Gerardo Illanes - VP, Finance & IR Patricio Contesse - CEO Ricardo Ramos - CFO.

Isabella Simonato - Bank of America Merrill Lynch Cesar Perez Novoa - BTG Pactual Giovana Araujo - Itau BBA Ben Isaacson - ScotiaBank Ravi Jain - HSBC.

Welcome to the SQM First Quarter 2015 Conference Call. [Operator Instructions]. I would now like to turn the conference over to Gerardo Illanes, Vice President of Finance and Investor Relations. Please go ahead..

Thank you. Good morning, everyone, and welcome to SQM's first quarter 2015 earnings conference call. For your information, this conference call will be recorded and is being webcast live. You may access the webcast later on at our website www.sqm.com. Joining me today as speakers are Patricio Contesse, Chief Executive Officer and Ricardo Ramos, CFO.

Before we begin, let me remind you that statements in this conference concerning the company's business outlook, future economic performance, anticipated profitability, revenues, expenses or all other financial items, anticipated cost synergies and products 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 law.

Any forward-looking statements are estimates reflecting the best judgment of SQM based on currently available information and involve a number of risk, uncertainties and all other factors that could cause actual results to differ materially from those stated in such statements.

Risk, uncertainties and factors that could affect the accuracy of such forward-looking statements are identified in the public filings made with the Securities and Exchange Commission, and forward-looking statements should be considered in light of those factors.

I now leave you with our Chief Executive Officer, Patricio Contesse, for brief comments before we move to Q&A..

Thank you, Gerardo. Good morning and thank you for joining the SQM first quarter ending conference call. Last night we post our resource for the first quarter of 2015. Earning for this period reached $72 million lower than the amounts in during the same period in 2014.

Revenues for the quarter totaled just over $388 million down approximately 27% when compared to the first quarter of 2014 mainly because of delays of shipments in the fertilizer business line and lower price in iodine.

EBITDA margins for the first quarter were very high reaching 45.7% compared to EBITDA margins of 35.6% during the same period of 2014. I will now outline what we see happening in our five business lines. First potassium nitrate, revenue were significantly lower compared to the first quarter of last year.

Revenues were impacted by considerable lower volumes which were caused by shipment delays to Brazil. About 30,000 tons were not delivered during the first quarter but should be recovered during the second quarter of this year.

Price were up when compared to the fourth quarter of 2014 because demand is strong and there was less supply from other players. Going forward, we are expect market demand in potassium nitrate business to grow at about 5% this year and we expect price to remain stable.

Potassium chloride, revenue decreased compared to the first quarter of 2014 impact by important lower sales volume which were down approximately 48%. As mentioned in the press release these volumes decreased as a result of delay that should be recuperated in the coming quarters.

Although we anticipated recovery of sales volume in subsequent quarter, volume for the year should be between 5% to 10% less than sales volumes in 2014. We expect our average prices in the business line to be similar to price seen in 2014.

Iodine, revenues reported for the first quarter were in-line with expectation given our current strategy, lower iodine price has help stimulate the demand and this along with a more aggressive volume strategy have had in higher sales volumes during the first quarter.

Price which were down 30% compared to the first quarter of last year were anticipated and are also in-line with this strategy. Going forward we expect iodine volumes in 2015 to exceed volumes since in 2014 by around 5%.

Lithium, revenues for the first quarter of 2015 compared to the first quarter of 2014 was down around 7%, volumes in the lithium business were down approximately 8% when compared to the first quarter of last year. Demand was strong and some new projects has been delayed creating a sensation of the time market.

Average price in the business line were up about 10% compared to the fourth quarter of last year. Volume for the next three quarter will be higher than the volume seen in the first quarter and therefore our volumes for the year should be slightly higher this year compared to last year.

Industrial chemicals, revenues were down compared to the first quarter of 2014 by approximately 28%, volumes were down 30% compared to the first quarter of 2014 and were up about 34% compared to the fourth quarter of 2014.

Going forward we see very positive signs in the solar [indiscernible] business and expect it to recognize some sales anticipate for 2016 in 2015 boasting volume this year. This should bring sales volume expectation for 2015 to over 75,000 metric tons, an increase of over 50,000 metric tons when compared to last year.

We have close contract for project in Chile and South Africa for 2016 and 2015. Before I open up the line for questions I would like to reiterate that on April 24, our shareholders elected a new Board of Director. The Board members have been working diligently over the past months to understand the challenges and opportunities that the company face.

I'm confident that they are expertise in various fields including cooperate governance will be invaluable in supporting and guiding SQM in the future. Thank you..

Thank you, Patricio. Operator we may now go to Q&A session..

[Operator Instructions]. And our first question comes from Isabella Simonato from Merrill Lynch. Please go ahead..

I’ve two questions first, Patricio if you could go over and give us more color about what caused those delays in the shipments of SPN and potash why that happened in those business lines and then potash specifically why you think volumes are reducing -- you won't be able to recover those volumes in the coming quarters unlike SPN.

And secondly my question moves on lithium, we understand that Brazil [ph] might be close to vote for the proposed change in the lithium regulation. Do you’ve a specific date for that to happen? Indeed that should happen in the short term. Those are my questions. Thank you..

Regarding the potassium chloride delays, we generally sell large volume of potassium products to Brazil during the beginning of the year. We were facing some product problems as a result of the rain in the North of Chile in March and consequently our production was delayed in that month.

Additionally we did a special maintenance in our [indiscernible] plan. Our port because of bad weather was closed at the end of March for some days adding to the delay of the first quarter. We hope to recover the production according to our plan for the year by the end of the year but we will not reach our originally anticipated volumes.

Of course we’re already recovering the volumes that we did not achieve in the first quarter but for the total year we will be some kind of less of the previous year. Regarding SPN, it was a specific delay of boat to Brazil that we’re recovering in the second quarter. So we see bigger volumes in this year if you compare with the last year in SPN.

Regarding to your second quarter of lithium, we do not have any specific, we heard the same information that you said, but we don’t have any specific conduct [ph] we will have to wait. We of course review report of the commission and we expect that we shouldn’t be directly that affected..

Our next question comes from Cesar Perez Novoa from BTG Pactual. Please go ahead..

Could you give us a little bit more color on your cost breakdown, you had a very interesting cost reduction in the quarter and I would like to know how you achieved those cut in cost and whether those will be attainable and if we could extrapolate the margin for the rest of the year? If you could provide some color that would be quite helpful.

And I would also have a follow-up question regarding your CapEx guidance for 2015 and 2016 and if you could provide some breakdown there that would be really helpful as well. Thank you very much..

Regarding the cost we do reflected a very good EBITDA margin as we indicated in the press release and that was in one hand because of the cost reduction but also because of the mix in the different businesses that we have in the first quarter.

We are seeing the result of our cost saving effort over the last six quarter now, we also have been seeing lower energy cost and better exchange rate that is helping us. We continue to work in our program and we’re very happy with the result.

People in all our plans are really taking this as a personal challenge and we’re seeing the result, we expect to see an additional $40 million saving, additional what we really accomplished during this year. So we feel that this of course is an effort that will continue and we can project for the future this kind of cost reductions.

Regarding the CapEx, we do have an original CapEx in 2015 of close to $170 million or $180 million more or less. We start our investment planning which is mainly related to maintaining CapEx and some specific efficiency projects, we have the capacity in all of our business line.

So we are planning to consolidate our cost cutting efforts and this is what the CapEx is for, much less than our depreciation. For 2016, we’re starting to work in new ideas, we don’t have still a CapEx to comment but we of course want to review our strategy for the future and of course bring new ideas that will come in when we have it developed..

And if I may, would those $180 million that you’ve budgeted for this year does that include of course exploration and specifically would that -- there was this statement on the press release where you’re budgeting 5 million for the metallic side of the business would that allocate, would that be included in the 180 million?.

Yes, that’s included in our CapEx..

And our next question comes from Giovana Araujo from Itau BBA. Please go ahead..

So my question is about the potash market, you seem to be a little bit more bearish in terms of prices for 2015 than you were in the last quarter.

So I would like to better understand, so what is driving this weakness in prices if it is indeed linked to more competition among players or if it is linked to weakness, weaker than expected demand so especially here in Brazil and looking more medium terms, when do you expect this price equilibrium [ph] to improve? That’s my first question..

Regarding potash you know that we’re a small player so we just are completing price taker and of course what we’re trying to optimize is our net back, meaning try to allocate where we get better net backs in our distribution of [indiscernible] going better to market where we get a better price like Brazil, like also granular instead of standard product.

What happened this year is that the total market is expected to be lower than the total market of last year. Last year was close to 63 million tons in the world and this year what the analyst and some of the big player are thinking that it will be in the range of 58 million or 59 million ton.

So we will see a total lowered demand because of the stocks that were accumulated last year and also maybe because of influence of lower crop prices. Second, the increased price in the contract in China was only $10, people were expecting that will be over $15 so it's only $10 which is good, it's an increase.

However we have seen that the difference between the context [ph] price in China and the other markets like Brazil is now diminishing. Previously the difference used to be more between $40, in some cases $50 now it's going to a difference that is more close to $30 or even less dollars. So that is affecting the price of potash market.

For our sales we’re thinking that the price is more or less the same. What we will see as our price this year, we’re seeing that it will be very similar to what we saw price last year..

And regarding iodine market it seems that year-over-year drop in prices were higher than original expected so I would like to understand the main driver behind that and if it is more supply than the market than we originally expected and if there is upside risk in your guidance for volumes more upside or downside which is your guidance for volumes growth in 2015.

Thank you..

No we think that prices have been moving the way we expect according our strategy.

We indicated when we start this strategy that we wanted to regain our market share that we’re by far the lowest cost producer, we have the install capacity, so we were not prepared to continue losing the market share and that was our strategy, a very clear signal to the market and support to our customers and we’ve being doing that and the market has been reacting the way we expected.

Demand is being very strong, some new application are out in the market and we’re being seen more volumes.

Prices at the end of the day we’re not the ones that set the price, the price is set according to balance of supply and demand, we will have to see what happened the rest of the year but today we’re seeing prices in the range of $30 probably we will see some small deterioration during the rest of the year.

We expect that will continue strong and we see that there are some probabilities that we can sell even a little bit more of what we’re indicate..

And our next question comes from Ben Isaacson from ScotiaBank. Please go ahead..

Patricio, just a couple of follow-up questions, on the iodine price you talked about how it could deteriorate a little bit further.

Can you talk about how low can iodine go in theory, maybe talk a little bit about the cost curve, I mean could we go to $25? Could we go to $22? What's actually driving that right now?.

This is very difficult question, as always you do [ph]. It's very difficult to answer. We of course have some estimate of our cost curve that we don’t share because it is very small market.

We’re very confident for sure that we’re not only the lowest cost by important difference, with our cost reduction program in the last year and half we have improved even more our cost position in iodine. So we feel very comfortable. We’re not thinking that the price could go as far as you indicated but this is something that we cannot say for sure.

We feel that the additional demand, we feel that some of the marginal producer are suffering already, so we will have to wait and see..

And my second question is maybe a follow-up on Isabella's question, on the national lithium commission they gave their ruling I guess or the recommendation at the end of January.

Can you just remind us what are the two options that the government is looking at? And under both scenarios what does it mean for SQM and what does it mean for new entrants? Thank you..

Well basically what the commission has indicated first is that politically they decided that lithium will not be -- they don’t recommend to put it as a material that will be similar to any other mineral but will continue to be "strategic".

Second, the government should have more action in these through different alternatives that they analyze and proposed to the press [ph]. But they also recognize in what we understood from the report that the actual contract should continue working. So we don’t see any specific effect on us.

We always have been proposing that should open up to have more production from us, or from other people but we will have to see and wait what will be their final decision..

And our next question comes from Ravi Jain from HSBC. Please go ahead..

Couple of quick question, so first thing is a follow-up on the lithium angle, looking at strategically do you also considering doing M&A beyond Chile? Do you think that there are opportunities for you to grow your lithium capacity outside Chile or do you think that Chile's lower cost is going to be the main driver for your growth going forward in terms of new auctions? And the second question is on the free cash flow generations.

So you’re going to be generating similar to last year, a pretty good amount of free cash flow. Should we expect another extraordinary dividend this year or are there some other uses of cash in your mind? Thank you..

Regarding your lithium question, we like in our other business, iodine and potassium nitrate where we are one of the most important players in the world.

We continually look for opportunities in Chile as well outside Chile that is our anything that smell lithium, smell iodine or potassium nitrate of course we look at we have been looking at different alternative, we have not found something that really fit us at, but we will continue to do so.

Regarding growth specifically in lithium we’re seeing that the logical growth for us is producing more in our actual operations and to do that we need to agree with Corfo from the government agency where we rent our mining rights for that operation and I hope that we could do that in the near future.

Regarding on your second question on free cash flow, we hope that we will be generating free cash flow, the way it is [ph], there is no special dividends on sight, there is no decision on that and we expect to really propose new projects in the future..

A quick follow-up on the lithium and iodine as well.

So have you -- just I would love to hear your thoughts of -- have you looked at the RB Energy asset that was for sale in Canada as well as the iodine operations and if you had any comments on the asset?.

As I indicated we have looked at everything in detail but given our confidentiality agreements we cannot comment details on that..

Having no further questions, this concludes our question and answer session. I would like to turn the conference back over to Mr. Illanes for any closing remarks..

Thank you all very much for joining us today and we hope to have you with us in the next conference call. Goodbye everyone..

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect..