As a result of the rains that affected the area of Tocopilla in August 2015, the railway between Coya Sur and Tocopilla was damaged and the train stopped operating at that time. Since then, SQM has been using trucks to move the product from Coya Sur to Tocopilla. Detailed engineering studies were performed to assess the damage of the railway. During the third quarter of 2016, the report was completed; it concluded that the cost and time needed to repair the railway at this time is not economical in the short and medium term. As a result of this determination, the Company wrote-off the assets related to the train, and reported a non-cash, one-time before-tax impact of approximately US$33 million to its third quarter 2016 financial statements. The amount represents approximately 0.7% of the total assets of the Company. The net income comparison between the third quarter of 2016 and the third quarter of 2015 is also affected by the write-off related to stopping the operations of the mines in Pedro de Valdivia, which had a one-time, before-tax effect of US$56.3 million on net income in 2015.
SQM's Chief Executive Officer, Patricio de Solminihac, stated, "The third quarter results were mainly driven by the higher lithium prices seen during this quarter. In general, trends seen during the third quarter were in line with what we have seen in previous months: higher prices in lithium, lower prices in iodine, lower average prices in the potassium chloride market, and increased price pressure in the specialty plant nutrient market. Lithium volumes and prices exceeded expectations during the third quarter. We expect total market demand growth to be between 12-13% this year. For upcoming years, we expect growth to be between 8-10%. During the third quarter, we also announced plans to invest approximately US$30 million in a lithium hydroxide expansion project, which would allow us to more than double our lithium hydroxide capacity. We believe this expansion will allow us to further expand margins and maximize value in this business line."
He continued by saying, "Our sales volumes of iodine continue to grow, and this was no different in the third quarter when sales volumes topped 2,600 MT. Sales volumes will grow during 2016, and we expect total sales volumes to exceed 9,500 MT this year.
"In the fertilizer markets, potassium chloride sales volumes for the first nine months of 2016 were up over 22% when compared to the same period last year. We expect the sales volumes for 2016 to be at least 20% stronger than the sales volumes we saw last year."
Mr. de Solminihac concluded by saying, "As part of our growth strategy we are continuously looking for opportunities to develop low-cost projects related to our core businesses where we believe we can add value at the development stage and will have sustainable competitive advantages. In March of this year, we announced a joint venture with Lithium Americas to develop the Caucharí-Olaroz lithium project in the Jujuy province of Argentina. We currently have sixty people working on this project, and can report that the project still expects to begin construction during the first half of 2017. In September, we announced an investment of US$20 million in Elemental Minerals Limited, which would grant us access to some potassium deposits in the Republic of Congo; preliminary studies suggest these deposits boast some of the highest grade potassium available and could therefore potentially lead to some of the lowest-cost production in the market. Feasibility studies are currently being evaluated, and should be completed during 2018."
SQM is an integrated producer and distributor of specialty plant nutrients, iodine, lithium, potassium-related fertilizers and industrial chemicals. Its products are based on the development of high quality natural resources that allow the Company to be a leader in costs, supported by a specialized international network with sales in over 110 countries. SQM's development strategy aims to maintain and strengthen the Company's position in each of its businesses.
The leadership strategy is based on the Company's competitive advantages and on the sustainable growth of the different markets in which it participates. SQM's main competitive advantages in its different businesses include:
- Low production costs based on vast and high quality natural resources;
- Know-how and its own technological developments in its various production processes;
- Logistics infrastructure and high production levels that allow SQM to have low distribution costs;
- High market share in all its core products;
- International sales network with offices in 20 countries and sales in over 110 countries;
- Synergies from the production of multiple products that are obtained from the same two natural resources;
- Continuous new product development according to the specific needs of its different customers;
- Conservative and solid financial position.
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Cautionary Note Regarding Forward-Looking Statements
This news release contains "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as: "anticipate," "plan," "believe," "estimate," "expect," "strategy," "should," "will" and similar references to future periods. Examples of forward-looking statements include, among others, statements we make concerning the Company's business outlook, future economic performance, anticipated profitability, revenues, expenses, or other financial items, anticipated cost synergies and product or service line growth.
Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are estimates that reflect the best judgment of SQM management based on currently available information. Because forward-looking statements relate to the future, they involve a number of risks, uncertainties and other factors that are outside of our control and could cause actual results to differ materially from those stated in such statements. Therefore, you should not rely on any of these forward-looking statements. Readers are referred to the documents filed by SQM with the United States Securities and Exchange Commission, specifically the most recent annual report on Form 20-F, which identifies important risk factors that could cause actual results to differ from those contained in the forward-looking statements. All forward-looking statements are based on information available to SQM on the date hereof and SQM assumes no obligation to update such statements, whether as a result of new information, future developments or otherwise.
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SOURCE Sociedad Quimica y Minera de Chile S.A.