SQM, Santiago, reported a big jump in third-quarter net income to $106.1 million ($0.37 per share), up from $1.7 million ($0.01 per share) a year ago. But net income missed the average analyst estimate of $135.2 million, according to a Bloomberg Consensus (range $110.0 million to $179.0 million).
Gross profit increased 96 percent, to $224.8 million from $114.8 million, while adjusted EBITDA was up 72 percent, to $250.9 million from $146.2 million.
Revenues for the quarter grew 46 percent to $661.6 million, up from $452.9 million.
SQM took a $62.5 million hit in third-quarter 2020 from a class action settlement related to alleged noncompliance with securities laws and regulations in the U.S. in connection with disclosures made by the company. The amount paid was reflected as an expense in the third-quarter 2020 financial statements (GM Nov. 20 & 13, 2020).
For the nine-months to Sept. 30, 2021, the company posted a 170 percent rise in net income to $263.9 million ($0.92 per share) from the prior-year $97.5 million ($0.37). Gross profit moved up 56 percent, to $547.3 million versus $350.4 million the previous year, while nine-month adjusted EBITDA moved up 44 percent, to $626.0 million from the year-ago $433.6 million
Revenues for the nine-month period increased 36 percent, to $1.78 billion from $1.30 billion.
“We reported a significantly higher net income for the nine months when compared to the similar period of 2020. These results were driven by much higher sales volumes in lithium, iodine, specialty plant nutrition, and potassium business lines, as well as higher realized prices in all our business lines,” said SQM CEO Ricardo Ramos on Nov. 17.
“The expansion of our lithium operations is yielding positive results, letting us increase our sales volumes more than 80 percent when compared with last year,” he continued. “We already are producing at rates higher than 120,000 mt/y of lithium carbonate, while we continue working to reach the 180,000 mt/y capacity next year,” adding that the company expects to sell almost 100,000 mt/y of lithium carbonate equivalent this year, and is looking forward to growing those sales volumes in 2022.
Ramos also highlighted that as a result of the existing shortage of potash and potassium-based fertilizers and the significant increase of global potassium prices, the company reported a more than 65 percent increase of its average price in the potassium business line during the third quarter when compared to the same period last year.
SQM sees the positive trends being seen in each of the markets in which it participates, along with the expiration of legacy lithium contracts, are leading the company to reach “record-level” results in the fourth quarter of this year, with “significantly higher EBITDA.” Third-quarter revenues for the Specialty Plant Nutrition (SPN) business moved up 31 percent on the year, reaching $229.2 million, up from $174.8 million. Nine-month revenues increased 23 percent, to total $640.5 million compared with the year-ago $522.6 million.
SPN sales volumes for the third quarter were up 8 percent to 292,800 mt from 270,000 mt, while nine-month sales volumes increased 13 percent, to 869,500 mt from 771,200 mt.
SQM expects that total annual sales volumes for SPN could increase by about 5-7 percent in 2021 compared with last year.
“Due to export restrictions on nitrogen products in certain markets and continued logistics interruptions, we are seeing a meaningful shortage of potassium and sodium nitrate products globally,” the company said.
“That, coupled with a significant increase of potash and ammonia prices, has resulted in higher average prices of potassium nitrate with our average prices increasing over 20 percent in the third quarter compared to the same prior-year period.”
Given the current market conditions, SQM anticipates that the company’s average potassium nitrate price will continue to increase in the coming quarters, reaching over $1,000/mt in the fourth quarter.
But the company sees slightly lower potassium nitrate demand growth in 2021 compared with its previous estimates, and now sees demand growth of about 3 percent this year.
SPN sales volumes
| ‘000 mt | 3Q-2021 | 3Q-2020 | % change | 9M-2021 | 9M-2020 | % change |
| Sodium nitrate | 3.8 | 6.0 | (38) | 19.3 | 18.8 | +3 |
| Potassium nitrate and sodium | ||||||
| Potassium nitrate | 147.3 | 138.2 | +7 | 484.7 | 438.5 | +11 |
| Specialty blends | 102.9 | 89.3 | +15 | 241.9 | 193.5 | +25 |
| Other specialty plant nutrients1 | 38.8 | 36.5 | +6 | 123.5 | 120.4 | +3 |
| Total SPN sales volumes | 292.8 | 270.0 | +8 | 869.5 | 771.2 | +13 |
1 Includes trading of other specialty fertilizers
SQM’s Potassium Chloride and Potassium Sulfate (MOP and SOP) business in the third quarter saw revenues increase by 35 percent to $88.7 million, up from $65.5 million. Nine-month revenues were up 45 percent, to $208 million from the year-ago $143 million.
However, potassium chloride and potassium sulfate sales volumes in the third quarter fell by 18 percent on the same year-ago period, declining to 201,800 mt from 247.5 million mt.
For the nine-months, sales volumes increased 22 percent, reaching 588,600 mt, up from 482,100 mt.
Ramos told participants at the company earnings call on Nov. 18 that SQM “was doing its best in order to increase volumes during the fourth quarter.
“We are using some inventories in order to increase the volume during the fourth quarter, and now expect fourth-quarter total potassium volumes to be close to 300,000 mt,” he said, adding that level might be a bit lower depending upon whether “one or two shipments” may be delayed from the fourth quarter to the first quarter of next year, depending on the conditions at the port.
For 2021 as a whole, the company said it expects to sell close to 900,000 mt of potassium chloride and potassium sulfate.
SQM put its average realized price for MOP/SOP in the third quarter at almost $440/mt, an increase of over 66 percent compared to the same year-ago period. The company now expects its average MOP/SOP prices to reach close to $700/mt in the fourth quarter.
Regarding an analyst’s question about potash volumes next year, Ramos said the company does not have a forecast. He reminded that from total production in the Salar de Atacama, SQM uses most of the potash for the production of potassium nitrate, either for fertilizer or for the solar salt business.
“So it depends on what our strategy will be in specialty fertilizers and solar salt next year, and on the total production from the Salar de Atacama, and what will remain will be potash we sell to the market,” he said.
As part of its Sustainable Development Plan goals outlined late last year, which include a significant reduction in the use of continental water and brine extraction, SQM is reducing the pumping of solutions from the Salar de Atacama. The biggest reduction will be in 2022 as compared to this year, and in 2023 through 2025.
“We will have small reductions in these years, but the most important one will be in the first year, i.e. 2022. Total production of potash at the Salar de Atacama will be between 100,000 and 150,000 mt lower next year,” said Ramos.
From a total production level of close to 1.25 million mt, the company will move to 1.1 million mt total production for next year, he said, adding that the reduction could be closer to a 200,000 mt reduction.
Most of the reduction will be reflected in the potash industry, given the company’s first priority is to use the potash for potassium nitrate production and solar salt business, said Ramos
“Going forward [from 2022], because of the reduction in pumping, potash reductions will be in the range of 40,000 mt/y,” he said.