SQM Inc., Santiago, reported a 26 percent drop in third-quarter net income, to $83.5 million ($0.32 per share) on revenues of $543.2 million from the year-ago $112.9 million ($0.43 per share) and $558.7 million, respectively, citing a delay in ramping up new lithium production, as well as logistics issues in Chile.
“During 2017, we announced an important lithium expansion near Antofagasta, which would allow us to increase our capacity by almost 50 percent,” SQM CEO Patricio de Solminihac explained. “This project, which entailed a complete overhaul of our existing plant, had a quick timeline, and a very low capex.
“The commissioning of the fully upgraded plant, as previously announced, has been more challenging than expected, impacting our ability to produce high-quality lithium during the third quarter, affecting our sales volumes. We are working diligently to resolve these issues as soon as possible,” said de Solminihac. He added that the ramp-up delay will likely impact fourth-quarter lithium and derivative sales volumes, delaying part of these volumes to first-quarter 2019.
Solminihac told analysts in a Nov. 22 earnings call that the company would solve its lithium production issues and reach a 70,000 mt/y nameplate capacity in the near term. “We believe fourth-quarter sales volumes will be significantly higher than third-quarter, but less than originally expected, letting us reach approximately 45,000 mt this year.”
“As we reach the end of the year, we have been positively surprised by the demand growth in the lithium market, especially lithium hydroxide,” he added. “We believe that total lithium demand growth will surpass 25 percent this year. As a result, prices in the lithium market remain strong, our average prices during the third quarter remained relatively flat compared to the second quarter. We believe that the prices reported during the fourth quarter will be similar to the third quarter.
“We have seen positive trends in our other business lines as well,” de Solminihac continued. “Prices for potassium chloride in the third quarter increased over 15 percent when compared to last year. Specialty plant nutrient sales volumes increased almost 10 percent compared to the third-quarter 2017, and iodine prices exceeded expectations, reaching almost US$25/kg. We believe iodine and derivatives sales volumes could surpass 13,500 mt this year.”
Third-quarter Specialty Plant Nutrition volumes were up 10 percent and revenues 5 percent. Volumes were 288,700 mt, up from 263,600 mt, while revenues were $194.9 million versus $185.6 million.
Potassium nitrate-based products saw only a 2 percent volume increase for the quarter, to 160,800 mt from 157,400 mt, though they have had a 19 percent uptick year-to-date. SQM noted that there has been less supply in the market in recent quarters, as a main competitor has been ramping up capacity.
SQM said it had been able to supply the additional needs of the market. The company believes its 2018 sales volumes for the product line will be up 15 percent, and that the overall market will grow 6 percent this year.
Within the Specialty segment, Specialty Blend volumes were up 16 percent, to 84,200 mt from 72,700 mt.
Third-quarter Potash-based volumes and revenues were both down, as the company continues to favor enhanced lithium production over potash. Volumes were off 39 percent, to 249,300 mt from 406,100 mt, while revenues were down 29 percent, to $80 million from $113 million. SQM said third-quarter sales volumes were down 14 percent from the second quarter, and it expects the fourth quarter to be lower. It projects full-year 2018 sales volumes of 900,000 mt, and expects 2019 to be lower.
Third-quarter Lithium-based volumes were off 27 percent, to 9,300 mt from 12,700 mt, while revenues were down 9 percent, to $152.8 million from $167.8 million, respectively.
SQM nine-month net income was up at $331.2 million ($1.26 per share) on revenues of $1.7 billion, compared to the year-ago $317.2 million ($1.21 per share) and $1.58 billion, respectively.
Nine-month Specialty Plant Nutrition volumes and revenues were both up 19 percent. Volumes were 844,800 mt compared to 712,000 mt, while revenues were $607.3 million versus $511.4 million. Potassium nitrate-based products also saw a 19 percent uptick in volumes, to 535,000 mt from the year-ago 448,700 mt. Specialty Blends were up 18 percent, at 180,100 mt from 152,200 mt.
Nine-month Potash-related volumes were down 35 percent, to 702,300 mt from the year-ago 1.08 million mt. Revenues were down 27 percent, to $219.8 million from $301 million.
Nine-month Lithium-based volumes were down 17 percent, to 30,400 mt from the year-ago 36,500 mt. They were 16 percent less than second-quarter volumes. Revenues were up 8 percent, to $500.9 million from $465.2 million.