Sociedad Quimica Y Minera (NYSE:SQM) held its first-quarter earnings conference call on Wednesday. Below is the complete transcript from the call.
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The full earnings call is available at https://edge.media-server.com/mmc/p/9qtcu4gc/
Summary
Sociedad Quimica Y Minera reported strong financial performance for Q1 2026, with significant contributions to the Chilean state and local governments.
Lithium sales volumes increased by 25% year-over-year, and the company raised its 2026 sales volume guidance by 15%, reflecting strong demand and tight supply conditions.
Strategic initiatives included the ongoing partnership with Codelco, progressing with the Salar Futuro project, and expanding operations in Australia, with significant investments planned for future growth.
In the specialty plant nutrition business, sales guidance was increased by 10% due to reduced exports from China, and iodine demand remained strong with expectations of similar or slightly higher sales volumes compared to the previous year.
Management provided insights into the impact of market conditions on pricing and costs, highlighted capital allocation strategies, and projected continued strong performance across key business lines.
Full Transcript
OPERATOR
Good day everyone and thank you for standing by. Welcome to Sociedad Quimica Y Minera 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 11 on your telephone. You will then hear a message advising your hand is raised to withdraw your question. Please press star 11 again. Please be advised that today's conference is being recorded now. It's my pleasure to hand the conference to Megan Souter with Investor Relations. Please proceed.
Megan Souter (Investor Relations)
Good day and thank you for joining Sociedad Quimica Y Minera's earning conference call for the first quarter of 2026. This call is being recorded and 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. Ricado Ramos, Chief Executive Officer, Mr. Geraldo, Chief Financial Officer, Mr. Pablo Altamiras, CEO of the Iodine and plant Nutrition Division Mr. Paulo Hernandez, Vice President of Strategy and Development of Novandino Lithium, Mr. Andres Fontanas, 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 as 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.
Ricardo Ramos (Chief Executive Officer)
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 Sociedad Quimica Y Minera and for Tilip as our partnership with Codelco through Novandino Lithio 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 results 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 corporate 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 continue 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 growth 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, Novandino Lithio 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 delivered strong results. Munholland 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 are 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 SKM is well positioned to help provide the supply the market needs. In iO9 we delivered a strong quarter and we expect this trend to continue into the second quarter as the spot transaction prices have continued to increase, particularly in Asian markets for the full year, we continue to expect iodine 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 SKM 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 and A. Thank you.
OPERATOR
Thank you. And as a reminder to ask a question, simply press star11 and wait for your name to be announced. To withdraw your question, please press Star one one again. One moment for our first question. It comes from Joel Jackson with BMO Capital Markets, please go ahead.
Evan (for Joel Jackson)
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 lithium price movement. So does the movement over the last year make SQM feel more bullish or the same about mid cycle pricing?
Paolo Hernandez
Hey Joel. Paolo Hernandez from Novandino speaking. So I'll refer to our pricing if this helps answer your question. So 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 price 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 are still in a very high volatile price scenario, so it's difficult to predict prices beyond Q2.
Evan (for Joel Jackson)
Okay, thank you. And also, how does SQM 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?
Gerardo (Chief Financial Officer)
Hi, this is Gerardo speaking. Yes, we finished the first quarter with 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 iodine, higher prices of nitrates. But you have to consider that right after that we pay dividends 50% of the net income of last year. We also have to make payments to Corfo and other payments that are, that are tax related payments and others. We are constantly assessing opportunities to distribute dividends. In the past we have done. We have done that. But at this quarter we have not taken any decision so far.
OPERATOR
Thank you. One moment for our next question comes from Ben Isaacson with Scotiabank. Please proceed.
Ben Isaacson (Equity Analyst)
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 volume 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 that.
Paolo Timiras
Hello, Ben, Paolo Timiras speaking. Yes, that's right. We intend 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 allow us to go to Markets where we normally are not going. That opened 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 nitrate. 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 install capacity, inventories and our supply chain worldwide ready if the market needs more potassium nitrate.
Ben Isaacson (Equity Analyst)
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 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?
Paolo Timiras
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 is too much time. 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 X 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 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 sustained that we believe that this year the market will grow 3%. Sorry. And in the meantime that that happened and if supply is not there, we believe that, well, everything is there to remain this level of prices.
Ben Isaacson (Equity Analyst)
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 Futero project and how that could impact what returns? Thank you.
Ricardo Ramos (Chief Executive Officer)
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 third quarter. We're assessing now what is going to be the total investment and our first estimate is in the range of $3 billion. Investment in Salar Futuro. You are right. In terms that there's 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 the world. 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 iodine, lithium, everything will be affected by the inflation means will increase accordingly. That's why we do not expect that the project will be affected in terms of the return of the profitability 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 solar Atacama as we speak. We're 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. We will start investment in the Salar futuro project during 2030. Everything is according 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.
Ben Isaacson (Equity Analyst)
Thank you very much.
OPERATOR
Thank you. Our next question is from the line of Corinne Blanchard with Deutsche Bank. Please proceed.
Corinne Blanchard (Equity Analyst)
Hey, good morning everyone. Thank you for taking my question. Can you talk about the lithium volume outlook raise? You're now targeting 15% up year over year, which would bring you almost close to the 300 kiloton. 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? Sorry. And then is it coming those volume, are they coming from a production or is it also. You may be offloading Some of your inventory. Thank you.
Paolo Hernandez
Hey Corinne, Paolo 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%, hitting 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 the Salar de Atacama. So there's significant appetite for lithium units in the market.
Corinne Blanchard (Equity Analyst)
Thank you. And then I. Sorry, I wanted to go. Two questions. Maybe spodumene price in Mantaland. I think if you compare this to some of your peers, I think you have got a much lower price. Can you comment maybe of. 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 capstab allocation. I know Gerardo, you mentioned you're not going to.
Corinne Blanchard (Equity Analyst)
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.
Andres Montanas
Hey, Cody. Andres Montanas from International Lithium speaking. Regarding your question on spodumeneene 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 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. 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 spodumeneene and downstream hydroxide sales.
Gerardo (Chief Financial Officer)
Hi Corinne, this is Gerardo. Regarding your question about the capital allocation, I think that there are a few things that have to be considered. First, given what Pablo just mentioned about higher volume sales from Salar, deacama. And with these price levels, our payments to corfu, the government of Chile and local communities will be high, 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 IUI operations as well as in the international Lithium 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 is 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 will 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.
Corinne Blanchard (Equity Analyst)
Thank you, guys.
OPERATOR
Thank you. One moment for our next question. It comes from Isabella Simonato with Bank of America. Please proceed.
Isabella Simonato
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 effective 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 sba, as you said, you are more optimistic about sales and share gains and 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 involving throughout the quarter, throughout the year would be helpful. Thank you.
Gerardo (Chief Financial Officer)
Hi, Isabela Gerardo speaking. Regarding the taxes that we pay, it's important to consider or to keep 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 Corfo. 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.
Pablo Timiras
Hello, Isabela. Pablo Timiras speaking. Well, regarding to your question, we are optimistic regarding to the price trends 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 wort is affecting raw materials or other fertilizers that are related with our potassium nitrate business. One example is the price of potassium sulfate is growing and because of that today support the potassium nitrate the price trend. So we are optimistic and we believe that the price will continue increasing in the next quarters.
Isabella Simonato
Thank you very much. And Gerardo, can you give us a ballpark about how can we think about mining taxes? The rate. I noticed was something between 8 to 10%. Just wanted to double check.
Gerardo (Chief Financial Officer)
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 is in between 11 and 12% out of the profit that we get on the lithium business, excluding the corporate payments.
Isabella Simonato
Super clear. Thank you very much.
OPERATOR
Thank you. Our next question comes from Emerson Viera with Goldman Sachs. Please proceed.
Emerson Viera
Hello, good morning. I have two questions on Mulholland. The first one, just trying to understand 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 Motorola expansion and what is the Alwin cost that the operation is running right now? Thank you.
Andres Fontanas (Commercial Vice President of the International Lithium Division)
Thanks Emerson for the question. Andres Fontanas speaking. So regarding the expansion, we continue executing the plan and expect to present the Munt 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 28, 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 cost for that operation.
Emerson Viera
Okay, can you. Thank you. Very clear. Can you share with us what would be, I mean ballpark Capex for the expansion. I know, I mean studies are ongoing, but any number here could be very helpful.
Andres Fontanas (Commercial Vice President of the International Lithium Division)
Yeah, regarding the CapEx, 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 SQM share for that.
Emerson Viera
Okay, thank you very much.
OPERATOR
Thank you so much. And as a reminder, if you do have a question, please press star one one to get in the queue. Our next question is from Juraj Domic with laramvial. Please proceed.
Juraj Domic
Hello, good evening and thanks for taking our questions. I have two of them. The first one is on cash cost. This 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 BES 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.
Paolo Timiras
Hello, Julie. So, regarding the cash cost or operating cost in speaking about no and Dino, as a consequence of continued efficiency and improvement processes together with the economies of scale, so our 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.
Girard Maxville
Hello, Girard Maxville speaking. Regarding the best participation in the demand of the market for lithium, we expect something around 30% for BSS overall demand.
Paolo Timiras
Hello, Jurai Paolo Timiros speaking. Regarding your question about the higher increase. Well, first of all I would remark that the increase is not too much, but there are some explanation for that. The first one is that well, we are producing quite with volume. Remember that we intend this year to produce more than 15,000 meters of iodine. That means that we are using some marginal facilities that they have higher cost. 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, has been increased. So those are the reasons. However, as always, we are working in different initiatives to control the cost increase.
Juraj Domic
Perfect. Thank you very much.
Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.
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