Sociedad Quimica y Minera S.A.

Good day and thank you for standing by. Welcome to the SQM third quarter 2025 earnings conference call. At this time all participants are in a listen only mode. After the speaker's presentation there will be a question and answer session. To ask a question during the session you will need to press star 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Megan Suter, Investor Relations Team. Please go ahead.

Good day, and thank you for joining SQM's Earnings Conference Call for the third quarter of 2025. This call is being recorded and webcast live. Our earnings press release and accompanying results presentation are available on our website along with a link to the webcast. Today's participants include Mr. Ricardo Ramos, Chief Executive Officer, Mr. Gerardo Allanes, Chief Financial Officer, Mr. Carlos Diaz, CEO of the Lithium Chile Division, Mr. Pablo Altamires, CEO of the Iodine and Plant Nutrition Division, and Mr. Mark Fons, CEO of the International Lithium Division. Also joining us today are members of our Commercial and Business Intelligence team. Mr. Felipe Smith, Commercial Vice President of the Lithium Chile Division. Mr. Pablo Hernandez, Vice President of Strategy and Development of the Lithium Chile Division. Mr. Juan Pablo Velolio, Commercial Vice President, Plant Nutrition and Specialty Products. And Mr. Andres Fontenas, Commercial Vice President of International Lithium Division. Before we begin, please note that statements made during this call regarding our business outlook future economic performance, anticipated profitability, revenues, expenses, and other financial items, along with expected cost synergies and product and service line growth, are considered forward-looking statements under U.S. federal securities laws. These statements are not historical facts and are subject to risks and uncertainties that could cause actual results to differ materially. We assume no obligation to update these statements except as required by law. For full discussion of forward-looking statements, please refer to our earnings press release and presentation. With that, I will now turn the call over to our Chief Executive Officer, Mr. Decado Ramos.

Thank you. Good morning, everyone, and thank you for joining us today. During the third quarter, we experienced a more favorable pricing environment for lithium compared with the previous period. Although the market remains highly volatile, we are cautiously optimistic. Our realized average prices increased, and while we expect this positive trend to continue in the fourth quarter, we remain focused on high-quality production, being a reliable supplier, increasing volumes, and continuing to advance our cost reduction initiatives. Demand fundamentals remain strong, not only for electric vehicles, but also from energy storage systems, which already account for more than 20% of global lithium demand. Operationally, the quarter was very strong. We delivered the highest lithium sales volumes in SGM history, supported by low cost and strong efficiencies in our Atacama operations. Our Australian operation also continued to progress as planned, Spodumene sales increased significantly. We initiated lithium hydroxide production and we reached record sales volumes of spodumene concentrate, an important milestone from this project. We expect commercial activity to remain robust in the fourth quarter. Outside the lithium segment, performance was also solid. In iodine and plant nutrition, results remain strong. Iodine prices continue at high levels with a balanced supply-demand environment Construction of our seawater pipeline is now more than 80% complete, giving us the ability to bring additional iodine to the market earlier than expected if required. We're also expanding our iodine production capacity through the development of a third operation in Maria Elena, which will add 1.5 thousand tons of iodine capacity. This further strength our long-term supply position and reinforces our reputation as a reliable supplier. In fertilizer, we continue to see healthy demand and stable price across most key markets. Our specialty plant nutrition business delivered discrete but sustainable growth compared with last year, both in volumes and revenues. The shift toward tailor-made solutions and high-value blends continues to improve our product mix and supports our strategy of allocating products to the most attractive markets. In iodine, revenues increased 5% year-on-year, with prices averaging close to $73 per kilogram. The X-ray contrast media segment, the largest end-use application, continues to grow steadily and remains a key driver of long-term demand. We also complete a detailed review of our CAPEX program for the period 2025-2027. Total CAPEX is now estimated at 2.7 billion over the three-year period. Our plan maintains a focus on increasing production capacity, preserving low costs, ensuring high product quality, and upholding strong sustainability standards. While some investment decisions have been delayed, this does not affect our ability to meet the production and sales objectives set for each of our divisions. Finally, as announced last week by SQM and Codelco, We receive approval from China's Antitrust Authority. We look forward to advancing this joint venture before the end of the year. Thank you.

Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Joel Jackson from BMO Capital Markets.

Good morning. I'll ask my questions one by one. Thanks for the update. Can you talk about what you're seeing right now in lithium demand? Particularly, I want to maybe investigate It seems like inside China, the demand forecasts for lithium are a lot higher. For forecasts, they're coming from Chinese forecasters, as opposed to people outside China in the Western world seem to have lower demand forecasts. Do you see this disconnect? Is it around energy storage in China?

Can you talk about that? Thanks.

Hey, Joe. Pablo Hernandez here. So regarding 2025 demand expectations, We have recently improved since our last earning calls, so driven by stronger than expected EV sales, particularly in Europe and the sharp increase that you mentioned in BSS shipments. So we expect demand to reach over 1.5 million metric tons this year, representing an over 25% growth. In terms of China, it continues to maintain a significant lead in the EV market with an expected 30% year-on-year growth. representing more than 60% of the global EV sales. And regarding the other significant EV markets, Europe this year had a very strong first three quarters with more than 30% year-over-year growth. On the U.S., they still had a slower growth of 10% year-over-year, while the rest of the world, of course, had strong numbers reaching 40% year-over-year growth.

Okay. You on your last quarter talked about Chilean production for lifting to be up about 10% for you, and then you'd have about 20,000 tons for your share at Mount Holland. Are you still maintaining that 10% year-over-year out of Atacama? And then should we now expect something closer to 24,000, 25,000 tons for the year out of Mount Holland and Spodumene?

Joe, this is Gerardo.

Just to be clear, are you asking about production or sales?

Well, you gave guidance last quarter that Atacama production or sales at the local would be up 10% this year, and then you'd have 20,000 tons out of Mulholland. In this particular quarter release, you said Q4 volumes would be similar to Q3 out of Mulholland, which would imply more than 20,000 tons out of Mulholland. So, I mean... What do you expect out of Atacama? What production do you expect in Chile this year? What production do you expect in Australia this year? Let's do it like that.

Hello, Joe.

This is Carlos Diaz. Well, our production in Chile is going to, according to our schedule, we expect to produce this year close to 230,000. That is lithium coming from the Salado Tacama. 180 of those is processed in Chile and 50 is going to be processed in China. It started for our lithium sulfate production. We have been very successful with that. We continue working with next expansion for next year and we expect to grow next year. We still don't have the final figure, but I'll continue working in increase the production. That is related to the lithium production in Chile.

Hi Joel, this is Mark Falls. To answer the second part of your question, yes, we maintain our production. Estimation of forecast for this year, which you may recall, it was between 150,000 to 170,000 tons of spodumene concentrate at 5.5%. So that still holds. And regarding the sales projection, which you were referring to of 20,000 tons LCE for this year, you're also right. We are increasing that to a range between 23,000 and 24,000 tons.

Okay, that's perfect. And then my last question would be, When we look at the different average selling price for lithium that you get between Chile and international, it's about a $3,000 to $4,000 a ton discount. Should we think of that as that's the conversion costs that are basically embedded because you have to pay a toller to produce spodumene on an LTE basis? And then would we expect that international price discount versus the Chilean price realized to decrease across 2026 as you ramp up the quinana hydroxide conversion plant.

Hey Joel, this is Andres Fontanas. Regarding prices for the SQM International Lithium Division, please keep in mind that most of our sales are concentrated on spodumene, so more than 90% of our third quarter sales were explained by spodumene. And right now, we are reporting all of our sales as lithium carbonate equivalent. So, in order to compare those prices with the prices that we are getting in the Chilean operation, you need to take into consideration the conversion factors and also the refining costs. So, that would make a more fair comparison.

Right. So, my question is then, across 2026, as Conana ramps up, shouldn't the – shouldn't your Shouldn't the international price rise, realized price on an LCA basis rise closer to the Chilean price as Quinana ramps up next year?

Hey, Joel, this is Gerardo. Don't worry, next year or starting from next quarter, we're going to report the numbers from Australia as the product is sold. So if it's spodumene or lithium hydroxide, you will see the breakdown. So you will not have this confusion of prices without the conversion cost or not.

Okay, thank you. I'll pass it on.

Thank you. One moment for our next question. Our next question comes from the line of Lucas Ferreira from JP Morgan.

Hi, guys. Hope you can hear me well.

My first question is just to make sure I understand the part about China production. So are you already running 50,000 tons there? Because I remember the capacity was something around 30,000 tons with potential tolling of another 20,000. So I was wondering if there is more capacity to be used in China next year, if the market remains, you know, good as it is right now in terms of prices. Is China ready for capacity? And the other question I have is also follow up on the JV with Coelco. if uh imagine the signing like ricardo mentioned now by the end of the year if there is any sort of a retroactive payment that sqm has to do uh for the year 2025 uh given that it took long to to sign the contract um so in other words when you look at the free cash flow the company even though you consolidate the most likely consolidate the full thing is there any any sort of adjustment effect or cash transfers that we should be aware of when the contract is fully signed.

Thank you. Lucas, Ricardo speaking here.

First, you're right in terms that we have to pay a dividends to CODELCO during next year. This dividend will be in relation of the tonnage of volume that belongs to CODELCO according to the joint venture agreement. And we will put in our accounting this value as soon as we finish the agreement. It has been stated very clearly in our financial statements that we have to do it as soon as we have the agreement with CODECO. And it is reflected, and you can calculate the number because it's quite clear in the agreement with SQM and CODECO. That is public agreement.

Hello, Lucas. Carlos Neves again. Respect to your first question, our production in China, Let me tell you first that we expect to produce this year 100,000 metric tons of lithium sulfate. So when you convert to lithium carbon dioxide, you have to divide by two. So it's equivalent to 50,000 around that. And 20 of those is going to be produced in our Dixing plant in China. And 30 is going to be produced with third parties. So for the coming year, we expect to keep increasing the production in lithium sulfate. And we're studying and evaluating to expand our capacity in China in our own plans.

That is our plan. Perfect. Thank you very much.

Thank you. One moment for our next question. Our next question comes from the line of Ben Isaacson from Scotiabank.

Hi. This is Lucy on for Ben. And I have three questions. With the CapEx plant lowered and lithium prices start to rise, how should we think about the need to raise capital in 2026? Is it fair to say that the base case scenario is no capital raise? Thank you.

Hi, Lucy. This is Gerardo. Well, you can see our balance sheet. We have a very strong balance sheet. And we have had always a strong balance sheet. And on these days, even at the current pricing environment, some of our main KPIs are improving. We are deeply committed to maintaining a strong investment grade. And there are several levers we believe can be pulled before pulling the last one, which is raising capital. So we're working on several initiatives, and as long as we keep on having a strong balance sheet, it may not be needed.

Thank you. And for my second question, earlier this year, earlier this week, GAMFON suggested 30% to 40% lithium demand growth next year. Do you have any preliminary thoughts on demand growth next year? And in particular, how do you see demand for ESS developing next year? Thank you.

Hey, Lucy. Pablo Hernandez here. So regarding Empeng, of course, we would need to look into their assumptions. But of course, this looks like a good and optimistic projection for next year. In our case, regarding 2026, we're still assessing demand growth expectations, and we remain relatively conservative with the expectation to reach more than 1.7 million metric tons. And the main driver will continue to be the EVs. And of course, as you mentioned, the very strong demand that we've seen on VSS side.

Perfect. And finally, how much R&M production growth do you expect to see in 2026? That is not from SQM. And is it all Chile-based? Thank you.

Hello, Pablo Timidez speaking. Well, regarding to the third-party production, I mean, with the public information that we have, we believe that most of that will come from Chile, from Caliche Org. And we don't have the exact figure, but our expectation is that that amount will not surpass the growth of the total demand.

Thank you. One moment for our next question. Our next question comes from the line of Andres Castanos Muller from Berenberg.

Hey, thank you very much. Can you please just update us on the progress to closing the deal with Codelco and remind us what the milestones are pending. What happens if it doesn't close by 2025? Is there a long-stop close there? What will happen?

Sorry, Ricardo speaking. First, as we announced, we closed an agreement with the antitrust authority in China. That was the last remaining external authorization we needed. And now everything is under review, especially the agreements between Corfo and Codelco under the review of Contraloría and Chile. Contraloría is like an internal... auditing body of the government that needs to review this kind of contracts. We expect that this review will be positive and will be before the end of the year. There's no second plan. We will close this year. That's for sure.

Thank you. That's great. Another question, if I may. This would be asking on 2026 expected mix out of Australia. What mix of spodumene and hydroxide do you expect to get out of Australia in 2026? Thank you. if you can indicate something about this. Thank you.

Hi, Andres. This is Mark Fons. We have not yet closed our budget for next year on production for Monholland. What I can tell you is that the mine and concentrator at Monholland, we expect to be producing at capacity. So, of course, we will be expecting half of Monholland's capacity in terms of spotting and concentrate. What happens with the ramp-up on the refinery, on the other hand, is that we've announced the first product this year, as you well know, and we will be ramping up production until almost reaching nameplate capacity by the end of 2026. What's the exact amount of that lithium hydroxide, considering all the good work that has been performing covalent with farmers and SQM at the refinery, in addition to all the challenges as any ramp up in a capital project It will happen next year. It still remains to be seen. And we will let the market inform in due time.

Very clear. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Corinne Blanchard from Deutsche Bank.

Hey, good morning. Thank you for taking my question. The first question I would like to get... more callers on the capex reduction. You're reducing by about 22% versus what we had last year. But I think in the price release, you stated that there will not be, you will not have an impact on any capacity or project. So I'm not sure how to think about it. So maybe if you can help us understand the reduction of capex and for which business or segment division it comes and maybe any projects that have been pushed out of the 2027 range, that would be helpful.

Hi, Corinne. This is Gerardo. Let me give you a breakdown of what we announced. Well, yesterday we announced that our CAPEX program for the years 2025-2027 will be somewhere around $2.7 billion. The breakdown is going to be somewhere around $1.3 billion for the Lithium Chilean Division. The main project that they have is to finish the expansion of lithium hydroxide to reach 100,000 metric tons. That should be ready at the beginning of next year. Then the expansion to reach 260,000 metric tons of lithium carbonate capacity in Chile. while we keep on working on initiatives to keep on producing lithium sulfate that is quite relevant, as Carlos was mentioning before. Then, for the International Lithium Division, the total capex that is included within this $2.7 billion is approximately $700 million, which includes approximately $400 million between the expansion of Moholan and the first steps of Azure, Of course, both projects are subject to approval with our partners, but that's what is included in this timeframe. And finally, in the iodine and plant nutrition business line, the total capex is approximately $800 million. that includes the seawater pipeline that should be ready next year that is going to be critical to give us flexibility to produce more iodine and also the Maria Elena iodine production site that should let us bring additional production or capacity of iodine as of this moment.

Thank you. Maybe the second question, coming back to the Codeco agreement, are you still waiting for the local group to be consulted? And if so, can you provide an update of where you stand with them?

Thank you. No, no, no. Sorry.

Regarding the communities, we had the agreement with the communities that was, I think, a couple of months ago. It was publicly released that we had the final agreement in order to move forward. And the only one that I already explained to you is the internal auditing body of the government that is reviewing the agreements between Corfo and Codelco. After they finish the review and their approval, we will continue with the joint venture startup.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Marcio Farid from Goldman Sachs.

Hello everyone, thank you. A quick follow up on my side, please. You mentioned the demand expectations. I think you mentioned 25% growth to 1.5 million tons. I wasn't sure if that was related to 2025 or 2026, because in the presentation you mentioned 20% expectations for demand growth for 2025. And if you can also detail how you see demand for 2026 and also maybe provide some more details around ESS demand, which has been calling the market potential for the last few weeks, would be great. And then I'll have a few follow-ups as well. Thank you.

Hi, Marcio. This is Gerardo. Give me one second before answering your question, and just to clarify something over the previous answer I gave. I mentioned 260,000 metric tons of lithium carbonate production capacity in Chile, but it refers to 260,000 metric tons of lithium production overall coming from Chile, from lithium chlorine, or toll in China from lithium sulfate.

Hey, Marcio. This is Pablo Hernandez. So on your question, the information that I previously provided on the 1.5 million metric tons, or over 1.5 million metric tons, and the 25% year-over-year growth, that was related to 2025. And as I also mentioned, our expectations for 2026 is that this number is going to be reaching over 1.7 million metric tons. Specifically to BSS, As you well mentioned, and has been mentioned during the call, there's been a strong growth in demand from BSS, which we estimate over between 40 and 50% year-over-year growth this year, and we expect those numbers to remain stable for next year as well.

That's great. Thank you. And maybe another follow-up on the CODELCO deal. Can you provide us what are the expectations in terms You probably need a revision of your license if you go ahead with the plan to produce nearly 260,000 tons overall. with Chilean assets, obviously, in theory, it would be ideal that you defer as much CapEx as possible for when the JV becomes effective in 2030. So I'm just thinking if there is any CapEx related to Salar Futuro that we can expect to be spent before 2030, or can you defer that to beyond 2030 when the JV becomes effective? That would be great. Thank you.

First, the agreement will go into effect the same day we sign the agreement that it's going to happen in the next few weeks. I hope so. And after we sign the agreement, we sign with CODA, the agreement is starting. We don't need to wait until 2030. But you are right in terms that Salad for Duty is a great, great project, and we are working very hard on it. We expect to submit the environmental study to the authorities and communities during next year. It's going to be a complex project and probably we will reach the final agreement during 2029, 2030. It means that the initial investment in Salar Futuro, that is a big project and very interesting one, will be 2030 or 2031 starting investment. It means that it will not affect the CAPEX in the next three or four years. It will not affect 2026, 2027, 2028, and we will continue with our today plan of projects in the Salar de la Cama as usual. That's why this project will have a significant impact, yes, and a very positive one starting, I hope, 2030, if not 2031.

That's great.

Thank you.

And maybe one last one on iodine. Obviously, the market has been strong for a couple of years now. I think you're going to be adding about 5,000 tons of capacity once the new pipeline and MariaLand is ready. So can you talk a little bit about the overall supply and demand conditions on iodine if you expect this price is above $70 per ton? or $70 per kilo to remain sustainable? Where are the other areas of supply growth that could put some pressure on prices, if at all, in the next couple of years? Thank you.

Hi, Pablo Timidez speaking.

As we have been said before, Supply and demand for this year is tight because this year we are not seeing additional supply. Actually, the demand of this year is not growing because of the lack of supply. We believe that demand for the next year will grow in the range of 3%. And why the demand will grow? Because we see more capacity arriving to the market next year. As I said before, it's coming from Caliche Oil mainly. So we believe that we'll have more supply next year.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Mazahir Mamadli from Rothschild & Company, Redburn.

Thank you for taking my questions. So my first question is, If we assume that lithium hydroxide and spodumene prices stay kind of at the same level as they are today for 2026, would you expect the standalone profitability of quinana conversion to be positive?

Hi, Masahir. This is Mark Fulnes.

Yes, as we've said before, we continue to see the long-term profitability of Queen Anna and the Monoland project to be positive, and we still see ourselves committed with our partners, and we will continue to develop this project, and that's the reason also we announced that we expect a final investment decision on the expansion for the mine and concentrator for somewhere next year. Okay, thank you.

And maybe a follow up on the Codelco deal. So the 201 kilotons of lithium that's attributable to Codelco. Do I understand that correctly? That will be paid as sort of revenue that's attributable to that amount of lithium or is it gross profit or is it some other metric?

Hi, this is Gerardo.

Yeah, the amount that is to be paid to CODELCO is paid as a function of a certain amount of tonnage per year, which is 33.5, and it's paid as a dividend.

Yeah, I just want to clarify, is it going to be the revenue that's derived from 33.5 kilotons or gross profit that's derived from that amount of lithium?

It's the profitability that we get from this tonnage, but the exact calculation and the exact way of how you can get to the number, it's describing the contracts that are publicly available on our website. Okay, thank you.

Thank you. this concludes today's conference call thank you for participating you may now disconnect