Sociedad Quimica Y Minera De Chile SA ADR Executive Insights: Potash & Iodine, SPN Division

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On Thursday, Sociedad Quimica Y Minera De Chile SA ADR (NYSE:SQM) reported its first quarter earnings and discussed the following topics in its earnings conference call. Take a look.

Potash & Iodine

Ben Isaacson – Scotiabank: Just one question on potash and then I want to turn to the iodine market. Can you talk a little bit about the shift in mix in terms of where your potash was sold this quarter versus last year and how you see that evolving over the next year or two?

Patricio Contesse G. – CEO: Basically, last year where we ended up at the granular and compacting plan for last year that is permitting us to sell more in the (indiscernible) this quarter that we used to sell last year. There has been the most significant change.

Ben Isaacson – Scotiabank: How much potash do you sell in Latin America, not including the Brazilian market?

Patricio Contesse G. – CEO: We sell not too much. We sell by region in Argentina, Chile, Peru, Ecuador and Colombia. And at the end all those volumes should be in the range of 100,000 metric ton of (indiscernible).

Ben Isaacson – Scotiabank: Maybe I will just ask couple of questions on the iodine market. If I remember correctly, you closed down – I think it was one or two iodine plants a couple of years ago. Now, I don’t know if those are still shut down or not, but obviously, the market is starting to tighten up a little bit. Do you think you would open those up again soon?

Patricio Contesse G. – CEO: This year we are considering to sell slight lesser than last year. So, still (indiscernible) there our total capacity in the range of 25,000, but we are selling less than that, but even though we are increasing our capacity to 50,000. So, we expect to be used some in future and not the (indiscernible) today, but clearly this year those capacity are not open – we’re not producing our total capacity.

Ben Isaacson – Scotiabank: The iodine prices that have increased quite recently is that entirely due to demand growth or are there some supply challenges globally?

Patricio Contesse G. – CEO: It’s a mixture of both, demand has increased, but also there is some slower supply from our two (indiscernible).

Ben Isaacson – Scotiabank: Then just my last question on iodine, can you talk about your costs and how you see those costs changing, I think you mentioned in your initial comments you see the cost being relatively stable, can you provide a little bit more color in terms of costs and therefore margins?

Patricio Contesse G. – CEO: Well, I would say that (indiscernible) our cost in iodine and I apologize to that.

Ben Isaacson – Scotiabank: So, in a flat iodine price enterprise environment, you expect your margins to stay relatively flat?

Patricio Contesse G. – CEO: yes.

SPN Division

Rodrigo Ordonez – Santander: I have two questions, first regarding the SPN division where you saw increasing competition and disaffected sales. Can you talk a little bit more about this, you were affected in prices or volumes? The second question is about the global market in the press release, you showed that a European consolidated sales decreased more than 40% compared to last year first quarter, is this a consequence of the economic slowdown in Europe? In line with this, how it is affecting the economic scenario to SQM operations regarding the situation in Europe and a chance of a slowdown in China?

Patricio Contesse G. – CEO: I’d just say related to SPN we saw again the fertilizer market was little bit weaker in the last quarter of 2011 and the first quarter 2012, not only for us (indiscernible). We see that is now changing significantly, so our forecast for the year is reasonably– as we had thought in the budget for the year. Of course, there are some less sales in SPN, seeing that Haifa has normalized their operation, but we see the next quarter, second, third and four would be much better than the first quarter that you have and we have.

Rodrigo Ordonez – Santander: Regarding the second question, the other thing about the economic scenario and the influence to SQM?

Patricio Contesse G. – CEO: The impact of European market today has really been significant to us. In the industrial chemical we are selling okay, the fertilizer was related to what was going on in the market and (indiscernible) not only in Europe. Clearly, the currency – the weakness of European market affects us on return in terms of the fertilizers that we sell there, not industrial chemical because we sell them in U.S. dollar basically, but the fertilizer was sell in euro, so clearly we are affected there on return. But prices of SPN are already good, but potash prices in Europe are very low because of exchange costs, but we have not seen our business significantly or importantly affected by what’s going on in Europe up to now.

Rodrigo Ordonez – Santander: Regarding a chance of a slowdown in China

Patricio Contesse G. – CEO: In China, we sell very little fertilizer, so it does not affect us. Lithium has been very strong in China and iodine too. The fertilizer really we don’t sold too much. We have diversified (indiscernible) of our products.

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