Sociedad Quimica Misses Q2 Earnings Estimates, Tops Sales

Sociedad Quimica y Minera de Chile S.A. SQM posted a profit of $213.6 million or 75 cents per share in second-quarter 2024. The figure marks a decline from the $580.2 million or $2.03 per share registered in the year-ago quarter. Quarterly earnings also fell short of the Zacks Consensus Estimate of 99 cents per share.

SQM generated revenues of $1,293.6 million in the quarter, down around 37% year over year. The figure beat the Zacks Consensus Estimate of $1,260.7 million.

Segment Highlights

Revenues from the Lithium and Derivatives segment fell nearly 55% year over year to $664.7 million in the reported quarter. Despite a near 21% increase in sales volumes, the downside was caused by a sharp 63% reduction in average sales prices.

The Specialty Plant Nutrients segment generated revenues of $260.5 million, up 5% year over year. This upside was primarily driven by higher sales volumes, though it was tempered by lower average sales prices.

The Iodine and Derivatives segment posted revenues of $269.2 million, up around 22% from the prior year's levels, benefiting from higher sales volumes and increased sales prices.

Revenues from the Potassium business rose 10% year over year to $73.1 million, supported by higher sales volumes, though partially offset by lower average sales prices.

The Industrial Chemicals unit recorded sales of $20.5 million, down around 56% year over year. The figure was partially dented by significantly lower sales volumes despite higher average sales prices.

Financials

The company's cash and cash equivalents were $1,033.1 million at the end of the quarter, down around 22% sequentially. Long-term debt was $2,946.2 million, flat sequentially.

Outlook

SQM's production guidance remains unchanged from earlier this year, with expectations to produce approximately 210,000 metric tons of lithium carbonate equivalent from its production facilities. Sales volumes in the second half of the year are anticipated to be similar to those reported in the first half of 2024.

Positive trends have been observed in the potassium nitrate market during the first half of this year, driven by strong demand growth and stable market prices. The firm projects that total market demand for potassium nitrate could rise by nearly 13% compared with 2023 levels. As a result, its sales volumes are expected to outpace this demand growth, increasing by close to 20% in 2024 from the previous year's tally. Price stability seen in the first half of 2024 is expected to continue through the remainder of the year, assuming market conditions remain consistent.

In the iodine market, stronger-than-anticipated demand growth was seen in the first half of the year, a trend the company believes could extend into the second half. Total iodine demand growth in 2024 is projected to reach approximately 7% year over year, primarily driven by applications in X-ray contrast media and LCD/LED screen segments. Given these favorable trends, SQM expects its iodine sales volumes in 2024 to exceed 14,500 metric tons, surpassing the levels reported for 2023. Iodine prices have shown a slight increase since the first quarter, with the potential for further price gains in the second half due to robust demand and limited supply.

Global demand growth for potassium remained robust in the first half of 2024, with total demand projected to exceed 70 million metric tons by the year-end. The company expects its sales volumes to reach 650,000 metric tons in 2024.

Quarterly sales volumes for industrial chemicals are anticipated to remain steady throughout the year, with market prices likely to stay stable for the remainder of 2024.

Price Performance

SQM's shares have plunged 41.8% over a year compared with the industry's decline of 22.1%.

Image Source: Zacks Investment Research

Zacks Rank & Key Picks

SQM currently carries a Zacks Rank #5 (Strong Sell). 

Some better-ranked stocks in the Basic Materials space are Newmont Corporation, Element Solutions Inc and Barrick Gold Corporation. Newmont and ElementSolutionssport a Zacks Rank #1 (Strong Buy), while Barrick Gold carries a Zacks Rank #2 (Buy) each.

The Zacks Consensus Estimate for Newmont's current-year earnings is pegged at $2.82, indicating a rise of 75% from the year-ago levels. The consensus for NEM's earnings has increased 16% in the past 60 days.The stock has gained nearly 34.4% in the past year.

The Zacks Consensus Estimate for ESI's current-year earnings is pegged at $1.42, indicating a rise of 10% from the year-ago levels. ESI beat the consensus estimate in three of the last four quarters, with the average earnings surprise being 3.8%. The stock has rallied nearly 36.8% in the past year.

The Zacks Consensus Estimate for GOLD's current year earnings is pegged at $1.21, indicating a year-over-year rise of 44%. GOLD's earnings beat the Zacks Consensus Estimate in all of the last four quarters, the average earnings surprise being 21.2%. The company's shares have increased 30.2% in the past year.

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