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CFA Institute Research Challenge 
hosted by 
Local Challenge CFA Society Chile 
XÆA-12 
 
 
The CFA Institute Research Challenge is a global competition that tests the equity research and valuation, 
investment report writing, and presentation skills of university students. The following report was prepared in 
compliance with the Official Rules of the CFA Institute Research Challenge, is submitted by a team of university 
students as part of this annual educational initiative and should not be considered a professional report. 
 
Disclosures: 
Ownership and material conflicts of interest 
The author(s), or a member of their household, of this report does not hold a financial interest in the securities of this company. 
The author(s), or a member of their household, of this report does not know of the existence of any conflicts of interest that might bias the 
content or publication of this report. 
Receipt of compensation 
Compensation of the author(s) of this report is not based on investment banking revenue. 
Position as an officer or a director 
The author(s), or a member of their household, does not serve as an officer, director, or advisory board member of the subject company. 
Market making 
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Disclaimer 
The information set forth herein has been obtained or derived from sources generally available to the public and believed by the author(s) 
to be reliable, but the author(s) does not make any representation or warranty, express or implied, as to its accuracy or completeness. 
The information is not intended to be used as the basis of any investment decisions by any person or entity. This information does not 
constitute investment advice, nor is it an offer or a solicitation of an offer to buy or sell any security. This report should not be considered 
to be a recommendation by any individual affiliated with CFA Institute, or the CFA Institute Research Challenge with regard to this 
company’s stock. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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Valuation Date: October 20th, 2020 Exchange: NYSE Ticker: SQM Industry: Metals & Mining 
INVESTMENT SUMMARY 
We issue a HOLD recommendation on SQM at USD 32.2 per share, representing an 
8.11% downside from its October 20th, 2020 closing price of USD 35. Our valuation is 
based on a mix of Discounted Cash Flow Model (80%) and EV/EBITDA Comparable 
Multiple Analysis (20%). Our recommendation is based on three key pillars: 
 
Strong competitive position 
The company is based on two main competitive advantages: an integrated, synergy 
based and low cost production, with a wide geographic diversification of sales thanks 
to an extensive distribution network, and high quality mineral reserves (Caliche ore and 
Brine deposits) available for its exploitation. These raw materials allow the entity to 
obtain multiple compounds through the extraction of non-metallic minerals, achieving 
significant economies of scale in production. These competitive advantages have led 
SQM to be a leader in almost each of its business lines. 
Solid financial position 
SQM has a strong liquidity position, a moderate indebtedness and maintenance of 
high financial debt coverage. The company has a solid capacity to pay all short term, 
business-cycle related liabilities as all previous current ratios and quick ratios have 
been above 3.3 and 2.06, respectively (appendix 1 & 5). Moreover, SQM has enough 
cash to, on average, cover 85% of current liabilities. The financial coverage ratio over 
the last 5 years has been 12.4x on average. At the end of 2019, SQM ended with an 
8.1x ratio in comparison to 2018 where the company ended with a coverage of 15.3x. 
 
Uncertainty regarding future of lithium 
Lithium is, without doubt, the main driver of SQM’s stock price as lithium batteries and 
electric vehicles demand grow. High operational cash flow volatility is expected as 
lithium price, being a commodity, depends on overall aggregate supply and demand. 
Thus, lithium and derivatives performance will depend on the company capacity to 
reduce costs of metric tons of lithium extracted by an increase in operational 
efficiency and by investing in higher-level technology, as price is exogenous. 
 
Uncertainty is built on both production capacity and price. Even though the company 
expected to sell annually 150,000 metric tons of lithium by 2025, we expect sales to be 
not higher than 124,000 metric tons as ongoing projects, 50,000 metric tons lithium 
carbonate and 16,000 metric tons lithium hydroxide, have been delayed by one year 
and lithium price suffered a 42% plunge in 2020’s first semester. Moreover, Mt. Holland's 
final investment decision was deferred until the first quarter 2021. 
 
 
 
 
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BUSINESS DESCRIPTION 
Sociedad Química y Minera de Chile S.A. (SQM) is a global company that focuses on 
various industries that are strategic for human development, such as healthcare, food, 
clean energy, technologies that promote global development, among others. The 
business model can be split into five business units: 
Specialty plant nutrients (SPN) are fertilizers that enable farmers to improve yields and 
the quality of certain crops. SPN represents 34% of SQM’s gross profit and is one of the 
main drivers of the stock’s market value. Having an estimated market share of 51% 
(sales volume of 1,041 kMT/year), the company produces four main types of specialty 
plant nutrients: potassium nitrate (KNO3), sodium nitrate (NaNO3), specialty blends and 
other specialty fertilizers. 
Market demand is driven by the continued growth rate of per capita consumption of 
both fruits and vegetables, but specially tobacco products. The company’s SPN 
revenues have increased over the last ten years at a rate of 5% per year. However, 
expected growth of the potassium nitrate market for 2020 is 3% due to COVID-19. 
Iodine and its derivatives are used in the X-ray contrast media and biocides industries, 
among others. This business unit represents 39% of SQM’s gross profit. As indicated in 
SQM’s annual report, the company is one of the world’s most important producers of 
Iodine and its derivatives with an estimated market share of 34% (sales volume of 12.8 
kMT/year). 
Demand for iodine varies depending upon overall levels of economic activity, but 
mainly on the level of demand in the medical, pharmaceutical, industrial and other 
sectors that are the main users of iodine and derivative products. So, demand is stable 
enough, price will be determined by supply. Revenues have had a CAGR of 3% over 
the last 30 years. 
Lithium and its derivatives are used in batteries, greases and frits for production of 
ceramics. Lithium and derivatives represent 15% of SQM’s gross profit and is the current 
driver of the stock price because of a 20% revenue CAGR for the next 10 years. The 
company is a world leader in the production of lithium carbonate, with an estimated 
market share of 15% that positions it as the second biggest supplier worldwide (sales 
volume of 45 kMT/year). Current production capacity is 83.5 kMT per year but the 
company is in the process of increasing production capacity to 149.5 kMT per year by 
end of 2021. 
Industrial chemicals have a range of applications in chemical processes, such as the 
manufacturing of glass and industrial nitrates. The company is a world leader in the 
production of these chemicals with an estimated market share of 41% (sales volume 
of 124 kMT). Industrial chemicals represent 9% of SQM’s gross profit. SQM focuses on 
three industrial chemicals: (1) Potassium nitrate (KNO3), (2) Sodium nitrate (NaNO3) & 
(3) Potassium chloride (KCl). 
Beside these industrial chemicals, SQM also produces solar salts which are a mixture of 
potassium nitrate and sodium nitrate and are used as a thermal storage medium in 
solar plants. Mainclients make use of solar salts for parabolic Concentrated Solar 
Power Plants (CSP) plant that require 30 kMT of solar salts each year. Therefore, 
expected CAGR for the next 10 years is estimated at 5.5% 
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Potassium chloride is a commodity fertilizer that is produced and sold by the Company 
across the world. Potassium is one of the products extracted from brines in Salar de 
Atacama. While it represents 3% of SQM’s gross profit, the company has less than a 1% 
market share even though sale volume is approximately 597 kMT. The main potassium 
products are potassium chloride and potassium sulphate. 
Demand for potassium is driven by population growth, higher demand for protein-
based diets and less arable land. For the last ten years, the compound annual growth 
in the global potassium chloride market was around 1 - 2%. 
LITHIUM – KEY REVENUE DRIVER 
The company is a world leader in the production of lithium carbonate, with an 
estimated market share of 15% that positions it as the second biggest supplier 
worldwide. This product is used in a wide variety of industries: it is a key electrochemical 
component of batteries, a key component for the fabrication of heat resistant glass, 
air conditioning chemicals and pharmaceutical products. 
Lithium has three main usage categories: (1) Industrial: uses such as aluminum alloys, 
ceramics, glass, pharmaceutical, lubricants, high-performance rubber, among others; 
(2) Portable electronic devices: it is a key component in batteries for these devices 
and (3) Electric cars: it is used in the cars’ batteries, this usage represents 46% of lithium’s 
total demand. 
To grasp the importance of this last specific use, by 2025 electric vehicle’s expected 
demand is approximately 1 million electric cars, which means 50k of LCE (Lithium 
Carbonate Equivalent) per vehicle. Thus, a 1% increase in electric vehicles sales implies 
a 17% increase in lithium demand. 
To be able to address this increase in demand the company expected a US$1,300 
million investment for 2019-2023 period in both lithium and potassium business lines 
(appendix 2). Considering the forecast was made before COVID 19, we adjusted it by 
considering potential delays to a US$1,215 million investment for 2019-2024 period. 
CORPORATE GOVERNANCE 
The company has 263.2 MM outstanding shares of common stock. SQM does not have 
a controlling group, but Mr. Julio Ponce de Lerou indirectly controls 32% of the 
company through his 100% control of both Inversiones SQYA Ltda and Inversiones SQ 
Ltda and is the largest shareholder. The Company has a 100% dividend policy when 
certain financial parameters are met, if these are not met, the dividend policy could 
drop to 80%, 60% or even as low as 50%. 
The Board of Directors consists of 8 eligible members for a period of three years and 
current Chairman of the Board is Alberto Salas Muñoz. The last election was at the 
shareholders’ meeting on April 25, 2019. Board members have diverse backgrounds in 
Business Administration, Engineering, Law and Economics. Most of the Board members 
do not own any shares directly to their name, and the ones who do have less than a 
1% of the shares. 
 
 
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ENVIRONMENTAL AND SOCIAL RESPONSIBILITY 
SQM is committed to have a sustainable operation and a few of its goals are to reduce 
continental water consumption operations 40% by 2030 and 65% by 2040, on Salar de 
Atacama 50% by 2030. In order to do that the Company is building an aqueduct to 
supply itself from the ocean and desalinate it. The Company also aims to reduce 
emissions and achieve carbon neutrality by 2040, have more dialogue with local 
communities and reduce brine annually until a 50% reduction by 2030. As shown in 
appendix 3, SQM is above the median of its peers in ESG topics. 
 
INDUSTRY OVERVIEW AND COMPETITIVE POSITIONING 
SQM has a lasting competitive advantage through the exploitation rights of the 
mineral reserve Caliche Ore (perpetual) and Salar de Atacama, which ends in 2030 
but can be renewed if approved by the Chilean government. These reserves are high 
quality mineral reserves and the raw materials obtained from here allow the Company 
to obtain multiple compounds and achieve important economies of scale in 
production. 
The company also has important strategic alliances in China, India, Peru, Brazil, Dubai, 
South Africa and the Netherlands and a constant innovation in its business lines. 
The world's economies are being affected by the COVID-19 virus crisis which has had 
an impact on most mining companies, and the expected growth has declined. 
Nevertheless, this growth is expected to resume its previous trend by 2022 and the 
trade war between USA and China seems to be coming to an end, which will have a 
positive effect on commodity exports to China, one of the biggest lithium clients SQM 
has. 
The lithium global market is highly concentrated and SQM is one of the biggest actors 
in it. Lithium demand is on track to reach 1 million MT by 2025, with a CAGR of over 20% 
driven by electric cars penetration. There is a current excess of supply that is expected 
to diminish in the mid-term due to an increase in demand for hydroxide. 
 
VALUATION 
Our valuation arrives at USD 32.2 target price, driven 80% of our DCF model price of 
USD 32.5 and 20% of EV/EBITDA multiple analysis of USD 30,6. The 80% weight assigned 
to DCF is based on the flexibility to incorporate USA’s expected inflation rate, expected 
world economic growth and production capacity expansion of business lines 
regarding the growth and cash flow generation. Multiple valuation has a lower weight 
due to the lack of peer public comparatives companies, related both in size, location, 
and business lines. 
10-year DCF Model 
This valuation model was selected since it allows us to have control over sensitivity 
analysis with respect to key variables. 
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The first phase is based on specific year-to-year forecasts as most business lines are not 
easy to forecast considering they are mostly commodities. The model consists of 
forecasts until 2029 as exploitation rights for Salar de Atacama expire at the beginning 
of 2030. We assumed a long-term constant growth rate of 2,58% for the terminal values 
cash flows, based on a weighted average of both the USA and Chile’s expected 
inflation rate. 
We formulated a base case scenario using historical operating data, industry outlook, 
political regulations and company strategy and risks. The accuracy of the implied 
enterprise value for the company depends on the following modelling inputs: Each 
segment growth was forecasted using relevant drivers, USA’s expected inflation rate, 
expected world economic growth, electric cars’ penetration and production 
capacity expansion of business lines. 
 
Exploitation rights 
Exploitation concessions essentially grant a perpetual right, but Salar de Atacama 
rights are an exception as they were leased to SQM until 2030. Taking in consideration 
that Salar de Atacama is of the main competitive advantage drivers for SQM, the 
uncertainty of the 2030 concession result was incorporated in the model as an increase 
in the CORFO rights expenditure as SQM will deploy more resources to ensure the 
reassignment of the exploitation rights. 
 
Operating Expenses 
We performed a historical analysis of operating expenses in which it was determined 
that there is a strong correlation between the kilo metric ton of mineral exploited and 
the operating expense allocated to each business line. For this reason, we decided to 
continue the trend and project operating expenses as a product between an average 
of historical cost per kMT of mineral extracted from the expected kMT production. 
 
Depreciation and Amortization 
We performed a historical analysis of D&A, in which we were able to determine both 
estimated usefulness and average life of the long-lived assets. Thus,we projected D&A 
by separating between existing long-lived assets, maintenance, and expansion 
capital expenditures. 
 
Capital Expenditure 
Capex is one of the most relevant factors within the company, given its need to 
maintain high levels of investment in order to remain a leader in most of its business 
lines. We performed a historical analysis in which it was determined that maintenance 
capital expenditures have been and are expected to be stable over time. On the 
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other hand, expansion capital expenditures depend exclusively on the investment 
plan dictated by SQM, which is currently driven by expansions on lithium, SPN and 
industrial chemicals business lines. 
 
Weighted Average Cost of Capital 
We derived a WACC rate of 8,32%. The cost of equity was computed using the Capital 
Asset Pricing Model, we selected as the risk-free rate the DGS10 (1,92%) plus the 
Chilean EMBI (135 BPS), obtaining a 3.27% risk-free rate. We computed a beta of 0.88 
by obtaining the unlevered beta from peer companies from the Refinitiv database 
and re-leveraging it using the capital structure of SQM. The expected market risk 
premium was 7,3% according to Damodaran, leading to a cost of equity of 9.67%. The 
cost of debt of 4% was based on the 2019 annual report of SQM and confirmed by a 
weighted average of debt based on relevant interest-bearing liabilities and current 
financial debt amortizations. Finally, we used Chile’s corporate tax rate of 27%. 
 
Comparable Multiple Analysis 
While the DCF method is our main valuation approach, we also analyzed multiples of 
comparable firms. We identified EV/EBITDA as the most appropriate multiple to 
compare SQM to its peers, resulting in a one-year target price of USD 30,6 per share, 
which has a 20% weight on our blended target price. Suitable national peers are 
scarce in the mining and chemical industry, since the other Chilean companies are 
mainly private and considerably smaller. Thus, using the Refinitiv database, we were 
able to identify 8 appropriate peers that have similar business models, every single one 
of them from a different country. We used EV/EBITDA to isolate the effect of different 
tax regimes and because it is appropriate in analyzing the value of an infrastructure-
intensive business as it isolates any distortions that may arise from differences in D&A 
among different companies. Also, these multiples allow the comparison to focus on 
operating results regardless of each company’s capital structure. 
 
FINANCIAL ANALYSIS 
Revenue Structure 
During 2019 SQM revenues were US$1,943 MM. The breakdown of the revenues is: 37% 
for SPN, 19% for Iodine and Derivatives, 11% for Potassium, 5% for Industrial Chemicals 
and 2% for Others. Compared to past years the percentages for SPN and Iodine and 
Derivatives have increased, for Lithium and Derivatives and Potassium the 
percentages decreased and for Industrial Chemicals and Others the percentages 
stayed the same. The total revenue has grown at a CAGR of 4% between the years 
2010-2019 and our projection expects a CAGR of 7,68% between the years 2020-2029 
mainly driven by an increase in the sale of Lithium and Derivatives that impacted 
positively on the price. Appendix 4 represents historical information and our projections 
for the revenue structure. 
 
Cost Structure 
Raw materials and consumables used are the main cost for SQM, in 2019 it represented 
14% of the total revenues and between 2016-2019 the average was of 15,5% so there 
has been no major change in the cost of sales regarding the raw materials and 
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consumables used. Going into detail, analyzing the cost of sales as a % of revenues 
filtered by the different business lines in 2019, SPN represented 26,02%, Iodine and 
Derivatives represented 9,62%, Lithium and Derivatives represented 13,42%, Industrial 
Chemicals represented 2,92%, Potassium represented 7,12% and Others represented 
1,69%. Lithium and Derivatives increased from 7,35% in 2016 to 13,42% in 2019. In our 
forecast Lithium will have a continuous impact in the cost of sales as a % of the total 
revenues with an average of 18,19% during 2020-2029. It is important to highlight the 
fact that the company lowered its disbursements in employee benefits and in the 
CORFO’s rights. Appendix 4 represents historical information and our projections for the 
cost structure. 
D&A Expenses 
During 2019, Depreciation and Amortization expenses accounted for 10,41% of the 
total income. Between 2016-2019 the average was 11,02% with a minimum of 9,75% 
and a maximum of 12,87% meaning that it is a stable variable. Our projections 
between 2020 to 2029 expected an average of 11,64% D&A expenses of the total 
income. 
 
Source: Team Estimates 
EBITDA and Others 
SQM EBITDA has a lot of variation, from 2016-2019 EBITDA increased an average of 
22,79% and our projections expect a yearly growth of 9,48% from 2020-2029. During 
2010 to 2019, SQM EBITDA Margin ranged from 33,2% - 45,2% with an average of 38,6%. 
While our projections between 2020-2029 predict an average of 36% with a minimum 
of 28,3% and a maximum of 42,5%. This means that the EBITDA will be more likely to 
have volatility; there are two reasons for this, the first one is for lithium expectations and 
the second one is for the uncertainty of the Salar de Atacama after 2030. EBIT Margin 
from 2017-2019 increased an average of 24,89%, and our projections expect a yearly 
increase of 24,36%. Margins have been stable due to the competitive advantages of 
the company. 
 
Capital Expenditure 
To assure a constant supply to its customers and to take advantage of its position as a 
world leader in the production of different products SQM has been very careful with 
his capital expenditures investments. In 2015 the company's capex was US$111 MM 
and by 2019 this changed to US$ 321 MM. The growth of the capex between 2016-
2019 has an average of 32,42% meaning that during this period SQM strongly increased 
its investment in capex. On one hand, Maintenance capex has been historically (2016-
2019) around US$100 MM being stable and with no future announcements to change. 
On the other hand, growth capex has been highly volatile, changing every year 
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depending on the projects that the company is investing for expansion, in 2015 SQM 
investment in expansion around US$31 MM while in 2019 the investment was around 
US$221 MM. For future years we project similar capex for both, maintenance capex 
and growth capex. 
 
Cash Flows 
The company’s Operational Cash Flow to Capital Expenditure ratio has an historical 
average of 3,42x between 2015-2019. For the years 2020-2020 we project a stable 
OCF/CAPEX ratio of 3,15x meaning that the company will not have a problem 
financing its capex. This great ratio implies that SQM has great financial flexibility. 
Appendix 4 represents historical information and our projections for CAPEX and OPC. 
 
Solvency and Liquidity 
In 2019, SQM current ratio was 3,45x with an average (between 2015-2019) of 3,78x. 
The company is a bit below the historical average, but this is something no to worry 
about considering that 2019 was a hard year. For the quick ratio, in 2019 was 2,67x 
while in past years (2015-2019) the average was 2,33x, so SQM has a better quick ratio 
than his past information. Also, for the cash ratio, in 2019 it was 0,76x while in past years 
(2015-2019) the average was 0,85x, the reason for this is the same as the current ratio. 
 
For future years we expect that the company will improve these ratios; for the current 
ratio we expect an average of 5,32x during 2020-2029, for the quick ratio we expect 
an average of 3,44x and for the cash ratio we expect an average of 1,66x. For the 
financial coverage ratio, in 2019, SQM had 8,3x and a Debt-EBITDA ratio of 1,8x. Even 
though that year was complicated, the company maintained excellent ratios. It isimportant to highlight the fact that currently the debt of the company is made up of 
91,2% by obligations with the public, 3,5% by bank loans, 1,7% by financial leases and 
the rest corresponds to the hedging of liabilities. 
 
DuPont Analysis 
From 2015-2019 SQM ROE has fluctuated, with a minimum value of 9,05%, a maximum 
of 20,16% and an average of 14,63%. In appendix 5 it is easy to see that EBIT Margin is 
one of the most important variables to explain this volatility, because asset turn over 
and financial leverage have been constant during the period. For our projections, 
between 2020-2029 we expect an average ROE of 24,18% considering a fast recovery 
from the pandemic and that SQM is taking the correct advantage of the lithium boom. 
In our projections we considered similar asset turnover as historical information, but our 
financial leverage is increasing in time, meaning that SQM will be more leveraged 
through time. SQM ROA between 2015-2019 was on average 11,5% and our projections 
expect an average of 13,2% between 2020-2029. 
 
Dividend Payout Ratio 
The company has a dividend policy where the final dividend is determined by different 
financial parameters. It has 4 options of dividend: 100%, 80%, 60% and 50% depending 
on the parameters (appendix 6). 
 
Sensitivity Analysis 
We did a sensitivity analysis of our model considering the WACC and the terminal flows 
growth as the variables to sensitize. As we can see, the results vary a lot; with WACC of 
8,07% or less, our recommendation stays the same, to HOLD. For a WACC of 8,32%, the 
recommendation changes depending on the terminal growth. If the growth is 2,33% 
or more we recommend to HOLD, however if the rate is less than 2,33% we recommend 
to SELL. For a WACC of 8,57%, with a terminal growth rate of 2,83% we recommend to 
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HOLD, and for less than this rate, we recommend to SELL. Finally, for a WACC of 8,82% 
our recommendation is to strongly SELL. 
 
Source : Team Estimates 
INVESTMENT RISK 
Regulatory risks (somewhat probable, high potential impact): The company is subject to the full range of 
government regulations including labor, social security, public health, consumer protection, tax, 
environmental, free competition and securities laws. Many of SQM’s future projects and, therefore, much of 
its future cash flow depends on government approval, which is not guaranteed. Also, changes in laws and 
regulations may affect SQM’s ability to make necessary investments for projected expansions. 
The Chilean National Congress is processing a bill which may enable the expropriation of lithium assets from 
SQM due to declaring this mineral to be of national interest. The current government is not supporting this bill, 
but the scenario could change depending on who wins the 2021 presidential elections. The constitutional 
changes that are set to begin in October 2020 probably will not affect the essence of SQM nor the natural 
resource market in the short term. In the long term however, constitutional changes could affect mining rights, 
concessions and water rights that are essential to SQM’s operations. 
Also, under Chilean law, companies that exploit natural resources are subject to a special “royalty” tax. This 
tax could change in the future, affecting the company's earnings significantly. 
Mining concessions (low probability, high potential impact): SQM leased the Salar de Atacama from CORFO 
(a government agency). The lease expires in December 2030, and if SQM is unable to extend it, revenues 
would be severely affected as products derived from the brines of the Salar de Atacama represented 37% of 
the company’s consolidated revenues as of 2019. Access to these deposits is essential to the production which 
is the main driver of the company’s valuation. Arrangements to renew the contract will be made years in 
advance of the expiration date and it is fairly likely that an agreement with the government will be reached, 
however this cannot be guaranteed and depends on the political climate and views of the administration in 
power. 
Risks related with the operation (somewhat probable, medium impact): In a highly competitive industry, top 
quality employees are required to be a leader, if there is a high turnover of professional staff, it is difficult to 
transfer experiences and produce correct organizational learning. The supply of certain fertilizers or chemicals, 
including certain products which the company trades, vary mainly depending on the production of top 
producers and their related business strategies. Accordingly, the company cannot forecast with certainty 
changes in demand, responses from competitors or fluctuations in the final price of its products. 
Risks related to the volatility of international demand and prices (probable, medium impact): The company’s 
opportunities are tied to a sustained increase in demand for almost all the company’s products, but 
particularly for lithium carbonate as it is the main component for electric car batteries. Prices of the products 
that SQM sells: lithium and fertilizers, are “world prices” and are highly volatile. They change due to market and 
economic expectations. These variations can affect the company's revenues substantially. 
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Risks related to competitors (somewhat probable, high impact): The high expectations of EV penetration and 
the improvements of battery technology has motivated big investments in Lithium Hydroxide production, 
especially in Australia. The Australian government has recently given approval to the construction of one of 
the biggest Lithium Hydroxide plants in the world. There is a risk that excess supply of lithium could depress the 
price if demand expectations are not met. 
Exchange rate risks (probable, medium impact): The majority of SQM’s revenues are in US dollars. However, 
approximately 30% of costs are in CLP. Changes in the USD/CLP exchange rate could have a large effect on 
the company's bottom line as the financial statements of SQM are reported in US Dollars. 
Legal risks (somewhat probable, low impact): The company could be subject to considerable financial 
penalties in Chile and in the US resulting from investigations carried out by the Chilean Internal Revenue Service 
due to questionable payments made to political organizations. 
 
 
 
 
 
 
 
 
 
 
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APPENDIX 1 
 
 
Source: Company Data, Non-deal roadshow with BTG Pactual, Boston, New York. Page 24. 
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APPENDIX 2 
 
Source: Company Data, Non-deal roadshow with BTG Pactual, Boston, New York. Page 7. 
 
 
 
 
 
 
 
 
 
 
 
 
 
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APPENDIX 3 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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APPENDIX 4 
 
 
 
 
 
 
Source: Team Estimates 
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APPENDIX 5 
 
Solvency 
Total debt ($Th USD) 1,692,233 1,219,949 1,208,569 1,333,794 1,753,023 
Net debt ($Th USD) 1,164,974 705,280 578,131 777,728 1,164,493 
Equity ($Th USD) 2,400,356 2,307,272 2,247,468 2,137,802 2,134,472 
Net Debt/Equity (%) 48.53% 30.57% 25.72% 36.38% 54.56% 
Total Debt / Equity 0.7x 0.5x 0.5x 0.6x 0.8x 
Total Debt / EBITDA 4.7x 1.7x 1.4x 1.5x 2.8x 
Net Debt/EBITDA 3.2x 1.0x 0.7x 0.9x 1.8x 
Returns 
EBIAT ($Th USD) 263,836 327,588 451,185 486,587 316,568 
Invested capital (Net debt + Equity) 3,565,330 3,012,552 2,825,599 2,915,530 3,298,965 
Return On Invested Capital (ROIC) 7.40% 10.87% 15.97% 16.69% 9.60% 
Return on Equity (ROE) 9.05% 11.98% 18.81% 20.16% 13.14% 
Tax Burden (NI/EBT) 72.18% 67.95% 72.05% 71.18% 71.83% 
Interest Burden(EBT/EBIT) 83.31% 92.45% 96.20% 93.17% 90.08% 
EBIT Margin (EBIT/Revenues) 20.91% 23.14% 28.65% 29.42% 22.31% 
Asset Turn Over (Revenues/Asset) 0.4x 0.4x 0.5x 0.5x 0.4x 
Financial Leverage (Asset/Equity) 1.9x 1.9x 1.9x 2.0x 2.1x 
Return on Assets (ROA) 7.8% 10.1% 14.5% 15.6% 9.7% 
EBIT Margin (EBIT/Revenues) 20.91% 23.14% 28.65% 29.42% 22.31% 
Asset Turn Over (Revenues/Asset)0.4x 0.4x 0.5x 0.5x 0.4x 
 
Hist. Hist. Hist. Hist. Hist. 
2015 2016 2017 2018 2019 
Growth (Y/Y) 
Revenues 12.21 % 11.24 % 5.03 % -14.22 % 
EBITDA 93.25 % 22.63 % % 3.61 -28.34 % 
Cash Flow from Operations % 48.29 11.10 % -25.45 % -18.65 % 
Net Income 29.72 % 51.96 % 3.19 % % -36.52 
Profitability 
EBIT margin(%) 20.91 % 23.14 % 28.65 % 29.42 % 22.31 % 
EBITDA margin (%) 20.91 % 36.01 % 39.70 % 39.16 % 32.72 % 
Net income margine (%) 12.57 % 14.54 % 19.86 % 19.51 % 14.44 % 
Liquidity 
Current Ratio 3.84 4.02 3.30 4.32 3.45 
Quick Ratio (CA - Inventory) 2.41 2.31 2.09 2.67 2.19 
Cash ratio 0.75 0.89 0.84 1.00 0.76 
SQM 
16 
 
 
Solvency 
Total debt ($Th USD) 1,472,246 1,461,820 2,270,840 2,538,401 3,007,440 
Net debt ($Th USD) 998,351 1,029,018 1,254,053 1,260,003 1,345,918 
Equity ($Th USD) 2,134,472 2,436,992 2,436,992 2,436,992 2,436,992 
Net Debt/Equity (%) 46.77% 42.22% 51.46% 51.70% 55.23% 
Total Debt / Equity 0.7x 0.6x 0.9x 1.0x 1.2x 
Total Debt / EBITDA 3.0x 2.2x 2.0x 2.0x 2.0x 
Net Debt/EBITDA 2.1x 1.5x 1.1x 1.0x 0.9x 
Returns 
EBIAT ($Th USD) 190,449 295,376 593,670 664,112 807,422 
Invested capital (Net debt + Equity) 3,132,823 3,466,010 3,691,045 3,696,995 3,782,910 
Return On Invested Capital (ROIC) 6.08% 8.52% 16.08% 17.96% 21.34% 
Return on Equity (ROE) 9.26% 13.24% 24.65% 27.54% 33.43% 
Tax Burden (NI/EBT) 73.00% 73.00% 73.00% 73.00% 73.00% 
Interest Burden(EBT/EBIT) 103.75% 102.42% 101.20% 101.08% 100.88% 
EBIT Margin (EBIT/Revenues) 15.18% 18.70% 28.48% 29.63% 31.52% 
Asset Turn Over (Revenues/Asset) 0.4x 0.5x 0.5x 0.5x 0.6x 
Financial Leverage (Asset/Equity) 2.1x 2.0x 2.1x 2.4x 2.6x 
Return on Assets (ROA) 5.7% 8.8% 15.5% 15.6% 17.6% 
EBIT Margin (EBIT/Revenues) 15.18% 18.70% 28.48% 29.63% 31.52% 
Asset Turn Over (Revenues/Asset) 0.4x 0.5x 0.5x 0.5x 0.6x 
 
Proj. Proj. Proj. Proj. Proj. 
2020 2021 2022 2023 2024 
Growth (Y/Y) 
Revenues -11.59 % 25.93 % % 31.94 7.54 % 14.27 % 
EBITDA -23.63 % 39.02 % 66.64 % 11.78 % % 18.48 
Cash Flow from Operations 67.16 % -53.16 % % 90.34 % 45.49 6.84 % 
Net Income -29.58 % 53.10 % 98.60 % 11.72 % 21.35 % 
Profitability 
EBIT margin(%) 15.18 % 18.70 % % 28.48 % 29.63 % 31.52 
EBITDA margin (%) 28.26 % 31.20 % % 39.40 40.96 % 42.47 % 
Net income margine (%) % 11.50 % 13.98 21.04 % 21.86 % 23.22 % 
Liquidity 
Current Ratio 4.65 4.42 5.15 5.43 5.74 
Quick Ratio (CA - Inventory) 2.89 2.59 3.34 3.62 3.91 
Cash ratio 0.97 0.75 1.50 1.79 2.10 
SQM 
17 
 
 
Solvency 
Total debt ($Th USD) 2,886,733 2,872,984 2,859,235 2,732,145 2,504,824 
Net debt ($Th USD) 1,255,327 1,098,632 1,039,917 1,001,068 973,845 
Equity ($Th USD) 2,436,992 2,436,992 2,436,992 2,436,992 2,436,992 
Net Debt/Equity (%) 51.51% 45.08% 42.67% 41.08% 39.96% 
Total Debt / Equity 1.2x 1.2x 1.2x 1.1x 1.0x 
Total Debt / EBITDA 2.0x 2.2x 2.2x 2.2x 2.0x 
Net Debt/EBITDA 0.9x 0.9x 0.8x 0.8x 0.8x 
Returns 
EBIAT ($Th USD) 737,441 604,179 583,790 630,206 637,947 
Invested capital (Net debt + Equity) 3,692,319 3,535,624 3,476,909 3,438,061 3,410,837 
Return On Invested Capital (ROIC) 19.97% 17.09% 16.79% 18.33% 18.70% 
Return on Equity (ROE) 30.55% 25.09% 24.25% 26.15% 26.47% 
Tax Burden (NI/EBT) 73.00% 73.00% 73.00% 73.00% 73.00% 
Interest Burden(EBT/EBIT) 100.97% 101.18% 101.22% 101.13% 101.12% 
EBIT Margin (EBIT/Revenues) 28.51% 23.82% 21.66% 23.26% 22.88% 
Asset Turn Over (Revenues/Asset) 0.5x 0.5x 0.6x 0.6x 0.6x 
Financial Leverage (Asset/Equity) 2.7x 2.6x 2.7x 2.6x 2.6x 
Return on Assets (ROA) 15.6% 12.8% 12.4% 13.4% 13.9% 
EBIT Margin (EBIT/Revenues) 28.51% 23.82% 21.66% 23.26% 22.88% 
Asset Turn Over (Revenues/Asset) 0.5x 0.5x 0.6x 0.6x 0.6x 
 
 
Proj. Proj. Proj. Proj. Proj. 
2025 2026 2027 2028 2029 
Growth (Y/Y) 
Revenues 1.00 % -1.97 % % 6.28 0.53 % 2.90 % 
EBITDA -4.01 % -10.24 % 0.63 % -5.24 % % 1.38 
Cash Flow from Operations 10.77 % -6.13 % % -11.51 % 2.92 -0.41 % 
Net Income -8.59 % -17.90 % -3.34 % 7.85 % 1.21 % 
Profitability 
EBIT margin(%) 28.51 % 23.82 % % 21.66 % 23.26 % 22.88 
EBITDA margin (%) 40.36 % 36.95 % % 34.99 32.98 % 32.49 % 
Net income margine (%) % 21.01 % 17.60 16.01 % 17.17 % 16.89 % 
Liquidity 
Current Ratio 5.66 5.84 5.77 5.64 5.37 
Quick Ratio (CA - Inventory) 3.80 3.93 3.80 3.64 3.36 
Cash ratio 2.00 2.16 2.07 1.93 1.65 
SQM 
18 
 
APPENDIX 6 
 
Source: Company Data, Annual Report 2019. Page 82.