SQM Earnings Drop 82% on Lithium Revenue Plunge of 69%
Chilean lithium giant Sociedad Quimica y Minera de Chile (NYSE: SQM), or SQM, released lower-than-expected fourth-quarter 2023 revenue and earnings results on Wednesday night. The biggest driver for the declines in the top and bottom line was the huge drop in lithium prices last year.
Lithium prices fell sharply throughout 2023 after soaring to historical highs in late 2022. The main catalysts were the lithium industry's increased production capacity and a slowdown in the growth of the electric vehicle (EV) market, due in part to high interest rates. Lithium is used to make the lithium-ion batteries that power EVs.
SQM's key quarterly numbers
| Metric | Q4 2022 | Q4 2023 | Change |
|---|---|---|---|
| Revenue | $3.13 billion | $1.31 billion | (58%) |
| Net income | $1.15 billion | $203.2 million | (82%) |
| Earnings per share (EPS) | $4.03 | $0.71 | (82%) |
Data source: SQM.
Wall Street was looking for EPS of $1.16 on revenue of $1.35 billion, so the company fell short of both expectations. The top-line miss, however, was small.
SQM ended the quarter (and year) with $1.04 billion in cash and cash equivalents and $3.21 billion in long-term debt. Last year's big drop in lithium prices hurt the company's balance sheet. At the end of 2022, it had $2.66 billion in cash and cash equivalents and $2.39 billion in long-term debt.
Revenue by business
| Segment | Q4 2023 Revenue | Change YOY |
|---|---|---|
| Lithium and derivatives | $791.4 million | (69%) |
| Specialty plant nutrition (SPN) | $223.7 million | (18%) |
| Iodine and derivatives | $218.1 million | 3% |
| Potassium | $50.8 million | (37%) |
| Industrial chemicals | $18.8 million | (45%) |
| Other | $8.7 million | 21% |
| Total | $1.31 billion | (58%) |
Data source: SQM. YOY = year over year.
In Q4, the lithium segment's sales volume increased 19% from the year-ago period to about 51,300 metric tons (MT) of lithium carbonate equivalent (LCE), a quarterly record. However, this volume gain was more than offset by the company's average realized lithium price plunging 73% year over year. On a sequential-quarter basis, its average realized lithium price dropped 47%.
For context, in the third quarter, the lithium segment's revenue declined 45% year over year to $1.28 billion. Sales volume edged up 4%, which was more than offset by the average realized price falling 47% year over year.
The specialty plant nutrition business was hurt by a 28% decrease in the average realized price, partially offset by higher volumes. On the positive side, the company said that it believes the market prices in this space "might have reached the bottom and we should see less price volatility during this year."