Performance, Earnings, and Valuation Analysis: Sociedad Quimica y Minera de Chile SA (SQM)

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SQM Stock
SQM Stock

Sociedad Quimica y Minera de Chile SA (NYSE: SQM), a Chilean lithium producer, has released a report for the second quarter of the fiscal year 2022. Because of the increased need for lithium in new vehicles, SQM continues to increase profitability and sales. SQM climbed 5.56 percent to $95.23 in May 19 trade.

SQM’s sales increased 282 percent year over year to $2.02 billion in March, while profitability increased 1,071 percent to $796.1 million. The earnings per share jumped 973 percent to $2.79.

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The results are outstanding and confirm the optimistic predictions made at the start of the year. At the same time, the increased demand for lithium for batteries in cars and other vehicles is driving SQM’s commercial development. 

This is a long-term trend that will likely continue until a new form of lithium-free battery is developed. However, this is unlikely to happen in the next decade, and lithium-ion batteries will continue to be the most widely used in industry.

With high pricing and increasing demand, SQM continues to enjoy a favorable climate. The corporation expanded its cash reserves to $2.27 billion, which will allow it to grow output.

Lithium accounts for over 72% of SQM’s income, and shipments are increasing. SQM lithium sales increased 59 percent year on year to 38.1k LCE in the fourth quarter. Simultaneously, the average selling price rose 572 percent year on year to $38,000 per tonne.

Other divisions of the SQM business also exhibited favorable trends, with the company’s iodine business seeing a rise in sales of 8% and a 47 percent increase in average selling price. The need for raw materials for screens was the main driver of the increase.

Furthermore, prices in the fertilizer business soared due to fears about a global shortage. The average selling price of SQM goods climbed by 89 percent year over year in this category, while shipping quantities fell by 25%.

SQM is now seeing increased profitability as a result of high pricing. This is a really favorable scenario, as the company only needs additional funds to expand its operations in the face of increased lithium demand.

SQM anticipates a 30% increase in worldwide lithium demand in 2022, with the business able to sell 140 thousand tonnes of LCE by the end of the year. In comparison, the volume of SQM lithium deliveries in 2021 was a little over 100 thousand tonnes.

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