter starting at the beginning of 2023 as a result of the capacity and inventory excess in the battery supply chain. Our lithium sales volumes guidance for this year considers an expected growth around 5% to 10% based on the contracted sales volumes for the year. as well as market estimates and conditions we are seeing at the moment. We believe lithium demand could grow another 20% this year. China remains the biggest demand and supply market for lithium products and is still going through the stocking of both battery materials and lithium chemicals inventory accumulated in the past years. That, coupled with an estimated incremental supply, makes it challenging at the moment to expect our sales volumes to increase above provided guidance. Nevertheless, depending on the timing of new supplies and any potential production curtailments, we could revisit our guidance as we advance through the year. Later in this call, we will discuss in more detail our lithium market views and electric vehicles market dynamics. In the iodine business, we reached record high production volumes during 2023, producing over 13,000 metric tons of iodine and increasing our sales volumes despite global demand contractions seen during last year. We expect to see some demand recovery in the iodine market during 2024 with relatively stable prices as seen at the end of last year and stable sales volumes with a potential upside subject to lack of any incremental volumes from the competition. We believe SQM, as industry leader, is the only global iodine producer which has been able to materially increase its supplies in the recent years. In the fertilizer business, we saw some sales volumes recovery and market price stabilizing. We expect to see positive demand growth in the potassium-nitrogen market driven by increased demand and product availability and expect our sales volumes to grow accordingly. In the meantime, we will focus on cost improvements and new market opportunities for our products. Finally, I would like to thank the SGM team for dedication and unified vision in sustaining our leadership position in our key markets at consistently delivering great performance year over year. Thank you. Before we move to the Q&A, I would like... It's going to be something different today. I would like to address one of the issues that has been brought up in the conversation with investors. especially in the last two months, probably, related to the future of the electric vehicles industry. For this discussion, I have invited to this meeting Gonzalo Gil. Gonzalo is responsible for lithium market intelligence at SQM and could help us to visualize better the EV battery industry. Thank you for being here, Gonzalo. And I have some questions, I think. We're going to get on 10 to 15 minutes in order to go through this, but I think it's very important in order to have an outlook of the lithium industry in the future. My first point is, as you know, in the recent weeks, it has been reported in the press that the U.S. and other countries are considering delaying deadlines for requiring minimum percentage of electric vehicles in new cars. How do you think this could affect electric vehicles penetration in the long term?