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SQM hurt by a market even trickier than potash

SQM, the Chilean fertilizer and chemicals giant, highlighted a market more difficult than potash, with its iodine operations providing even more of a headache, leading a 47% tumble in profits.

The Santiago-based group reported earnings of $81.0m for the January-to-March period, compared with $151.8m a year before, and marking the company's worst start for four years.

The decline reflected a 14.3% drop to $534.1m in revenues, led by the group's iodine division, where a drop in prices sent sales down 38%.

In potash too, prices dropped, by 20% year on year, depressed by the market fallout stemming from the break-up of the Belarusian Potash Company cartel in July.

"Prices of our major business lines declined," said Patricio Contesse, the SQM chief executive.

But the group's potash revenues held steady at $152m, with the best sales volumes in "several years" offsetting the dent from lower prices.

Oversupply

SQM said that demand for iodine "continues to grow", led by use in X-ray technology, liquid crystal displays and as an ingredient in pharmaceuticals.

However, prices have been undermined by a jump in supplies, and with many foreign producers claiming lower costs than Chilean rivals, reducing the group's ability to make up for lower values through higher volumes.

London-listed Iofina, for instance, which extracts iodine from brine produced from onshore US oil and gas wells, achieved record output last year, although its volumes pale in comparison with those of the likes of SQM and Sirocco Mining.

Although SQM does not reveal divisional profit performances, analysis of its results suggests that its gross margin in iodine more than halved, to roughly $39m, compared with a drop of less than 25%, about $37m, in potash.

'Stronger demand'

SQM downplayed prospects of value recoveries in markets for both products next year, saying that, for iodine, "lower prices will remain throughout 2014".

For potash, the group said that "we have seen prices stabilise in recent months, and do not expect further price reductions in the near term".

The group added that it expected the rise in potash volumes to continue, with total sales this year "to exceed" those in 2013.

"We look forward to a stronger demand in the potash market, as well as higher sales volumes," Mr Contesse said, forecasting strength in the group's specialty fertilizer division too, which saw revenues dip 2.2% to $192.4m in the first three months of the year.

However, he made no outlook reference to iodine.

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