SQM Inc., Santiago, reported a 48 percent dip in second-quarter net income to $70.2 million ($0.27 per share) on revenues of $494.1 million from the year-ago $133.9 million ($0.51 per share) and $638.7 million, citing lower lithium prices among other factors.
“The second-quarter results were mainly impacted by lower lithium sale prices, partly compensated by higher lithium sales volumes, lower potassium chloride volumes, and the lack of solar salt sales during the second quarter,” said SQM CEO Ricardo Ramos. “These factors were partially offset by higher iodine prices.
“We have seen lithium supply growing more than demand over the past few quarters, putting pressure on prices,” he said. “We sold higher sales volumes in the second quarter and expect to sell higher volumes in the second half of the year as we prepare for a 30-40 percent increase in sales volumes next year, which will help us recover some of the market share lost in previous years.”
SQM said lithium prices to China were lower due to different quality and grades of product being offered into the market. Ramos also told analysts on Aug. 22 that the company has been selling under short-term contracts, which exposes it to the ups and downs of the market. He said the timing of the Chinese government’s subsidies to the electric vehicle industry may have cut demand by 3,000-4,000 mt, but he sees no lasting effect, and said China is committed to the electric vehicle market.
SQM continues to believe that supply will outpace demand growth during 2019, given that part of the growth expected during the second half could be delayed. It said new supply entering the market will continue to have an impact on prices, and it believes that the average realized price in the third quarter could reach $10,000 mt.
“We are expecting higher sales volumes in the potassium chloride business line this year than previously anticipated, reaching close to 600,000 mt; this implies significantly higher sales volumes during the second half of the year,” he added. “Additionally, our sales volumes could grow in the future as we get back to the brine extraction levels that we had at the beginning of last year.”
Ramos told analysts that the 600,000 mt for the year would be a 20 percent increase over earlier expectations. He said potash production could go to 1 million in 2020 and more in 2021, noting that the company used to sell 1.3-1.5 million mt/y.
“We still expect the solar salt sales volumes this year of between 45,000 and 50,000 mt, while for the upcoming years these volumes should grow significantly as we will be supplying a major project in the Middle East that will require approximately 400,000 mt of product between 2020 and 2022,” he said. “The margins in the iodine business line are becoming more attractive, as prices are up almost 20 percent when compared to last year. We expect prices to continue on this upward trend as the market remains tight.”
In the company’s Potassium Chloride/Potassium Sulfate segment, second-quarter revenues were off 49 percent and volumes 60 percent from year-ago levels. Revenues were $44.4 million, down from $87.6 million, with volumes at 116,500 mt, down from 290,100 mt. The company said average prices for the quarter surpassed $381/mt, an increase of approximately 26 percent over the year-ago period. However, given higher inventories in China and changes in product mix, SQM said its average price could be lower in the second-half than the first-half.
Specialty Plant Nutrition (SPN) revenues were off 11 percent in the second quarter, to $199.3 million from the year-ago $224.6 million. Volumes were down 10 percent, to 279,700 mt from 309,600 mt. The unit’s major seller, potassium nitrate-based products, saw a 13 percent drop, to 183,500 mt from 211,100 mt.
Overall, SQM said SPN prices and sales volumes decreased as a result of increased supply from major competitors. Still, the company believes that the potassium nitrate market will grow 4 percent in 2019.
Second-quarter Lithium revenues were down 25 percent, to $138.5 million from the year-ago $183.9 million, while volumes were up 9 percent, to 12,100 mt from 11,100 mt.
Six-month net income was off 39 percent, to $150.7 million ($0.57 per share) on revenues of $998.4 million from the year-ago $247.7 million ($0.94 per share) and $1.16 billion, respectively.
Six-month Potassium Chloride/Potassium Sulfate volumes were off 47 percent, to 241,000 mt from the year-ago 453,100 mt. Revenues were down 37 percent, to $88.5 million from $139.9 million.
Six-month SPN revenues were off 7 percent, to $383.3 million from the year-ago $412.4 million. Volumes were down 4 percent, to 535,500 mt from 556,100 mt. Potassium nitrate-based volumes were off 7 percent, to 349,400 mt from 374,300 mt.
Six-month Lithium revenues were down 16 percent, to $293.6 million from the year-ago $348.2 million, while volumes were up 8 percent, to 22,800 mt from 21,000 mt.