Sociedad Quimica y Minera S.A.

Good day, everyone, and thank you for standing by. Welcome to SQM First Quarter 2026 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 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, please press star 1-1 again. please be advised that today's conference is being recorded. Now it's my pleasure to hand the conference to Megan Suter with Investor Relations. Please proceed.

Good day, and thank you for joining SQM's earnings conference call for the first quarter of 2026. This call is being recorded in Webcast Live. Our earnings press release and the accompanying results presentation are available on our website, where you can also find a link to the webcast. Today's participants include Mr. Ricardo Ramos, Chief Executive Officer, Mr. Geraldo Allanes, Chief Financial Officer, Mr. Pablo Aguimita, CEO of the Iodine and Plant Nutrition Division, Mr. Pablo Hernandez, Vice President of Strategy and Development of No Bandino Lithium, Mr. Andres Contanas, Commercial Vice President of the International Lithium Division, and Mr. Maxial, 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 law. 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 what's 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 our Chief Executive Officer, Mr. Ricardo Ramos.

Good day and thank you for joining us today. We reported strong results for the first quarter of the year, reflecting a strong performance across our key business lines. The first quarter of 2026 also marked an important milestone for SQM and for TILI, as our partnership with Codelco through Novandino Lidio completed the first full quarter of operations. This partnership represents much more than a business combination. It reflects a long-term commitment to responsibly developing Salar de Atacama lithium resources while creating value not only for our shareholders but also for the country and local communities. We are operating at full capacity, delivering strong operational and financial resource while continuing to invest in future growth and production expansion. Importantly, During the first quarter alone, Novandino Lithio generated more than $530 million in contributions to the Chilean state through payments to Corfo, taxes, and transfers to local governments. We believe this demonstrates the scale of value this operation creates and the meaningful role it plays in supporting Chile's long-term economic development. Starting our business analysis with lithium, total sales volumes in the first quarter increased by 25% year-over-year, reaching approximately 69,000 metric tons of lithium carbonate equivalent across our operations. Based on our current estimates, global lithium demand could exceed 1.9 million metric tons of lithium carbonate equivalent this year, while Mark Dynamics continues to suggest a tight supply-demand balance. As a result, we have increased our lithium sales volume guidance for the year and now expect total lithium sales volumes to grow by approximately 15% compared to 2025. Given current market conditions, we also believe average realized price in the second quarter could be higher than those reported in the first quarter. In Chile, Noandino Lithium delivered a solid first quarter sales volumes, and we expect volumes to continue increasing quarter over quarter. In parallel, we continue advancing in the Salar Futuro project and expect to begin the environmental permitting process in the coming months. In our international lithium division, operations in Australia also deliver strong results. Moon Holland and the concentrator are operating at full capacity, while they continue advancing in the ramp-up of Quinana Refinery, which is expected to be fully operational during 2027. Moving to our specialty plant nutrition business line, we're also increasing our sales guidance for the year. We now expect sales volumes to grow by approximately 10% compared to 2025, driven by reduced potassium nitrate export from China, which have created supply gaps in international markets. We believe SQM is well positioned to help provide the supply the market needs. In IONINE, We deliver a strong quarter, and we expect this trend to continue into the second quarter, as spot transaction prices have continued to increase, particularly in Asian markets. For the full year, we continue to expect iron cell volume to be broadly in line with last year, or slightly higher, while remaining focused on operating at maximum capacity. At Nueva Victoria, the seawater pipeline is currently under commissioning, and is expected to support future production capacity growth. Overall, we continue to observe supportive market conditions across our key business lines, and we believe SGM is well-positioned to continue delivering solid results and creating value for our shareholders. With that, I will now turn the call back to the operator for the Q&A. Thank you.

Thank you. And as a reminder, to ask a question, simply press star 11 and wait for your name to be announced. To withdraw your question, please press star 11 again. One moment for our first question. It comes from Joel Jackson with BMO Capital Markets. Please go ahead.

Good afternoon. It's Evan on for Joel. Thanks for taking the questions. Just have a couple here. So, this first one's on the within price movement. So, does the movement over the last year make SDRM feel more bullish or the same about mid-cycle pricing?

Hey, Joe. Tyler Lenders from Rondina speaking.

So, I'll refer to our pricing if this helps for you to answer your question. In Q1 2026, our average sales price was roughly $18 per kilo, which was substantially higher than the $10 per kilo we reached in Q4 2025. And our realized prices remain mainly linked to the pricing indexes. So consequently, of course, we expect our sales prices in Q2 2026 is expected to be higher than what we had in Q1 2026. We're still in a very high volatile price scenario, so it's difficult to predict prices beyond Q2.

Okay, thank you. And also, how does SPM plan to deploy windfall-free cash flow this year, driven by the higher lithium prices and higher earnings? In the past, you've done special dividends. Should the market expect this again?

Hi, this is Gerardo speaking.

Yes, we finished the first quarter with a higher cash and cash equivalent than what we had at the end of last year, mainly because of higher prices of lithium, higher prices of iron, higher prices of nitrates. But you have to consider that right after that, we paid dividends, 50% of the net income of last year, We also have to make payments to Corfo and other payments that are tax-related payments and others. We are constantly assessing opportunities to distribute dividend. In the past, we have done that, but at this quarter, we have not taken any decisions so far.

Thank you.

One moment for our next question. It comes from Ben Isaacson with Scotiabank. Please proceed.

Thank you very much, and good afternoon, everyone. I just have three questions. The first one is on the SPN business. You have announced an increase in your guidance for 10% growth in volumes. versus about 2% to 3% before. And you've talked about really taking share away from China in Asian markets. Can you just provide some color as to what's going on in China that's causing them to focus more on their domestic market? And how sustainable do you think this is?

Hello, Ben. I'm Pablo Tiburazo speaking.

Yes, that's right. We pretend to increase our volumes in 10%, as you said. This is more related with increasing potassium nitrate sales. As you know, by the end of March, China suspends the export of potassium nitrate abroad. So that means that allows us to go to markets where we normally are not going. That, you know, opens an opportunity to put more volume in the market, and that explains mainly our growth. Regarding what's going on in China, well, it's difficult to say. In China also, you see that today is not the only restriction in that product, potassium nitrogen. You have other products that are restricted, so it's not easy to see what will happen in the future. However, in the meantime, we have the opportunity. We are well prepared because we have the capacity, the installed capacity, inventories, and our supply chain worldwide ready if the market needs more potassium nitrogen.

Great. Thank you. And my next question is on iodine. We've had elevated prices for quite some time. And if we go back, I can't remember how long it was, maybe 12 years ago. I can't remember. But when prices were this level again, you know, at this level, it didn't last that long. And we saw supply coming to market and then we saw prices dropping. What gives you the confidence, and I know supply is coming to market slowly, but what gives you the confidence that we won't see an acceleration in supply of iodine over the next two or three years that will disrupt this pricing environment?

Well, I would say that, first of all, I mean, if you try to compare the market today with what was the market 10, 12 years ago, I think that it's not so easy to compare. The market is much higher than before. Also, the participation of the different applications has changed. I mean, today you have a more, for example, much more importance of ex-contrast media. That didn't happen before. So today, let's say that you have some changes in the market. Also, what we have seen is that marginal projects, you know, are not there, but when they arrive, normally they are higher cost than before, so that also puts some pressure in the price structure, let's say. And today, well, we are confident because it's a matter of supply and demand. In Q1, we saw a very strong demand. We believe that the market growth in Q1 more than 3%, so that's sustained. that we believe that this year the market will grow 3%, sorry. And in the meantime that that's happening and the supply is not there, we believe that, well, everything is there to remain this level of prices. Thank you.

And then my final question is on Solar Futuro. Can you just remind us what the CapEx spend looks like? and the timing of the outflow. And the real question is to do with inflation, whether it's the impact of what's happened with respect to the Iran war, or whether it's tariffs, or whether it's general inflation. We're seeing CapEx for projects around the world increase. So can you talk about what impact inflation is going to have on the Solar Futuro project and how that could impact returns? Thank you.

Hello, Ricardo Ramos speaking. As you may know, we expect to file the environmental study of Salar Futuro in the next few months, probably before the end of the quarter. And we are assessing now what is going to be the total investment. And our first estimate is in the range of $3 billion, the investment in Salar Futuro. You are right in terms that there is a lot of uncertainty in the world in terms of costs, in terms of the pricing of raw material, everything. we don't have a full understanding of how long it will take to solve these issues that we are facing today, especially because of the war. But yes, inflation is an issue, but inflation also is affecting the price of our different commodities. That's why if the total investment is affected by inflation, and it will be, Of course, pricing of the different products that we sell worldwide, like iron and lithium, everything will be affected by the inflation. It means it will increase accordingly. That's why we do not expect that the project will be affected in terms of the return of the rentability of the project. I think it's going to be an extremely good project. We are very, very proud of the new technology that we will implement. We are doing things very good in the Salar de Atacama as we speak. We are moving as far as we can. And, of course, the environmental study, environmental review of a project like that takes some time. We think that during the year 2029, we will have the final approval. That's what we expect. And we will start investment in the Salar Futuro project during 2030. Everything is... According to our original plan with CODELCO, I think that we're just a little better in the plan because we have been working very hard together. I think everything is moving in the right direction. Thank you very much.

Thank you. Our next question is from the line of Corinne Blanchard with Deutsche Bank. Please proceed.

Hi, good morning, everyone. Thank you for taking my question. Can you talk about the lithium volume outlook rates? You're now targeting 15% up year over year, which would bring you almost close to the 300 kilotons. Can you first talk about the cadence? Are we seeing that increase already starting in 2Q, or is it more like a second half of the year story? And then is it coming, those volumes, are they coming from the production, or is it also you may be offloading some of your inventory.

Thank you. Hey, Corinne. Pablo Hernandez speaking.

So we're expecting strong sales volumes in Q2 2026. We hope to surpass the sales volume of Q1 2025 by more than 10%. Heating a record volume for any past calendar quarter. We continue maximizing our sales volume as we have consistently done over the years, following our decision to operate at full capacity and expanding it in line with the anticipated market growth. So ensuring we're always prepared to meet our customers' needs. And aligned 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 going to be over 270,000 metric tons. coming from El Cerro de la Cama. So there's significant appetite for lithium units in the market.

Thank you. And then I'll... Sorry, I wanted to go... So two questions here, maybe. Spodumene price in Montferland, I think if you compare this with some of your peers, I think you have got a much lower price. Can you comment maybe of the driver and the why here, and how do you view that for the rest of the year? And then quick, another question. I want to go back on the capital allocation. I know, Gerardo, you mentioned you're not going to – you haven't yet decided if it's going to be special dividends. If it's not special dividends, what are you going to do with the cash?

Thank you.

from International Lithium speaking. Regarding your question on spoiling price, well, the difference between our realized price for concentrate and the quarterly average of some of the indexes is mainly explained by two factors. First, you have the market volatility during the last few months. For example, December, you saw prices at around $1,300. Then in March, it was more than $2,000. So the realized price for any given producer depends on the timing of the negotiations and the shipments within that price cycle. And second, spodum shipments are not continuous or evenly distributed month to month. So when you combine a strong price recovery with the lumpy nature of the shipments, you can see some difference between the reported realized prices and the quarter average of some of the market benchmarks. So, from a commercial standpoint, we remain comfortable with our positioning as we continue to optimize both the timing and flexibility between storing and downstream hydroxides sales.

Hi, Corinne. This is Gerardo.

Regarding your question about capital allocation, I think there are a few things that have to be considered. First, given what Pablo just mentioned about higher volume sales from Salar de Atacama and with these price levels, our payments to Corfo, the government of Chile and local communities will be higher than last year and probably higher than the first quarter in the upcoming quarters, so we will have a lot of need for cash to basically comply with these obligations. Second, we have a high CAPEX program. We are expanding capacity in Chile. We're working on initiatives in the ION operations as well as in the international division. And of course, we have a dividend policy that considers payments of dividends at the year end. Well, it's approved on the shareholders meeting, and it's paid right after. But in the past, we have made interim dividend payments when we have seen the opportunity to do so. And of course, this year, we are assessing that. This is just the first quarter of the year, and the board will reconvene and we'll discuss about opportunities, and if appropriate, interim dividends will be paid. Otherwise, we will see a final dividend paid at the end of the fiscal year.

Thank you, guys. Thank you. One moment for our next question. It comes from Isabella Simonato with Bank of America. Please proceed.

Hi, everyone. Thank you for taking my call, my question. I have to just, if you could give a little bit more details about taxes paid in the quarter, so the fact that tax rate was higher than what you usually have, so if you can provide a little bit more details about why that happened in the quarter. And second, back to the SPM business, right? As you said, you are more optimistic about sales and share gains in pricing of fertilizers in general have definitely been a theme, right, given the war. So if you can comment also on how do you see prices evolving throughout the quarter to throughout the year would be helpful. Thank you.

Hi, Isabella. Gerardo speaking. Regarding the taxes that we pay, it's important to consider or to give in consideration that within the tax line, of course, we have the corporate income tax that we pay in Chile, which is 27%, along with the taxes that we pay abroad, which, of course, it varies by jurisdiction, but we can say that an average is something around 30%. But on top of that, we pay a mining tax in Chile. And this mining tax is basically a function of the profitability of the business. The higher the profitability of the business, the higher the bracket you fall in. Basically, that profitability is considered or is calculated based on the total revenues you get on the exports of products from Chile and the cost that we have on those products, excluding the payments that we make to Corfu. So with the higher prices of lithium that we saw during the first quarter, the profitability of the lithium business went up. And because of that, the lithium mining tax that was paid during the first quarter of this year, or not paid, but accrued during the first quarter of this year, is higher than what it was in the past.

Hello, Isabella. Pablo Pineda speaking. Well, regarding to your question, we are optimistic regarding to the price trend in our specialty fertilizer business. The reason is what we already explained. I mean, today we have some lack of supply because of the China situation. But on top of that, the environment because of the war is affecting our raw materials or other fertilizers that are related with our products. potassium nitrate business. One example is the price of potassium sulfate is growing. And because of that, today support, you know, the potassium nitrate price trend. So we are optimistic and we believe that the price will continue increasing in the next quarters.

Thank you very much. And Gerardo, can you give us a ballpark about how How can we think about mining taxes, the rate? I noticed there's something between 8% to 10%. Just wanted to double check.

Well, of course, I mean, all of this is public information, and you can find how this is exactly calculated on public records. But the mining tax goes between 0% to 14%, and currently, based on the profitability of the business, it's in between 11% and 12% out of the profit that we get on the lithium business, excluding the Corfo payments.

Super clear. Thank you very much.

Thank you. Our next question comes from Emerson Vieira with Goldman Sachs. Please proceed.

Hello. Good morning. I have two questions on North Holland.

The first one just here when you guys expect to carry on with the expansion given that we saw news that the expansion was recently approved by regulators. So just, I mean, on timing for expansion and what is the cost that the operation is running right now? Thank you.

Thanks, Emerson, for the question.

Andres Fontana speaking. So regarding the expansion, we continue executing the plan. and expect to present the Mount Holland expansion for the board's review and decision early Q3 2026. Regarding permitting, that's progressing well, and it's currently under a public review period. At this stage, we do not have access to see if any appeals have been lodged. But once the appeals period officially closes, this is at midnight on May 28th, we will request confirmation of whether any appeals were submitted. In parallel, you know that we remain focused on sustaining full capacity operations at the existing mine and concentrator. Regarding cost, we do not comment on the specific costs for that operation. Okay.

Can you share with us what would be, I mean, both part for the expansion? I know, I mean, but any number here could be very helpful.

Yeah, regarding the CATEX, we are working it.

It will be presented for the board. As commented previously, for next year, we are planning to, or what is considered for next year is 200 million. That is only for 2027. And that is the SGM share for that. Okay. Thank you very much.

Thank you so much. And as a reminder, if you do have a question, please press star 1-1 to get in the queue. Our next question is from Juraj Domic with Laran Vial. Please proceed.

Hello. Good evening, and thanks for taking our questions. I have two of them. The first one is on cash cost. It's excluding the depreciation and CORFO payments. We saw a significant improvement in lithium and also weaker performance in iodine. And my question is, what should we expect for the rest of 2026? And perhaps moving to my second question, in previous conference calls, you've mentioned that the VES application accounts for around 20% of the total demand of lithium. And what would you say is this best share so far in 2026?

Thank you. Hello, Geray.

So, regarding the cash cost or operating cost and speaking about no and dino. As a consequence of continued efficiency and improvement processes, together with the economies of scale for increased production levels, we have indeed consistently been able to make cost improvements, and we expect the 2026 cost to be lower than the one we had in 2025. And this is, of course, aligned with our production strategy of increasing production at low cost.

regarding the best participation in the demand of the market for lithium, we expect something around 30% for BSS, overall demand.

Hello, . Regarding your question about the, well, first of all, I would remind that the increase is not too much. There are some explanations for that. The first one is that we are producing quite a bit of volume. Remember that we pretend this year to produce more than 15,000 metros of iodine. That means that we are using some marginal facilities that have higher costs. Second, well, we are in the ramp-up of Maria Elena, so that means that we have some specific costs related to the ramp-up. And third, that we cannot forget is that because of the situation of the war, because of some raw materials, mainly fuel which is very important for our mining activity is increased so those are the reasons however as always we are working in different initiatives to control the ghost increase perfect thank you very much thank you so much and ladies and gentlemen this will conclude our q a session and conference for today we want to thank everyone for participating you may now disconnect