Good day, everyone, and welcome to the SQM Second Quarter 2025 earnings 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, simply press star 11 again. Please note this conference is being recorded. Now it's my pleasure to turn the call over to the Investor Relations Officer, Isabel Bendek. Please proceed.

Thank you, Operator. Good day, everyone, and thank you for joining SQM Earnings Conference Call for the second quarter of 2025. This call is being recorded and webcast live. our earnings press release and results presentations have been uploaded to our website where you can also find a link to the webcast today's participants include mr ricardo ramos chief executive officer mr gerardo llanes pfo mr carlos diaz ceo of lithium chile division mr. Pablo Altimira CEO of the iodine and plant nutrition division mr. mark phone CEO of the International lithium division also joining us today are members of our commercial and business intelligence team mr. Felipe Smith commercial vice president of the lithium chile division mr. Pablo Hernández, Vice President of Strategy and Development of Living Chile Division, Mr. Juan Pablo Belolio, Commercial Vice President of Plant Nutrition and Specialty Products, and Mr. Max Vial, Head of Studies of International Living 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 lines growth are considered forward-looking statements under the US federal securities law these statements are not historical facts and are subject to risk and uncertainties that could cause actual results to be fair materially we 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 said, I will now turn the call over to our Chief Executive Officer, Mr. Ricardo Ramos.

Good morning, everyone, and thank you for joining us. I would like to take a few minutes to share some highlights and provide a bit of color before we move to your questions. As expected, during the second quarter, we faced lower lithium prices compared to the earlier this year. We dropped revenues down by more than 30% year on year. More recently, we have seen a change in market dynamics with prices improving in the past few weeks compared to the level observed in May and June. We are seeing strong demand growth coming from EV and BEST, particularly in China, but also Europe, has surprised us with stronger than expected demand growth. I'm pleased to share some positive news from Australia. Despite the expected lower sales volume seen in the second quarter, we're updating our sales guidance for the International Lithium Division to approximately 20,000 metric tons of lithium carbonate equivalent for the full calendar our year 2025. As the mine is reaching full capacity, in addition, Kiwana refinery is now complete and delivers its first product on spec, on budget, and on time last month. The ramp-up is underway, and when at full capacity, the project is expected to produce 50,000 metric tons of lithium hydroxide annually, with half attributable to SQM. Lithium sales volumes from product coming from the Salar de Atacama were almost flat compared to last year, as lower prices triggered contract floors that impacted volumes. Nevertheless, we expect the yearly sales volume from our trillion operations to increase by at least 10% versus 2024. Beyond lithium, our business continued to deliver solid results. Aiyuan was our most profitable segment in the second quarter, with an adjusted gross margin of 57% and contributing more than 50% to the total company gross profit. Prices remain strong, supported by healthy demand and tight supply, and we expect this strength to continue into the coming years. In fertilizers, our specialty plant nutrition business remains stable, reflecting resilient demand across our key markets. While potassium volumes are lower as guided, but prices remain firm. Overall, our diversified portfolio positions us well to navigate in a volatile environment. We are confident that SKM is well-placed to capture the strong fundamentals of the lithium market while continuing to deliver solid results across all our businesses. Thank you, and we look forward to your question.

Thank you. As a reminder to ask a question, press star 11 to get in the queue.

One moment for our first question, please.

And it comes from the line of Ben Isakson with Scotiabank. Please proceed with your question.

Thank you very much and good day, everyone. I hope you're doing well. I have three questions and I'll ask them one by one if that's okay. The first question is on SPN. um ricardo we we don't talk about it much but it continues to be a really solid contributor of gross profit to the business can you talk about what is your midterm or or or long-term goal for where you want spn to be and in your answer is that based on volume a goal or an ibada goal or maybe a margin per ton goal. Thank you.

Hi, Ben. This is Juan Pablo. Look, first of all, it is important to mention that our business in SPN is not only the potassium nitrate that we sell. Also, we have been developing for a couple of years ago a complementary business of blends based on MPKs that we have been deploying in our markets. So that has been giving us the chance to keep growing in this market, keeping the margins that we are having and the success to remain as a main player in this industry. So our mid-term and long-term are related to the same strategy to keep growing, adding services and products to our customers in different regions, giving us the chance to remain our brand as a solid one and being able to keep the prices where also we want to have. So I would say it's an idea of having more products, more services available for our customers, growing in volume but remaining with a solid brand to have the prices at this level.

That's great. Thank you. And my second question is on Mount Holland. If you had asked me two months ago, I probably would have bet that the expansion wouldn't go ahead, but maybe that's not right now with lithium prices starting to improve. Can you comment on what your thinking is on the expansion right now? And how does the cash flow spending, or sorry, how does the CapEx outlook impact your thinking as it comes to Solar Futuro?

Hi, Mark Fons here. Yes, as you probably have seen on our webpage, we made a recently announcement that the expansion decision will not be taken during this year, 2025. And we continue to progress, of course, with the approvals relevantly and engineering and studies over that project. And final decision will be periodically reviewed during next year. And we'll consider not only market context, we will also consider how we're progressing with those engineering studies, and particularly the approvals. And finally, with all that information on the table, we will make a decision informed on the financial evaluation and also on the progress of the refinery.

Thank you. That makes sense. And then just my last question, and I've asked this question before, in iodine, it's a simple question. What is going to break iodine prices? Are we starting to see any signs of demand destruction, any changes to the new supply outlook over the next couple of years? Can you talk about that? It just continues to be so strong, and I'm not sure if anything will break it soon. Thank you.

Hi, Ben. Pablo Timirias is speaking. Well, regarding the iodine, for this year, as we said in our early release, we expect that the demand will grow less than 1%, But the main reason is because we don't have supply. So that is the reason also that the demand is being impacted. Having said that, for the next year, we expect that the growth will be there if the capacity also is there. But we see solid fundamentals in all the application, especially in the ex-contrast media, which is needing more iodine every year. For the next year, we expect some capacity coming, because it's supposed that some capacity should arrive this year. We see some delay, so we expect some additional capacity for the next year. However, because the demand is strong, we don't see for the next year a big change in the dynamic of the market that we see today.

And just in theory, the last time iodine prices were high, I can't remember how long it was, maybe about 12 years ago, when iodine prices started to fall, you started to cut your production. And that strategy didn't seem to work, and then you went full volume. Can you talk about if iodine prices start to break? Have you thought about your strategy?

Well, I would say that you cannot compare the dynamic of the market that we have today with some years ago we see new applications that are growing much more than before and our strategy is clear is always to have the capacity to be prepared to provide the best iodine to our customers that we have been doing in the last year we have we are growing in Nueva Victoria we build Pampa Blanca we are also opening a new facility we are growing with our sea water pipe project because our strategy is to have enough capacity to be there to respond to the demand. So, not a big change on that. Great. Thanks so much.

Thank you. Our next question comes from the line of Joel Jackson with BMO Capital Markets. Please proceed.

I have a few questions too, and I will also ask them one by one. Just going back to Mount and Kwanana, can you just confirm, so we have the numbers right, to hit 20,000 tons for your share in 2025, what would the volumes be in the second half of the year? And then, you know, some of the earlier hydroxide plants that come out in Australia, as we all know, have had lots of problems. Do you have a sense yet if you will have a similar ramp up, if you're going kind of better than the the two plants that came ahead of you. Thanks.

Hi, Joe. Mark here.

Regarding your first question regarding the volumes for this year, what we have announced in the press release about being 20,000 tons of LCE for this year in sales, it mostly comes from sales of spotting and concentrate, and it will be mostly heavy into the second half of this year. And between two quarters, so quarter three and quarter four of this year, probably evenly distributed among them. Regarding your second question, which is probably a more long one to answer, I think let me start first with a factual perspective of it, because we have last week announced a very relevant milestone, which is first product in quality, on budget, and on specifications. and that result arises from a lot of work done during the years between the teams and it was a collective effort from planning to engineering to execution which counted with the support and the contribution of the knowledge from SQM in lithium processing from Chile and China, also with farmers with their processing technology and experience in Queen Anna Strip and that's how we reached that relevant milestone. So as we now look ahead at the additional challenge we have for ramping up now the operations in Quenada, well, we'll face it the same way. And I cannot talk about third parties or others, how they have done it. But I can tell you that we are facing that challenge again with a lot of planning, a lot of knowledge. We only started the construction of the refinery when we had 80% of engineering in detail design. and that's not what usually you do in the market so we started when we were ready and we knew what we were doing and in addition to that we have established provisions of the refinery provisions that come also in having additional capacity on critical equipment as well as additional physical space to install additional equipment for refining if we need so and finally and I can our relevant vendors. We have very good vendors supporting us in this ramp-up period, particularly two technology partners, which are day and night together with us today in the refinery, particularly in the areas of pyrocalcination and crystallization. So as you see, this is a collective effort. It started many years ago, and we will tackle it together with our partners and a great team in Covalent Lithium. Thank you.

Okay, obviously we've seen a churn of Lithium market the last couple months. Everyone sees it, everyone knows it. Can we talk about your order book and your discussion with customers and how they've changed last month or two? So you were going into the end of Q2, early Q3, you were selling, prices were going below the floors in your contracts, volumes are being changed. Suddenly, prices have gone up now, you know, a lot, maybe 20,000 RMB, a ton for LCE, and now you're having different discussions. Can you talk about how the discussions have changed, how your order books have changed, have some of your contracts, short-term contracts now broken because the customers didn't pay the floor and now you went out and sold elsewhere? Just tell me whatever. What's changed the last two months, if anything?

This is Felipe.

Look, I would like to comment, first of all, So what we see for the second semester, I think it's important to share that with you. I will speak about the volume and the prices. And regarding the Chile lithium division, I would like to say that sales volume reached 51.7,000 tons in Q2, which is similar as Q2 last year and slightly lower than Q1. However, I am very optimistic and I expect that our sales in Q3 should be at least 10% higher than Q2. Also, the sales in the second semester of this year are expected to be higher than the first semester and higher than the second semester of last year, which would allow us to increase the yearly volume by at least 10%. So this is regarding the volume and regarding the price. During Q3 2025, lithium carbonate prices in China have been recovering, and over the last two weeks, at high speed, following the news about potential supply reductions. Prices in Asia, ex-China, have also been recovering, but at a reduced pace when compared to Chinese prices. Since our sales volumes are concentrated in China, and the realized prices remain mainly linked to price indices we expect that with the recent price recovery in china our sales price in q3 should be higher than q2 so the good news here is that we will have a better volume next quarter and a better price next quarter and regarding our strategy i will not go in the details of the contracts because you know these are confidential but regarding a strategy as we done always, our strategy remains to produce at full capacity, to expand such capacity in line with the expected market growth. We do not speculate and we sell and serve the needs of our customers.

Maybe just following up on that, one last try here. So, you know, going into Q3 and Q4, are your prices really reflective of spot prices at this point? Like if we follow the spot price is, we should really get your price about right?

Well, depending on the contracts, we tend to be very close to the spot price. We only have small differences or gaps from the moment you apply the index calculation in the contract and the actual spot, but we are really close to the spot levels. Thank you very much.

Thank you so much. And as a reminder, if you do have a question, press star 1-1 to get in the queue. Our next question is from the line of Cesar Perez Novoa with PTG Pactual. Please proceed.

Good afternoon. Could you please comment on Mount Holland Mine Economics, namely your short-term costs, maybe your startup costs, and long-term costs when the asset is fully ramped, I believe, 18 months from now. How comparable is that OPEX relative to the Salar de Atacama? And if I may, a second question on Salar Futuro. Where do we stand on its implementation? Has SQM already presented the conceptual engineering design? And if so, what CAPEX deployment should we think of on an annual basis? Thank you very much.

Hi, Cesar. Mark here again. as you know we continue to be in ramp up mode both in the refinery and also still to reach 100% capacity production in Mount Holland and as such our current production cost is not yet reflective of our long term projections. We are though profitable in the current scenario but our reasons remain to produce lithium hydroxide and our sales of spodium concentrate is a temporary solution while we ramp up the refinery, and we remain flexible to sell between one and the other. On the long-term prediction for sodium concentrate, though, we expect to be between the top producers in Western Australia concentrate. And regarding the refinery, the successful development of the refinery production in the long term will generate satisfactory returns, considering the structure where we expect to be, around the middle of the industry cost curve. Thank you.

Thank you very much.

Cesar, Ricardo speaking. About Salar Futuro, we are working very hard with CODELCO in order to be ready to submit our environmental study to the authority during next year. It's a huge project. It's a complex project, a beautiful project. But we are not going to be ready until probably beginning second half next year. At that moment, when we file the environmental study, just before that, we will be very clear and we will disclosure the CAPEX in detail together with CODELCO. Anyway, because it is a complex project and it will be an interesting analysis and study at different levels, we think it's reasonable to expect to have an approval of the project during the beginning, maybe during 2030, I hope next first half of 2030. And as you may know, we cannot invest in Salar Futuro until we have the total approval. You cannot start investing in the project without approval. That's why the CAPEX of Salar Futuro, it will be starting to be reflected probably during second half 2030, the beginning of the project, the CAPEX. And most of the CAPEX will be reflected 31, 32, and some of 33. That's why it will not affect in significant term the CAPEX of next year, 2026, no, it is 27 or 28 or 29. Anyway, of course, we have some expenses and CAPEX related to the environmental study, but compared to the full project, CAPEX is not relevant.

All right. Thank you very much, Ricardo and Mark.

One moment for our next question, please. And it comes from Isabella Simonato with Bank of America. Please proceed.

Hi. Good afternoon, everyone. Thank you for taking my questions. I wanted to go back a little bit to the iodine business. I think it's pretty clear, right, your views on demand and how strong the market is. But what is mapped in terms of supply for the next couple of years and how do you see the balance of the market? I think it's still a little bit unclear what type of supply additions we're talking about in this environment, right, in considering this crisis and what do you guys see as a bottleneck for that supply to continue to grow more sustainably, right, given where prices are? I think that is my first question. And the second one, back to the deal with Codelco, right, I think there was an expectation that this would get done by September. Just wondering if there is any new update in terms of timing.

Hi, Isabella.

Pablo Altimidas speaking. Well, have you seen in the last year, we have seen a lack of supply. It's not the case of SQM. Actually, we have been one of the only companies that have been able to provide more iodine in the last years. That is our plan. As I said before, we are not only growing in Huella Victoria. We also opened a Pampa Blanca, and now we are working in a new greenfield project where the idea is to provide 1,500 additional metric tons of iodine. And on top of that, we are continuing growing in our seawater pipeline to provide more iodine and to increase significantly in capacity in Nueva Victoria. So regarding to SQM, we are investing a lot of money to be prepared to supply more iodine because of the needs of our customers. Regarding to the other players, well, as I said before, we expect some supply in the next year. Regarding to the next year, we are following what's going to happen. We don't know. What is important here is to consider the capacity of planning because today environmental restriction and these kind of things maybe are the main bottlenecks to see a new supply. So planning is very important, and that's what we have been doing as a company, to plan and to have a good lecture about the demand and then to build the new supply.

About the project with CODELCO, just to inform you that we are very positive about the results of the process. We are moving really fast, and we maintain our schedule. It means that it has to be ready during September, maybe October, but it's going to be ready during this year in any way.

Thank you very much. Thank you. One moment for our next question, please. And it comes from the line of Emerson Vieira with Goldman Sachs. Please go ahead.

Good morning, everyone. I have two questions.

The first one on the cost curve of the sector. If I recall, in the previous earnings conference, you guys mentioned that you estimate about 40% of the supply was under the water at the low prices at the time. Can you provide us an update on what is the supply amount right now that could still be underwater at current prices? So that's question number one. And question number two, can you please provide us an update on CAPEX expected for 2026-27, given that the construction of the refinery was already completed, and you have the seawater pipeline coming in line with expectations. Please, thank you.

Hey, this is Pablo Hernandez speaking.

So regarding your first question on the cost curve, today prices which have increased significantly since what we saw a couple weeks ago, we believe are still below what the balance would be between the supply and demand.

So we still believe that there are some competitors in this space that are with costs that are higher than current pricing and of course therefore in the long run if we think about long-term pricing everybody in the space i guess believes that the prices should be a little bit higher than what we are today hi merson this is gerardo regarding your question about the capex usually once a year we make a full review of our capex plan for the next few years and once we do that we we present it to the market and we expect to do that during this quarter and be in a position to share updates with the market during the third quarter earnings call in any case it's important to remember that out of approximately one billion dollars of capex that we have announced before per year for years 25 to 27 the very vast majority of that capex is growth capex a maintenance capex is approximately 250 million dollars per year across all our divisions so what we do in this exercise that i explained before is we review which other opportunities we have there and how each of these projects are evolving to see whether we have other opportunities or or something in these projects could change. So as soon as we have that, we will share it with the market.

Thank you for the answers.

Thank you so much. Our next question is from Corrine Blanchard with Deutsche Bank.

Please proceed.

Hey, good morning. Two questions here. Can you speak first about, give us an update on the progress with the conversation with Codeco and the local groups, anything you can give here in terms of future steps and kind of when you expect to have that complete, it would be helpful. And the second question, if you can speak about your current lithium inventory level, just to give us an idea that would be helpful.

I'm talking about CODELCO.

The process, as I mentioned before, is moving in the right direction, and we're really moving fast. And as you may know, the process with the community, with the communities which is led by Corfo is moving in the right direction is according to the stated deadlines. We're very positive. It's going to result in the next few weeks. Everything is going to be positive in our opinion. We have to keep in mind and remember that the SKM Code Elco project is very positive for Chile, for the Antigua region, and mainly for the nearby communities. That's why I think it's a strong point, our relation with the communities and it's going to be positive. There's other issues that we're working on it. One of them, of course, is have all the regulatory authorities' authorizations. It has been informed the Chinese regulatory authorities reviewing the transaction. We have provided them all the information and explained the agreement with CODELCO in full detail. This agreement, again, is a positive one for all consumers, both in China and around the world. We are really optimistic about the review and we think it will conclude positively in the next coming weeks. That's the main topics, points that are pending, and we are advancing other small points. That's why, as I mentioned before, we foresee a final full approval of the transaction during the next two months.

Hi, Karim. This is Carlos Díaz.

Regarding to the little inventor, you have a healthy position right now that is according to our production of this year, We expect to be close to 230,000 metric tons, and our sales, as Felipe already explained, will be 10% higher than compared to last year. So our inventory is according to that sales and what we are projected for next year. And just to finalize, to talk about that we are really optimistic about the business this year. The demand remains strong in the price environment, although it's extremely volatile, but it has shown positive sign of recovery. S-Coin is a long-term player, and we are cost competitive. We are a high-quality producer, and we have developed a strong commercial and logistic infrastructure. So, what I said before, we keep very optimistic about the business, and our inventory keeps it in a healthy position.

All right, ladies and gentlemen, thank you. And this concludes our Q&A session and conference for today. Thank you all for participating. You may now disconnect. Everyone have a great day.