Sociedad Química y Minera de Chile S.A. (NYSE:SQM) Q2 2023 Earnings Call Transcript
Sociedad Química y Minera de Chile S.A. (NYSE:SQM) Q2 2023 Earnings Call Transcript August 17, 2023
Operator: Good morning. And welcome to the SQM Second Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Irina Axenova, Head of Investor Relations. Please go ahead.
Irina Axenova: Thank you. Good morning. Thank you for joining SQM's earnings conference call for the second quarter of 2023. This conference will be recorded and is being webcast live. Our earnings press release and presentation with a summary of the results have been uploaded to our website, where you can also find a link to the webcast. Speaking on the call today will be Ricardo Ramos, our Chief Executive Officer; and Gerardo Illanes, Chief Financial Officer. Carlos Díaz, Executive Vice President of Lithium; Felipe Smith, Commercial Vice President of Lithium; and Pablo Altimiras, Executive Vice President of Nitrates & Iodine will also be available to answer any questions. Before we begin, I would like to remind you that statements made in this conference 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 federal securities laws.
These statements are not historical facts and may be subject to changes due to new information, future developments or other factors. We assume no obligation to update these statements, except as required by law. For a complete forward-looking statement, please refer to our earnings press release and presentation. I now leave you with our Chief Executive Officer, Ricardo Ramos.
Ricardo Ramos: Thank you, Irina. Good afternoon, everyone, and thank you for being on the call today. Yesterday, we published our second quarter 2023 earnings report, and I would like to highlight the positive impact of significantly high sales volumes in Lithium business and continued strong performance in Iodine business seen during the quarter. Lithium business, we reported record high quarterly sales volumes, which surpassed 43,000 metric tons, driven by strong customer demand recovery and positive market outlook. We expect to deliver higher sales volumes in the second half of this year compared to the sales volumes reported to the first half of the year. Since the majority of our sales contracts are based on price indices which follow market price trends, our realized sales prices moved with the market with some lag, depending on the terms of the contracts.
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This commercial strategy allowed us to capture the price premiums in market last year. After first quarter pricing negative trend, we have seen some price recovery during the second quarter and expect our realized price to follow the market for the remainder of the year. We continue to see strong fundamentals behind lithium demand growth with the global EV sales showing another strong performance during the second quarter, increasing 50% year-over-year. We believe that the total EV sales growth could be close to 30% this year when compared to 2022. And the global lithium demand could increase at least 20% this year compared to the previous year. Signing the long-term agreement with Ford Motor Company and LG Energy Solution was another important milestone of the quarter.
The trust our customers put in SQM's ability to successfully increase production in a sustainable way and deliver high-quality battery material make us very proud and encourage us to continue with our growth plans in Chile and globally. We expect to produce approximately between 180,000 and 190,000 metric tons of lithium this year from our operations in Chile and China. Our expansions in Chile are progressing on schedule, and we expect to ramp up our lithium carbonate capacity to 210,000 metric tons by the end of next year. The commissioning of our lithium hydroxide refinery in China has been delayed by a few months, and we expect to see the first production volumes coming to the market in the coming months. Simultaneously, our attention is directed towards our exploration initiatives in Australia, guided by SQM's team of highly experienced geologists and in collaboration with local partners.
We are advancing on securing potential new lithium supply sources. In Iodine businesses, we have seen both a strong market performance as well as successful delivery of new capacity from our caliche operations. Iodine market continues with record high prices, driven by a growing demand of x-ray contrast media segment. While annual global iodine market demand is expected to be flat, we believe we will deliver higher sales volumes during this year when compared to last year. Despite the record high prices seen in the market in the past quarters, SQM has been the only producer to increase materially its production volumes. We remain on track to increase our production of iodine by approximately 800 tons this year to support the future growth of iodine market.
We are also very proud of our contribution to the Chilean treasury during the first six months of this year of approximately $1.7 billion, mainly due to the public private alliances we have with CORFO over the Salar de Atacama operations. And finally, in this quarter, we released our latest sustainable report, outlining the progress we have accomplished in our sustainable journey in the past year, the advances we achieved in pursuing our goals and the upcoming challenges we have set for ourselves. Thank you, operator, and we will now open for the questions. Thank you.
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