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Specialty Business
May 2012 Natural Resources Specialty Business Growth Important Notice Statements in this presentation concerning the Company’s business outlook or future economic performances, anticipated profitability, revenues, expenses, or other financial items, anticipated cost synergies and product or service line growth, together with other statements that are not historical facts, are “forward-looking statements” as that term is defined under Federal Securities Laws. Any forward-looking statements are estimates, reflecting the best judgment of SQM based on currently available information and involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. Risks, uncertainties, and factors that could affect the accuracy of such forward-looking statements are identified in the public filing made with the Securities and Exchange Commission, and forward-looking statements should be considered in light of those factors. Natural Resources Specialty Business Growth 2 World Leader in Specialty Businesses US$ M* 2010 2011 ∆ Revenues 1,830 2,145 +17% EBITDA** 691 959 +39% Net Income 382 546 +43% Specialty Plant Nutrition Iodine & Derivatives Lithium & Derivatives 49% world market share KNO3† 37% world market share† 31% world market share† 2011 Revenues US$722M (34%) 2011 Revenues US$455M (21%) 2011 Revenues US$183M (9%) 27% of total 2011 gross margin 31% of total 2011 gross margin 10% of total 2011 gross margin Potassium Industrial Chemicals 2011 Revenues US$556 M (26%) 2011 Revenues US$140M (7%) *Figures are based on IFRS 26% of total 2011 gross margin 7% of total 2011 gross margin **EBITDA= Gross margin- SG&A expenses+ depreciation & amortization Natural Resources Specialty Business †Market share figures are based on 2011 SQM estimates. Growth 3 Unique Natural Resources Caliche Ore Salar Brines Nitrates Potassium Iodine Lithium NaNO3 + KCl = KNO3 + NaCl (salt) Sodium nitrate + Potassium chloride = Potassium nitrate + Sodium chloride Natural Resources Specialty Business Growth 4 Diversified Cash Flows Exports by region 2011 Europe 27% North America 21% Africa & Middle East 8% Latin America 27% Asia & Oceania 17% • Approximately 89% of sales are exports in 2011 • Sales in more than 100 countries • Local presence in major markets • In 2011, SG&A expenses represented 4.3% of revenues. Natural Resources Specialty Business Growth 5 Potassium 26% of Total 2011 Gross Margin Potassium Consumption by Crop* MOP Market* 60 600 Million MT 40 400 30 20 200 10 0 0 2009 2010 2011 FOB Vancouver Price** 50 Other 21% Fruits & Vegetables 22% Cotton 2% Palm Oil 5% Maize 15% Wheat 6% 2012E Soy 7% Year Sugar 9% Rice 13% *SQM estimates **Price as of December for respective years • During 2011 and 2010, fertilizer markets were positively influenced by demand and a normalization of inventory levels and optimal utilization ratios • MOP grew about 7% in 2011 over volumes in 2010, with the Brazilian market growing over 25% Natural Resources Specialty Business Growth 6 Potassium 26% of Total 2011 Gross Margin SQM Production Volumes MOP + SOP 2000 Th. MT 1600 Outlook • SQM continues its expansion of potassiumbased products in the Salar de Atacama, aiming to reach an installed capacity of approximately 2 million MT in 2012 1200 • Crop prices remain strong throughout the world, and SQM remains confident in the long term sustainability of the potassium market 800 400 0 2006 2007 2008 2009 2010 Year • MOP is potassium chloride (KCl), also known as potash • SOP is potassium sulfate (K2SO4) Natural Resources 2011 2012E • World demand for commodity products continues to expand as the world population grows and farmers continue to optimize utilization rates Specialty Business Growth 7 Specialty Plant Nutrition 27% of Total 2011 Gross Margin Main uses: Premium crops* Potassium Nitrate Competitive Advantages Demand Drivers • Chlorine free • High cost of land • Fully water soluble • Water scarcity • 100% Natural origin • Demand for premium crops • Fast absorption Others 9% Vegetables 41% Industrial Crops 28% Modern Agricultural Techniques Fruits 22% *SQM estimates Natural Resources Specialty Business Growth 8 Specialty Plant Nutrition* 27% of Total 2011 Gross Margin Outlook •Continued average price increases •North American and European markets will continue to be demand motivators SQM KNO3 Market* 1,000 1,000 800 Th MT 800 600 600 400 400 200 200 0 SQM SPN Average Price 1,200 Potassium Nitrate Market Players* 0 2009 2010 2011 2012E Kemapco 12% Year Overview 2011 • Completion of new potassium nitrate facility in Coya Sur (300,000 tons/year) • North American and European vegetable and tomato markets were principal motivators of demand Natural Resources Others 7% SQM 49% Haifa 32% *SQM estimates Specialty Business Growth 9 Iodine 31% of Total 2011 Gross Margin Main Uses* Market Size 2011: 30,800* Others 2% Others 18% USA 4% SQM 37% Recycling 15% X-Ray Contrast Media 20% Human Nutrition 3% Animal Nutrition 8% Nylon 4% Fluoro Derivatives 6% Others Chile 22% Biocides 6% Iodophors 12% Japan 20% LCD 11% Pharmaceutical 12% *SQM estimates. • Approximately 55% of applications are related to human and animal health and nutrition. • SQM is the biggest iodine producer in the world Natural Resources Specialty Business Growth 10 Iodine 31% of Total 2011 Gross Margin 35 40 30 35 25 30 25 20 20 15 15 10 10 5 5 0 0 2008 2009 2010 Year 2011 2012E Iodine Price US$/kg TThousand MT Iodine Market* Overview 2011 • Market demand and prices in 2011 reached historical highs • From 2009 through 2011, SQM captured a large part of the market growth Outlook • SQM continues to be a world leader in iodine; and will expand if world demand exists • Future demand growth expected to maintain a positive trend *SQM estimates Natural Resources Specialty Business Growth 11 Lithium 10% of Total 2011 Gross Margin Main Uses* Lithium Market 2011: 136,500 MT* FMC 11% Others 13% Chemical Processes 1% Others 3% SQM 31% Pharmaceutical 2% Batteries 33% Aluminum 2% Australia 14% Polymers 3% A/C 5% Continuous Casting 4% Chemetall 19% China 22% Glazes 10% *SQM estimates. Lubricating greases 11% Glass 16% • Battery technology for portable devices has historically been the demand driver for this market • If only lithium chemicals are considered, SQM’s market share is 38% Natural Resources Specialty Business Growth 12 Lithium 10% of Total 2011 Gross Margin 160 7,000 140 6,000 5,000 120 4,000 100 3,000 80 2,000 60 1,000 40 0 2008 2009 2010 Year 2011 2012E Lithium Average Price TH. MT LCE Lithium Market* Overview 2011 • Global demand CAGR (1997-2011): 6%-7% • Expected growth for 2012; ~ 10% • Current lithium carbonate plant capacity 48,000 MT/year, Outlook • Total production of e-cars (HEV-PHEV-EV) using lithium-ion batteries (LIB) is expected to reach 1.53.0 million (2015), 5.0-10.0 million (2020) • Total lithium demand is expected to reach 250300 KMT-LCE (2020) *SQM estimates Natural Resources Specialty Business Growth 13 Industrial Chemicals 7% of Total 2011 Gross Margin • Traditional applications include: metal treatment, water treatment, pyrotechnics, explosives, glass manufacturing, among others. • New demand for industrial nitrates for thermal energy storage in solar power plants will significantly increase nitrate consumption • Mixture of 60% sodium nitrate and 40% potassium nitrate • Main projects: ACS Cobra-Sener, Aries, Rocketdyne, Abengoa, SAMCA, Solar Reserves • 50 MW → ~30,000 MT of salts Outlook • We expect that sales for solar salts will increase significantly in 2012 Natural Resources Specialty Business Growth 14 Capital Expenditure Program Over US$500 million for 2012 1. Capacity expansion for potassiumbased products in the Salar de Atacama 2. Increased capacity in iodine and nitrates facilities in first region, with increased plant efficiencies and higher quality products 3. Optimization railroad system, other projects aimed at improving yields and reducing costs *Approximately 70% of capex expenditures will be related to expansion projects Natural Resources Specialty Business Growth 15 Financial Performance Revenues* Net Income* 2.500 600 500 US$ Million US$ Billion 2.000 1.500 1.000 500 400 300 200 100 0 0 2008 2009 2010 2011 2008 2009 2010 2011 * 2008 figures prepared according to Chilean GAAP; 2009-2011 figures are based on IFRS numbers. Natural Resources Specialty Business Growth 16 Financial Performance* EBITDA/Revenues 50% 42% NFD/EBITDA 45% 41% 40% 2 38% 30% 30% 1 20% 10% 0% 0 2007 2008 2009 2010 2011 2007 2008 2009 2010 2011 EBITDA (2007-2009): operating income + depreciation (not including amortization) * 2008 figures prepared according to Chilean GAAP; 2009-2011 figures are based on IFRS numbers. EBITDA (2010-2011): gross margin – SGA + depreciation & amortization NFD: interest bearing debt net of cash and cash equivalents, considering the effects of derivatives Natural Resources Specialty Business Growth 17 Key Conclusions • Largest global producer, lowest cost producer, market growth. • Specialty Plant Nutrition • Iodine • Lithium • Solar Salts • Growth opportunies and a low cost producer. • Potassium • Industrial Chemicals • Solid financial position • Focused on growth Business flexibility according to market conditions Natural Resources Specialty Business Growth 18
