Sociedad Quimica y Minera S.A.

Good day, everyone, and welcome to SQM's earnings conference call for the fourth quarter and full year 2025. 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 participate, you will need to press star 1-1 on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply press star 1-1 again. Please note this conference is being recorded. Now it's my pleasure to turn the call over to Megan Suter with Investor Relations. Please proceed.

Good day, and thank you for joining SQM's Earnings Conference Call for the fourth quarter and full year of 2025. This call is being recorded and webcast live. Our earnings press release and accompanying results presentation are available on our website, where you can also find the link to the webcast. Today's participants include Mr. Decado Ramos, Chief Executive Officer, Mr. Gerardo Llenes, Chief Financial Officer, Mr. Carlos Diaz, CEO of Nova Andino Lithio. Mr. Pablo Altamira, 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 the commercial and business intelligence teams. Mr. Felipe Smith, commercial vice president of Nova Andino Lithio. Mr. Pablo Hernandez, Vice President of Strategy and Development of Novandino Litio. Mr. Juan Pablo Belolio, Commercial Vice President of Plant Nutrition and Specialty Products. Mr. Alvaro Araya, CFO of the International Lithium Division. Mr. Andres Fontanas, Commercial Vice President of the International Lithium Division. And Mr. Max Vial, Head of Studies of the 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 or service line growth, are considered forward-looking statements under U.S. federal securities laws. These statements are not historical facts and are subject to risk and uncertainties that could cause actual results to differ materially. We assume no obligation to update these statements except as required by law. For a 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 Chief Executive Officer, Mr. DeCarlo Ramos.

Good morning, everyone, and thank you for joining us today. 2025 was an important year for SQM. We finished the year by signing our association agreement with Codelco, creating Novandino Lithium, which enables long-term lithium production from the Salar de Atacama. At the same time, we deliver solid financial results, strengthen our operational performance across our key businesses, and continue advancing our long-term growth strategy. For the full year 2025, we reported revenues of $44.6 billion, slightly higher than the previous year, with net income of $588 million. These results reflect improved market conditions, strong operational execution, and the resilience of our diversified portfolio. During the fourth quarter, we saw particularly strong performance in lithium and iodine, two of our most strategic businesses. In lithium, we achieved record quarterly sales volumes across both our Chilean and international operations. At Novandina Lithio, sales volumes exceed 66,000 metric tons in the fourth quarter, more than 50% higher year-over-year, reflecting the expansion efforts we have implemented over the past several years. On the market side, we began to observe an important shift toward the end of the year. As we mentioned in our previous conference call in November, we saw the inflection point in lithium prices driven by a stronger than expected demand from energy storage system, together with some supply disruptions. This contributed to a tighter market environment and improving pricing trends. As a result, our average realized lithium price increased nearly 14% quarter over quarter, reaching close to $10 per kilogram in the fourth quarter. Given the demand momentum we have seen in recent months and limited new supply entering the market, we expect the pricing environment in the first quarter to be significantly stronger. Looking ahead, we continue to see strong long-term fundamentals for lithium, driven primarily by electric vehicles and energy storage systems. Operationally, we are currently running at full capacity at Novandino Lithium while continuing to advance expansion plans in the Salar de Atacama. In our international lithium division, the Monholland mine and concentrator perform well, and the Kiwana refinery continues progressing through the ramp-up phase. Early this year, we also celebrated the first treatment of lithium hydroxide from the Kiwana refinery in Australia, a milestone that highlights the progress of our international lithium strategy. Moving to iodine, the business delivered a strong contribution, representing approximately 42% of SQM's total gross margin during the year. By the end of 2025, we observed record iodine prices, supported by a tight supply conditions and a strong demand, particularly in the X-ray contrast media market. Looking ahead, we estimate the iodine market could grow by around 3% in 2026. and our sales volumes are expected to remain stable or increase slightly depending on market conditions. We expect to be able to finish our seawater pipeline project in the Tarapacá region, which will provide additional operational flexibility and should allow us to unlock incremental production capacity. In specialty plant nutrition, we saw 3% volume growth during the year, driven by specialty blends and value-added products. For 2026, we expect moderate volume growth of between 2% and 4% within a stable pricing environment. Before concluding, I would also like to highlight our continued progress in sustainability. During 2025, SKM strengthened its ESG performance and received important international recognition, including inclusion in the SP Global Sustainability Yearbook 2026, and a strong radius from Dow Jones Sustainability Index, MSCI, and Ecovaries. To conclude, we're entering 2026 with a strong operational momentum, improving lithium market conditions, and continuous strength in ion and specialty plant nutrition. Our teams remain focused on delivering reliable supply to our customers, executing our growth projects, and creating long-term value for our shareholders. Thank you for joining us today. I will now turn the call over to the operator for the Q&A session. Thank you.

Thank you so much. And as a reminder, to ask a question, press star 1-1 to get in the queue. That is star 1-1 to get in the queue. One moment for our first question. It comes from the line of Lucas Ferreira with JP Morgan.

Please proceed. Hi, everybody.

Hope you can hear me well. I have two questions regarding lithium. The first one is your expectation of sales in 2026 of an increase of 10% from the Chile operations. If you can briefly discuss the product mix from the production side, if the company would be willing to put a bit more focus on on sulfates in 2026, eventually as a way to quickly expand production. If you're fully utilizing your plant in China, if you have been able to toll more capacity there, so pretty much what's the outlook for production mix, and if you can share some production numbers for JV. And the second question is regarding the cost of production in the fourth quarter. Felipe Cruz- which was up significantly significantly from the last quarter, I would assume that has to do with Felipe Cruz- the lease payments, given the higher average prices, but just wanted to confirm if there's Felipe Cruz- anything else impacting the cost of production, eventually these sulfate operations could be a bit more expensive. Anyways, any call around on the cost of production side would be appreciated. Thank you very much.

Hello, Lucas. This is Felipe Smith. Regarding the first part of your question, the sales volume 2026, we are targeting a strong sales volume in Q1. We hope to surpass the sales volume of Q1 25 by more than 15%, which would also be a record for the first calendar quarter. As we have consistently done over the years, our strategy remains unchanged. which is to operate at full capacity and expand it in line with anticipated market growth, ensuring we are always prepared to meet our customers' needs. So aligning with that strategy, we feel confident that we will successfully allocate in the market the additional production that we expect to achieve this year, which is close to 260,000 tons. There is an appetite for lithium units in the market, especially in Asia-Pacific. I will give you Carlos who will comment about the product mix.

Hi Lucas, this is Carlos Diaz, CEO of Novo Andino. Respect to the production, first during the year 2025, our production went according to the schedule, reaching 234,000 LCA. Out of 50 of those were produced in China, coming from our lithium surface producing in the Salar Atacama. And for this year, our expectations for production have been increased, and we target to produce close to 260,000 as a lithium carbonate equivalent, increasingly even from both our production in Chile and in China. And as has been the case during the past year, in 2025, we expect to continue to increase our productivity driven by the efficiency improvement, the use of new technology at the same time, reducing the brine extraction according to our sustainability strategy. And this year, we will continue to have full flexibility in terms of lithium carbon and lithium agrocyte both in Chile and China. I understand you're asking for the sheen. We are now operating at full capacity as well, same as in Chile.

Hi, Lucas. This is Mark Fons from Esquim International Lithium Division. In our case, we also expect cells to be increasing in around 10% on an LCE basis. As we have completed the ramp-up of the concentrator, we will continue and expect to be producing capacity at the concentrator in Monholland. So our cells will be heavily directed by our production. And in terms of the mix between spodium and concentrate and lithium hydroxide, they will be heavily leaned and skewed into spodium and concentrate as we continue to ramp up the lithium hydroxide plant in Kwinana.

Hey, Lucas, regarding your question about cost, I think there may be a mistake in those numbers, because if you look at the total cost per ton of the lithium and derivatives division, third quarter versus fourth quarter, it's quite similar. But you would see that the average price of lithium in the fourth quarter was higher, and consequently, within the cost line, we have a higher portion of lease payments to Corfo. Bear in mind that within the cost of goods sold, we have the cost of our Novandino lithium division and also the international lithium division that is becoming more relevant in terms of total volumes within the business line.

Thank you very much, guys, for the call. That was exactly my question, Gerardo. If there was any effect other than the lease payments in the quarter. Thank you so much. That's very clear.

Thank you. One moment for our next question. And it comes from Andres Castanos Mollor with Bernberg. Please proceed.

Hello. Congratulations on the strong results. So your EPS shows an impact from higher minority interest, but we don't see yet a dividend paid to CODELCO in the cash flow statement. So two questions about this. First, can you provide some guidance on how to calculate the minority interest going forward? Can you please provide also some guidance on when we start seeing dividend payments to CODELCO and how these dividends will relate to the minority interest? Thank you.

Hello, Andres.

Ricardo Ramos speaking. The detail of the agreement with CODELCO is public and it's a shareholder's agreement how we calculate the dividend to CODELCO every year, but In very simple terms, you have the net income of Novandino and from the portion, most of the Novandino net income is related to lithium business. And nowadays, 33.6, 0.5 thousand metric tons of lithium are allocated to Codelco and the rest allocated to SGM. Using this proportion, we allocate the net income for both companies. That's a simple way to do it. It's just a little bit more complicated, but it's public and you can review in the shareholders agreement. We have both parties. We expect to pay the dividends during April. I think during April, May, but I think April is going to be the month. We are going to release every quarter our best estimates and assumptions of the portion of the dividend to Codelco that is going to be paid at the end of the year.

So a follow-up, if I may. The earnings that we see, the minority interest, reflects a proportion to the 33.5 kilotons or reflects a proportion of the 50% that Codelco controls? Thank you.

In the minority interest, we put the dividend to Codelco, and this dividend is related with the 33.5 thousand metric tons of lithium and the net income allocated to these 33.5 thousand metric tons.

That's clear. Thank you.

thank you our next question is from ben isaxon with scotia bank please proceed thank you very much and good morning everyone i have three questions and i'd like to ask them one by one uh the first question is on iodine you sold much more than i think the street was expecting in q4 but you're also looking for stable um a stable volume in 26 especially given that you have the seawater pipeline coming on. I'm just curious, why did you sell more than expected in Q4, but you're going to be flat on volume in 26, even though you have the pipeline coming on?

Hi, Ben. Pablo Altimiras speaking. I could say that the main reason is what we didn't see some capacity from third parties that was expected to come. So that's the reason why finally we sell more in Q4. Also, we are seeing good signage in terms of the demand. Actually, demand of last year in Ireland growth more than expected. According to our numbers, finally, the demand growth 0.6%, where the expectation was to grow almost zero. So that was a good signage. So we have the product to deliver. In the case of this year, we are expanding some capacity. Actually, we are expanding the new projects in Chile are coming. Our first estimation was the first semester. Right now, maybe it will happen in the second semester. So that's the reason why finally we pretend to sell much more or less the same amount. Having said that, you know that as an SQM strategy, you're always putting more capacity. And our idea with the new project is to have a capacity to respond to the market needs.

Thank you. My second question is on Tianqi. They have filed that they are now an active seller of, I think, maybe 3 million shares or so, and potentially that could grow. But given that you see significantly higher lithium prices, iodine is doing well, potash, and the SPN business seems fine. Have you been in discussions to potentially buy back some of those shares and keep them out of the market? And if you haven't, is that something that you would be willing to consider?

So we're not under any kind of discussion about this point, first. And second, there's no, from a legal point of view, you cannot buy back shares in Chile.

Okay, thank you for that. That's easy. Let me go to my third question. And we're starting to see sodium ion batteries really inflect this year and improve on key metrics like energy density costs. etc i was hoping you could talk about what the risks are to lithium demand growth for both evs and for energy storage from sodium ion and how are you managing those risks hey ben paulo hernandez speaking here so we have indeed heard a lot of sodium ion batteries in the market as you have mentioned but we still strongly believe that lithium is the

best placed atom to be used in these batteries in our conversations with the market and understanding of the market. We see a small potential market space for the sodium-ion batteries, but we feel very strongly that lithium will be the dominant technology for the future.

Great. Thank you very much.

Thank you. Our next question comes from Corinne Blanchard with Deutsche Bank. Please proceed.

Hey, good morning. Thank you for taking the time for my question. I want to go back on the lithium expectation for the year. So you mentioned a pretty strong 1Q, 15% up year over year. Can you talk about the expectation or the cadence 2Q through 4Q? And then maybe if you can share as well what you hear from Chinese customers trying to get a sentiment on what people are saying there on the market.

Thank you. Yeah, Corinne, Felipe here.

Yeah, well, as I said before, 15% for the first quarter compared to the Q1-25, and we expect an increasing volume quarter by quarter, ending up with, hopefully, the largest volume in Q4. As I said also in the previous question, We are planning to sell more or less in line with the increase in production, but if we have opportunities to sell a bit more, of course, we will try to take them. Just for your information, we have today about more than 80% of our volume is already contracted, so we are leaving some space for spot sales, trying to maximize our opportunities and margins. And your question about the Chinese customers, well, as I said also, there is a strong appetite for lithium units, especially in Asia-Pacific, and China is not an exception. On the contrary, we have been getting a lot of inquiries for trying to increase our volumes, but we want to have a very diversified customer portfolio, so we manage that carefully.

Thank you. And maybe another question. So can you talk about like the pricing expectation? You mentioned having about 80% on the contract. So I'm assuming that looking at the current pricing or like what we've seen in the last three months, can you just remind us how you look at it for the contract and then just overall, what's your pricing view for the year for the market? Thank you.

Yeah, this is the best question, of course, which nobody can answer, but I will try. After reaching the lowest point over the last four years in the second quarter of 2025, our average sales price reached around $10 in Q4 2025, aligned with market indices, which is good news. Our realized prices remain, as always, mainly linked to those price indices. Consequently, our sales price in Q1, I can say now, that will be substantially higher than Q4 2025. That is one very good news. And however, if you ask me to go further beyond that, it's more difficult. I can only say that prices will remain volatile this year. It is very difficult to predict what will happen in the other quarters. But what I can say, without my boss being upset with me, is that prices should be closer to current price levels than the levels we saw last year. I hope this is good for you, Corinne.

Yeah, that's very helpful.

Thank you. Thank you. Our next question comes from the line of Marcio Farid with Goldman Sachs. Please proceed.

Thank you. Morning, everyone. All up on my side, looking at your presentation, you have Chile capacity increasing to 240,000 tons by 2028, and the early presentation points into 2026. So just trying to understand what led to that change. And it seems like that you guys are privileging China over Chile capacity. I'm not sure it's because of CapEx, but Tone is more efficient. And just trying to understand how should we think about production growth and the mix between Chile and China in the next couple of years would be great. And secondly, on the iodine side, you just mentioned 3% expectations in terms of demand growth, flood pricing. Obviously, profitability has been quite strong for the last few years. And it's always surprising to see that the supply response has been relatively slow and you suggested that seems like growth that was expected in the later part of last year has failed to materialize as well. So just trying to understand your level of conviction on the IOD market that we can, you know, continue to see this level of profitability and if there is any risk in terms of supply response to these elevated prices. Thank you.

Hi, I'm Marcio Carlos Diaz speaking. Regarding the question of lithium expansion, the 240,000 expansion of our chemical plant in Antofagasta has been delayed into 2028 as a consequence of optimization and efficiency project we have been developing in Salar de Cama, allowing us to increase the lithium sulfate production. But it's important to mention that the total production we have forecast hasn't been affected. And actually, our total production expected for this year is increasing compared to the previous announcement. So finally, it's an optimization of the capex, and we're going to produce more every year.

Hello. Pablo Timidez speaking. Regarding to your question about iodine, the perspective that we have for this market is quite positive. As we already said, our expectation for this year is that the demand will grow 3%, which is a big jump compared to the growth that we saw last year. And also in the long term, our view about the demand also is positive. That's the reason why we have been investing material resources in expansions. Remember that some years ago, we opened Pampa Blanca. Right now, we are opening... Maria Elena, and also we are close to finish our project of the seawater pipeline in order to be able to continue to grow and to have more capacity and flexibility. Our strategy is to be there to deliver the iodine that the market needs. And actually with the new investment, We pretend to produce more than 15,000 metric tons this year, and also after the seawater pipeline project, we pretend to reach a capacity that will surpass the 17,000 metric tons of iodine per year.

Okay, thank you.

One moment for our next question. And it comes from the line of Cesar Perez Novoa with BTG Pac-12. Please proceed.

Yes, good morning, gentlemen, and thank you for taking my questions. The first one, could you please provide an update on the ramp-up trajectory of the Kinana Refinery and if you could provide a volume forecast for Mount Holland throughout 2026. Additionally, if you could detail the current status of the engineering studies and regulatory permits for the proposed expansion of the mine and concentrator. If this expansion would be able to proceed, what capital expenditure range would we be looking at? And my second question relates to your exploration activity within Australia and other international jurisdictions. If you could provide an update on that, that would be extremely helpful. Thank you.

Thank you, Cesar, for your questions. I will try to go one by one over them. This is Mark Foles. So regarding your question on the expansion of the mine and concentrator, remember that the final investment decision that we're supposed to take this year refers only to the mine and concentrator. We expect that to be brought to the respective boards, so both West Farmers and SQM, by mid this year. And its output is still subject, of course, as you well mentioned, to the environmental approval and engineering studies. Both have progressed well, so we expect ahead of the decision to have a relevant milestone on the approvals, which is progressing well. And engineering studies has also been progressing well As you will know, and as was usual on our previous investment decision, we take our capital investment decisions with above 30% advance in engineering. We expect to have that advance by mid-this year. And relevantly in the concentrator, we expect to give around 10% engineering progress. So that has been moving well. And regarding your question on CAPEX, on the expansion, we haven't yet defined a number on investment CAPEX. but I can tell you that we have allocated within our 2025 and 2027 CapEx projection, we have allocated around $200 million for the expansion on the concentrator for Monholland in 2027. Your next question was on the Queen Anna refinery and having production outputs and projections. I can tell you first on the mine and concentrator, As I explained briefly before, we are already producing at capacity. We expect to have such capacity production within 2026. That should be a range for SQMs, 50% of in between 170 and 180,000 tons of sodium concentrate, 6%. That's our portion along this year. The more tough and difficult question has to do with the projection and guidance on production on Quijana. As you well know, we've been under ramp-up lately. It's difficult to come up with precise numbers in such scenarios. However, I can tell you that the ramp-up has been affected by intermittent odor issues, as has been briefed by our partners, West Farmers, before. But it has already been tackled with the studies and engineering development, so we expect to have that solution by mid-this year, completed solution. It's important to know there that our emissions have been within approved limits. So because of this, we are now expecting RAMPAP to move into 2027. Therefore, as I mentioned before, that volumes of cells will be heavily leaned into spodum and concentrate also this 2026, which provides us the flexibility of selling profitable spodum and concentrate in limited time.

Thank you. Thank you.

Regarding your exploration question, we are focused today in three main areas. So Australia, Namibia, and Canada. So let me go probably a little bit over each one of those briefly. In Australia, we have four earning agreements or partners, if you may. Those four early exploration agreements are distributed across Western Australia and the Northern Territories. Each one of those are in different early stages, if you may. A couple of them are on surface exploration and a couple of them are already undergoing drilling programs. And we expect to have progress and development during this year, 2026. The two drilling programs, if you're interested, are planned at Mount Roberts and at the Northern Territories areas where pegmatites are already being identified. Regarding our exploration activities outside Australia, still early days in Namibia, we are conducting our stage one drilling program with our partner Andrada Mining there. And in addition to have confirmed some very good grades at surface, we have also confirmed several bodies of pegmatite, in this case spodumene, at depth. But it's still to be seen how well spread, how big they are, so still early days, and we expect to have a second stage of exploration during this year as well. And finally, regarding Canada, as you well know, we established SQM Canada for exploration purposes last year, and we are currently exploring our own land in Canada as we speak. Thank you.

All right. Thank you very much, Mark.

Thank you. Our last question comes from Juraj Domic with Laramvia. Please proceed.

Hello, good morning. Can you hear me okay?

Hello? Yes.

Go ahead. So in the previous list, you mentioned some certain supply disruptions in the lithium market. And just to confirm, is this related to the news we've been hearing in Zimbabwe? or you have seen disruptions in other countries or areas. And my second question is regarding the permit process for Salar Futuro. If you have any time or schedule, we can have any news from that. Thank you.

On the disruptions on the lithium market, I believe what you're asking is related to when we talked about the supply, and that was mainly related to some lipidolite producers in the second half of last year who had some government restrictions in China that actually ended up in some of them stopping their production.

Carlos Diaz speaking again. With respect to the Solar Futuro project, we'll continue working on that, and we expect to apply the environmental approval in the middle of this year.

Okay, perfect. Thank you very much. Thank you so much. And this concludes today's conference call and Q&A session. Thank you all for participating. You may now disconnect.