On Thursday, Deutsche Bank reiterated its Hold rating on Sociedad Quimica y Minera (NYSE:SQM), with a steady stock price target of $42.00. SQM's first quarter results revealed an adjusted EBITDA of $404 million, surpassing both the market's expectations and Deutsche Bank's estimate of $334 million.
The performance was attributed to increased volumes in key segments such as lithium, iodine, and potassium, coupled with stronger pricing in specialty plant nutrition (SPN), iodine, and industrial chemicals.
The slight discrepancies in volume for SPN and industrial chemicals, along with reduced pricing in lithium and potassium, were noted. SQM has also updated its volume guidance for lithium, anticipating an approximate 10% increase, and hinted at a potential slight rise in iodine volumes.
While the company does not provide forecasts for commodity prices, the sentiment regarding lithium and iodine prices was more optimistic compared to the fourth quarter.
SQM reported earnings per share (EPS) at a loss of $3.04, which aligned with Deutsche Bank's projections but was significantly lower than the consensus estimate of a $0.21 loss per share. The EPS was heavily influenced by a one-time accounting adjustment of $1.1 billion for taxes on mining activities. Without this adjustment, EPS would have been $0.80, marking a 13% quarter-over-quarter improvement.
The company's efforts to shorten the price lag between realized price and spot price for lithium were highlighted, with 85% of its 2024 production volumes now contracted at prices indexed with a one-month average lag. This move was unexpected in its scope, according to Deutsche Bank.
Despite SQM's modest financial beat, Deutsche Bank anticipates a subdued market reaction to the stock today due to the ongoing uncertainty surrounding the Memorandum of Understanding with Codelco and unresolved regulatory matters with Tianqi.
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