Chemical & Mining Co. of Chile (SQM) Q2 2026 earnings call transcript

Good day, and thank you for joining SQM's earnings conference call for the second 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. Ricardo Ramos, Chief Executive Officer, Mr. Gerardo Allanez, Chief Financial Officer, Mr. Carlos Díaz, CEO of Novandino, Mr. Pablo Altimidas, CEO of the Iodine and Plant Nutrition Division, and Mr. Mark Fons, CEO of the International Lithium Division. Also joining us today are members of our commercial and business intelligence teams.

Mr. Felipe Smith, Commercial Vice President of Novandino. Mr. Pablo Hernandez, Vice President of Strategy and Development of Novandino. Mr. Juan Pablo de L'Olio, Commercial Vice President for Plant Nutrition and Specialty Products. Mr. Alvaro Araya, CFO of the International Lithium Division. Mr. Andreas Fontanaz, 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 laws.

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.

Thank you. Good morning, and thank you for joining us today. I'm pleased to report SGM's second quarter results, which reflect a strong performance across our main business line. I would like to start by highlighting an important milestone for our lithium operations in Chile. In July, Novandino Lithium, our association with CODELCO, submitted the environmental and technical documentation for the SALAR Futuro project to the authorities. SALAR Futuro represents the next stage in the transformation of our operations in the Salar Atacama, subject to the required approvals. The project contemplates approximately $3 billion of investment over seven years and is designed to increase production while significantly reducing the environmental footprint of our operations. I would also like to highlight the contribution that our operations make to Chile.

During the first half of this year, SQM and its subsidiaries accrue more than $1.6 billion in payments to the Chilean government, including taxes, contribution to local governments, and payments to CORFO.

Moving to the lithium market, we achieved record quarterly sales volumes of more than 84,000 metric tons of lithium carbonate equivalent from our operations in Chile through Novandino Lithium, and in Australia through covalent lithium. As anticipated in our previous earnings report, lithium prices increased during the second quarter, supported by a strong than expected market demand. We now expect global lithium demand to exceed 2.1 million metric tons in 2026. We continue to expand our production capabilities in both Chile and Australia. In Chile, we expect NOVAL and Dino Lithium to produce between 280 and 290,000 metric tons of lithium carbonate equivalent this year, and to have approximately 300,000 metric tons of production capacity by next year. In Australia, together with our partners with farmers, we recently announced the expansion of the Moon Holland mine and concentrator, which is expected to double the podium and concentrate production capacity to approximately 350,000 metric tons per year, corresponding to CHEM's shares of the project, with first production expected in 2030.

These investments reflect our long-term view of the lithium market and our confidence in the fundamentals of the energy transition. Moving to Ajudin, we once again deliver good results supported by robust market demand and favorable pricing. We expect demand to remain robust. Our seawater pipeline is currently in its commissioning phase and will provide We will provide additional flexibility to optimize our production and respond to market conditions. We are now producing iodine from our four different operations and we expect total iodine production to reach approximately 15.5 thousand metric tons this year.

Turning to specialty plant nutrition, we deliver another strong quarter supported by higher sales prices and volumes. We continue to expect full-year sales volumes to increase by approximately 10% compared to 2025. Market conditions have benefited from supply constraint in certain markets, and we expect this condition to gradually normalize toward the end of the year.

Finally, we have updated our capital expenditure outlook. We now included 2028, and we expect approximately total capital expenditures of approximately $3 billion over the three years, 26-28 period. This investment is mainly focused on supporting future growth and enhancing the competitiveness of our operations through lower production costs. Overall, we are encouraged by the performance delivered during the first half of the year and remain focused on executing our growth plans and creating long-term value from our shareholders.

With that, I will turn the call and we can go operator to the Q&A. Thank you.

Hello this is Felipe I will comment about the Novandino part of course Indeed we had a very good second quarter We are very enthusiastic about how the market is doing Regarding Q3 first of all in terms of sales volume we expect Q3 2026 to remain strong in line with Q2 Okay? And in terms of the price, I would say that the average price based on the indexes, because you know that our contracts are all based on indices, and indices are well known. Based on that, we believe that the price of Q3 should be more or less in line with what we saw as the average of the first semester. But, again, nobody can predict where the indexes are going.

It's a very volatile market today. Still, difficult to predict prices too long.

Hi, Joe. This is Carlos Diaz. Regarding you, you asked about the cost, no? Well, mainly we have been working harder the last year in continuous efficiency and improvement process. And that is together with the economic of a scale of, as we have been increasing the production level, we have been constantly being able to make a cost improvement. But in the Q3, we expect similar costs that we already get in Q2. But at this year, at least 26, it should be lower compared with the last year.

Andres Fontanas from CHEMICAL International. Well, you know, most of our sales are based on spolium in concentrate, so in order to compare, you need to add some conversion costs and also to take into consideration the conversion yield. So that's where the main difference is. And And at the end, what matters the most is that we are also following the market. These shipments that are discrete, because not every month we have sales, all these shipments are following market conditions at the moment of shipment.

Yeah, well, as we commented before, our prices are affected by the timing of the shipments. Again, not every month we are having shipments. And as I said, in the coming quarters, you will see this better reflected in our price reporting.

Hey Joel, this is Pablo Hernandez speaking. So of course these are just our estimations, so we cannot predict what's actually happening fully in the market. But we believe there's some increase of supply mainly coming from China, both from spodumene and brine, but also some ramp-up projects in Africa and Argentina. And of course, as you've heard, because of the current price scenario, there are some restarts in Australia also as well coming into the market.

Hi, Isabella. Sorry, this is Carlos Diaz again. Well, this year we expect, as our CEO said before, We expect to produce around 280 to 290 thousand metric tons. Looking ahead, growth will initially be more motivated as we continue reducing the price fraction. Specifically for next year, we expect production close to 300 thousand. For the coming year, we're still starting different initiatives in order to increase a little bit their production, but you have to have in account We have been reducing the preparation structure. So it's an exercise we are not ready yet, so in the coming, probably, call conference that we can share with you.

Hello, Isabel, by Multimedus speaking. Well, regarding to your question about the AYA and the new supply, Again, this is our estimation, but we believe that the main supply could arrive from projects here in Chile. We see a particular new project that is coming. It's a project of Caliche Oil. Respective to the amount of product that will come into the market, we actually don't know, but we expect that they will provide more product. That's the reason why we believe that our volume, sales volume, this year will be similar to what we see last year. Of course, there is something different happens with the supply. Well, we could potentially see more sales in our case, but everything will depend on the supply and demand.

Our demand forecast for this year is that the growth will be around 3%. So we expect that the new capacity that will come into the market will compensate that growth, but we don't see more than that.

Okay, Emerson, Carlos Diaz speaking. Well, first of all, all our production is coming from the Salera da Gama in two different ways. One is lithium chlorine that is refining in Chile, and lithium sulfate, we are refining in China. So what I said before, we expect 282.90 and for next year 300.000 of those. We estimate now 80 of those is going to be from lithium sulfate and the other 220 for lithium chlorine or for our antophagasta chemical plant.

I'm sorry, you asked for the hydroxide production? Carbon. We don't see more than 20 or 30 thousand of those of total, I mean 10 percent of those production will be hydroxide and the remaining obviously carbonate.

Hi Emerson, this is Mark Fones here. Thanks for your question. First of all, we are very proud of the decision of expanding Mon Holland, first the MINING concentrator. Regarding the refinery, we still remain open to that decision. We have not yet come to a conclusion or a decision We are not there yet. This will be continued analysis by Covalent and with Farmers, our partner, and it will be depending also on reaching our ramp up at full extent by second semester next year.

Regarding the balance for next year in terms of sales and production, we expect next year to be higher lithium hydroxide production than this year for sure, based on the same ramp up curve. Therefore, our sales of direct spotting concentrate cells should be probably lower than this year.

Hello, this is Carlos Diaz speaking here. Regarding to the lithium sulfur production, yes, we have been increasing the production very strongly in the last three or four years. And what we said before, we expect this year, we expect to produce our next year in a range of 80,000 to 90,000 as LCE equivalent. First of all, we have to remind that we have our own plan in China, the CHEM plan that we produce close to 24, 25. We are expanding with respect to 30,000 around that level. And the difference, we do the dealing with the different suppliers that we don't disclose that contract, but we will feel very happy with the contract that we have and we expect to continue working with those in the coming year.

Lucas, hi, this is Mark Fones. Regarding the Mount Holland timeline, and you're right, the first product is expected by first half of 2030. Well, the CHEMICAL reflects the normal sequencing for a project of this scale, and we have been building the scale to achieve a de-risk rather than a rushed project. You need to consider also that this is a relevant, Not a marginal brownfield increase. So we are loving the capacity where our operation already exists.

And giving some milestones which you asked for, I would say the next relevant milestone has to do with the start of the construction of the facility itself, which should happen in mid-next year. A construction of a facility of this nature takes between 18 and 24 months in duration. Ahead of that, we need to, of course, purchase long-lead items, prepare earthworks and earth folk movement.

After the construction of these 18 to 24 months, there's a period there of commissioning, which will follow in 2009, to reach our first product by the beginnings of 2030. So that's the overall scheme of things and the relevant milestones in there. In terms of if there are any opportunities to compress this CHEMICAL, yes, there are opportunities. Covalent and our technical teams are actively advising, analyzing those, and we will continue to push it forward. But please take in consideration that this brownfield, of course, has relevant opportunities since we're working on an existing operation, but also it increases levels of challenges, and we need to be always minding and safety. Thank you.

Hello, Corinne. This is Felipe. Okay. You know, 4Q is so far away now. So I will try to speak about the future, the long future, but I only have hopes that we can at least have the volume of a second and third quarter, because as I said before, third quarter, we expect to have similar volume as second quarter. So I expect minimum that in the fourth quarter, but hope that could be more. But again, my boss is looking at me like, what are you doing? But this is my personal hope, okay? I will try.

Yeah, if you add only the Novandino part, I mean, I will speak about the Novandino part, it's hopefully above 280, and then my colleagues in the international could comment, maybe Andres, good luck.

Yeah, Andres speaking here. We are expecting sales to be around 27,000 to 30,000 tons LCE for the full year.

I think the agreement with CODECO has been even better than expected in terms of coordination, working together, and the board level having cooperation between both companies. That's why we are very positive about that. We already commented in the press release that we are starting the submission. We did it in July of the Salar Futuro. We're working in engineering and everything in order to be ready for the investment. That's why I hope in 2031 we will be in the middle of the investment of Stellar Futuro. We think it's going to be a great project. We are really committed with CODELCO in order to do so. I think everything is included in our long-term projections, all the investment of the work we want to do.

And what Carlos is doing today with their team is trying to have a very good expectation about the volumes, sales volumes for the future. And I think we will share with you in the next conference call our first view about what we expect for the next year. And we will continue to have a long-term view. But we are working very hard and very good agreement so far. And COELICO is a very good partner. Thank you.

Thank you.

Ben, it's very important to consider that the Salar Futuro project is not only increasing capacity, it's changing technology. It means we are, as you know, we are offering a very good technology in terms of cost, in terms of production, in terms of environmental footprint, And that's why you have to analyze the Salar Futuro project as a whole in terms of having a new beginning of the Salar Takama for the next 60 years operation. That's exactly our 30 years operation that we have. That's the whole idea. And of course, we expect to have more production. We're working on it, and it will depend on the deals and depend on the quality of the solutions that we're going to bring to the process.

But, and we will disclose our best estimate in the next two years, but the whole project Salar Futuro is not just an idea to increase production capacity. It's much more than that in terms of having a revamping, having a new Salar de Tacama for the future.

I'm just trying to understand if this is an anomaly or if this growth rate is sustainable. Hey, Ben. Paolo Hernandez speaking. So, first of all, I agree with your view on the market. Indeed, we have seen much larger shipments of batteries for BSS than actual deployments of those batteries. So, there's some gap there that we are monitoring. We believe most of that gap is related to some larger projects being implemented, which larger projects naturally bring some longer terms in terms of implementation and some delays from approvals and everything. So there's a natural delay on that end. But of course, as well, I think there's also some push forward of some sales from 2027 because of tax rebates that have been removed from the export side in China.

So overall, my view for the longer term is that indeed for the following years we might see some slowdown in the pace at which the BSS battery implementation is growing.

Sorry, Ben, but just to finish that, but of course still BSS will remain a very relevant and strong demand factor for the future.