Sociedad Química y Minera de Chile (SQM) reported 2016 earnings $278.3mn ($1.06/ ADR), a 30% increase from 2015. Both were adjusted, the 2016 with the write-off from a train stop which had a one-time, before-tax effect of $32.8 mn on net income, and the 2015 results by the stoppage of work at Pedro de Valdivia, with a one-time, before-tax impact of $57.7 mn). Gross profit reached $611 mn (or 31.5% of revenues) for 2016, vs $542.7 mn (31.4% of revenues) for 2015. Revenues for 2016 came to $1.9393 bn, up 12.2% from 2015.

Q4 earnings were $80.9 mn or 31 cents/ADR, up 90% from the prior year Q4 for both. Gross Q4 profit reached $204.8 mn also up 90% on revenues which totaled $553.8 mn, an increase of 34.6% over prior year Q4, well ahead of analyst forecasts.

SQM Q4 results were nipped by fines from the US SEC and Dept of Justice totaling $30.5 mn imposed in Q4. These were for illegal activities by the former Pinochet-linked management whose ouster led us to buy SQM in the first place. Now its CEO is personally presenting its accounts with every potential positive and negative spelled out, to make sure the US regulators leave SQM alone. While revenue handily beat analyst forecasts, the EPS of $1.06 for the year fell short by 4 cents. SQM mines potash, iodine, and lithium in the Atacama Desert of Chile, where our intrepid Latin America reporter Frida Ghitis visited before writing up the stock.

CEO Patricio de Solminihac said: "We ended 2016 with a very strong fourth quarter; our EBITDA reached $238.9 mn, and contributed to the EBITDA of $761 mn reported for the year. Higher lithium sales volumes and average prices were the main contributors to these strong Q4 results,[while] higher sales volumes [for potassium chloride, iodine and solar salts also played an important role."

Full year lithium sales volumes were nearly 50,000 metric tonnes and Q4 sales of 14,000T were a record for SQM. Li prices rose in Q4 to a 12-mo high. CEO de Solminihac warned: “we remain uncertain about future lithium prices, as new supply and timing of new projects will be an important factor during 2017. It is anticipated that new supply could enter the market during the second half of 2017. Lithium demand could grow over 10% per year in the near term." His strategy will be to “focus production on maximizing lithium yields, trying to reach sales volumes in 2017 in 2016.

Again a warning: 'This could lead to a decrease in [2017] potassium chloride production and sales volumes, that were up over 24% in 2016 compared to 2015. In recent months potassium chloride prices have reached a bottom, and in some cases, we have seen slight price recovery. However, we still believe that average prices in 2017 will be lower than during 2016. In the SPN [special plant nutrition] business, prices decreased during 2016, and could decrease further in coming quarters." SPN revenues fell 4% in tonnage and 4.4% in value in the year 2016 and 13% in volume and 9% in value in Q4.

He continued by discussing iodine lines."Our sales volumes of iodine and derivatives grew over 13% when compared to the fourth quarter last year, reporting the strongest quarterly sales volumes seen in recent years, and the strongest annual sales volumes seen since 2012. Prices continued to decline as anticipated, but we regained market share closing the year with approximately 29%. We expect sales volumes in 2017 to be slightly higher than 2016. We expect average prices during 2017 to be lower than 2016." In 2016 and its Q4, iodine revenues fell ~12% to $231.1 mn and $56.1 mn respectively.

Last year SQM cut its long term debt by about 18% to $1.331 bn.

SQM capex in 2016 was $120 mn related to nitrate and lithium hydroxide production. The level in 2017 will be higher for the building of a new lithium hydroxide plant in Cochari-Olaroz in next door Argentina This is right near the Aregentina Salar de Olaroz where Orocobre of Australia operates, and where it will have to reconfigure its evaporation ponds and cut output, as reported yesterday. Today the panic over the reconfiguration has calmed down and the stock is up moderately in a dump market.

Meanwhile SQM is up 5%+.