Sociedad Quimica y Minera de Chile S.A. (SQM) reported a 34.7 percent increase in net income for the first quarter ending March 31, 2012, to $150 million ($0.57 per ADR), up from the year-ago $111.4 million ($0.42 per ADR). Gross margin was up 26 percent, to $236.3 million from $187.6 million, while revenues were up 10.3 percent, to $529.6 million from $480 million.
“We are very pleased with our first quarter earnings results,” said SQM CEO Patricio Contesse. “Increased average prices in all business lines when compared to the first quarter of 2011 has led to an increase in gross margin and has contributed to a positive start to the 2012 fiscal year. Iodine and lithium markets continue to be strong and in line with expectations in both demand and pricing. Fertilizer market volumes followed the trend we saw during the fourth quarter of 2011, and in recent weeks we have started seeing positive indications.
“In response to positive market news, we continue our major capital expansions to increase iodine production and increase production in potassium based products; these expansions will give us the flexibility to help meet market demands in the future. Although we continue to monitor broader financial markets and developments in Europe very closely, we remain optimistic about the remainder of 2012.”
Iodine and Derivative sales surged some 53.3 percent during the quarter, to $143.9 million from the year-ago $93.9 million, putting the category in striking distance of the traditional sales leader – Specialty Plant Nutrition (SPN), which saw a 7 percent decline in first-quarter sales, to $159.1 million from the year-ago $171 million. SQM explained that SPN saw increased supply during the first quarter of 2012, as some competitors returned to normal production levels when compared to 2011. It said demand for SPN products was also lower; in particular, some markets, such as the tomato market in North America, presented weaker conditions than expected. However, SQM said it saw a slight increase in volumes when compared to fourth quarter 2011. SQM remains confident, believing SPN conditions will improve during the second quarter and continue throughout the second half of 2012. However, it sees prices remaining flat for the rest of the year.
As for the iodine products, SQM said demand in all main uses continues to grow, specifically in x-ray contrast media and pharmaceutical sales. It said iodine markets have remained tight and that average prices have increased 10 percent versus the year-ago quarter.
Sales in the Potassium Chloride/Potassium Sulfate segment were up 6.6 percent during the quarter, to $133.6 million from $125.3 million. In general, SQM said potash fertilizer market conditions saw slower demand during the quarter, though prices were up over 10 percent versus the year-ago quarter. In recent weeks, SQM said global potash demand showed signs of improvement in major markets, specifically Brazil. It believes these conditions will continue throughout the year. SQM said recently settled contracts in Brazil will allow SQM to post higher average prices in 2012 than in 2011. SQM told analysts that it is shipping more potash to Brazil now that it has more granular product available. This year, overall, SQM expects to sell 1.1 million mt of potash, with 700,000 mt as granular and 400,000 mt standard. The company said first-quarter sales volumes were almost 10 percent higher than those recorded during the fourth quarter.
Potash expansion plans at Salar de Atacama continue. SQM expects total MOP and SOP fertilizer production there to be up over 25 percent in 2012 versus 2011.
First-quarter Industrial Chemicals revenues were off 5.8 percent, to $32.3 million from the year-ago $34.3 million. While volumes were lower, prices were up over 20 percent. SQM said volume decreases were caused mostly by a decrease in demand in t