Good day, welcome to the SQM First Quarter 2023 Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded. I would now like to turn the conference over to Irina Aksenova, Head of Investor Relations. Please go ahead. Thank you, Sarah. Good morning. Thank you for joining SQM's Earnings Conference Call for the first quarter of 2023. This conference call will be recorded and is being webcast live. Our earnings press release and a 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, Chief Executive Officer, and Gerardo Illanes, Chief Financial Officer, Carlos Diaz, Executive Vice President of Lithium, Felipe Smith, Commercial Vice President of Lithium, and Juan Pablo Bellolio, Commercial Vice President of 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 presentations. I'll now leave you with our Chief Executive Officer, Ricardo Ramos. Hey, good morning. Thank you for joining the call today. Yesterday, we reported our earnings for the first quarter of 2023. The results were affected by lower sales volumes in Lithium and Specialty Plant Nutrition business lines, partially offset by higher average prices when compared to the same period last year. We saw a decline in Lithium demand in the beginning of the year, especially in China, which affected our sales volumes. High inventory levels across supply chain accumulated in the previous quarter and reduced cathode production volumes resulted in low customer purchasing activity and put pressure on market prices. Coming out of the first quarter, we have seen an increase in market activity with customers looking for more volume to buy, which signals the end of the destocking period and is also being reflected in the spot prices trending upwards in the recent weeks. We believe that the lithium market foundations are intact and have not changed our expectation for the lithium demand growth this year. During the first quarter of the year, the global electric vehicle sales continued to increase when compared to the same period last year, achieving almost 30% growth worldwide, with sales in China increasing almost 22%, in Europe almost 19% and over 50% in the US. We expect this growth to continue throughout the year, with the total electric vehicle sales increasing over 2.5 million units in 2023. While we see new supply coming to the market this year, we believe that the softer price conditions and the stricter environmental requirements for mining operations have affected the economics of some of the high cost suppliers, as well as impacted the timing of new projects. Consequently, we expect that the lithium market will remain tight throughout the year. We will continue to focus on expanding our production capacity and fostering a strong relationship with our strategic customers. We're committed to investing in these areas to drive growth and maximize our sales volumes. With the reconfirmation of volumes from all our major customers for this year, we anticipate a steady increase in sales volume throughout the year, quarter-over-quarter. Since last year, we have made significant progress in transforming majority of our contracts into flexible pricing conditions, utilizing index reference price with a lag between. We believe this approach allow us to respond swiftly to changes in the industry and provides greater flexibility to our customers. As I mentioned yesterday, we are very proud of the results in our caliche operation and specifically iodine business, which allow us to increase our sales volumes and ensure the supply of iodine to meet the growing demand of the X-ray contrast media segment. While global iodine demand is expected to be flat on the year as a result of the reduced demand in some of the iodine applications, we believe that contrast media segment will growth close to 7% a year. SQM is the only producer that has been able to increase materially its production volumes in the recent year. Sustainability remains at the core of our operations as we continue to focus on reducing the carbon and water intensity of our products. I am pleased to announce that our 2022 sustainability report will be published next week and invite you to explore and progress throughout past year. We take pride in the achievement we have made and remain committed to advancing our sustainability development plan even further. Sarah, we will now open the line to questions. Thank you. We will now begin the question and answer session. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. If you're using a speakerphone, please pick up your handset before pressing the key. At this time, we will pause momentarily to assemble our roster. Our first question comes from Thiago Lofiego with Bradesco BBI. Please go ahead. Thank you, gentlemen. Thank you for taking my question. Actually I have two questions. The first one is on lithium supply in the coming years. How do you see new frontiers evolving? How do you look at Argentina, Brazil, Mexico as potential new frontiers? Still in that question, would you consider eventually exploring potential projects in those regions? Then the second question is about the national lithium policy. Can you give us an update on how conversations are ongoing with Corfo, with the Chilean authorities? Any, you know, hope that, you know, a middle ground can be reached? Just wanna hear your views on that. Thank you. Yes. Hello, Diego. This is Felipe Smith. How are you? I'm good. How are you, Felipe? Yeah. I will try to answer your first question. Indeed, I mean, we have always mentioned to the market that lithium is available everywhere. And there are, of course, today we are seeing projects arising in different regions. We are, of course, following those developments. As SQM, we have also said in the past, we are always interested in studying new projects in different parts of the world. We are potentially also analyzing that possibility. Now one important statement that we have to add is that when we look at new projects, I mean, here the experience and know-how of the one who is responsible of that project is key. Because we have seen that in some cases, projects take too long or finally do not materialize as originally foreseen. Okay. Yeah. Ricardo Ramos speaking now. Talking about the Codelco. We expect to start talks with Codelco in the coming weeks. As Ana said before, we are looking for an agreement that will be positive for the country, the Antofagasta region, the communities, and of course for the two companies. About the what you call the national lithium policy, As a company, we do not comment or give an opinion about what we call public policies. I think it's a very interesting discussion, but it's a discussion that corresponds to political parties, you the analysts or the study centers, that we have a lot of them in Chile, and the different unions that are also giving their opinions. We just want to start this conversation in the coming weeks, as I said before. We will report when it starts to the market. Fair enough. If I may very quickly go back to Felipe. Felipe, which one of those regions do you see more, you know, potential growth within? And I ask those specifically because of the, you know, geographical proximity to you guys. Argentina, Mexico and Brazil. Which one of those would you know, think that there's more potential for SQM and for the market in general? Yes. I would say that today our main focus is Australia as number one, let's say, a potential area of development. We are already, you know, developing a project there and we are studying different potential new projects. I would say this is our number one focus today. All right. Thank you. Our next question comes from Rafael Barcellos with Banco Santander. Please go ahead. Good afternoon, and thanks for taking my questions. My first question is related to lithium volumes. You mentioned that sales volumes have rebounded the second Q. I just would like to understand if it's now at normal levels for a second Q, or if you believe that it will take, for example, two more quarters, for us to see volumes returning to normal levels. My second question is related to CapEx. I'd just would like to understand how flexible is your 2023 CapEx guidance of $1.2 billion, and in which scenario you would consider reducing these CapEx level. Thank you. Okay. Hi, Rafael. Regarding the volumes. Well, as Ricardo mentioned at the beginning of the call, we are very positive today. First of all, the fundamentals of the demand are strong. The EV sales are showing an increase of 30% on the first quarter, which is already very positive. We are also seeing that the customer activity has recovered. We are engaged in business discussions with our customers. Customers are buying again. I would say that from a volume point of view, I can say that the second quarter will be substantially higher in volume than the first quarter. Also will be higher than what was the second quarter of last year. Finally, I would say that, as we have said in the previous call, that the second semester volumes should be better than the first semester volumes. Just about the projects, just one comment. Our projects in the Lithium business are so good that we are not even thinking about to reduce it. We don't foresee any scenario where we are gonna reduce the CapEx. We are thinking about increasing our CapEx. We have new projects, new initiatives, and probably we have new projects in the Lithium industry, even in Chile, we will announce during the next two quarters. Nowadays, not forget about reducing. We are thinking about increasing. Okay, thank you. The next question comes from Isabella Simonato with Bank of America. Please go ahead. Hi, good afternoon. Hi, Ricardo, everyone. I have two questions. First of all, on the iodine side. You mentioned, Ricardo, that prices should be resilient for the second quarter, I'd like to hear more your views beyond that. I mean, what you're seeing in terms of new supply. You mentioned that no one has been able to add supply, if you could give a little bit more details on the midterm scenario. Second of all, even though potash prices were down, the premium of SPN was relatively resilient during the quarter. Also, what are your expectations going forward? Thank you. Hello, Isabella, this is Juan Pablo. I'm gonna answer the question about Iodine. We believe that, as we mentioned, that during the first half of the year, demand and supply is gonna be stable within the same about prices. For the second half of the year, will depend on the demand and supply of the market finally. What we see from today and onwards is that there is a segment of the contrast media market that is growing strongly, so there is a fundamental on the demand that should keep the market and demand strong. Unless more supply arrives to the market, we see the market more or less as stable. Yeah. About the potash and the relation between SPN, it means especially the plant nutrition products, potassium nitrate, and the relation with potash, it's important to consider that are not direct competitors. It means it's important to keep these numbers as a ratio, as an important indicator. It's different market, it's different outcome, it's different uses. Anyway, I think that today price environment of potassium nitrate is not good. Is not bad. Is good. In term, if you consider our average prices 2 years ago, whatever it means today prices, today prices are very good. We're very positive about the potential demand in the near future. Things are just a little bit better now than what used to be during the first quarter. Just to comment to you that first quarter this year, we're mainly affected in the sales in Europe. Europe is affected by the high inflation, high production costs of farmers. We had bad weather that has delayed crops. The uncertainty in the world also have caused agricultural activity to be lower than expected. If you consider the other markets, mainly, for example, United States, Mexico, and other ones, we can say that we're close to a normal demand. That's why we think that we are more positive regarding the next three quarters, and we expect SPN, and means especially the plant nutrition business, 2023 volumes to slightly exceed or higher than 2022 volumes. That's a good news we expect in the next three quarters. Pricing, you're right, it will depend also for many conditions. Of course, if the potash price goes down, it will affect the price of potassium nitrate in some way. Yes, it will affect. We have to see what is gonna be the development of the pricing of potash and potassium nitrate. It still is not so clear for the future. Thank you. Our next question comes from Ben Isaacson with Scotiabank. Please go ahead. Thank you very much, good afternoon, everybody. Just a few questions. I'd like to ask them, one by one, if that's okay. You, you sold 32,000 tons in Q1, which was a little bit lower than what most had expected. What does that mean for your overall guidance for the year, in terms of volume? Can you give us some kind of range, in terms of what we should expect? Ben, I agree that the Q1 was low, and we anticipated that it would be low. As I said before in the previous question, we are very positive about the market situation now, so we expect a good second quarter, substantially better than the first. We also expect that the second semester volumes will be higher than the first semester volumes. Okay, that's perfect. Second question is, I believe we saw 46,000 tons of exports. From SQM and you recognized 32,000 tons. Does that mean that you've paid Corfo royalty payments on the whatever the difference is, 14,000 tons? You, you've paid maybe, I don't know, $150 million or something like that's as a prepayment. Is that correct? Hi, Ben. How are you? This is Gerardo Illanes. Well, that figure of 46,000 metric tons of exports is, I'm not sure if it's the exact number that we are considering or that we consider during the first quarter exports. You're right. We pay to Corfo the moment we export based on the volumes that were exported during the quarter and the average sales price to third parties during that quarter. In the first quarter, we export more than what we, than what we sell. Consequently, we pay to Corfo more than the actual calculation of the tonnage invoiced to third parties times. Right. The price invoiced to third parties. Right. Okay. Thank you. Just, 2 more quick ones, if I may. In the past, you had mentioned some interest in investing, potentially, as joint ventures in Canada and the U.S. Earlier on the call, you said you're still, most excited about Australia. Are you still looking in Canada and the U.S., and any progress there? We are open to do business almost everywhere in the world, if it is good for us. We think that we have competitive advantages in lithium. We have a lot of experience. We know how to do it. We have commercial capacities and a lot of technical know-how. Of course, the US, Canada, Australia, everywhere is an alternative to look forward. Of course, Australia for us, because we have an office there, we have some people there, seems like a very interesting place. We are open to review, and we are reviewing alternatives all around the world. Last question, if I may. You said in the press release that you believe destocking has been concluded. Can you just give a little bit more color in terms of what you mean by that? What data points are you seeing? What locations, kind of where in the supply chain have we seen destocking finished? Yeah. I mean, of course, the main issue with the lower demand happened in China. As you know, as you may know, China concentrated the mainly the lower demand. It's also in China where we are seeing this activity of purchasing restarting strongly. I would say strongly, I want to highlight that. The fact that you see also the indexes changing is a very good sign that what we are reading is also what, in general, the market is reading. The customers are buying again, and that means definitely that they need to start or they reached their lower stock levels, and now they are rebuilding stocks and consuming. Thank you very much. Our next question comes from Corinne Blanchard with Deutsche Bank. Please go ahead. Hey. Good morning or good afternoon, everyone. I missed actually the beginning of the call, I hope my question hasn't been asked or you haven't made comment on this. Was trying to get maybe some clarity on your negotiation with Codelco or the government. Again, not sure if you shared something on the prepare remark because I was not able to join. Just really trying to understand where we stand, what could be the likely scenario coming out of those negotiation, would be helpful. Okay. Sorry, but we expect to start the talks with Codelco in the coming weeks. I think we need to wait until we have an idea about the conversation. I think both sides, Codelco and SQM, we're open to look for alternatives that are gonna be, if they are positive for the country, the Antofagasta region, the communities, and of course, the two companies. At today's, I think it's not possible to have an estimate of the time we will be requiring the negotiation or what kind of negotiation we will have. I think we need to start the process, it's gonna start in the coming weeks. Great. Thank you. You know, maybe trying to understand a little bit better, like the volume and pricing that we could expect for lithium for the remaining of the year. I mean, obviously you mentioned destocking being nearly done and, I think, you know, based on market checks, it seems to already have happened. Do you still feel comfortable with the cadence of capacity and your production cadence that you have versus the sales that you can realize for the rest of the year? Yes, Corinne. Well, as I said before, we are positive about the volumes in the second semester, and also in Q2. Regarding pricing, you know, I mean, we will repeat this as a mantra. Supply, demand, the prices are basically following the supply/demand balance. It's very difficult to predict. The market has shown this year that it has been very fluctuating. We started the year with high prices, then by mid-April, we reached very low level prices in China. We have seen those prices recovering now. We're in the range of $30s. What will happen from now till the end of the year is something definitely we cannot predict. It will depend not only on the continuation of the customer activity, but also on the supply coming at the right time and so on. Felipe, you can comment to us about your mood, your personal mood and all that. Oh, I. That's very important for me. Ricardo, I am in a very good mood. Better than one month ago, no? Yes, better than one month ago, for sure. I was in China. I will go to China again. I see that the activity is much, much higher today. Corrine, we expect good volumes. That's what I can say. That's what really matter for me. Yes. Great. Thank you. I appreciate it. For the other side, sorry, Corrine, Carlos, as you mentioned that, our production plan is not changing. That mean we're running at full capacity in Chile, and we expect to start producing soon in China, at the end of the year in Australia. It doesn't change anything regarding to keeping producing as full capacity. Yeah, probably we will change, and we will increase some of our projects. That's what we expect from Carlos to announce to everyone that we expect to do something better and to move forward in production, move forward in new technology, move forward in new qualities. It means we are very, very positive in order that we will increase our CapEx in order to do something better. That's what we expect for the near future. Thank you. Our next question comes from Joel Jackson with BMO. Please go ahead. Hey, good afternoon, guys. This is Joseph. I'm for Joel. Just in terms of lithium pricing, can you just discuss, please, how Q2 is trending so far versus Q1 realizations? Also we've seen recently very big disparity, obviously between Chinese spot prices and the broader Asian and European prices. We're just wondering which regional benchmarks would be the most relevant for us to look at for SQM and which ones do you guys follow primarily? Yes. How you doing? Well, you know, we have sales more or less in all the main markets. Our contracts, we have explained in the past, our contracts are. Pardon me. This is your conference operator. Please stand by while we reconnect. Again, please stand by while we reconnect. Thank you. Pardon me. This is your conference operator. You may proceed with your call. Thank you. Yeah, thank you. We're back. Any more questions from Joel? Joel, are you there? Yes. Sorry, we had a problem with the connection when you came. No worry. Is there? Just in terms of pricing first, just wondering kinda how Q2 has been trending so far versus Q1 realizations and, just given the disparity that we've seen in Chinese spot prices versus Asian and European prices, which regional benchmarks would be the best for us to follow, and most relevant for SQM, and we're just wondering which ones you guys look at primarily. Thanks. I don't know how much you heard from my previous comments, Joel, but basically, I was trying to explain that depending on where we sell, we follow different indexes. Most of our demand is concentrated same as the global demand. Our sales is also concentrated in Asia. That's what I can comment. Our next question comes from Lucas Ferreira with JPMorgan. Please go ahead. Hi, guys. Good morning. Good afternoon. I have two questions, pretty much two follow-ups. One is on the realized price. Again, I think that realized price that you posted in the first quarter, correct me if I'm wrong, but implies that most of your sales happened probably in the month of March, right? Where prices were lower, and probably because with prices on a free fall, your clients maybe waited a little bit to put the orders, and then you probably sold most of the volumes towards the end of the quarter. My question is, looking at the second quarter, if we can expect something similar to happen, so most of your sales happening more towards the bottom we saw in Asia. If not, if you're being able to sort of capitalize in a way to sell better, at the better prices more towards the end of the quarter since the prices are up by more than 50% already from the lows. Just so we can better calibrate here our expectations for the realized price in 2Q, given all the volatility. The other question, maybe to Ricardo, sorry to come back to the same issue of the Codelco negotiations, and I know that it's just starting. It's a very sensitive issue to the company. Just wanted to understand from you, and the company if there's any aspect of this negotiation that is sort of inegotiable for you. For instance, the control of the Atacama. Is this something that you would be willing to give away in exchange for a better economic terms? You know, for whatever reason you think the company needs to keep the control of the operations? How you deal with the decantation plant, is that something that you are willing to contribute to an eventual negotiation, or the plant could not be part of the negotiation? How to think about sort of the big level important things for these talks? Thank you very much. Okay. Regarding your first question, Lucas, in general, as Q1 tends to concentrate towards the end of the quarter because you have always the Chinese New Year in between at the end of January, sometimes early February. In particular, this year, the start was even slower because of the things you know we have explained in the past about some pre-buying occurred at the end of last year. Okay? In Q2, the situation is different. Situation is so far is showing that it is a more stable volume pattern. Yeah. I think I want to sorry, it's repeating the same, but we expect to start the meetings and conversation with Codelco in coming weeks. We are not in the middle of the process as we speak. That's why we have to wait until we sit together, and we start talking about opportunities. We think we can create value, both companies. We think that if we have an agreement, this agreement has to be good for everyone. It has to be good for communities, for the region, for the country, for Codelco, and for SQM. I have to answer my shareholders. It means all my shareholders, and that if we have an agreement, it's gonna be a good agreement for us. I think it's important to go to the meetings and have and understand different positions. Of course, I think it's a very bad idea to send any message to Codelco indirectly. It means if I have something to say to them, I will do it during the table, during the negotiation in a confidential basis. I think keep it confidential and keeping a process that we can get at and we can reach an agreement is very important. If we start publicly discussing alternatives, it will not be a very good idea. Not in terms of confidentiality, not in terms of having a productive negotiation. Again, it's gonna start in the coming weeks, and we will keep everyone informed. If it is necessary to inform, we will. We will try to keep it confidential because it's gonna be good for the process. That's my main statement about that. That makes total sense, Ricardo. Thank you very much for the answers. De nada, Lucas. This concludes our question and answer session. I would like to turn the conference back over to Irina Aksenova for any closing remarks. Thank you for joining our call today, and apologies for some technical issues we're having. We look forward to having you at our next conference. Have a great day, everyone. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.