UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16 UNDER THE

SECURITIES EXCHANGE ACT OF 1934

For the month of September, 2018.

Commission File Number 33-65728

 

CHEMICAL AND MINING COMPANY OF CHILE INC.

(Translation of registrant’s name into English)

 

El Trovador 4285, Santiago, Chile (562) 2425-2000

(Address of principal executive office)

 

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F:   x      Form 40-F   ¨

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ____

 

Note: Regulation S-T Rule 101(b)(1) only permits the submission in paper of a Form 6-K if submitted solely to provide an attached annual report to security holders.

 

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ____

 

Note: Regulation S-T Rule 101(b)(7) only permits the submission in paper of a Form 6-K if submitted to furnish a report or other document that the registrant foreign private issuer must furnish and make public under the laws of the jurisdiction in which the registrant is incorporated, domiciled or legally organized (the registrant’s “home country”), or under the rules of the home country exchange on which the registrant’s securities are traded, as long as the report or other document is not a press release, is not required to be and has not been distributed to the registrant’s security holders, and, if discussing a material event, has already been the subject of a Form 6-K submission or other Commission filing on EDGAR.

 

 

 

 

 

 

Santiago, Chile. December 17, 2018.- Sociedad Química y Minera de Chile S.A. (SQM) (NYSE: SQM; Santiago Stock Exchange: SQM-B, SQM-A) reports the translation of its financial statements for the six months ended September 30, 2018, the Spanish version of which was filed with the Chilean Comission for the Financial Market (Comisión para el Mercado Financiero or “CMF”) on November 21, 2018.

 

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

For the period ended

September 30, 2018

 

Sociedad Química y Minera de Chile S.A. and Subsidiaries

In Thousands of United States Dollars

 

 

This document includes:

-Consolidated Classified Statements of Financial Position
-Consolidated Statements of Income by Function
-Consolidated Statements of Comprehensive Income
-Consolidated Statements of Cash Flows
-Consolidated Statements of Changes in Equity
-Notes to the Consolidated Financial Statements

 

 

  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Table of Contents –Consolidated Financial Statements

 

Consolidated Classified Statements of Financial Position 9
Consolidated Statements of Income by Function 11
Consolidated Statements of Comprehensive Income 13
Consolidated Statements of Cash Flows 14
Consolidated Statements of Changes in Equity 16
Note 1 Identification and Activities of the Company and Subsidiaries 18
1.1 Historical background 18
1.2 Main domicile where the Company performs its production activities 18
1.3 Codes of main activities 18
1.4 Description of the nature of operations and main activities 18
1.5 Other background 20
Note 2 Basis of presentation for the consolidated financial statements 22
2.1 Accounting period 22
2.2 Consolidated financial statements 22
2.3 Basis of measurement 23
2.4 Accounting pronouncements 23
2.4 Accounting pronouncements, continued 24
2.5 Basis of consolidation 28
Note 3 Significant accounting policies 31
3.1 Classification of balances as current and non-current 31
3.2 Functional and presentation currency 31
3.3 Foreign currency translation 31
3.4 Subsidiaries 33
3.5 Consolidated statement of cash flows 33
3.6 Financial assets 33
3.7 Financial liabilities 34
3.8 Financial instruments at fair value through profit or loss 34
3.9 Financial instrument offsetting 34
3.10 Reclassification of financial instruments 34
3.11 Derivative and hedging financial instruments 34
3.12 Available for sale financial assets 36
3.13 Derecognition of financial instruments 36
3.14 Derivative financial instruments 36
3.15 Fair value initial measurements 37
3.16 Deferred acquisition costs from insurance contracts 37
3.17 Trade and other receivables 37

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
3
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

3.18 Inventory measurement 38
3.20 Transactions with non-controlling interests 39
3.21 Related party transactions 40
3.22 Property, plant and equipment 40
3.23 Depreciation of property, plant and equipment, continued 41
3.24 Goodwill 42
3.25 Intangible assets other than goodwill 42
3.26 Research and development expenses 44
3.27 Prospecting expenses 44
3.27 Prospecting expenses 45
3.28 Impairment of non-financial assets 45
3.29 Minimum dividend 46
3.30 Earnings per share 46
3.31 Trade and other payables 46
3.32 Interest-bearing borrowings 46
3.33 Other provisions 47
3.34 Obligations related to employee termination benefits and pension commitments 48
3.35 Compensation plans 49
3.36 Revenue recognition 49
3.37 Finance income and finance costs 50
3.38 Income tax and deferred taxes 50
3.39 Segment reporting 52
3.40 Responsibility for Information and Estimates Made 53
3.41 Environment 54
Note 4 Changes in accounting estimates and policies (consistent presentation) 55
4.1 Changes in accounting estimates 55
4.2 Changes in accounting policies 55
Note 5 Financial risk management 56
5.1 Financial risk management policy 56
5.2 Risk Factors 57
5.3 Risk measurement 76
Note 6 Background of companies included in consolidation 77
6.1 Parent’s stand-alone assets and liabilities 77
6.2 Parent entity 77
Note 7 Board of Directors, Senior Management And Key management personnel 78
7.1 Board of Directors and Senior Management 78
7.2 Key management personnel compensation 81
Note 8 Background on companies included in consolidation and non-controlling interests 82

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
4
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

8.1 Background on companies included in consolidation 82
8.2 Assets, liabilities, results of consolidated subsidiaries 85
8.3 Detail of transactions between consolidated companies 89
8.4 Background on non-controlling interests 91
Note 9 Equity-accounted investees 92
9.1  Investments in associates recognized according to the equity method of accounting 92
9.2 Assets, liabilities, revenue and expenses of associates 95
9.3 Other information 96
9.4 Disclosures on interest in associates 96
Note 10 Joint Ventures 98
10.1 Policy for the accounting of equity accounted investment in joint ventures 98
10.2 Disclosures of interest in joint ventures 98
10.3 Investment in joint ventures accounted for under the equity method of accounting 100
10.4 Assets, liabilities, revenue and expenses from joint ventures: 103
10.5 Other Joint Venture disclosures: 104
Note 11 Cash and cash equivalents 105
11.1 Types of cash and cash equivalents 105
11.2 Short-term investments, classified as cash equivalents 105
11.3 Information on cash and cash equivalents by currency 106
11.4 Amount restricted (unavailable) cash balances 106
11.5 Short-term deposits, classified as cash equivalents 107
11.6 Other information 109
Note 12 Inventories 110
Note 13 Related party disclosures 112
13.1 Related party disclosures 112
13.2 Relationships between the parent and the entity 112
13.3 Detailed identification of the link between the Parent and subsidiary 113
13.4 Detail of related parties and related party transactions 116
13.5 Trade receivables due from related parties, current: 117
13.6 Trade payables due to related parties, current: 117
Note 14 Financial instruments 118
14.1 Types of other financial assets 118
14.2 Trade and other receivables 119
14.3 Hedging assets and liabilities 122
14.4 Financial liabilities 124
14.5 Trade and other payables 136
14.6 Financial liabilities at fair value through profit or loss 137
14.7 Financial asset and liability categories 138

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
5
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

14.8 Fair value measurement of assets and liabilities 140
14.9 Financial assets pledged as a guarantee 142
14.10 Estimated fair value of financial instruments and financial derivatives 143
14.11 Nature and scope of risks arising from financing instruments 144
Note 15 Intangible assets and goodwill 145
15.1 Balances 145
15.2 Disclosures on intangible assets and goodwill 145
Note 16 Property, plant and equipment 151
16.1 Types of property, plant and equipment 151
16.2 Reconciliation of changes in property, plant and equipment by type: 153
16.3 Detail of property, plant and equipment pledged as guarantee 157
16.4 Impairment of assets 157
16.5 Información adicional 157
Note 17 Other current and non-current non-financial assets 158
Note 18 Employee benefits 159
18.1 Provisions for employee benefits 159
18.2 Policies on defined benefit plan 160
18.3 Other long-term benefits 161
18.4 Post-employment benefit obligations 162
18.5 Staff severance indemnities 163
18.6 Executive compensation plan 164
Note 19 Provisions and other non-financial liabilities 165
19.1 Types of provisions 165
19.2 Description of other provisions 166
19.3 Other current liabilities 167
19.4 Changes in provisions 168
Note 20 Disclosures on equity 169
20.1 Capital management 169
20.2 Disclosures on preferred share capital 170
20.3 Disclosures on reserves in equity 172
20.4 Dividend policies 175
20.5 Interim and provisional dividends 178
Note 21 Earnings per share 180
Note 22 Contingencies and restrictions 181
22.1 Lawsuits and other relevant events 181
22.2 Restrictions to management or financial limits 190
22.3 Environmental contingencies 191
22.4 Tax contingency, continued 193

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
6
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

22.5 Contingencies regarding the Changes to the Contracts with Corfo. Appeal No. 10301-2018, Santiago Court of Appeals: 195
22.6 Restricted or pledged cash 197
22.7 Securities obtained from third parties 198
22.8 Indirect guarantees 199
Note 23 Lawsuits and complaints 201
Note 24 Sanction proceedings 204
Note 25 Environment 205
22.6 Disclosures of disbursements related to the environment 205
25.2 Detail of information on disbursements related to the environment 206
25.3 Description of each project, indicating whether these are in process or have been finished 215
Note 26 Mineral resource exploration and evaluation expenditure 220
Note 27 Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature 221
27.1 Revenue from customer activities 221
27.2 Cost of sales 223
27.3 Other income 224
27.4 Administrative expenses 224
27.5 Other expenses by function 225
27.6 Other income (expenses) 225
27.7 Summary of expenses by nature 226
27.8 Finance expenses 227
Note 28 Reportable segments 228
28.1 Reportable segments 228
28.2 Reportable segment disclosures: 230
28.3 Statement of comprehensive income classified by reportable segments based on groups of products 232
28.4 Revenue from transactions with other Company’s operating segments 234
28.5 Disclosures on geographical areas 234
28.6 Disclosures on main customers 234
28.7 Segments by geographical areas as of September 30, 2018 and 2017 235
28.8 Property, plant and equipment classified by geographical areas 236
Note 29 Borrowing costs 237
29.1 Costs of capitalized interest, property, plant and equipment 237
Note 30 Effect of fluctuations in foreign currency exchange rates 238
Note 31 Disclosures on the effects of fluctuations in foreign currency exchange rates 240
Note 32 Income tax and deferred taxes 245

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
7
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

32.1 Current and non-current tax assets 245
32.2 Current tax liabilities 246
32.3 Income tax and deferred taxes 246
Note 33 Assets held for sale 258
Note 34 Events occurred after the reporting date 259
34.1 Authorization of the financial statements 259
34.2 Disclosures on events occurring after the reporting date 259
34.3 Details of dividends declared after the reporting date 261

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
8
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Consolidated Classified Statements of Financial Position

 

 

 

 

Assets

 

 

Note

 

 

As of
September
30, 2018

ThUS$

  

As of
December
31, 2017

ThUS$

 
Current assets             
Cash and cash equivalents  11.1   428,024    630,438 
Other current financial assets  14.1   332,367    366,979 
Other current non-financial assets  17   39,580    26,883 
Trade and other receivables, current  14.2   428,650    446,875 
Trade receivables due from related parties, current  13.5   70,862    59,132 
Current inventories  12   910,207    902,074 
Current tax assets  32.1   52,089    32,291 
Current assets other than those classified as held for sale or disposal      2,261,779    2,464,672 
Non-current assets or groups of assets classified as held for sale  33   60,131    1,589 
Total current assets      2,321,910    2,466,261 
              
Non-current assets             
Other non-current financial assets  14.1   31,930    42,879 
Other non-current non-financial assets  17   25,812    19,262 
Trade receivables, non-current  14.2   2,415    1,912 
Investments classified using the equity method of accounting  9.1-10.3   114,081    146,425 
Intangible assets other than goodwill  15.1   128,152    113,787 
Goodwill  15.1   34,758    44,177 
Property, plant and equipment  16.1   1,433,186    1,429,354 
Tax assets, non-current  32.1   32,179    32,179 
Total non-current assets      1,802,513    1,829,975 
Total assets      4,124,423    4,296,236 

 

The accompanying notes form an integral part of these consolidated financial statements.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
9
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Consolidated Classified Statements of Financial Position, (continued)

 

 

 

Liabilities and Equity

 

 

Note

 

 

As of September
30, 2018

ThUS$

  

As of December
31, 2017

ThUS$

 
Current liabilities             
Other current financial liabilities  14.4   20,369    220,328 
Trade and other payables, current  14.5   181,778    196,280 
Trade payables due to related parties, current  13.6   391    1,365 
Other current provisions  19.1   90,405    63,445 
Current tax liabilities  32.2   63,188    75,402 
Provisions for employee benefits, current  18.1   14,669    22,421 
Other current liabilities  19.3   164,053    168,804 
Total current liabilities      534,853    748,045 
              
Non-current liabilities             
Other non-current financial liabilities  14.4   1,216,491    1,031,507 
Other non-current provisions  19.1   29,491    30,001 
Deferred tax liabilities  32.3   169,025    205,283 
Provisions for employee benefits, non-current  18.1   36,455    33,932 
Total non-current liabilities      1,451,462    1,300,723 
Total liabilities      1,986,315    2,048,768 
              
Equity  20          
Share capital      477,386    477,386 
Retained earnings      1,624,784    1,724,784 
Other reserves      (16,175)   (14,349)
Equity attributable to owners of the Parent      2,085,995    2,187,821 
Non-controlling interests      52,113    59,647 
Total equity      2,138,108    2,247,468 
Total liabilities and equity      4,124,423    4,296,236 

 

The accompanying notes form an integral part of these consolidated financial statements,

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
10
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Consolidated Statements of Income by Function

 

 

 

     January to September   July to september 
      2018   2017   2018   2017 
   Note  ThUS$   ThUS$   ThUS$   ThUS$ 
                
Revenue  27.1   1,700,576    1,582,549    543,155    558,685 
Cost of sales  27.2   (1,119,830)   (1,036,162)   (379,466)   (370,148)
Gross profit      580,746    546,387    163,689    188,537 
                        
Other income  27.3   10,084    12,098    607    6.236 
Administrative expenses  27.4   (83,562)   (72,605)   (27,298)   (26,518)
Other expenses by function  27.5   (28,117)   (26,872)   (10,811)   (13,476)
Other gains (losses)  27.6   (712)   (868)   (250)   123 
Profit (loss) from operating activities      478,439    458,140    125,937    154,902 
Finance income      16,518    8,809    5,825    3,093 
Finance costs  27.8-29   (42,083)   (37,811)   (13,722)   (12,265)
Share of profit of associates and joint ventures accounted for using the equity method  9-10   14,705    10,566    5,213    2,742 
Foreign currency translation differences  30   (9,438)   602    (8.836)   5,309 
Profit (loss) before taxes      458,141    440,306    114,417    153,781 
Income tax expense, continuing operations  32.3   (126,232)   (123,376)   (30,077)   (40,766)
                        
                        
Profit (loss) from continuing operations      331,909    316,930    84,340    113,015 
Profit attributable to      331,909    316,930    84,340    113,015 
Owners of the Parent      331,198    317,243    83,501    112,857 
Non-controlling interests      711    (313)   839    158 
Profit for the year      331,909    316,930    84,340    113,015 

 

The accompanying notes form an integral part of these consolidated financial statements.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
11
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

  

Consolidated Statements of Income by Function, (continued)

 

 

 

       January to
September
   July to
september
 
   Note   2018   2017   2018   2017 
       US$   US$   US$   US$ 
                 
Earnings per share                         
Common shares                         
Basic earnings per share (US$ per share)   21    1.2583    1.2053    0.3172    0.4288 
Basic earnings per share (US$ per share) from continuing operations        1.2583    1.2053    0.3172    0.4288 
                          
Diluted common shares                         
Diluted earnings per share (US$ per share)   21    1.2583    1.2053    0.3172    0.4288 
Diluted earnings per share (US$ per share) from continuing operations        1.2583    1.2053    0.3172    0.4288 

 

The accompanying notes form an integral part of these consolidated financial statements,

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
12
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Consolidated Statements of Comprehensive Income

 

 

 

   January to september   July to september 
   2018   2017   2018   2017 
Statement of comprehensive income  ThUS$   ThUS$   ThUS$   ThUS$ 
             
Profit (loss) for the year   331,909    316.930    84,340    113,015 
Other comprehensive income                    
Items of other comprehensive income that will not be reclassified to profit for the year, before taxes                    
Other comprehensive income, before taxes, gains (losses) from new measurements of defined benefit plans   338    80    279    686 
Total other comprehensive income that will not be reclassified to profit for the year, before taxes   338    80    279    686 
Items of other comprehensive income that will be reclassified to profit for the year, before taxes                    
Foreign currency exchange difference                    
Foreign currency exchange gains I(losses) before taxes   (12,192)   (1,701)   (6,421)   (203)
Other comprehensive income before taxes   (12,192)   (1,701)   (6,421)   (203)
Financial assets held for sale                    
Gain (loss) from revaluations of financial assets held for sale, net of tax   (5,310)   (57)   (2,134)   3,808 
Other comprehensive income before taxes   (5,310)   (57)   (2,134)   3,808 
                     
Financial assets measured at fair value with changes in other comprehensive income                    
Gain (loss) from cash flow hedges   14,794    1,826    6,530    (307)
Other comprehensive income, net of tax   14,794    1,826    6,530    (307)
Total other comprehensive income that will be reclassified to profit for the year   (2,708)   68    (2,025)   3,298 
                     
Other items of other comprehensive income before taxes   (2,370)   148    (1,746)   3,984 
                     
Income taxes related to items of other comprehensive income that will not be reclassified to profit for the year                    
Income taxes related to new measurements of defined benefit plans in other comprehensive income   214    (79)   32    (208)
Accumulated income taxes related to items of other comprehensive income that will not be reclassified to profit for the year   214    (79)   32    (208)
                     
Income taxes related to items of other comprehensive income that will be reclassified to profit for the year                    
Income tax related to financial assets held for sale in other comprehensive income   1,434    (544)   572    (506)
Income taxes related to cash flow hedges in other comprehensive income   -    -    -    (24)
Accumulated income taxes related to items of other comprehensive income that will be reclassified to profit for the year   1,434    (544)   572    (530)
                     
Total other comprehensive income   (722)   (475)   (1,142)   3,246 
Total comprehensive income   331,187    316,455    83,198    116,261 
                     
Comprehensive income attributable to                    
Owners of the Parent   330,373    316,764    82,332    116,102 
Non-controlling interests   814    (309)   866    159 
Total comprehensive income   331,187    316,455    83,198    116,261 

 

The accompanying notes form an integral part of these consolidated financial statements,

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
13
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Consolidated Statements of Cash Flows

 

 

 

Consolidated Statements of cash flows

 

 

Note

 

 

9/30/2018

ThUS$

  

9/30/2017

ThUS$

 
Cash flows from operating activities             
              
Cash receipts from sales of goods and rendering of services     1,745,188    1,520,970 
Cash receipts from premiums and benefits, annuities and other benefits from policies entered      2,215    154 
              
Cash payments to suppliers for the provision of goods and services (1)      (907,198)   (690,749)
Cash payments to and on behalf of employees      (181,352)   (167,075)
Other payments related to operating activities      (25,526)   (7,967)
Net cash generated from (used in) operating activities      633,327    655,333 
Dividends received      8,919    1,769 
Interest paid      (41,426)   (18,351)
Interest received      15,177    8,809 
Income taxes paid      (177,682)   (146,173)
Other incomes (outflows) of cash (1)      (25,368)   (13,992)
              
Net cash generated from (used in) operating activities      412,947    515,379 
              
Cash flows from (used in) investing activities             
Payments made to acquire interest in joint ventures      (16,711)   (42)
Loans to related parties      (8,500)   - 
Proceeds from the sale of property, plant and equipment      23    4,667 
Acquisition of property, plant and equipment      (201,011)   (98,323)
Purchases of intangible assets      -    5,999 
Proceeds from the repayment of advances and loans granted to third parties      (568)   117 
Other inflows (outflows) of cash (2)      50,637    (94,614)
              
Net cash generated from (used in) investing activities      (176,130)   (182,196)

 

(1) Other inflows (outflows) of cash from operating activities include increases (decreases) net of Value Added Tax.

 

(2) Other inflows (outflows) of cash include investments and redemptions of time deposits and other financial instruments that do not qualify as cash and cash equivalent in accordance with IAS 7, paragraph 7, since they mature in more than 90 days from the original investment date.

 

The accompanying notes form an integral part of these consolidated financial statements,

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
14
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Consolidated Statements of Cash Flows, (continued)

 

 

 

   Note 

9/30/2018

ThUS$

  

9/30/2017

ThUS$

 
            
Cash flows used in financing activities             
              
Proceeds from long-term loans     134,228    - 
Proceeds from short-term borrowings      120,000    20,000 
Repayment of borrowings      (213,000)   (86,712)
Dividends paid      (466,525)   (260,566)
              
Net cash generated used in financing activities      (425,297)   (327,278)
              
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate      (188,480)   5,905 
              
Effects of exchange rate fluctuations on cash held      (13,934)   (13)
Net (decrease) increase in cash and cash equivalents      (202,414)   5,892 
              
Cash and cash equivalents at beginning of period      630,438    514,669 
Cash and cash equivalents at end of period      428,024    520,561 

 

The accompanying notes form an integral part of these consolidated financial statements,

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
15
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Consolidated Statements of Changes in Equity

 

 

 

2018  Share
capital
   Foreign
currency
translation
difference
reserves
   Cash
flow
hedge
reserves
   Reserve for
gains (losses)
from financial
assets
measured at
fair value
through other
comprehensive
income
  

Actuarial

gains
(losses)
from
defined
benefit

plans

   Other
miscellaneous
reserves
  

Total

Other
reserves

   Retained
earnings
   Equity
attributable
to owners of
the Parent
  

Non-

controlling
interests

   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                             
Equity at beginning of the year   477,386    (24,913)   2,248    2,937    (5,953)   11,332    (14,349)   1,724,784    2,187,821    59,647    2,247,468 
Equity at beginning of the year   477,386    (24,913)   2,248    2,937    (5,953)   11,332    (14,349)   1,724,784    2,187,821    59,647    2,247,468 
Profit for the year   -    -    -         -    -    -    331,198    331,198    711    331,909 
Other comprehensive income   -    (12,302)   14,794    (3,876)   559    -    (825)   -    (825)   103    (722)
Comprehensive income   -    (12,302)   14,794    (3,876)   559    -    (825)   331,198    330,373    814    331,187 
Dividends   -    -    -    -    -    -    -    (431,198)   (431,198)   (8,348)   (439,546)
Increase (decrease) due to transfers and other changes   -    -    -    -    -    (1,001)   (1,001)   -    (1,001)   -    (1,001)
Increase (decrease) in equity   -    (12,302)   14,794    (3,876)   559    (1,001)   (1,826)   (100,000)   (101,826)   (7,534)   (109,360)
                                                        
Equity as of September 30, 2018   477,386    (37,215)   17,042    (939)   (5,394)   10,331    (16,175)   1,624,784    2,085,995    52,113    2,138,108 

 

The accompanying notes form an integral part of these consolidated financial statements,

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com
16
  Sociedad Química y Minera de Chile S.A. and Subsidiaries

 

Consolidated Statements of Changes in Equity

 

 

 

2017  Share
capital
  

Foreign
currency
translation

difference

reserves

  

Cash

flow
hedge
reserves

   Reserve for
gains (losses)
from financial
assets
measured at
fair value
through other
comprehensive
income
   Actuarial
gains
(losses)
from
defined
benefit
plans
   Other
miscellaneous
reserves
  

Total

Other
reserves

   Retained
earnings
   Equity
attributable
to owners of
the Parent
   Non-
controlling
interests
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                             
Equity at beginning of the year   477,386    (19,463)   64    3,513    (4,834)   7,832    (12,888)   1,781,576    2,246,074    61,198    2,307,272 
Equity at beginning of the year   477,386    (19,463)   64    3,513    (4,834)   7,832    (12,888)   1,781,576    2,246,074    61,198    2,307,272 
Profit for the year   -    -    -         -    -    -    317,243    317,243    (313)   316,930 
Other comprehensive income   -    (1,701)   1,826    (600)   (4)   -    (479)   -    (479)   4    (475)
Comprehensive income   -    (1,701)   1,826    (600)   (4)   -    (479)   317,243    316,764    (309)   316,455 
Dividends   -    -    -    -    -    -    -    (370,532)   (370,532)   (1,699)   (372,231)
Increase (decrease) due to transfers and other changes   -    -    -    -    -    3,500    3,500    (3,500)   -    -    - 
Increase (decrease) in equity   -    (1,701)   1,826    (600)   (4)   3,500    3,021    (56,789)   (53,768)   (2,008)   (55,776)
                                                        
Equity as of September 30, 2017   477,386    (21,164)   1,890    2,913    (4,838)   11,332    (9,867)   1,724,787    2,192,306    59,190    2,251,496 

 

The accompanying notes form an integral part of these consolidated financial statements,

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

17

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 1Identification and Activities of the Company and Subsidiaries

 

1.1Historical background

 

Sociedad Química y Minera de Chile S.A. "SQM" is an open stock corporation organized under the laws of the Republic of Chile and its Tax Identification Number is 93.007.000-9.

 

The Company was incorporated through a public deed dated June 17, 1968 by the notary public of Santiago Mr. Sergio Rodríguez Garcés. Its existence was approved by Decree No. 1,164 of June 22, 1968 of the Ministry of Finance, and it was registered on June 29, 1968 in the Registry of Commerce of Santiago, on page 4,537 No. 1,992. SQM’s headquarters are located at El Trovador 4285, Fl. 6, Las Condes, Santiago, Chile. The Company's telephone number is +56 2 2425-2000.

 

The Company is registered with the Financial Markets Commission (formerly the Chilean Superintendence of Securities and Insurance) under number 184 of March 18, 1983 and is therefore subject to oversight by that entity.

 

1.2Main domicile where the Company performs its production activities

 

The Company’s main domiciles are: Calle Dos Sur plot No. 5 - Antofagasta; Arturo Prat 1060 - Tocopilla; Administration Building w/n - Maria Elena; Administration Building w/n Pedro de Valdivia - María Elena, Anibal Pinto 3228 - Antofagasta, Kilometer 1378 Ruta 5 Norte Highway - Antofagasta, Coya Sur Plant w/n - Maria Elena, kilometer 1760 Ruta 5 Norte Highway - Pozo Almonte, Salar de Atacama (Atacama Saltpeter deposit) potassium chloride plant s/n - San Pedro de Atacama, potassium sulfate plant at Salar de Atacama s/n – San Pedro de Atacama, Minsal Mining Camp s/n CL Plant CL, Potassium– San Pedro de Atacama, formerly the Iris Saltpeter office S/N, Commune of Pozo Almonte, Iquique.

 

1.3Codes of main activities

 

The codes of the main activities as established by the CMF, as follows:

 

-1700 (Mining)

 

-2200 (Chemical products)

 

-1300 (Investment)

 

1.4Description of the nature of operations and main activities

 

Our products are mainly derived from mineral deposits found in northern Chile. We mine and process caliche ore and brine deposits. The ore deposit in northern Chile contains nitrate and iodine deposits. The brine deposits of the Salar de Atacama, in northern Chile, contain high concentrations of lithium and potassium as well as significant concentrations of sulfate.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

18

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 1Identification and Activities of the Company and Subsidiaries (continued)

 

1.4Description of the nature of operations and main activities, continued

 

From our caliche ore deposits located in the north of Chile, we produce a wide range of nitrate-based products used for specialty plant nutrients and industrial applications, as well as iodine and iodine derivatives. At the Salar de Atacama, we extract brines rich in potassium, lithium and sulfate in order to produce potassium chloride, potassium sulfate, lithium solutions, and bischofite (magnesium chloride). We produce lithium carbonate and lithium hydroxide at our plant near the city of Antofagasta, Chile, from the solutions brought from the Salar de Atacama.

 

We sell our products in over 110 countries worldwide through our global distribution network and generate our revenue mainly from abroad.

 

Our products are divided into six categories: specialty plant nutrition, iodine and its derivatives, lithium and its derivatives, industrial chemicals, potassium and other products and services, described as follows:

 

Specialty plant nutrition: SQM produces and sells four types of specialty plant nutrition in this line of business: potassium nitrate, sodium nitrate, sodium potassium nitrate, and specialty mixes. This business is characterized by being closely related to its customers for which it has specialized staff who provide expert advisory in best practices for fertilization according to each type of crop, soil and climate. Within this type of business, potassium derivative products and especially potassium nitrate have had a leading role because of the contribution they make to developing crops, ensuring an improvement in post-crop life, in addition to improving quality, flavor and fruit color. The potassium nitrate, which is sold in multiple formats and as a part of other specialty mixtures, is complemented by sodium nitrate, potassium sodium nitrate, and more than 200 fertilizing mixtures.

 

Iodine: The Company is a major global producer of iodine. Iodine is widely used in the pharmaceutical industry, technology and nutrition. Additionally, iodine is used as X ray contrast media and polarizing film for LCD displays.

 

Lithium: The Company’s lithium is mainly used for manufacturing rechargeable batteries for cellphones, cameras and laptops and electric vehicles. It is also used in industrial applications, such as the manufacture of glass, ceramics and lubricating grease. Other uses are in pharmaceuticals and the chemicals industry.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

19

Notes to the Consolidated Financial Statements as of September 30, 2018


Note 1Identification and Activities of the Company and Subsidiaries (continued)

 

1.4Description of the nature of operations and main activities, continued

 

Industrial chemicals: Industrial chemicals are products used as supplies for a number of production processes. SQM participates in this line of business producing sodium nitrate, potassium nitrate and potassium chloride. Industrial nitrates have increased their importance over the last few years due to their use as storage means for thermal energy at solar energy plants, which are widely used in countries such as Spain, the United States, South Africa, Morocco and Chile.

 

Potassium: Potassium is a primary essential macro-nutrient, and even though does not form part of the plant’s structure, it has a significant role for the development of its basic functions, ensuring the quality of a crop, increasing post-crop life, improving crop flavor, the amount of vitamins it contains and its physical appearance. Within this business line, SQM also has potassium chlorate and potassium sulfate, both extracted from the salt layer located under the Salar de Atacama (the Atacama Saltpeter Deposit).

 

Other products and services: This business line includes revenue from commodities, services, interests, royalties and dividends.

 

1.5Other background

 

Staff

 

As of September 30, 2018, and December 31, 2017, the workforce was as follows:

 

   9/30/2018   12/31/2017 
Employees  SQM S.A.   Other
subsidiaries
   Total   SQM S.A.   Other
subsidiaries
   Total 
Executives   35    89    124    43    77    120 
Professionals   115    1,069    1,184    143    942    1,085 
Technicians and operators   258    3,264    3,522    248    3,177    3,425 
Foreign employees   11    375    386    19    272    291 
Overall total   419    4,797    5,216    453    4,468    4,921 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

20

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 1Identification and Activities of the Company and subsidiaries (continued)

 

1.5Other background, continued

 

Main shareholders

 

The following table shows information about the main shareholders of the Company’s Series A or Series B shares in circulation as of September 30, 2018 and December 31, 2017, in line with information provided by the Central Securities Depository:

 

The information below is taken from our records and reports controlled in the Central Securities Depository and reported to the CMF, and the Chilean Stock Exchange, whose main shareholders are as follows:

 

Shareholder as of September 30, 2018  No, of Series A with
ownership
   % of Series A
shares
   No, of Series B with
ownership
   % of Series B
shares
   % of total
shares
 
Sociedad de Inversiones Pampa Calichera S.A.(*)   44,894,152    31.43%   10,093,154    8.38%   20.89%
The Bank of New York Mellon, ADRs   -    -    38,574,995    32.05%   14.66%
Inversiones El Boldo Limitada   29,330,326    20.54%   -    -    11.14%
Potasios de Chile S.A.(*)   18,179,147    12.73%   -    -    6.91%
Inversiones RAC Chile Limitada   17,700,242    12.39%   -    -    6.73%
Inversiones PCS Chile Limitada   15,526,000    10.87%   -    -    5.90%
Banco de Chile via non-resident third party accounts   -    -    10,673,064    8.87%   4.06%
Inversiones Global Mining (Chile) Limitada (*)   8,798,539    6.16%   -    -    3.34%
Banco Itau via investor accounts   -    -    8,236,248    6.84%   3.13%
Banco Santander via foreign investor accounts   -    -    7,017,253    5.83%   2.67%
                          

 

(*)Total Pampa Group 32% (2.247.895 Series B shares are in the custody of different brokers).

 

Shareholder as of December 31, 2017  No, of Series A with
ownership
   % of Series A
shares
   No, of Series B with
ownership
   % of Series B
shares
   % of total
shares
 
The Bank of New York Mellon, ADRs   -    -    54,599,961    45.36%   20.74%
Sociedad de Inversiones Pampa Calichera S.A.(*)   44,894,152    31.43%   7,007,688    5.82%   19.72%
Inversiones El Boldo Limitada   29,330,326    20.54%   16,363,546    13.59%   17.36%
Inversiones RAC Chile Limitada   19,200,242    13.44%   2,202,773    1.83%   8.13%
Potasios de Chile S.A.(*)   18,179,147    12.73%   -    -    6.91%
Inversiones PCS Chile Limitada   15,526,000    10.87%   1,600,000    1.33%   6.51%
Inversiones Global Mining (Chile) Limitada (*)   8,798,539    6.16%   -    -    3.34%
Banco de Chile via non-resident third party accounts   -    -    8,394,289    6.97%   3.19%
Banco Itau via Investor Accounts   19,125    0.01%   7,017,504    5.83%   2.67%
Banco Santander via foreign investor accounts   -    -    4,593,336    3.82%   1.75%

 

(*)Total Pampa Group 29,97%

 

On September 30, 2018 the total number of shareholders had risen to 1,478.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

21

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 2Basis of presentation for the consolidated financial statements

 

2.1Accounting period

 

These consolidated financial statements cover the following periods:

 

-Consolidated Statements of Financial Position as of September 30, 2018 and, December 31,2017.
-Consolidated Statements of Changes in Equity as of September 30, 2018 and 2017
-Consolidated Statements of Comprehensive Income as of September 30, 2018 and 2017
-Consolidated Statements of Direct-Method Cash Flows as of September 30, 2018 and 2017.

 

2.2Consolidated financial statements

 

The consolidated financial statements of Sociedad Química y Minera de Chile S.A. and its Subsidiaries were prepared in accordance with International Financial Reporting Standards (hereinafter “IFRS”) and represent the full, explicit and unreserved adoption of International Financial Reporting Standards as issued by the International Accounting Standards Board (the “IASB”).

 

These consolidated financial statements fairly reflect the Company’s financial position, the comprehensive results of operations, changes in equity and cash flows occurring during the years then ended.

 

IFRS establish certain alternatives for their application, Those applied by the Company are detailed in this Note.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

22

Notes to the Consolidated Financial Statements as of September 30, 2018


Note 2 Basis of presentation for the consolidated financial statements (continued)

 

2.2Consolidated financial statements, continued

 

The accounting policies used in the preparation of these consolidated annual accounts comply with each IFRS in force at their date of presentation.

 

For the close of these consolidated financial statements, certain reclassifications were made as of December 31, 2017 for the items intangible assets other than goodwill and property, for the purpose of comparison with the figures as of September 30, 2018.

 

2.3Basis of measurement

 

The consolidated financial statements have been prepared on the historical cost basis except for the following:

 

-Inventories are recorded at the lower of cost and net realizable value.
-Financial derivatives at fair value; and
-Staff severance indemnities and pension commitments at actuarial value
-Certain financial investments classified as available for sale measured at fair value with an offsetting entry in other comprehensive income.
-Other current and non-current assets and financial liabilities at amortized cost

 

2.4Accounting pronouncements

 

New accounting pronouncements

 

a)         The following standards, interpretations and amendments are mandatory for the first time for annual periods beginning on January 1, 2018:

 

Standars and interpretations   Mandatory for annual
periods beginning on
IFRS 9, “Financial Instruments”- Published in July 2014. The IASB has published a complete new version of IFRS 9, which replaces the guidance in IAS 39. This final version includes requirements regarding the classification and measurement of financial assets and liabilities and a new model for the recognition of expected credit losses that replaces the incurred loss impairment model used today. The part relating to hedge accounting that forms part of this final version of IFRS 9 was published in November 2013.   01/01/2018  
       
IFRS 15, “Revenue from Contracts with Customers” – Published in May 2014. This established the principles that an entity must apply for presenting useful information to users of financial statements with regard to the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. The basic principle is that an entity will recognize revenue representing the transfer of goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange for such goods or services. This standard replaces the following standards and interpretations: IAS 11 Construction contracts; IAS 18 Revenue; IFRIC 13 Customer Loyalty Programs; IFRIC 15 Agreements for the Construction of Real Estate; IFRIC 18 Transfers of Assets from Customers; and SIC-31 Revenue - Barter Transactions Involving Advertising Services.   01/01/2018  

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

23

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 2Basis of presentation for the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

Standars and interpretations   Mandatory for annual
periods beginning on
IFRIC 22, “Transactions in Foreign Currency and Advance Payments” -Published in December 2016. This interpretation applies to a foreign currency transaction (or part of one) if an entity recognizes a non-financial asset or non-financial liability arising from the payment or receipt of an advance consideration prior to the entity recognizing the related asset, expense or income (or the applicable portion thereof). The interpretation provides a guideline for the transaction date to be used for both single payments/receipts and situations when there are multiple payments/receipts. Its objective is to reduce diversity in practice.   01/01/2018

 

Amendments and improvements   Mandatory for annual
periods beginning on or
after
Amendment to IFRS 2, “Share-based Payments” Published in June 2016. The amendment clarifies the measurement of share-based payments liquidated in cash and the accounting of modifications that change these payments to liquidation with equity instruments. In addition, it introduces an exception to the IFRS 2 principles that will require the treatment of awards as if they were all liquidation as an equity instrument, when the employer is required to retain taxes related to share-based payments.   01/01/2018
     
Amendment to IFRS 15 “Revenue from Contracts with Customers”. Published in April 2016. The amendment provides clarifications with regard to identifying performance obligations in contracts with customers, accounting for licensing involving intellectual property and assessing principal versus agent considerations (i.e. recording revenue on a gross basis versus the net amount it retains). It includes new and modified illustrative examples as a guide, along with practical examples related to the transition to the new standard on revenue.   01/01/2018
     
Amendment to IAS 28 “Investments in Associates and Joint Ventures” in regard to measuring an associate or joint venture at fair value. Published in December 2016.   01/01/2018

 

The adoption of the standards, amendments and interpretations indicated above had no significant impact on the Company’s consolidated financial statements.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

24

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 2Basis of presentation for the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

b)        Standards, interpretations and amendments issued that had not become effective for financial statements beginning on January 1, 2018 and which the Company has not adopted early are as follows:

 

Standards and interpretations   Mandatory for annual periods
beginning on
IFRS 16 “Leases” – Published in January 2016, it establishes the principle for recognizing, measuring, presenting and disclosing leases. IFRS 16 replaces IAS 17 and introduces a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases with a lease term of more than 12 months unless the underlying asset has a low value. IFRS 16 applies to annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted for entities that apply IFRS 15 before the initial application date of IFRS 16.  

 

01/01/2019

 
       

IFRIC 23 “Uncertainty over Income Tax Treatments”. Published in June 2016. This interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments.

 

  01/01/2019  

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

25

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 2Basis of presentation for the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

Amendments and improvements   Mandatory for annual
periods beginning on or
after
Amendment to IFRS 9 “Financial Instruments”. Published in October 2017. The amendment permits more assets to be measured at amortized cost than under the previous version of IFRS 9, in particular some prepayable financial assets with negative compensation. The assets affected, which include some loans and debt securities, would otherwise have been measured at fair value through profit and loss (FVTPL). For them to qualify for amortized cost measurement, the negative compensation must be "reasonable compensation for early termination of the contract.”   01/01/2019
     

 Amendment to IAS 28 “Investments in Associates and Joint Ventures”. Published in October 2017. This amendment clarifies that companies should apply IFRS 9 to account for long-term interests in an associate or joint venture to which the equity method is not applied. The Board has published an example that illustrates how companies should apply the requirements of IFRS 9 and IAS 28 to long-term interests in an associate or joint venture.

  01/01/2019
     
Amendment to IFRS 3 “Business Combinations” Published in December 2017. The amendment clarifies that gaining control of a company that is a joint venture is a business combination that is achieved in stages. The acquiring party must remeasure previously held interests in that business at fair value at the date of acquisition.   01/01/2019
     
Amendment to IFRS 11 “Joint Arrangements”. Published in December 2017. The amendment clarifies that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.   01/01/2019
     
Amendment to IAS 12 “Income Tax” Published in December 2017. This amendment clarifies that the income tax consequences of dividends on financial instruments classified as equity should be recognized when the past transactions or events that generated distributable profits were originally recognized.   01/01/2019
     
Amendment to IAS 23 “Borrowing Costs”. Published in December 2017. This amendment clarifies that the borrowing costs of specific borrowings that remain outstanding after the related qualifying asset is ready for intended use or for sale will be considered as part of the general borrowing costs of the entity.   01/01/2019
     
Amendment to IAS 19 “Employee Benefits” Published in February 2018. The amendment requires that the entities use updated conjectures to determine the cost of the current service and the net interest for the rest of the period after an amendment, reduction or liquidation of the plan; and recognize in profits or losses as part of the cost of the past service, or a profit or loss in the liquidation, any reduction in a surplus, even if this surplus was not previously recognized because it did not exceed the upper threshold of the asset.   01/01/2019

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

26

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 2Basis of presentation for the consolidated financial statements (continued)

 

2.4Accounting pronouncements, continued

 

The following amendment was issued by the IASB and was originally scheduled to take effect in 2016. However, the organization has changed its position and the mandatory effective date is yet to be determined.

 

Amendment to IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures”. Published in September 2014. These amendments address an inconsistency between the requirements in IFRS 10 and those in IAS 28 in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction involves assets that do not constitute a business, even if these assets are housed in a subsidiary.   Undetermined

 

For those standards to be applied as of 2019, the corresponding studies and analysis will be carried out during 2018.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

27

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 2Basis of presentation for the consolidated financial statements (continued)

 

2.5Basis of consolidation

 

(a)Subsidiaries

 

These are all those entities where Sociedad Química y Minera de Chile S.A. has control over directing their financial and operational policies. This is generally accompanied by a share of more than half of the voting rights. Subsidiaries apply the same accounting policies of their Parent.

 

To account for the acquisition, the Company uses the acquisition method. Under this method the acquisition cost is the fair value of assets delivered, equity securities issued, and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired, and liabilities and contingencies assumed in a business combination are measured initially at fair value at the acquisition date. For each business combination, the Company will measure non-controlling interest of the acquiree either at fair value or as proportional share of net identifiable assets of the acquiree. For more information, please see Note 8.1.

 

Companies included in consolidation:

 

            Ownership interest 
TAX ID     Country of     9/30/2018   12/31/2017 
No.  Foreign subsidiaries  origin  Functional currency  Direct   Indirect   Total   Total 
Foreign  Nitratos Naturais Do Chile Ltda,  Brazil  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Nitrate Corporation Of Chile Ltd,  United Kingdom  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM North America Corp,  USA  US$   40.0000    60.0000    100.0000    100.0000 
Foreign  SQM Europe N,V,  Belgium  US$   0.5800    99.4200    100.0000    100.0000 
Foreign  Soquimich S.R.L. Argentina  Argentina  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Soquimich European Holding B,V,  Netherlands  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Corporation N.V.  Netherlands  US$   0.0002    99.9998    100.0000    100.0000 
Foreign  SQI Corporation N.V.  Netherlands  US$   0.0159    99.9841    100.0000    100.0000 
Foreign  SQM Comercial De México S.A. de C.V.  Mexico  US$   0.0100    99.9900    100.0000    100.0000 
Foreign  North American Trading Company  USA  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Administración y Servicios Santiago S.A. de C.V.  Mexico  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Peru S.A.  Peru  US$   0.9800    99.0200    100.0000    100.0000 
Foreign  SQM Ecuador S.A.  Ecuador  US$   0.0040    99.9960    100.0000    100.0000 
Foreign  SQM Nitratos Mexico S.A. de C.V.  Mexico  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQMC Holding Corporation L.L.P.  USA  US$   0.1000    99.9000    100.0000    100.0000 
Foreign  SQM Investment Corporation N.V.  Netherlands  US$   1.0000    99.0000    100.0000    100.0000 
Foreign  SQM Brasil Limitada  Brazil  US$   1.0900    98.9100    100.0000    100.0000 
Foreign  SQM France S.A.  France  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Japan Co. Ltd.  Japan  US$   0.1597    99.8403    100.0000    100.0000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  US$   1.6700    98.3300    100.0000    100.0000 
Foreign  SQM Oceania Pty Limited  Australia  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Rs Agro-Chemical Trading Corporation A.V.V.  Aruba  US$   98.3333    1.6667    100.0000    100.0000 
Foreign  SQM Colombia SAS  Colombia  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Australia PTY  Australia  Australian dollar   0.0000    100.0000    100.0000    100.0000 
Foreign  SACAL S.A.  Argentina  Argentine peso   0.0000    100.0000    100.0000    100.0000 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

28

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 2Basis of presentation for the consolidated financial statements (continued)

 

2.5Basis of consolidation, continued

 

            Ownership interest 
TAX ID     Country of     9/30/2018   12/31/2017 
No.  Foreign subsidiaries  origin  Functional currency  Direct   Indirect   Total   Total 
Foreign  SQM Indonesia S.A.  Indonesia  US$   0.0000    80.0000    80.0000    80.0000 
Foreign  SQM Virginia L.L.C.  USA  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Italia SRL  Italy  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Comercial Caimán Internacional S.A.  Panama  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Africa Pty.  South Africa  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Lithium Specialties LLC  USA  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Iberian S.A.  Spain  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Beijing Commercial Co. Ltd.  China  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Thailand Limited  Thailand  US$   0.0000    99.996    99.996    99.996 
Foreign  SQM Internacional N.V.  Belgium  US$   0.5800    99.4200    100.0000    0.0000 
Foreign  SQM (Shanghai) Chemicals Co. Ltd.  China  US$   0.0000    100.0000    100.0000    0.0000 

 

            Ownership interest 
TAX ID     Country of  Functional  9/30/2018   12/31/2017 
No.  Domestic subsidiaries  origin  currency  Direct   Indirect   Total   Total 
96.801.610-5  Comercial Hydro S.A.  Chile  US$   0,0000    60,6383    60,6383    60,6383 
96.651.060-9  SQM Potasio S.A.  Chile  US$   99,9999    0,0000    99,9999    99,9999 
96.592.190-7  SQM Nitratos S.A.  Chile  US$   99,9999    0,0001    100,0000    100,0000 
96.592.180-K  Ajay SQM Chile S.A.  Chile  US$   51,0000    0,0000    51,0000    51,0000 
86.630.200-6  SQMC Internacional Ltda.  Chile  Ch$   0,0000    60,6381    60,6381    60,6381 
79.947.100-0  SQM Industrial S.A.  Chile  US$   99,0470    0,9530    100,0000    100,0000 
79.906.120-1  Isapre Norte Grande Ltda.  Chile  Ch$   1,0000    99,0000    100,0000    100,0000 
79.876.080-7  Almacenes y Depósitos Ltda.  Chile  Ch$   1,0000    99,0000    100,0000    100,0000 
79.770.780-5  Servicios Integrales de Tránsitos y Transferencias S.A.  Chile  US$   0,0003    99,9997    100,0000    100,0000 
79.768.170-9  Soquimich Comercial S.A.  Chile  US$   0,0000    60,6383    60,6383    60,6383 
79.626.800-K  SQM Salar S.A.  Chile  US$   18,1800    81,8200    100,0000    100,0000 
78.053.910-0  Proinsa Ltda.  Chile  Ch$   0,0000    60,5800    60,5800    60,5800 
76.534.490-5  Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.  Chile  Ch$   0,0000    100,0000    100,0000    100,0000 
76.425.380-9  Exploraciones Mineras S.A.  Chile  US$   0,2691    99,7309    100,0000    100,0000 
76.064.419-6  Comercial Agrorama Ltda. (a)  Chile  Ch$   0,0000    42,4468    42,4468    42,4468 
76.145.229-0  Agrorama S.A.  Chile  Ch$   0,0000    60,6377    60,6377    60,6377 
76.359.919-1  Orcoma Estudios SPA  Chile  US$   51,0000    0,0000    51,0000    51,0000 
76.360.575-2  Orcoma SPA  Chile  US$   100,0000    0,0000    100,0000    100,0000 
76.686.311-9  SQM MaG SpA.  Chile  US$   0,0000    100,0000    100,0000    100,0000 

 

(a)The Company consolidated Comercial Agrorama Ltda. as it has the control of this company’s relevant activities.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

29

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 2Basis of presentation for the consolidated financial statements (continued)

 

2.5Basis of consolidation, continued

 

Subsidiaries are consolidated using the line-by-line method, adding the items that represent assets, liabilities, revenues, and expenses of similar content, and eliminating those related to intragroup transactions.

 

Profit or loss of subsidiaries acquired or divested during the year are included in profit or loss accounts consolidated from the date control is transferred to the Group, or up to the date control is lost, as applicable.

 

Non-controlling interest represents the equity of a subsidiary not directly or indirectly attributable to the Parent.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

30

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies

 

3.1Classification of balances as current and non-current

 

In the attached consolidated statement of financial position, balances are classified in consideration of their recovery (maturity) dates; i.e. those maturing within a period equal to or less than 12 months are classified as current counted from the closing date of the consolidated financial statements and those with maturity dates exceeding the aforementioned period are classified as non-current.

 

The exception to the foregoing relates to deferred taxes, which are classified as non-current, regardless of the maturity they have.

 

3.2Functional and presentation currency

 

The Company’s consolidated financial statements are presented in United States dollars (“U.S. dollars”), which is the Company’s functional and presentation currency and is the currency of the main economic environment in which it operates.

 

Consequently, the term foreign currency is defined as any currency other than the U.S. dollar.

 

The consolidated financial statements are presented in thousands of United States dollars without decimals.

 

3.3Foreign currency translation

 

(a)Group entities:

 

The revenue, expenses, assets and liabilities of all entities that have a functional currency other than the presentation currency are converted to the presentation currency as follows:

 

-Assets and liabilities are converted at the closing exchange rate prevailing on the reporting date.

 

-Revenues and expenses of each profit or loss account are converted at monthly average exchange rates.

 

-All resulting foreign currency translation gains and losses are recognized as a separate component in translation reserves.

 

In consolidation, foreign currency differences arising from the translation of a net investment in foreign entities are recorded in equity (other reserves). At the date of disposal, such foreign currency translation differences are recognized in the statement of income as part of the gain or loss from the sale.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

31

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.3Foreign currency translation, continued

 

The main exchange rates and the adjustment unit used to translate monetary assets and liabilities, expressed in foreign currency at the end of each period in respect to U.S. dollars, are as follows:

 

   9/30/2018   12/31/2017 
   US$   US$ 
         
Brazilian real   4.02    3.02 
New Peruvian sol   3.30    3.08 
Argentine peso   41.05    18.40 
Japanese yen   113.59    113.00 
Euro   0.86    0.83 
Mexican peso   18.68    19.65 
Australian dollar   0.72    0.78 
Pound Sterling   0.77    0.74 
South African rand   14.14    12.35 
Ecuadorian dollar   1.00    1.00 
Chilean peso   660.42    614.75 
Chinese yuan   6.88    6.51 
Indian rupee   72.49    63.84 
Thai baht
Turkish lira
   

32.29

6.08

    

32.85

3.79

 
UF (*)   41.42    43.59 

 

(*) The Unidad de Fomento (UF) is an indexed monetary unit used in Chile, calculated based on the variation in the Consumer Price Index (CPI).

 

(b)Transactions and balances

 

Non-monetary transactions in currencies other than the functional currency (Dollar) are translated to the respective functional currencies of Group entities at the exchange rate on the date of the transaction. Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the functional currency at the exchange rate at that date. All differences are recorded in the statement of income except for all monetary items that provide an effective hedge for a net investment in a foreign operation. These items are recognized in other comprehensive income on the divestment, when they are recognized in the statement of income. Charges and credits attributable to foreign currency translation differences on those hedge monetary items are also recognized in other comprehensive income.

 

Non-monetary assets and liabilities that are measured at historical cost in a foreign currency are retranslated to the functional currency at the historical exchange rate of the transaction. Non-monetary items that are measured based on fair value in a foreign currency are translated using the exchange rate at the date on which the fair value is determined.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

32

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.4Subsidiaries

 

SQM S.A. uses the level of control it has in subsidiaries as a basis to determine their share in the consolidated financial statements. This control consists of the Company’s ability to exercise power in the subsidiary, exposure, or right, to variable performance from its share in the investee and the ability to use its power on the investee to have an influence on the amount of the investor’s performance.

 

The Company prepares the consolidated financial statements using consistent accounting policies for the entire Group. The consolidation of a subsidiary commences when the Company has control over the subsidiary and stops when control ceases.

 

3.5Consolidated statement of cash flows

 

Cash equivalents correspond to highly-liquid short-term investments that are easily convertible into known amounts of cash. They are subject to insignificant risk of changes in their value and mature in less than three months from the date of acquisition of the instrument.

 

For the purposes of the statement of cash flows, cash and cash equivalents comprise cash and cash equivalents as defined above.

 

The statement of cash flows includes movements in cash performed during the year, determined using the direct method.

 

3.6Financial assets

 

Corporate management (“Management”) determines the classification of its financial assets at the time of initial recognition, on the basis of the business model for the management of financial assets and the characteristics of contractual cash flows from the financial assets. In accordance with IAS 39, financial assets are measured initially at fair value plus transaction costs that may have been incurred and are directly attributable to the acquisition of the financial asset. Subsequently, financial assets are measured at amortized cost or fair value.

 

The Company assesses, at each reporting date, whether there is objective evidence that an asset or group of assets is impaired. An asset or group of financial assets is impaired if and only if there is evidence of impairment as a result of one or more events occurring after the initial recognition of the asset or group of assets. For the recognition of impairment, the loss event has to have an impact on the estimate of future cash flows from the asset or groups of financial assets.

 

As of January 1, 2018, the Company classifies its financial assets in the following categories: at fair value (be it through other comprehensive income or through profit or loss), and at amortized cost. The classification depends on the entity’s business model for managing financial assets and the contractual terms for cash flows.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

33

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.7Financial liabilities

 

Management determines the classification of its financial liabilities at the time of initial recognition. As established in IAS 39, financial liabilities at the time of initial recognition are measured at fair value, less transaction costs that may have been incurred and are directly attributable to the issue of the financial liability. Subsequently, these are measured at amortized cost using the effective interest method. Financial liabilities that have been initially recognized at fair value through profit or loss will be measured subsequently at fair value.

 

3.8Financial instruments at fair value through profit or loss

 

Management will irrevocably determine, at the time of initial recognition, the designation of a financial instrument at fair value through profit or loss. By doing so, this eliminates and/or significantly reduces the measurement or recognition inconsistency that would otherwise have arisen from the measurement of assets or liabilities or from the recognition of gains and losses from them on different bases.

 

The Company forecasts the expected credit losses associated with its debt instruments accounted for at amortized cost. The impairment method applied depends on whether there has been a significant increase in the credit risk.

 

3.9Financial instrument offsetting

 

The Company offsets an asset and liability if and only if it presently has a legally enforceable right of setting off the amounts recognized and has the intent of settling for the net amount of realizing the asset and settling the liability simultaneously.

 

3.10Reclassification of financial instruments

 

At such time when the Company changes its business model for managing financial assets, it will reclassify those financial assets affected by the new business model.

 

Financial liabilities could not be reclassified.

 

3.11Derivative and hedging financial instruments

 

Derivatives are recognized initially at fair value as of the date on which the derivatives contract is signed and, they are subsequently assessed at fair value. The method for recognizing the resulting gain or loss depends on whether the derivative has been designated as an accounting hedge instrument and, if so, it depends on the type of hedging, which may be as follows:

 

a)Fair value hedge of assets and liabilities recognized (fair value hedges);
b)Hedging of a single risk associated with an asset or liability recognized or a highly probable forecast transaction (cash flow hedge).

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

34

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.11Derivative and hedging financial instruments, continued

 

At the beginning of the transaction, the Company documents the relationship that exists between hedging instruments and those items hedged, as well as their objectives for risk management purposes and the strategy to conduct different hedging operations.

 

The Company also documents its evaluation both at the beginning and at the end of each period if the derivatives used in hedging transactions are highly effective to offset changes in the fair value or in cash flows of hedged items.

 

The fair value of derivative instruments used for hedging purposes is shown in Note 10.3 (hedging assets and liabilities). Changes in the cash flow hedge reserve are classified as a non-current asset or liability if the remaining expiration period of the hedged item is more than 12 months, and as a current asset or liability if the remaining expiration period of the entry is less than 12 months.

 

Derivatives that are not designated or do not qualify as hedging derivatives are classified as current assets or liabilities, and changes in the fair value are directly recognized through profit or loss.

 

a)Fair value hedge

 

Changes in the fair value of derivatives that are designated and qualify as fair value hedges are recorded in profit or loss, together with any changes in the fair value of the hedged asset or liability that are attributable to the hedged risk. The gain or loss relating to the effective portion of interest rate swaps that hedge fixed rate borrowings is recognized in profit or loss within finance costs, together with changes in the fair value of the hedged fixed rate borrowings attributable to interest rate risk. The gain or loss relating to the ineffective portion is recognized in profit or loss within other income or other expenses. If the hedge no longer meets the criteria for hedge accounting, the adjustment to the carrying amount of a hedged item for which the effective interest method is used is amortized to profit or loss over the period to maturity using a recalculated effective interest rate.

 

b)Cash flow hedges

 

Amounts taken to equity are transferred to profit or loss when the hedged transaction affects profit or loss, as when the hedged interest income or expense is recognized when a projected sale occurs. When the hedged entry is the cost of a non-financial asset or liability, amounts taken to other reserves are transferred to the initial carrying value of the non-financial asset or liability.

 

If the expected firm transaction or commitment is no longer expected to occur, the amounts previously recognized in equity are transferred to profit or loss. If a hedge instrument expires, is sold, finished, or exercised without any replacement, or if a rollover is performed or if its designation as hedging is revoked, the amounts previously recognized in other reserves are maintained in equity until the expected firm transaction or commitment occurs.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

35

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3 Significant accounting policies (continued)

 

3.12Available for sale financial assets

 

Available for sale financial assets are non-derivative financial assets, which have been designated as available for sale and are not classified in any of the previous categories of financial instruments. Available for sale financial instruments are initially recognized at fair value plus any directly attributable transaction costs.

 

Subsequent to initial recognition, they are recognized at fair value and changes other than impairment losses are recognized in other comprehensive income and presented in equity in the fair value reserve. If an investment is derecognized, the accumulated gain or loss is reclassified to profit or loss.

 

3.13Derecognition of financial instruments

 

In accordance with IAS 39, the Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all the risks and rewards of ownership of the financial asset are transferred; and the control of the financial assets has not been retained.

 

The Company derecognizes a financial liability when its contractual obligations or a part of these are discharged, paid to the creditor or legally extinguished.

 

3.14Derivative financial instruments

 

The Company maintains derivative financial instruments to hedge its exposure to foreign currencies. Derivative financial instruments are recognized initially at fair value; attributable transaction costs are recognized when incurred. Subsequent to initial recognition, any changes in the fair value of such derivatives are recognized in profit or loss as part of gains and losses.

 

The Company permanently assesses the existence of embedded derivatives, both in its contracts and financial instruments, As of September 30, 2018, and December 31, 2017, there were no embedded derivatives.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

36

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.15Fair value initial measurements

 

From the initial recognition, the Company measures its assets and liabilities at fair value plus or minus transaction costs incurred that are directly attributable to the acquisition of a financial asset or issuance of a financial liability

 

3.16Deferred acquisition costs from insurance contracts

 

Acquisition costs from insurance contracts are classified as prepayments and correspond to insurance contracts in force, recognized using the straight-line method and on an accrual basis, and are recognized under other non-financial assets.

 

(a)Lease - Finance lease

 

Leases are classified as finance leases when the Company substantially owns all the risks and rewards inherent in the ownership of the asset. Finance leases are capitalized at the commencement of the lease term at the lower of the fair value of the leased asset and the present value of the minimum lease payments.

 

Each finance lease payment is apportioned between the liability and the finance charges so as to obtain the constant rate of interest on the remaining balance of the liability. The respective lease obligations, net of finance charges, are included in other non-current liabilities. The interest part of the finance cost is charged to the consolidated financial statements for the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability for each year.

 

(b)Lease - Operating lease

 

Leases where the lessor retains a significant part of the risks and benefits derived from the property are classified as operating leases. Operating lease payments (net of any incentive received by the lessor) should be recognized as an expense in the income statement or capitalized (as appropriate) over the lease term on a straight-line basis.

 

3.17Trade and other receivables

 

The Company’s trade receivables are maintained to obtain contractual cash flows (charge and collect) and do not contain a significant financing component, being recognized at the transaction price defined in IFRS 15. Meanwhile, the Company is using the simplified approach for recognizing expected credit losses if there is no significant increase in the credit risk since initial recognition and the terms of sale are less than 12 months. Similarly, the Company is using an impairment model for trade receivables based on expected credit losses that considers the credit risk separately from its hedges, generating an effect equal to that established in the previous accounting standard IAS 39. The Company has established the procedures and controls for beginning to apply IFRS 9 as of January 1, 2018.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

37

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.18Inventory measurement

 

The Company measures inventories at the lower of production cost and net realizable value. The cost price of finished products and work in progress includes the direct cost of materials and, when applicable, labor costs, the depreciation of goods that are involved in the production process, the indirect costs incurred in transforming raw materials into finished products, and general expenses incurred in carrying inventories to their current location and conditions. The method used to determine the cost of inventories is the weighted average monthly cost and the average cost of warehouse storage.

 

Commercial discounts, rebates obtained, and other similar entries are deducted when determining the acquisition price.

 

The net realizable value represents the estimated selling price, less all the estimated costs of completion and the estimated costs necessary to make the sale.

 

The Company conducts an evaluation of the net realizable value of inventories at the end of each year, recording a debit to profit or loss when the inventory costs exceed the realizable value. This estimate is made for all the finished and intermediate products in the Company’s inventory. The valuation of obsolete, impaired or slow-moving products relates to their estimated net realizable value.

 

The provisions for uncertainties in the technical specifications for the Company’s stocks of finished goods and work in progress have been made based on a technical study which covers the different variables that affect products in stock (such as density and humidity). This study is updated periodically to include new measurement technologies and the results from previous financial periods.

 

Inventories of raw materials, supplies, materials and parts are recorded at the lower of acquisition cost or market value. The acquisition cost is calculated according to the average acquisition price method. Nonetheless, an estimate is made for each financial period of the potential lower value relating to the proportion of inventory that consists of obsolete, defective or slow-moving materials. This provision reduces the value of the Company’s raw materials, supplies, materials and parts.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

38

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.19Investments in associates and joint ventures, continued

 

Interests in companies over which joint control is exercised (joint venture) or where an entity has a significant influence (associates) are recognized using the equity method of accounting. Significant influence is presumed to exist when interest greater than 20% is held in the capital of an investee.

 

Under this method, the investment is recognized in the statement of financial position at cost plus changes, subsequent to the acquisition, and considering the proportional share in the equity of the associate. For such purposes, the interest percentage in the ownership of the associate is used. The associated goodwill acquired is included in the carrying amount of the investee and is not amortized. The debit or credit to profit or loss reflects the proportional share in the profit or loss of the associate.

 

Unrealized gains for transactions with affiliates or associates are eliminated according to the Company’s interest percentage in such entities. Unrealized losses are also eliminated, except if the transaction provides evidence of impairment loss of the transferred asset.

 

Changes in the equity of associates are recognized on a proportional basis with a charge or credit to “Other reserves” and classified according to their origin.

 

Reporting dates of the associate, the Company and related policies are similar for equivalent transactions and events under similar circumstances.

 

In the event that the significant influence is lost or the investment is sold or is held as available for sale, the equity method is discontinued, suspending the recognition of the proportional share of profit or loss.

 

If the resulting amount according to the equity method is negative, the share of profit or loss is reflected as zero in the consolidated financial statements, unless a commitment exists by the Company to reinstate the Company’s equity position, in which case the related provision for risks and expenses is recorded.

 

Dividends received by these companies are recorded by reducing the equity value, and the proportional share of profit or loss recognized according to the equity share are included in the consolidated profit or loss accounts in the caption “Equity share of profit (loss) of associates and joint ventures that are accounted for using the equity method of accounting”.

 

3.20Transactions with non-controlling interests

 

Non-controlling interests are recorded in the consolidated statement of financial position within equity, but separate from equity attributable to the owners of the Parent.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

39

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.21Related party transactions

 

Transactions between the Company and its subsidiaries are part of the Company’s normal operations within its scope of business activities. Conditions for such transactions are those normally effective for those types of operations with regard to terms and market prices. These transactions have been eliminated in consolidation. The expiration conditions vary according to the originating transaction.

 

3.22Property, plant and equipment

 

The assets tangible property, plant and equipment assets are stated at acquisition cost, net of the related accumulated depreciation, amortization and impairment losses that they might have experienced.

 

In addition to the price paid for the acquisition of tangible property, plant and equipment, the Company has considered the following concepts as part of the acquisition cost, as applicable:

 

1.Accrued interest expenses during the construction period that are directly attributable to the acquisition, construction or production of qualifying assets, which are those that require a substantial period prior to being ready for use. The interest rate used is that related to the project’s specific financing or, should this not exist, the average financing rate of the investor company.

 

2.The future costs that the Company will have to experience, related to the closure of its facilities at the end of their useful life, are included at the present value of disbursements expected to be required to settle the obligation.Having initially recognized provisions for closure and refurbishment, the corresponding cost is capitalized as an asset in Property, plant and equipment and amortized in line with the amortization criteria for the associated assets.

 

Construction-in-progress is transferred to property, plant and equipment in operation once the assets are available for use and the related depreciation and amortization begins on that date.

 

Extension, modernization or improvement costs that represent an increase in productivity, ability or efficiency or an extension of the useful lives of property, plant and equipment are capitalized as a higher cost of the related assets. All the remaining maintenance, preservation and repair expenses are charged to expense as they are incurred.

 

The replacement of full assets, which increase the asset’s useful life or its economic capacity, are recorded as a higher value of property, plant and equipment with the related derecognition of replaced or renewed elements.

 

Gains or losses which are generated from the sale or disposal of property, plant and equipment are recognized as income (or loss) in the period, and calculated as the difference between the asset’s sales value and its net carrying value.

 

Costs derived from the daily maintenance of property, plant and equipment are recognized when incurred.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

40

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.23Depreciation of property, plant and equipment, continued

 

Property, plant and equipment are depreciated through the straight-line distribution of cost over the estimated technical useful life of the asset, which is the period in which the Company expects to use the asset. When components of one item of property, plant and equipment have different useful lives, they are recorded as separate assets. Useful lives are reviewed on an annual basis.

 

Fixed assets associated with the Salar de Atacama consider useful life to be the lesser value between the technical useful life and the years remaining until 2030.

 

In the case of mobile equipment, depreciation is performed depending on the hours of operation

 

The useful lives used for the depreciation and amortization of assets included in property, plant and equipment in years are presented below.

 

Classes of property, plant and equipment  Minimum life or
rate (years)
   Maximum life or
rate (years)
   life or average
rate in years
 
Mining assets   3    10    7 
Energy generating assets   3    16    7 
Buildings   3    30    10 
Supplies and accessories   2    15    5 
Office equipment   3    20    6 
Transport equipment   3    20    10 
Network and communication equipment   2    15    5 
IT equipment   2    15    3 
Machinery, plant and equipment   2    20    9 
Other property, plant and equipment   1    26    7 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

41

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.24Goodwill

 

Goodwill acquired represents the excess in acquisition cost on the fair value of the Company's ownership of the net identifiable assets of the subsidiary on the acquisition date. Goodwill acquired related to the acquisition of subsidiaries is included in goodwill, which is subject to impairment tests annually or more frequently if events or changes in circumstances indicate that it might be impaired, and is stated at cost less accumulated impairment losses. Gains and losses related to the sale of an entity include the carrying value of goodwill related to the entity sold.

 

This intangible asset is assigned to cash-generating units with the purpose of testing impairment losses. It is allocated based on cash-generating units expected to obtain benefits from the business combination from which the aforementioned goodwill acquired arose.

 

3.25Intangible assets other than goodwill

 

Intangible assets other than goodwill mainly relate to water rights, emission rights, commercial brands, costs for rights of way for electricity lines, license costs and the development of computer software and mining property and concession rights, client portfolio and commercial agent.

 

(a)Water rights

 

Water rights acquired by the Company relate to water from natural sources and are recorded at acquisition cost. Given that these assets represent legal rights granted in perpetuity to the Company, they are not amortized, but are subject to annual impairment tests.

 

(b)Rights of way for electric lines

 

As required for the operation of industrial plants, the Company has paid rights of way in order to install wires for the different electric lines on third party land. These rights are presented under intangible assets. Amounts paid are capitalized at the date of the agreement and charged to the statement of income, according to the life of the right of way.

 

(c)Computer software

 

Licenses for IT programs acquired are capitalized based on their acquisition and customization costs. These costs are amortized over their estimated useful lives.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

42

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.25Intangible assets other than goodwill (continued)

 

Expenses related to the development or maintenance of IT programs are recognized as an expense as and when incurred. Costs directly related to the production of unique and identifiable IT programs controlled by the Group, and which will probably generate economic benefits that are higher than its costs during more than a year, are recognized as intangible assets. Direct costs include the expenses of employees who develop information technology software and general expenses in accordance with corporate charges received.

 

The costs of development for IT programs recognized as assets are amortized over their estimated useful lives.

 

(d)Mining property and concession rights

 

The Company holds mining property and concession rights from the Chilean and Australian Governments. Property rights are usually obtained at no initial cost (other than the payment of mining patents and minor recording expenses) and once the rights on these concessions have been obtained, they are retained by the Company while annual patents are paid. Such patents, which are paid annually, are recorded as prepaid assets and amortized over the following twelve months. Amounts attributable to mining concessions acquired from third parties that are not from the Chilean Government are recorded at acquisition cost within intangible assets.

 

(e)Client portfolio

 

The period for exploiting these portfolios is unlimited so they are considered assets with an indefinite useful life and are therefore not subject to amortization. However, they are subjected to an annual impairment test and the corresponding amounts are recorded in the profit or loss.

 

(f)Commercial agent

 

The rights obtained through the acquisition of the commercial agent of Sociedad Agrocom Ltda. corresponded to the fair value of that company’s line of business. The period for exploiting these rights is unlimited so they are considered assets with an indefinite useful life and are therefore not subject to amortization. However the indefinite useful life is subject to review for every reporting period, to see whether indefinite useful life continues to apply.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

43

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3 Significant accounting policies (continued)

 

3.26Research and development expenses

 

Research and development expenses are charged to profit or loss in the period in which the expenditure was incurred.

 

3.27Prospecting expenses

 

The Company has mining property and concession rights from the Chilean Government and others that it has acquired from third parties other than the Chilean Government, destined to the exploitation of caliche ore and saltpeter deposits and also the exploration of these types of deposits.

 

Upon obtaining these rights, the Company initially records disbursements directly associated with the exploration and evaluation of deposits (associated with small deposits with trading feasibility) as asset at cost, Such disbursements include the following concepts:

 

-Disbursements for geological reconnaissance evaluation

 

-Disbursements for drilling

 

-Disbursements for drilling work and sampling

 

-Disbursements for activities related to technical assessment and trading feasibility of drilling work

 

-And any disbursement directly related to specific projects where its objective is finding mining resources,

 

Subsequently, the Company distinguishes exploration and evaluation projects according to the economic feasibility of the mineral extracted in the area or exploration, among those that finally will deliver future benefits to the Company (profitable projects) and those projects that are unlikely to bring profit to the Company in the future (i.e., when the ore grade at the site is low and its exploitation is not economically profitable).

 

If technical studies determine that the ore grade is not economically suitable for exploitation, the asset is directly expensed. Otherwise, it is held in the caption “other non-current assets”, reclassifying the portion related to the area to be exploited in the year in the caption inventories and such amount is amortized as production cost on the basis of estimated tons to be extracted.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

44

Notes to the Consolidated Financial Statements as of September 30, 2018


Note 3Significant accounting policies (continued)

 

3.27Prospecting expenses

 

The technical reasons for this classification correspond to the fact that this is an identifiable non-monetary asset that is owned to be used in the production of our processes as a main raw material.

 

For this reason and because our disbursements correspond to reserves that have proved to be financially feasible and used as a principal raw material in our production processes, these are presented as inventories that will be exploited within the commercial year and the remainder as development expenses for small deposits and prospecting expenses in the caption “other non-current assets”

 

3.28Impairment of non-financial assets

 

Assets subject to depreciation and amortization are also subject to impairment testing, provided that an event or change in the circumstances indicates that the amounts in the accounting records may not be recoverable. An impairment loss is recognized for the excess of the book value of the asset over its recoverable amount.

 

The recoverable amount of an asset is the higher between the fair value of an asset or cash generating unit (“CGU”) less costs of sales and its value in use, and is determined for an individual asset unless the asset does not generate any cash inflows that are clearly independent from other assets or groups of assets.

 

When the carrying value of an asset exceeds its recoverable amount, the asset is considered an impaired asset and is reduced to its net recoverable amount.

 

In evaluating value in use, estimated future cash flows are discounted using a pre-tax discount rate that reflects current market assessment, the value of money over time and the specific asset risks.

 

To determine the fair value less costs to sell, an appropriate valuation model is used.

 

Impairment losses from continuing operations are recognized with a debit to profit or loss in the categories of expenses associated with the impaired asset function, except for properties reevaluated previously where the revaluation was taken to equity.

 

For assets other than acquired goodwill, an annual evaluation is carried out to determine whether any previously recognized impairment losses have already decreased or ceased to exist. If this should be the case, the recoverable amount is estimated. A previously recognized impairment loss is only reversed if there have been changes in the estimates used to determine the asset’s recoverable amount since the last time an impairment loss was recognized. If this is the case, the carrying value of the asset is increased to its recoverable amount. This increased amount cannot exceed the carrying value that would have been determined, net of depreciation, if an asset impairment loss had not been recognized in prior years. This reversal is recognized with a credit to profit or loss.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

45

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.29Minimum dividend

 

As required by the Law of Corporations (the “Law”), unless otherwise decided by unanimous vote of shareholders, a publicly-held corporation must distribute dividends in accordance with the policy determined in the ordinary general assembly of shareholders held each year, holding a minimum of 30% of profits, except in the case that the corporation has losses not absorbed in previous years. However, the Corporation defines as its policy the distribution of up to 100% of its net profits for the period.

 

3.30Earnings per share

 

The basic earnings per share amounts are calculated by dividing the profit for the year attributable to the ordinary owners of the parent by the weighted average number of ordinary shares outstanding during the year.

 

The Company has not conducted any type of operation of potential dilutive effect that would entail the disclosure of diluted earnings per share.

 

3.31Trade and other payables

 

Trade and other payables are measured at fair value plus all costs associated with the transaction. Subsequently, these are carried out at amortized cost using the effective interest rate method.

 

3.32Interest-bearing borrowings

 

At initial recognition, interest-bearing borrowings are measured at fair value net of transaction costs incurred. Subsequently, they are measured at amortized cost using the effective interest rate method. Amortized cost is calculated considering any premium or discount from the acquisition and includes costs of transactions which are an integral part of the effective interest rate.

 

These are recorded as non-current when their expiration period exceeds twelve months and as current when the term is lower than such term. Interest expense is calculated in the year in which it is accrued following a financial criterion.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

46

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.33Other provisions

 

Provisions are recognized when:

 

-The Company has a present obligation or constructive obligation as the result of a past event.

 

-It is more likely than not that certain resources must be used, including benefits, to settle the obligation.

 

-A reliable estimate can be made of the amount of the obligation.

 

In the event that the provision or a portion of it is reimbursed, the reimbursement is recognized as a separate asset solely if there is certainty of income.

 

In the consolidated statement of income, the expense for any provision is presented net of any reimbursement.

 

Should the effect of the value of money over time be significant, provisions are discounted using a discount rate before tax that reflects the liability’s specific risks. When a discount rate is used, the increase in the provision over time is recognized as a finance cost

 

The Company’s policy is to maintain provisions to cover risks and expenses based on a better estimate to deal with possible or certain and quantifiable responsibilities from current litigation, compensations or obligations, pending expenses for which the amount has not yet been determined, collaterals and other similar guarantees for which the Company is responsible. These are recorded at the time the responsibility or the obligation that determines the compensation or payment is generated.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

47

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 3Significant accounting policies (continued)

 

3.34Obligations related to employee termination benefits and pension commitments

 

Obligations towards the Company’s employees comply with the provisions of the collective bargaining agreements in force, which are formalized through collective employment agreements and individual employment contracts, except for the United States, which is regulated in accordance with employment plans in force up to 2002. (See more details in Note 18.4).

 

These obligations are valued using actuarial calculations, according to the projected unit credit method which considers such assumptions as the mortality rate, employee turnover, interest rates, retirement dates, effects related to increases in employees’ salaries, as well as the effects on variations in services derived from variations in the inflation rate. The criteria in force contained in the revised IAS 19 are also taken into account.

 

Actuarial gains and losses that may be generated by variations in defined, pre-established obligations are directly recorded in other comprehensive income.

 

Actuarial losses and gains have their origin in departures between the estimate and the actual behavior of actuarial assumptions or in the reformulation of established actuarial assumptions.

 

The discount rate used by the Company for calculating the obligation was 5.027% and 5.114% for the periods ended September 30, 2018 and December 31, 2017, respectively.

 

The Company’s subsidiary SQM North America has established pension plans for its retired employees that are calculated by measuring the projected obligation using a net salary progressive rate net of adjustments for inflation, mortality and turnover assumptions, deducting the resulting amounts at present value using a 3.75% interest rate for 2018 and 4.50% for 2017. The net balance of this obligation is presented under the non-current provisions for employee benefits (refer to Note 18.4).

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

48

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 3Significant accounting policies (continued)

 

3.35Compensation plans

 

Compensation plans implemented through benefits provided in share-based payments settled in cash are recognized in the financial statements at their fair value, in accordance with International Financial Reporting Standards No. 2 "Share-based Payments.” Changes in the fair value of options granted are recognized with a charge to payroll on a straight-line basis during the period between the date on which these options are granted and the payment date (see Note 18.6).

 

3.36Revenue recognition

 

Revenue includes the fair value of considerations received or receivable for the sale of goods and services during the performance of the Company's activities. Revenue is presented net of value added tax, estimated returns, rebates and discounts and after the elimination of sales among subsidiaries.

 

The company has adopted the method indicated in appendix C.3 (b) of IFRS 15 and therefore has not re-expressed the comparative financial statements.

 

At the date of closure of the financial statements, there are no effects that amend the company’s accumulated results derived from the application of the aforementioned method.

 

Revenue is recognized when its amount can be stated reliably, it is probable that the future economic rewards will flow to the entity and it meets the specific conditions for each type of activity-related revenue, as follows:

 

(a)Sale of goods

 

The sale of goods is recognized when the Company has delivered products to the customer, and there is no obligation pending compliance that could affect the acceptance of products by the customer. The delivery does not occur until products have been shipped to the customer or confirmed as received by the customer, and the related risks of obsolescence and loss have been transferred to the customer and the customer has accepted the products in accordance with the conditions established in the sale, when the acceptance period has ended, or when there is objective evidence that those criteria required for acceptance have been met.

 

Sales are recognized in consideration of the price set in the sales agreement, net of volume discounts and estimated returns at the date of the sale. Volume discounts are evaluated in consideration of annual foreseen purchases and in accordance with the criteria defined in agreements.

 

(b)Sale of services

 

Revenue associated with the rendering of services is recognized considering the degree of completion of the service as of the date of presentation of the consolidated classified statement of financial position, provided that the result from the transaction can be estimated reliably.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

49

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

Revenue recognition, continued

 

(c)Interest income

 

Interest income is recognized when interest is accrued in consideration of the principal pending payment using the effective interest rate method.

 

(d)Income from dividends

 

Income from dividends is recognized when the right to receive the payment is established

 

3.37Finance income and finance costs

 

Finance income is mainly composed of interest income in financial instruments such as term deposits and mutual fund deposits. Interest income is recognized in profit or loss at amortized cost, using the effective interest rate method.

 

Finance costs are mainly composed of interest on bank borrowing expenses, interest on bonds issued and interest capitalized for borrowing costs for the acquisition, construction or production or qualifying assets.

 

Borrowing costs and bonds issued are recognized in profit or loss using the effective interest rate method.

 

For finance costs accrued during the construction period that are directly attributable to the acquisition, construction or production of qualifying assets, the effective interest rate related to the project’s specific financing is used. If none exists, the average financing rate of the subsidiary making the investment is utilized.

 

Borrowing and financing costs that are directly attributable to the acquisition, construction or production of an asset are capitalized as part of that asset’s cost.

 

3.38Income tax and deferred taxes

 

Corporate income tax for the year is determined as the sum of current taxes from the different consolidated companies.

 

Current taxes are based on the application of the various types of taxes attributable to taxable income for the year.

 

Differences between the book value of assets and liabilities and their tax basis generate the balance of deferred tax assets or liabilities, which are calculated using the tax rates expected to be applicable when the assets and liabilities are realized.

 

In conformity with current Chilean tax regulations, the provision for corporate income tax and taxes on mining activity is recognized on an accrual basis, presenting the net balances of accumulated monthly tax provisional payments for the fiscal period and associated credits. The balances of these accounts are presented in current income taxes recoverable or current taxes payable, as applicable.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

50

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 3Significant accounting policies (continued

 

3.38Income tax and deferred taxes

 

Tax on companies and variations in deferred tax assets or liabilities that are not the result of business combinations are recorded in the statement of income accounts or equity accounts in the consolidated statement of financial position, considering the origin of the gains or losses which have generated them.

 

At each reporting period, the carrying amount of deferred tax assets has been reviewed and reduced to the extent where there will not be sufficient taxable income to allow the recovery of all or a portion of the deferred tax assets. Likewise, as of the date of the consolidated financial statements, deferred tax assets that are not recognized were evaluated and not recognized as it was more likely than not that future taxable income will allow for recovery of the deferred tax asset.

 

likely than not that the temporary differences will be reversed in the near future and that there will be taxable income with which they may be used.

 

With respect to deductible temporary differences associated with investments in subsidiaries, associated companies and interest in joint ventures, deferred tax assets are recognized solely provided that it is more

 

The deferred income tax related to entries directly recognized in equity is recognized with an effect on equity and not with an effect on profit or loss.

 

Deferred tax assets and liabilities are offset if there is a legally receivable right of offsetting tax assets against tax liabilities and the deferred tax is related to the same tax entity and authority.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

51

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 3Significant accounting policies (continued)

 

3.39Segment reporting

 

IFRS 8 requires that companies adopt a “management approach” to disclose information on the operations generated by its operating segments. In general, this is the information that management uses internally for the evaluation of segment performance and making the decision on how to allocate resources for this purpose.

 

An operating segment is a group of assets and operations responsible for providing products or services subject to risks and performance that are different from those of other business segments. A geographical segment is responsible for providing products or services in a given economic environment subject to risks and performance that are different from those of other segments operating in other economic environments.

 

For assets and liabilities, the allocation to each segment is not possible given that these are associated with more than one segment, except for depreciation, amortization and impairment of assets, which are directly allocated to the applicable segments, in accordance with the criteria established in the costing process for product inventories.

 

The following operating segments have been identified by the Company:

 

-Specialty plant nutrients

 

-Industrial chemicals

 

-Iodine and derivatives

 

-Lithium and derivatives

 

-Potassium

 

-Other products and services

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

52

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 3Significant accounting policies (continued)

 

3.40Responsibility for Information and Estimates Made

 

The Management of Sociedad Química y Minera de Chile S.A. and its subsidiaries is responsible for the information contained in these consolidated financial statements, which expressly indicate that all the principles and criteria included in IFRS, as issued by the International Accounting Standards Board (IASB), have been applied in full.

 

In preparing the consolidated financial statements of Sociedad Química y Minera de Chile S.A. and its subsidiaries, Management has made judgments and estimates to quantify certain assets, liabilities, revenues, expenses and commitments included therein. Basically, these estimates refer to:

 

-Estimated useful lives are determined based on current facts and past experience, and take into consideration the anticipated physical life of the asset, the potential for technological obsolescence, and regulations. See Notes 3.22, 15 and 16.

 

-Impairment losses of certain assets - Assets, including property, plant and equipment, exploration assets, goodwill and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts exceed their recoverable amounts. If an impairment assessment is required, the assessment of fair value often requires estimates and assumptions such as discount rates, exchange rates, commodity prices, future capital requirements and future operating performance. Changes in such estimates could impact the recoverable values of these assets. Estimates are reviewed regularly by management. See Notes 15 and 16.

 

-Assumptions used in calculating the actuarial amount of pension-related and severance indemnity payment benefit commitments. See Note 18.

 

-Contingencies – The amount recognized as a provision, including legal, contractual, constructive and other exposures or obligations, is the best estimate of the consideration required to settle the related liability, including any related interest charges, taking into account the risks and uncertainties surrounding the obligation. In addition, contingencies will only be resolved when one or more future events occur or fail to occur. Therefore, the assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. The Company assesses its liabilities and contingencies based upon the best information available, relevant tax laws and other appropriate requirements. See Notes 19 and 22.

 

-Provisions on the basis of technical studies that cover the different variables affecting products in stock (density and moisture, among others), and related allowance.

 

-Obsolescence to ensure that the carrying value of inventory is not in excess of the net realizable Inventory valuation requires judgment to determine obsolescence and estimates of provisions for value. See Note 12.

 

Despite the fact that these estimates have been made on the basis of the best information available on the date of preparation of these consolidated financial statements, certain events may occur in the future and oblige their amendment (upwards or downwards) over the next few years, which would be made prospectively, recognizing the effects of the change in estimates in the related future consolidated financial statements.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

53

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 3Significant accounting policies (continued)

 

3.41Environment

 

In general, the Company follows the criteria of considering amounts used in environmental protection and improvement as environmental expenses. However, the cost of facilities, machinery and equipment used for the same purpose are considered property, plant and equipment, as the case may be.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

54

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 4Changes in accounting estimates and policies (consistent presentation)

 

4.1Changes in accounting estimates

 

The Company had no changes in the determination of accounting estimates at the closing date of the consolidated financial statements, (For more information, see Note 3.40).

 

4.2Changes in accounting policies

 

As of September 30, 2018, the Company’s consolidated financial statements present no changes in accounting policies or estimates compared to the prior period (for further details refer to Note 3.40).

 

The consolidated statements of financial position as of September 30, 2018 and December 31, 2017 and the statements of comprehensive income, changes in equity and cash flows for the periods ended September 30, 2018 and 2017, have been prepared in accordance with the IFRS.

 

The accounting principles and criteria were applied consistently.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

55

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 5Financial risk management

 

5.1Financial risk management policy

 

The Company’s financial risk management policy is focused on safeguarding the stability and sustainability of Sociedad Química y Minera de Chile S.A. and its subsidiaries with regard to all such relevant financial uncertainty components.

 

The Company’s operations are subject to certain financial risk factors that may affect its financial position or results. The most significant risk exposures are market risk, liquidity risk, currency risk, doubtful accounts risk, and interest rate risk, among others.

 

There could also be additional risks, which are either unknown or known but not currently deemed to be significant, which could also affect the Company’s business operations, its business, financial position, or profit or loss.

 

The financial risk management structure includes identifying, determining, analyzing, quantifying, measuring and controlling these events. Management and, in particular, Finance Management, is responsible for constantly assessing the financial risk. The Company uses derivatives to hedge a significant portion of those risks.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

56

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors

 

5.2.1   Risks Relating to Our Business

 

We could be subject to numerous risks in Chile as a result of investigations by the Chilean Internal Revenue Service (“SII”) and the Chilean Public Prosecutor in relation to certain payments made by SQM between the tax years 2009 and 2015

 

The SII has conducted investigations related to the payment of invoices by SQM and its subsidiaries, SQM Salar S.A. and SQM Industrial S.A., for services that may not have been properly supported or that may not have been necessary to generate corporate income.  The Chilean Public Prosecutor also has conducted related inquiries to determine whether such payments may be linked with alleged violations by SQM, these subsidiaries and public officials of political contribution or anticorruption laws. 

 

On January 13, 2017, the Company and the DOJ reached an agreement on the terms of a Deferred Prosecution Agreement (“DPA”) that would resolve the DOJ’s inquiry, based on alleged violations of the books and records and internal controls provisions of the Foreign Corrupt Practices Act. In the DPA, the DOJ agreed to not pursue charges against the Company for a period of three years and to release the Company from liability after that period as long as the Company complies with the terms of the DPA, which include paying a monetary penalty of US$15,487,500, and engaging a compliance monitor for a term of two (2) years. Upon successful completion of the three (3) year term of the DPA, all charges against the Company will be dismissed. On the same date, the SEC agreed to resolve its inquiry through an administrative cease and desist order, arising out of the alleged violations of the same accounting provisions of the FCPA. Among other terms, the SEC order called for the Company to pay an additional monetary penalty of US$15 million.

 

On January 26, 2018, the 8th Court of Santiago approved a deferred prosecution agreement proposed by the Chilean Public Prosecutor relating to SQM and its subsidiaries SQM Salar and SQM Nitratos S.A., to suspend an investigation against these entities related to their duties of supervision and management. Under the deferred prosecution agreement, SQM, SQM Salar and SQM Nitratos S.A., agreed to pay an aggregate amount of (i) Ch$900,000,000 to the Chilean government, and (ii) Ch$1,650,000,000 to various charitable organizations. These amounts were accrued in the Company’s Consolidated Financial Statements for 2017. In addition, the companies have agreed to provide the Chilean Public Prosecutor with a report on the enhancements to their compliance program, implemented in recent years, with special emphasis on the incorporation of best practices in various jurisdictions. Under the deferred prosecution agreement, SQM, SQM Salar and SQM Nitratos S.A. have not admitted any responsibility in the matter. On August 17, 2018, the 8th Civil Court of Santiago definitively dismissed the case.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

57

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.1   Risks Relating to Our Business (continued)

 

Responding to our regulators’ inquiries and any future civil, criminal or regulatory inquiries or proceedings diverts our management’s attention from day-to-day operations. Additionally, expenses that may arise from responding to such inquiries or proceedings, our review of responsive materials, any related litigation or other associated activities may continue to be significant. Current and former employees, officers and directors may seek indemnification, advancement or reimbursement of expenses from us, including attorneys’ fees, with respect to the current inquiry or future proceedings related to this matter. The occurrence of any of the foregoing or adverse determination in litigation or other proceedings or similar actions could materially and adversely affect our business, financial condition, cash flows, results of operations and the prices of our securities.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

58

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.1   Risks Relating to Our Business (continued)

 

Our annual report on Form 20-F (available in Spanish on the Company’s website) for the year ended December 31, 2014, that we filed with the SEC identified a material weakness in our internal controls over payments directed by the office of the former Chief Executive Officer as of December 31, 2014

 

In the past, our management determined that the Company did not maintain effective control over payments directed by the office of the former CEO. This determination was reported in our annual report on Form 20-F, filed with the SEC on May 18, 2015.

 

We believe we have taken the necessary steps to remedy the identified material weakness and enhance our internal controls. However, any failure to maintain effective internal control over financial reporting could (i) result in a material misstatement in our financial reporting or financial statements that would not be prevented or detected, (ii) cause us to fail to meet our reporting obligations under applicable securities laws or (iii) cause investors to lose confidence in our financial reporting or financial statements, the occurrence of any of which could materially and adversely affect our business, financial condition, cash flows, results of operations and the prices of our securities.

 

Volatility of world fertilizer and chemical prices and changes in production capacities could affect our business, financial condition and results of operations

 

The prices of our products are determined principally by world prices, which, in some cases, have been subject to substantial volatility in recent years. World fertilizer and chemical prices vary depending upon the relationship between supply and demand at any given time. Supply and demand dynamics for our products are tied to a certain extent to global economic cycles, and have been impacted by circumstances related to such cycles. Furthermore, the supply of certain fertilizers or chemical products, including certain products that we provide, varies principally depending on the production of the major producers, (including us) and their respective business strategies.

 

World prices of potassium-based fertilizers (including some of our specialty plant nutrients, potassium chloride and potassium sulfate) fluctuated as a result of the broader global economic and financial conditions. During the second half of 2013, potassium prices declined as a result of an unexpected announcement made by the Russian company Uralkali (“Uralkali”) that it was terminating its participation in the exporter Belarus Potash Corporation (“BPC”). We cannot assure you that potassium-based fertilizer prices and sales volumes will not decline in the future.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

59

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.1   Risks Relating to Our Business (continued)

 

Iodine prices followed an upward trend beginning at the end of 2008 and continuing through 2012, reaching an average price of approximately US$53 per kilogram in 2012, over 40% higher than average prices in 2011. During the following years, supply growth outpaced demand growth, causing a decline in iodine prices. We cannot assure you that iodine prices or sales volumes will not continue to decline in the future.

 

Driven mostly by an increase in demand related to battery use, lithium demand growth in 2016 was accompanied by an increase in supply that was lower than expected, and as a result, average prices for this business line increased approximately 80% compared to 2015. In 2017, lithium demand continued to grow creating tight market conditions and increasing prices by 25% compared to 2016. We cannot assure you that lithium prices or sales volumes will not continue to decline in the future.

 

We expect that prices for the products we manufacture will continue to be influenced, among other things, by worldwide supply and demand and the business strategies of major producers. Some of the major producers (including us) have increased or have the ability to increase production. As a result, the prices of our products may be subject to substantial volatility. High volatility or a substantial decline in the prices or sales volumes of one or more of our products could have a material adverse effect on our business, financial condition and results of operations.

 

Our sales to emerging markets and expansion strategy expose us to risks related to economic conditions and trends in those countries

 

We sell our products in more than 110 countries around the world. We expect to expand our sales in these and other emerging markets in the future. In addition, we may carry out acquisitions or joint ventures in jurisdictions in which we currently do not operate, relating to any of our businesses or to new businesses in which we believe we may have sustainable competitive advantages. The results of our operations and our prospects in other countries in which we establish operations will depend, in part, on the general level of political stability and economic activity and policies in those countries. Future developments in the political systems or economies of these countries or the implementation of future governmental policies in those countries, including the imposition of withholding and other taxes, restrictions on the payment of dividends or repatriation of capital or the imposition of new environmental regulations or price controls could have a material adverse effect on our business, financial condition and results of operations in those countries.

 

Our inventory levels may increase for economic or operational reasons

 

In general, economic conditions or operational factors can affect our inventory levels. Higher inventories carry a financial risk due to increased need for cash to fund working capital and could imply increased risk of loss of product. We cannot assure you that inventory levels will not continue to remain high or increase further in the future. These factors could have a material adverse effect on our business, financial condition and results of operations.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

60

Notes to the Consolidated Financial Statements as of September 30, 2018


Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.1   Risks Relating to Our Business (continued)

 

New production of iodine or lithium carbonate from current or new competitors in the markets in which we operate could adversely affect prices

 

In recent years, new and existing competitors have increased the supply of iodine and lithium carbonate, which has affected prices for both products. Further production increases could negatively impact prices. There is limited information on the status of new iodine or lithium carbonate production capacity expansion projects being developed by current and potential competitors and, as such, we cannot make accurate projections regarding the capacities of possible new entrants into the market and the dates on which they could become operational. If these potential projects are completed in the short term, they could adversely affect market prices and our market share, which, in turn, could have a material adverse effect on our business, financial condition and results of operations.

 

We have a capital expenditure program that is subject to significant risks and uncertainties

 

Our business is capital intensive. Specifically, the exploration and exploitation of reserves, mining and processing costs, the maintenance of machinery and equipment and compliance with applicable laws and regulations require substantial capital expenditures. We must continue to invest in capital to maintain or to increase our extraction levels and the amount of finished products we produce.

 

In addition, we require environmental permits for our new projects. Obtaining permits in certain cases may cause significant delays in the execution and implementation of new projects and, consequently, may require us to reassess the related risks and economic incentives. We cannot assure you that we will be able to maintain our production levels or generate sufficient cash flow, or that we will have access to sufficient investments, loans or other financing alternatives, to continue our activities at or above present levels, or that we will be able to implement our projects or receive the necessary permits required for them in time. Any or all of these factors may have a material adverse effect on our business, financial condition and results of operations.

 

High raw materials and energy prices could increase our production costs and cost of sales, and energy may become unavailable at any price

 

We rely on certain raw materials and various energy sources (diesel, electricity, natural gas such as LNG, fuel oil and others) to manufacture our products. Purchases of energy and raw materials we do not produce constitute an important part of our cost of sales. In addition, we may not be able to obtain energy at any price if supplies are curtailed or otherwise become unavailable. To the extent we are unable to pass on increases in the prices of energy and raw materials to our customers or we are unable to obtain energy, our business, financial condition and results of operations could be materially adversely affected.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

61

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.1   Risks Relating to Our Business (continued)

 

Our reserves estimates are internally prepared and not subject to review by external geologists or an external auditing firm and could be subject to significant changes, which may have a material adverse effect on our business, financial condition and results of operations

 

Our estimation methods for caliche ore involve numerous uncertainties as to the quantity and quality of the reserves, and reserve estimates could change upwards or downwards. Furthermore, our reserves estimates are not subject to review by external geologists or an external auditing firm. A downward change in the quantity and/or quality of our reserves could affect future volumes and costs of production and therefore have a material adverse effect on our business, financial condition and results of operations.

 

Quality standards in markets in which we sell our products could become stricter over time

 

In the markets in which we do business, customers may impose quality standards on our products and/or governments may enact stricter regulations for the distribution and/or use of our products. As a result, if we cannot meet such new standards or regulations, we may not be able to sell our products. In addition, our cost of production may increase in order to meet any such newly imposed or enacted standards or regulations. Failure to sell our products in one or more markets or to important customers could materially adversely affect our business, financial condition and results of operations.

 

Chemical and physical properties of our products could adversely affect their commercialization

 

Since our products are derived from natural resources, they contain inorganic impurities that may not meet certain customer or government standards. As a result, we may not be able to sell our products if we cannot meet such requirements. In addition, our cost of production may increase in order to meet such standards. Failure to sell our products in one or more markets or to important customers could materially adversely affect our business, financial condition and results of operations.

 

Our business is subject to many operating and other risks for which we may not be fully covered under our insurance policies

 

Our facilities and business operations in Chile and abroad are insured against losses, damage or other risks by insurance policies that are standard for the industry and that would reasonably be expected to be sufficient by prudent and experienced persons engaged in businesses similar to ours.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

62

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.1   Risks Relating to Our Business (continued)

 

We may be subject to certain events that may not be covered under our insurance policies, which could have a material adverse effect on our business, financial condition and results of operations. Additionally, as a result of major earthquakes and unexpected rains and flooding in Chile, as well as other natural disasters worldwide, conditions in the insurance market have changed and may continue to change in the future, and as a result, we may face higher premiums and reduced coverage, which could have a material adverse effect on our business, financial condition and results of operations.

 

Changes in technology or other developments could result in preferences for substitute products

 

Our products, particularly iodine, lithium and their derivatives, are preferred raw materials for certain industrial applications, such as rechargeable batteries and liquid-crystal displays (LCDs). Changes in technology, the development of substitute raw materials or other developments could adversely affect demand for these and other products which we produce. In addition, other alternatives to our products may become more economically attractive as global commodity prices shift. Any of these events could have a material adverse effect on our business, financial condition and results of operations.

 

We are exposed to labor strikes and labor liabilities that could impact our production levels and costs

 

Over 95% of our employees are employed in Chile, of which approximately 64% were represented by 22 labor unions as of December 31, 2017. We are exposed to labor strikes and illegal work stoppages that could impact our production levels. If a strike or illegal work stoppage occurs and continues for a sustained period of time, we could be faced with increased costs and even disruption in our product flow that could have a material adverse effect on our business, financial condition and results of operations.

 

Chilean Law No. 20,123, known as the Subcontracting Law, provides that when a serious workplace accident occurs, the company in charge of the workplace must halt work at the site where the accident took place until authorities from either the National Geology and Mining Service (Servicio Nacional de Geología y Minería or “Sernageomin”), the National Health Service (Servicio Nacional de Salud) or the Labor Board (Dirección del Trabajo or “Labor Board”) inspect the site and prescribe the measures such company must take to minimize the risk of similar accidents taking place in the future. Work may not be resumed until the applicable company has taken the prescribed measures, and the period of time before work may be resumed may last for a number of hours, days, or longer. The effects of this law could have a material adverse effect on our business, financial condition and results of operations.

 

On September 8, 2016, Chilean Law No. 20,940 was published and modified the Labor Code by introducing, among other things, changes to the formation of trade unions, the election of inter-company union delegates, the presence of women on union boards, anti-union practices and related sanctions, and collective negotiations. Due to these changes to the labor regulations, we may face an increase in our expenses that may have a significant adverse effect on our business, financial condition, and results of operations.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

63

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.1   Risks Relating to Our Business (continued)

 

Lawsuits and arbitrations could adversely impact us

 

We are party to a range of lawsuits and arbitrations involving different matters as described in the note on contingencies and restrictions. Although we intend to defend our positions vigorously, our defense of these actions may not be successful. Adverse judgments or settlements in these lawsuits may have a material adverse effect on our business, financial condition and results of operations. In addition, our strategy of being a world leader includes entering into commercial and production alliances, joint ventures and acquisitions to improve our global competitive position. As these operations increase in complexity and are carried out in different jurisdictions, we may be subject to legal proceedings that, if settled against us, could have a material adverse effect on our business, financial condition and results of operations.

 

We have operations in multiple jurisdictions with differing regulatory, tax and other regimes

 

We operate in multiple jurisdictions with complex regulatory environments that are subject to different interpretations by companies and respective governmental authorities. These jurisdictions may have different tax codes, environmental regulations, labor codes and legal frameworks, which adds complexity to our compliance with these regulations and could have a material adverse effect on our business, financial condition and results of operations.

 

Environmental laws and regulations could expose us to higher costs, liabilities, claims and failure to meet current and future production targets

 

Our operations in Chile are subject to national and local regulations relating to environmental protection. In accordance with such regulations, we are required to conduct environmental impact studies or statements before we conduct any new projects or activities or significant modifications of existing projects that could impact the environment or the health of people. We are also required to obtain an environmental license for certain projects and activities. The Environmental Evaluation Service (Servicio de Evaluación Ambiental or “Environmental Evaluation Service”) evaluates environmental impact studies submitted for its approval and allows the public, government agencies or local authorities to review and challenge projects that may adversely affect the environment, either before these projects are executed or once they are operating, if they fail to comply with applicable regulations. In order to ensure compliance with environmental regulations, Chilean authorities, through the Environmental Superintendency, may impose fines up to approximately US$9 million per infraction, temporarily or permanently close facilities or revoke environmental permits.

 

Chilean environmental regulations have become increasingly stringent in recent years, both with respect to the approval of new projects and in connection with the implementation and development of projects already approved, and we believe that this trend is likely to continue. Given public interest in environmental enforcement matters, these regulations or their application may also be subject to political considerations that are beyond our control.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

64

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.1   Risks Relating to Our Business (continued)

 

We regularly monitor the impact of our operations on the environment and on the health of people and have, from time to time, made modifications to our facilities to minimize any adverse impact. Future developments in the creation or implementation of environmental requirements or their interpretation could result in substantially increased capital, operation or compliance costs or otherwise adversely affect our business, financial condition and results of operations.

 

The success of our current investments at the Salar de Atacama and Nueva Victoria is dependent on the behavior of the ecosystem variables being monitored over time. If the behavior of these variables in future years does not meet environmental requirements, our operation may be subject to important restrictions by the authorities on the maximum allowable amounts of brine and water extraction.

 

Our future development depends on our ability to sustain future production levels, which requires additional investments and the submission of the corresponding environmental impact studies or statements. If we fail to obtain approval or required environmental licenses, our ability to maintain production at specified levels will be seriously impaired, thus having a material adverse effect on our business, financial condition and results of operations.

 

In addition, our worldwide operations are subject to international and other local environmental regulations. Since environmental laws and regulations in the different jurisdictions in which we operate may change, we cannot guarantee that future environmental laws, or changes to existing environmental laws, will not materially adversely impact our business, financial condition and results of operations.

 

Our water supply could be affected by geological changes or climate change

 

Our access to water may be impacted by changes in geology or other natural factors, such as wells drying up or reductions in the flow available in the wells or rivers from which we obtain water, that we cannot control. Any such change may have a material adverse effect on our business, financial condition and results of operations.

 

Any loss of key personnel may materially and adversely affect our business

 

Our success depends in large part on the skills, experience and efforts of our senior management team and other key personnel. The loss of the services of key members of our senior management or employees with critical skills could have a negative effect on our business, financial condition and results of operations. If we are not able to attract or retain highly skilled, talented and qualified senior managers or other key personnel, our ability to fully implement our business objectives may be materially and adversely affected.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

65

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.1   Risks Relating to Our Business (continued)

 

5.2.2   Risks Relating to Chile

 

As we are a company based in Chile, we are exposed to Chilean political risks

 

Our business, financial condition and results of operations could be affected by changes in policies of the Chilean government, other political developments in or affecting Chile, legal changes in the standards or administrative practices of Chilean authorities or the interpretation of such standards and practices, over which we have no control.

 

Changes in regulations regarding, or any revocation or suspension of our concessions could negatively affect our business

 

Any changes to regulations to which we are subject or adverse changes to our concession rights, or a revocation or suspension of our concessions, could have a material adverse effect on our business, financial condition and results of operations.

 

Changes in mining or port concessions could affect our operating costs

 

We conduct our mining operations, including brine extraction, under exploitation and exploration concessions granted in accordance with provisions of the Chilean constitution and related laws and statutes. Our exploitation concessions essentially grant a perpetual right (with the exception of the rights granted with respect to the Salar de Atacama concessions that have been leased to us until 2030) to conduct mining operations in the areas covered by the concessions, provided that we pay annual concession fees and comply with other essential obligations under the respective agreements with Corfo. Our exploration concessions permit us to explore for mineral resources on the land covered thereby for a specified period of time and to subsequently request a corresponding exploitation concession.

 

Our subsidiary SQM Salar, as leaseholder, holds exclusive and temporary rights over the mineral resources in an area covering approximately 140,000 hectares of land in the Salar de Atacama in northern Chile, of which SQM Salar is exclusively entitled to exploit the mineral resources in 81,920 hectares. The respective mining concessions are exclusively owned by Corfo and leased to SQM Salar pursuant to a Lease Agreement between Corfo and SQM Salar. Corfo may not unilaterally amend the Lease Agreement or the Project Agreement, and the rights to exploit the minerals may not be transferred. The Lease Agreement establishes that SQM Salar is responsible for making quarterly lease payments to Corfo, maintaining Corfo’s rights over the mining exploitation concessions, and making annual payments to the Chilean government for such concession rights. The Lease Agreement expires on December 31, 2030.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

66

Notes to the Consolidated Financial Statements as of September 30, 2018


Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.2   Risks Relating to Chile (continued)

  

We also operate port facilities at Tocopilla, Chile, for the shipment of products and the delivery of raw materials pursuant to maritime concessions, which have been granted under applicable Chilean laws and are normally renewable on application, provided that such facilities are used as authorized and annual concession fees are paid.

 

Any significant adverse changes to any of these concessions could have a material adverse effect on our business, financial condition and results of operations.

 

Changes in water rights laws and other regulations could affect our operating costs

 

We hold water use rights that are key to our operations. These rights were obtained from the Chilean Water Authority (Dirección General de Aguas) for supply of water from rivers and wells near our production facilities, which we believe are sufficient to meet current operating requirements. However, the Chilean water rights code (Código de Aguas or the “Water Code”) and the respective laws and regulations are subject to changes, which could have a material adverse impact on our business, financial condition and results of operations. For example, a series of bills are currently being discussed at the Chilean National Congress that seek to desalinate seawater for use in mining production processes, amend the Mining Code for water use in mining operations, amend the Political Constitution on water and introduce changes to the regulatory framework governing the terms of inspection and sanction of water. As a result, the amount of water that we can actually use under our existing rights may be reduced or the cost of such use could increase. These and potential future changes to the Water Code or other relevant regulations could have a material adverse effect on our business, financial condition and results of operations.

 

The Chilean government could levy additional taxes on corporations operating in Chile

 

In Chile, there is a royalty tax that is applied to mining activities developed in the country.

 

On September 29, 2014, Law No. 20,780 was published (the “Tax Reform”), introducing significant changes to the Chilean taxation system and strengthening the powers of the SII to control and prevent tax avoidance. Subsequently, on February 8, 2016, Law No. 20,899 that simplifies the income tax system and modifies other legal tax provisions was published. As a result of these reforms, open stock corporations like SQM are subject to the partially integrated shareholder tax regime (sistema parcialmente integrado). The corporate tax rate applicable to us increased gradually from 20% in 2013 to 25.5% in 2017. The rate in force for 2018 is 27%.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

67

Notes to the Consolidated Financial Statements as of September 30, 2018


Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.2   Risks Relating to Chile (continued)

 

Under the partially integrated shareholder taxation regime, shareholders bear the tax on dividends upon payment, but they will only be permitted to credit against such shareholder taxes a portion of the Chilean corporate tax paid by us on our earnings, unless the shareholder is resident in a country with a tax treaty in force with Chile or signed with Chile prior to January 1, 2017, whether or not in force. In that case, 100% of the Chilean corporate tax paid by us may be credited against the final taxes at the shareholder level.

 

As a result, foreign shareholders resident in a non-treaty jurisdiction will be subject to a higher effective tax rate than residents of treaty jurisdictions. There is a temporary rule in effect from January 1, 2017, through December 31, 2019, that treaty jurisdictions for this purpose will include jurisdictions with tax treaties signed with Chile prior to January 1, 2017, whether or not such treaties are in force. This is currently the status of the treaty signed between Chile and United States.

 

The Tax Reform tax increase prompted a US$52.3 million increase in our deferred tax liabilities as of December 31, 2014. In accordance with instructions issued by the CMF, the effects of this adjustment were accounted for with a reduction in net equity in our statement of financial position as of December 31, 2014.

 

In addition, the Tax Reform may have other material adverse effects on our business, financial condition and results of operations. Likewise, we cannot assure you that the manner in which the Royalty Law or the corporate tax rate are interpreted and applied will not change in the future. The Chilean government may decide to levy additional taxes on mining companies or other corporations in Chile. Any such change may have a material adverse effect on our business, financial condition and results of operations.

 

Ratification of the International Labor Organization’s Convention 169 concerning indigenous and tribal peoples might affect our development plans

 

Chile, a member of the International Labor Organization (“ILO”), has ratified the ILO’s Convention 169 (the “Indigenous Rights Convention”) concerning indigenous and tribal people. The Indigenous Rights Convention established several rights for indigenous people and communities. Among other rights, the Indigenous Rights Convention states that (i) indigenous groups should be notified and consulted prior to the development of any project on land deemed indigenous, although veto rights are not mentioned and (ii) indigenous groups have, to the extent possible, a stake in benefits resulting from the exploitation of natural resources in indigenous land. The extent of these benefits has not been defined by the Chilean government. The Chilean government has addressed item (i) above through Supreme Decree No. 66 issued by the Social Development Ministry. This decree requires government entities to consult indigenous groups that may be directly affected by the adoption of legislative or administrative measures, and it also defines criteria for the projects or activities that must be reviewed through the environmental evaluation system that also require such consultation. To the extent that the new rights outlined in the Indigenous Rights Convention become laws or regulations in Chile, they could affect the development of our investment projects in lands that have been defined as indigenous, which could have a material adverse effect on our business, financial condition and results of operations.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

68

Notes to the Consolidated Financial Statements as of September 30, 2018


Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.2   Risks Relating to Chile (continued)

  

Chile is located in a seismically active region

 

Chile is prone to earthquakes because it is located along major fault lines. The most recent major earthquakes in Chile, which occurred in April 2017 in the Valparaiso region and in December 2016 in Chiloe Island, had a magnitude of 6.9 and 7.6, respectively, on the Richter scale. There were also earthquakes in 2015, 2014 and 2010 that caused substantial damage to some areas of the country. Chile has also experienced volcanic activity. A major earthquake or a volcanic eruption could have significant negative consequences for our operations and for the general infrastructure, such as roads, rail, and access to goods, in Chile. Although we maintain industry standard insurance policies that include earthquake coverage, we cannot assure you that a future seismic or volcanic event will not have a material adverse effect on our business, financial condition and results of operations.

 

5.2.3   Risks Relating to Our Shares and to Our ADSs

 

The price of our ADSs (American Depositary Shares - SQM shares traded on the New York Stock Exchange) and the U.S. dollar value of any dividends will be affected by fluctuations in the U.S. dollar/Chilean peso exchange rate

 

Chilean trading in the shares underlying our ADSs is conducted in Chilean pesos. The depositary will receive cash distributions that we make with respect to the shares in Chilean pesos. The depositary will convert such Chilean pesos to U.S. dollars at the then prevailing exchange rate to make dividend and other distribution payments in respect of ADSs. If the value of the Chilean peso falls relative to the U.S. dollar, the value of the ADSs and any distributions to be received from the depositary will decrease.

 

Developments in other emerging markets could materially affect the value of our ADSs and our shares

 

The Chilean financial and securities markets are, to varying degrees, influenced by economic and market conditions in other emerging market countries or regions of the world. Although economic conditions are different in each country or region, investor reaction to developments in one country or region can have significant effects on the securities of issuers in other countries and regions, including Chile and Latin America. Events in other parts of the world may have a material effect on Chilean financial and securities markets and on the value of our ADSs and our shares.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

69

Notes to the Consolidated Financial Statements as of September 30, 2018


Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.3   Risks Relating to Our Shares and to Our ADSs (continued)

 

The volatility and low liquidity of the Chilean securities markets could affect the ability of our shareholders to sell our ADSs

 

The Chilean securities markets are substantially smaller, less liquid and more volatile than the major securities markets in the United States. The volatility and low liquidity of the Chilean markets could increase the price volatility of our ADSs and may impair the ability of a holder to sell our ADSs into the Chilean market in the amount and at the price and time he wishes to do so.

 

Our share or ADS price may react negatively to future acquisitions and investments

 

As world leaders in our core businesses, part of our strategy is to look for opportunities that will allow us to consolidate and strengthen our competitive position in jurisdictions in which we currently do not operate. Pursuant to this strategy, we may carry out acquisitions or joint ventures relating to any of our businesses or to new businesses in which we believe we may have sustainable competitive advantages. Depending on our capital structure at the time of such acquisitions or joint ventures, we may need to raise significant debt and/or equity, which will affect our financial condition and future cash flows. Any change in our financial condition could affect our results of operations, negatively impacting our share or ADS price.

 

ADS holders may be unable to enforce rights under U.S. securities law

 

Because we are a Chilean company subject to Chilean law, the rights of our shareholders may differ from the rights of shareholders in companies incorporated in the United States, and ADS holders may not be able to enforce or may have difficulty enforcing rights currently in effect under U.S. federal or state securities laws.

 

Our Company is an open stock corporation incorporated under the laws of the Republic of Chile. Most of our directors and officers reside outside the United States, principally in Chile. All or a substantial portion of the assets of these persons are located outside the United States. As a result, if any of our shareholders, including holders of our ADSs, were to bring a lawsuit against our officers or directors in the United States, it may be difficult for them to effect service of legal process within the United States upon these persons. Likewise, it may be difficult for them to enforce judgments obtained in United States courts based upon the civil liability provisions of the federal securities laws in the United States against them in the United States.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

70

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.3   Risks Relating to Our Shares and to Our ADSs (continued)

 

In addition, there is no treaty between the United States and Chile providing for the reciprocal enforcement of foreign judgments. However, Chilean courts have enforced judgments rendered in the United States, provided that the Chilean court finds that the United States court respected basic principles of due process and that the judgment does not violate any Chilean laws. Nevertheless, there is doubt as to whether an action could be brought successfully in Chile in the first instance on the basis of liability based solely upon the civil liability provisions of the United States federal securities laws.

 

As preemptive rights may be unavailable for our ADS holders, they have the risk of their holdings being diluted if we issue new stock

 

Chilean laws require companies to offer their shareholders preemptive rights whenever issuing new shares of capital stock so shareholders can maintain their existing ownership percentage in a company. If we increase our capital by issuing new shares, a holder may subscribe for up to the number of shares that would prevent dilution of the holder’s ownership interest.

 

If we issue preemptive rights, United States holders of ADSs would not be able to exercise their rights unless a registration statement under the Securities Act were effective with respect to such rights and the shares issuable upon exercise of such rights or an exemption from registration were available. We cannot assure holders of ADSs that we will file a registration statement or that an exemption from registration will be available. We may, in our absolute discretion, decide not to prepare and file such a registration statement. If our holders were unable to exercise their preemptive rights because we did not file a registration statement, the depositary bank would attempt to sell their rights and distribute the net proceeds from the sale to them, after deducting the depositary’s fees and expenses. If the depositary could not sell the rights, they would expire and holders of ADSs would not realize any value from them. In either case, ADS holders’ equity interest in us would be diluted in proportion to the increase in our capital stock.

 

If we were classified as a Passive Foreign Investment Company by the U.S. Internal Revenue Service, there could be adverse consequences for U.S. investors

 

We believe that we were not classified as a Passive Foreign Investment Company (“PFIC”) for 2017. Characterization as a PFIC could result in adverse U.S. tax consequences to you if you are a U.S. investor in our shares or ADSs. For example, if we (or any of our subsidiaries) are a PFIC, our U.S. investors may become subject to increased tax liabilities under U.S. tax laws and regulations and will become subject to burdensome reporting requirements. The determination of whether or not we (or any of our subsidiaries or portfolio companies) are a PFIC is made on an annual basis and will depend on the composition of our (or their) income and assets from time to time.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

71

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 5Financial Risk Management (continued)

 

5.2Risk Factors (continued)

 

5.2.3   Risks Relating to Our Shares and to Our ADSs (continued)

 

U.S. federal income tax reform could adversely affect us and holders of our shares and ADSs 

 

On December 22, 2017, President Trump signed into law H.R. 1, originally known as the “Tax Cuts and Jobs Act,” which significantly reformed the Internal Revenue Code of 1986, as amended. The impact of this tax reform, or of any future administrative guidance interpreting provisions thereof, on holders of our ADSs or shares is uncertain and could be adverse. Prospective investors are urged to consult with their own legal and tax advisors with respect to any such legislation and the potential tax consequences of purchasing, holding, and disposing of our shares and ADSs.

 

Changes in Chilean tax regulations could have adverse consequences for U.S. investors

  

Currently cash dividends paid by us to foreign shareholders are subject to a 35% Chilean withholding tax. When the Company pays corporate income tax on the income from which the dividend is paid, known as a “First Category Tax”, a credit for First Category Tax effectively reduces the rate of Withholding Tax. Changes in Chilean tax regulations could have adverse consequences for U.S. investors.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

72

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 5Financial risk management, continued

 

5.2.4Credit risk

 

A contraction of the global economy and the potentially adverse effects in the financial position of our customers may extend the receivables recovery period for SQM, increasing its exposure to doubtful account risk. While measures have been taken to minimize such risk, the global economic situation may result in losses that might have a material adverse effect on the Company’s business, financial position or results of operations.

 

To mitigate these risks, SQM actively controls debt collection and has established certain safeguards which include loan insurance, letters of credit, and prepayments for a portion of receivables.

 

Financial investments correspond to time deposits with maturities exceeding 90 days and less than 360 days from the investment date, so they are not exposed to significant market risks.

 

The credit quality of financial assets that are neither past due nor impaired can be assessed by reference to external credit ratings (if available) or to historical information about counterparty default rates:

 

      Rating Institution   9/30/2018 
Financial institution  Financial assets  Moody’s   S&P   Fitch   ThUS$ 
Banco de Chile  Time deposits   P-1    A-1    -    2,358 
Banco de Crédito e Inversiones  Time deposits   P-1    A-1         9,125 
Banco Itau Corpbanca  Time deposits   P-2    A-2    -    3,006 
BBVA Banco Francés  Time deposits   -    -    -    75 
Nedbank  Time deposits   P-3    B    -    3,719 
ABN Amro Bank  Time deposits   P-1    A-1    -    232 
JP Morgan US dollar Liquidity Fund Institutional  Investment fund deposits   -    -    -    125,225 
Legg Mason - Western Asset Institutional Cash Reserves  Investment fund deposits   -    -    -    139,856 
Total                     283,596 

 

      Rating Institution   9/30/2018 
Financial institution  Financial assets  Moody’s   S&P   Fitch   ThUS$ 
Banco Scotiabank  90 days to 1 year   -    -    -    19,897 
Banco de Crédito e Inversiones  90 days to 1 year   P-1    A-1    -    133,787 
Banco Santander  90 days to 1 year   P-1    A-1    -    50,060 
Banco Itaú-Corpbanca  90 days to 1 year   P-2    A-2    -    102,547 
Banco de Chile  90 days to 1 year   P-1    A-1    -    4,013 
Total                     310,304 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

73

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 5Financial risk management, continued

 

5.2.5Currency risk

 

As a result of its influence on price level determination as well as its relationship with cost of sales, and since a significant portion of the Company’s business transactions are performed in that foreign currency, the functional currency of SQM is the United States dollar. However, the global business activities of the Company expose it to the foreign exchange fluctuations of several currencies with respect to the value of the U.S. dollar. Accordingly, SQM has entered into hedge contracts to mitigate the exposure generated by its main mismatches (assets, net of liabilities) in currencies other than the U.S. dollar against foreign exchange fluctuation. These contracts are periodically updated depending on the mismatch amount to be hedged in such currencies. Occasionally, and subject to the Board of Directors’ approval, in the short-term the Company insures cash flows from certain specific items in currencies other than the U.S. dollar.

 

A significant portion of the Company’s costs, particularly payroll, is denominated in Chilean pesos. Accordingly, an increase or decrease in the exchange rate against the U.S. dollar would affect the Company’s profit for the period. Approximately US$312 million of the Company’s costs are denominated in Chilean pesos. A significant portion of the effect of such obligations on the statement of financial position is hedged by derivative instrument transactions on the balance mismatch in such currency.

 

As of September 30, 2018, the Company recorded derivative instruments classified as currency and interest rate hedges associated with all the bonds payable, denominated in UF, with a fair value of US$21,3 million in favor SQM. As of June 30, 2018 this amounts to US$17.9 million in favor and December 31, 2017, this amounts to US$5 million against SQM. As of Juny 30, 2018, this value amounted to US$17,9 against the Company and as of December 31, 2017, it totaled US$5 million against the Company.

 

As of September 30, 2018, the Chilean peso to U.S. dollar exchange rate was Ch$660.42 per US$1.00 (Ch$ 614.75 per US$ 1.00 as of December 31, 2017).

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

74

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 5Financial risk management, continued

 

5.2.6Interest rate risk

 

Interest rate fluctuations, primarily due to the uncertain future behavior of markets, may have a material impact on the financial results of the Company.

 

The Company has current and non-current debts valued at the LIBOR rate, plus a spread.

 

As of September 30, 2018, the Company has around 6% of its financial liabilities linked to variations in the LIBOR rate and therefore any significant increases in that rate would impact its financial position. A change of 100 base points over that rate could generate variations in finance costs of around US$0.24 million.

 

In addition, as of September 30, 2018, the Company's financial liabilities are mainly concentrated in the long-term and none have maturities of less than 12 months, decreasing in the process the exposure to changes in interest rates.

 

5.2.7Liquidity risk

 

Liquidity risk relates to the funds needed to comply with payment obligations. The Company’s objective is to maintain financial flexibility through a comfortable balance between fund requirements and cash flows from regular business operations, bank borrowings, bonds, short term investments, and marketable securities, among others.

 

The Company has an important capital expense program which is subject to change over time.

 

On the other hand, world financial markets go through periods of contraction and expansion that are unforeseeable in the long-term and may affect SQM’s access to financial resources. Such factors may have a material adverse impact on the Company’s business, financial position and results of operations.

 

SQM constantly monitors the matching of its obligations with its investments, taking due care of maturities of both, from a conservative perspective, as part of this financial risk management strategy. As of September 30, 2018, the Company had unused, available revolving credit facilities with banks, for a total of approximately US$441 million.

 

The position in other cash and cash equivalents generated by the Company are invested in highly liquid mutual funds with an AAA risk rating.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

75

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 5Financial risk management, continued

 

5.2.7Liquidity risk, continued

 

   Nature of undiscounted cash flows 
As of September 30, 2018  Carrying
amount
   Less than 1
year
   1 to 5 years   Over 5 years   Total 
(in millions of US$)                    
Other non-derivative financial liabilities                         
Bank borrowings   70.86    2.64    81.97    -    84.61 
Unsecured obligations   1,168.53    58.45    828.26    546.03    1,432.74 
Subtotal   1,239.39    61.09    910.23    546.03    1,517.35 
Other derivative financial liabilities                         
Hedging liabilities   (37.90)   (12.05)   4.45    23.27    15.67 
Derivative financial instruments   (4.76)   (4.76)   -    -    (4.76)
Subtotal   (42.66)   (16.81)   4.45    23.27    10.91 
Total   1,196.73    44.28    914.68    569.30    1,528.26 

 

   Nature of undiscounted cash flows 
As of December 31, 2017  Carrying
amount
   Less than 1
year
   1 to 5 years   Over 5 years   Total 
(in millions of US$)                    
Other non-derivative financial liabilities                         
Bank borrowings   163.57    164.78    -    -    164.78 
Unsecured obligations   1,054.89    47.45    522.52    751.67    1,321.64 
Subtotal   1,218.46    212.23    522.52    751.67    1,486.42 
Other derivative financial liabilities                         
Hedging liabilities   28.38    37.01    (9.51)   (18.36)   9.14 
Derivative financial instruments   0.80    0.80    -    -    0.80 
Subtotal   29.18    37.81    (9.51)   (18.36)   9.94 
Total   1,247.64    250.04    513.01    733.31    1,496.36 

 

5.3Risk measurement

 

The Company has methods to measure the effectiveness and efficiency of financial risk hedging strategies, both prospectively and retrospectively. These methods are consistent with the risk management profile of the Group.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

76

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 6Background of companies included in consolidation

 

6.1Parent’s stand-alone assets and liabilities

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
         
Assets   3,863,707    3,658,528 
Liabilities   (1,777,712)   (1,470,707)
Equity   2,085,995    2,187,821 

 

6.2Parent entity

 

As provided in the Company’s by-laws, no shareholder can concentrate more than 32% of the Company’s voting right shares and therefore there is no controlling entity.

 

Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A., and Inversiones Global Mining (Chile) Ltda,, collectively the Pampa Group, are the owners of a number of shares that as of September 30, 2018 are equivalent to 32% of the current total amount of issued, subscribed and fully-paid shares in the Company.

 

Other than the Pampa Group, to date no persons directly, or through other individuals or legal entities, control at least 25% of the Company’s voting right shares. The Pampa Group does not qualify for the exception in letter b) of article 99 of Law No. 18,045 on Securities Markets (the “Securities Market Law”).

 

As a result, based on articles 97 and 99 of the Securities Market Law, the Pampa Group is considered the Company's controller. Notwithstanding, and pursuant to letter c) of article 99 of the Securities Market Law, the Financial Market Commission (“CMF”) may determine that the Pampa Group is not the Company’s controller based on the distribution and dispersion of the Company’s ownership. The Company has requested a declaration from the CMF on the matter, which has not yet been issued.

 

The Company’s second largest shareholder is Nutrien Ltd., a Canadian company with 23.77% of the current total amount of issued, subscribed and fully-paid shares in the Company. All of its shares are series A shares, giving it 48.80% of the shares of that series. Therefore, and considering the restrictions in the Bylaws, both the Pampa Group and Nutrien can elect the same number of directors (i.e. three each) of a total of eight directors on the Company's board.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

77

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 7Board of Directors, Senior Management And Key management personnel

 

7.1Board of Directors and Senior Management

 

1)Board of directors

 

SQM S.A. is managed by a Board of Directors which is composed of 8 regular directors, 2 of whom are independent directors, who are elected for a three-year period. The present Board of Directors was elected by the shareholders at the Ordinary Shareholders' Meeting of April 27, 2018.

 

As of September 30, 2018, the Company has the following Committees:

 

-Directors’ Committee: This committee comprises Hernán Büchi Buc, Laurence Golbome Riveros and Alberto Salas Muñoz and fulfills the functions established in Article 50 bis of Chilean Law no. 18.046 on publicly-held corporations.

-The Company’s Health, Safety and Environmental Matters Committee: This committee comprises Arnfinn F. Prugger, Patricio Contesse Fica and Gonzalo Guerrero Yamamoto.

-Corporate Governance Committee: The members of this committee are Darryl Stann, Hernán Büchi Buc and Mark F. Fracchia.

 

During the periods covered by these financial statements, there are no pending balances receivable and payable between the Company, its directors or members of Senior Management, other than those related to remuneration, fee allowances and profit-sharing. In addition, there were no transactions conducted between the Company, its directors or members of Senior Management.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

78

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 7Board of Directors, Senior Management And Key management personnel (continued)

 

7.1Board of Directors and Senior Management, continued

 

2)Directors’ Compensation

 

Directors’ compensation is detailed as follows:

 

a)The payment of a fixed, gross and monthly amount of four hundred UF in favor of the Chairman of the Board of Directors of SQM S.A. and of 350 UF in favor of the remaining seven Directors of SQM S.A. and regardless of the number of Board of Directors’ Meetings held or not held during the related month.

b)A payment in domestic currency in favor of the Chairman of the Company’s Board of Directors consisting of a variable and gross amount equivalent to 0.12% of profit for the period effectively earned by the Company during the 2018 fiscal year.

c)A payment in domestic currency in favor of each Company’s directors excluding the Chairman of the Board, consisting of a variable and gross amount equivalent to 0.06% of profit for the period effectively earned by the Company during the 2018 fiscal year.

d)The fixed and variable amounts indicated above cannot be altered and those expressed in percentages will be paid after the related General Shareholders’ Meeting of SQM S.A. approves the Balance Sheet, Financial Statements, Annual Report, the Account Inspectors’ Report and Independent Auditor’s Report of SQM S.A. for the commercial year ended December 31, 2018.

e)The amounts expressed in UF will be paid in accordance with the value determined by the Chilean Superintendence of Banks and Financial Institutions (SBIF), the Central Bank of Chile (Banco Central de Chile) or another relevant institution replacing them during the last day of the calendar year applicable, The amounts reflected in or referred to in U.S. dollars will be converted to Chilean pesos and paid in Chilean pesos in accordance with the exchange rate in force when the dividend for the 2018 fiscal year is paid,

f)Therefore, the remunerations and profit sharing paid to members of the Board of Directors and Audit Committee as of September 30, 2018, amount to ThUS$3,472, and as of September 30, 2017 to ThUS$2,790 (ThUS$ 3,231 as of December 31, 2017).

 

3)Directors’ Committee

 

The remuneration of the Directors Committee comprises:

 

a)The payment of a fixed, gross and monthly amount of UF 113 in favor of each of the 3 directors that are members of the Directors’ Committee, regardless of the number of meetings of the Directors’ Committee that have or have not been held during the month concerned.

b)The payment in domestic currency and in favor of each of the 3 directors of a variable and gross amount equivalent to 0.02% of total net profit that the Company effectively obtains during the 2018 fiscal year.

c)Approval of a budget for operating costs for the Directors’ Committee equal to the total of their joint annual remunerations plus ThUS$825.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

79

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 7Board of Directors, Senior Management And Key management personnel (continued)

 

7.1Board of Directors and Senior Management, continued

 

d)The fixed and variable amounts indicated above cannot be altered and those expressed in percentages will be paid after the related General Shareholders’ Meeting of SQM S.A. approves the Balance Sheet, Financial Statements, Annual Report, the Account Inspectors’ Report and Independent Auditor’s Report of SQM S.A. for the commercial year ended December 31, 2018.

e)The amounts expressed in UF will be paid in accordance with the value determined by the Chilean Superintendence of Banks and Financial Institutions (SBIF), the Central Bank of Chile (Banco Central de Chile) or another relevant institution replacing them during the last day of the calendar year applicable. The amounts reflected in or referred to in U,S, dollars will be converted to Chilean pesos and paid in Chilean pesos in accordance with the exchange rate in force when the dividend for the 2018 fiscal year is paid.

 

4)Health, Safety and Environmental Matters Committee:

 

The remuneration for this committee is composed of the payment of a fixed, gross and monthly amount of UF 50 for each of the 3 Directors on the committee, regardless of the number of meetings it has held.

 

5)Corporate Governance Committee

 

The remuneration for this committee is composed of the payment of a fixed, gross, monthly amount of UF 50 for each of the 3 Directors on the committee regardless of the number of meetings it has held.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

80

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 7Board of Directors, Senior Management And Key management personnel (continued)

 

7.1Board of Directors and Senior Management, continued

 

6)No guarantees have been constituted in favor of the directors.

 

7)Senior management compensation:

 

a)As of September 30, 2018, the global compensation paid to the 123 main executives amounts to ThUS$22,474 the global compensation paid to the 113 main executives as of September 30, 2017 amounted to ThUS$22,067 and the global compensation paid to the 115 main executives as of December 31, 2017 amounted to ThUS$27,367. This includes monthly fixed salary and variable performance bonuses.

 

b)SQM S.A. has an annual bonus plan based on goal achievement and individual contribution to the Company’s results, These incentives are structured as a minimum and maximum number of gross monthly salaries and are paid once a year.

 

c)The Company also has retention bonuses for its executives, The value of these bonuses is linked to the Company's stock price and is payable in cash during the first quarter of 2021 (see Note 18.6).

 

8)No guarantees have been constituted in favor of the Company’s management.

 

9)The Company’s Managers and Directors do not receive or have not received any benefit during the period ended September 30, 2018 and the year ended December 31, 2017 or compensation for the concept of pensions, life insurance, paid time off, profit sharing, incentives, or benefits due to disability other than those mentioned in the preceding points.

 

7.2Key management personnel compensation

 

As of September 30, 2018, there are 123 people occupying key management personnel posts (there were 115 as of December 31, 2017).

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
           
Key management personnel compensation (1)   22,474    27,367 

 

(1)Corresponds to a number of executives (see Note 7.1 7) a).

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

81

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 8Background on companies included in consolidation and non-controlling interests

 

8.1Background on companies included in consolidation

 

The following tables detail general information as of September 30, 2018 and December 31, 2017, on the companies in which the group exercises control and significant influence:

 

         Country of     Ownership Interest 
Subsidiaries  TAX ID No.  Address  Incorporation  Functional Currency  Direct   Indirect   Total 
                         
SQM Nitratos S.A.  96.592.190-7  El Trovador 4285 Las Condes  Chile  US dollar   99.9999    0.0001    100.0000 
Proinsa Ltda.  78.053.910-0  El Trovador 4285 Las Condes  Chile  Chilean peso   -    60.5800    60.5800 
SQMC Internacional Ltda.  86.630.200-6  El Trovador 4285 Las Condes  Chile  Chilean peso   -    60.6381    60.6381 
SQM Potasio S.A.  96.651.060-9  El Trovador 4285 Las Condes  Chile  US dollar   99.9999    -    99.9999 
Serv. Integrales de Tránsito y Transf. S.A.  79.770.780-5  Arturo Prat 1060, Tocopilla  Chile  US dollar   0.0003    99.9997    100.0000 
Isapre Norte Grande Ltda.  79.906.120-1  Anibal Pinto 3228, Antofagasta  Chile  Chilean peso   1.0000    99.0000    100.0000 
Ajay SQM Chile S.A.  96.592.180-K  Av. Pdte. Eduardo Fri 4900, Santiago  Chile  US dollar   51.0000    -    51.0000 
Almacenes y Depósitos Ltda.  79.876.080-7  El Trovador 4285 Las Condes  Chile  Chilean peso   1.0000    99.0000    100.0000 
SQM Salar S.A.  79.626.800-K  El Trovador 4285 Las Condes  Chile  US dollar   18.1800    81.8200    100.0000 
SQM Industrial S.A.  79.947.100-0  El Trovador 4285 Las Condes  Chile  US dollar   99.0470    0.9530    100.0000 
Exploraciones Mineras S.A.  76.425.380-9  El Trovador 4285 Las Condes  Chile  US dollar   0.2691    99.7309    100.0000 
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.  76.534.490-5  Anibal Pinto 3228, Antofagasta  Chile  Chilean peso   -    100.0000    100.0000 
Soquimich Comercial S.A.  79.768.170-9  El Trovador 4285 Las Condes  Chile  US dollar   -    60.6383    60.6383 
Comercial Agrorama Ltda. (*)  76.064.419-6  El Trovador 4285 Las Condes  Chile  Chilean peso   -    42.4468    42.4468 
Comercial Hydro S.A.  96.801.610-5  El Trovador 4285 Las Condes  Chile  US dollar   -    60.6383    60.6383 
Agrorama S.A.  76.145.229-0  El Trovador 4285 Las Condes  Chile  Chilean peso   -    60.6377    60.6377 
Orcoma Estudios SPA  76.359.919-1  Apoquindo 3721 OF 131 Las Condes  Chile  US dollar   51.0000    -    51.0000 
Orcoma SPA  76.360.575-2  Apoquindo 3721 OF 131 Las Condes  Chile  US dollar   100.0000    -    100.0000 
SQM MaG SpA  76.686.311-9  Los Militares 4290, Las Condes  Chile  US dollar   -    100.0000    100.0000 
SQM North America Corp.  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA  United States of America  US dollar   40.0000    60.0000    100.0000 
RS Agro Chemical Trading Corporation A.V.V.  Foreign  Caya Ernesto O. Petronia 17, Orangestad  Aruba  US dollar   98.3333    1.6667    100.0000 
Nitratos Naturais do Chile Ltda.  Foreign  Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo  Brazil  US dollar   -    100.0000    100.0000 
Nitrate Corporation of Chile Ltd.  Foreign  1 More London Place London SE1 2AF  United Kingdom  US dollar   -    100.0000    100.0000 
SQM Corporation N.V.  Foreign  Pietermaai 123, P.O. Box 897, Willemstad, Curacao  Curacao  US dollar   0.0002    99.9998    100.0000 
SQM Perú S.A.  Foreign  Avenida Camino Real N° 348 of. 702, San Isidro, Lima  Peru  US dollar   0.9800    99.0200    100.0000 
SQM Ecuador S.A.  Foreign  Av. José Orrantia y Av. Juan Tanca Marengo Edificio Executive Center Piso 2 Oficina 211  Ecuador  US dollar   0.0040    99.9960    100.0000 

 

(*) SQM controls Soquimich Comercial, which in turn controls Comercial Agrorama Ltda. SQM has management control over Comercial Agrorama Ltda.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

82

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 8Background on companies included in consolidation and non-controlling interests (continued)

 

8.1Background on companies included in consolidation, continued

 

          Country of     Ownership Interest 
Subsidiaries  TAX ID No.  Address  Incorporation  Functional Currency  Direct   Indirect   Total 
                         
SQM Brasil Ltda.  Foreign  Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo  Brazil  US dollar   1.0900    98.9100    100.0000 
SQI Corporation N.V.  Foreign  Pietermaai 123, P.O. Box 897, Willemstad, Curacao  Curacao  US dollar   0.0159    99.9841    100.0000 
SQMC Holding Corporation.  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta  United States of America  US dollar   0.1000    99.9000    100.0000 
SQM Japan Co. Ltd.  Foreign  From 1st Bldg 207, 5-3-10 Minami- Aoyama, Minato-ku, Tokio  Japan  US dollar   0.1597    99.8403    100.0000 
SQM Europe N.V.  Foreign  Houtdok-Noordkaai 25a B-2030 Amberes  Belgium  US dollar   0.5800    99.4200    100.0000 
SQM Italia SRL  Foreign  Via A. Meucci, 5 500 15 Grassina Firenze  Italy  US dollar   -    100.0000    100.0000 
SQM Indonesia S.A.  Foreign  Perumahan Bumi Dirgantara Permai, Jl Suryadarma Blok Aw No 15 Rt 01/09 17436 Jatisari Pondok Gede  Indonesia  US dollar   -    80.0000    80.0000 
North American Trading Company  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA  United States of America  US dollar   -    100.0000    100.0000 
SQM Virginia LLC  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA  United States of America  US dollar   -    100.0000    100.0000 
SQM Comercial de México S.A. de C.V.  Foreign  Av. Moctezuma 144-4  Ciudad del Sol. CP 45050, Zapopan, Jalisco Mexico  Mexico  US dollar   0.0100    99.9900    100.0000 
SQM Investment Corporation N.V.  Foreign  Pietermaai 123, P.O. Box 897, Willemstad, Curacao  Curacao  US dollar   1.0000    99.0000    100.0000 
Royal Seed Trading Corporation A.V.V.  Foreign  Caya Ernesto O. Petronia 17, Orangestad  Aruba  US dollar   1.6700    98.3300    100.0000 
SQM Lithium Specialties Limited Partnership  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA  United States of America  US dollar   -    100.0000    100.0000 
Soquimich SRL Argentina  Foreign  Espejo 65 Oficina 6 – 5500 Mendoza  Argentina  US dollar   -    100.0000    100.0000 
Comercial Caimán Internacional S.A.  Foreign  Edificio Plaza Bancomer
Calle 50
  Panama  US dollar   -    100.0000    100.0000 
SQM France S.A.  Foreign  ZAC des Pommiers  27930   FAUVILLE  France  US dollar   -    100.0000    100.0000 
Administración y Servicios Santiago S.A. de C.V.  Foreign  Av. Moctezuma 144-4  Ciudad del Sol. CP 45050, Zapopan, Jalisco Mexico  Mexico  US dollar   -    100.0000    100.0000 
SQM Nitratos México S.A. de C.V.  Foreign  Av. Moctezuma 144-4  Ciudad del Sol. CP 45050, Zapopan, Jalisco Mexico  Mexico  US dollar   -    100.0000    100.0000 
SQM Australia PTY  Foreign  Level 16, 201 Elizabeth Street Sydney  Australia  Australian dollar   -    100.0000    100.0000 
SACAL S.A.  Foreign  Av. Leandro N. Alem 882, piso 13 Buenos Aires  Argentina  Argentine peso   -    100.0000    100.0000 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

83

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 8Background on companies included in consolidation and non-controlling interests (continued)

 

8.1Background on companies included in consolidation, continued

 

          Country of     Ownership Interest 
Subsidiaries  TAX ID No.  Address  Incorporation  Functional Currency  Direct   Indirect   Total 
                         
Soquimich European Holding B.V.  Foreign  Loacalellikade 1 Parnassustoren 1076 AZ Amsterdan  Holland  US dollar   -    100.0000    100.0000 
SQM Iberian S.A  Foreign  Provenza 251 Principal 1a CP 08008, Barcelona  Spain  US dollar   -    100.0000    100.0000 
SQM Africa Pty Ltd.  Foreign  Tramore House, 3 Wterford Office Park, Waterford Drive, 2191 Fourways, Johannesburg  South Africa  US dollar   -    100.0000    100.0000 
SQM Oceanía Pty Ltd.  Foreign  Level 9, 50 Park Street, Sydney NSW 2000, Sydney  Australia  US dollar   -    100.0000    100.0000 
SQM Beijing Commercial Co. Ltd.  Foreign  Room 1001C, CBD International Mansion N 16 Yong An Dong Li, Jian Wai Ave Beijing 100022, P.R.  China  US dollar   -    100.0000    100.0000 
SQM Thailand Limited  Foreign  Unit 2962, Level 29, N° 388, Exchange Tower Sukhumvit Road, Klongtoey Bangkok  Thailand  US dollar   -    99.996    99.996 
SQM Colombia SAS  Foreign  Cra 7 No 32 – 33 piso 29 Pbx: (571) 3384904 Fax: (571) 3384905 Bogotá D.C. – Colombia.  Colombia  US dollar   -    100.0000    100.0000 
SQM International N.V.  Foreign  Houtdok-Noordkaai 25a B-2030 Amberes  Belgium  US dollar   0.5800    99.4200    100.0000 
SQM (Shanghai) Chemicals Co. Ltd.  Foreign  Room 4703-33, 47F, No.300 Middle Huaihai Road, Huangpu district, Shanghai  China  US dollar   -    100.0000    100.0000 
                            

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

84

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 8Background on companies included in consolidation and non-controlling interests (continued)

 

8.2Assets, liabilities, results of consolidated subsidiaries

 

9/30/2018
   Assets   Liabilities           Comprehensive
income
 
Subsidiary  Current   Non-current   Current   Non-current   Revenue   Profit (loss)   (loss) 
  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                             
SQM Nitratos S.A.   488,841    37,397    444,972    1,550    120,912    22,761    22,807 
Proinsa Ltda.   55    -    -    -    -    -    - 
SQMC Internacional Ltda.   203    -    -    -    -    (1)   (1)
SQM Potasio S.A.   320,159    1,099,880    113,527    22,899    2.499    199,234    198,712 
Serv. Integrales de Tránsito y Transf. S.A.   55,289    36,435    83,401    1,905    27,115    801    794 
Isapre Norte Grande Ltda.   542    793    562    149    2,681    13    (42)
Ajay SQM Chile S.A.   17,992    1,272    1,049    413    24,317    1,747    1,747 
Almacenes y Depósitos Ltda.   278    48    1    -    -    (7)   (87)
SQM Salar S.A.   854,859    833,271    419,163    188,485    767,747    243,770    243,131 
SQM Industrial S.A.   1,171,814    682,681    760,375    85,548    611,037    82,284    82,437 
Exploraciones Mineras S.A.   542    31,808    6,425    -    -    (100)   (100)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.   303    598    457    301    1,775    12    (13)
Soquimich Comercial S.A.   161,238    14,345    64,293    5,918    89,887    121    101 
Comercial Agrorama Ltda.   5,875    1,682    8,737    34    5,972    (647)   (648)
Comercial Hydro S.A.   5,006    34    30    2    19    96    96 
Agrorama S.A.   7,736    615    12,191    60    5,633    (1,067)   (1,047)
Orcoma SpA   -    2,360    14    -    -    -    - 
Orcoma Estudio SpA   296    4,411    58    -    -    2    2 
SQM MaG SpA   221    133    266    -    179    77    77 
SQM North America Corp.   125,475    16,660    114,790    4    209,360    4,004    4,823 
RS Agro Chemical Trading Corporation A.V.V.   5,155    -    33    -    -    (19)   (19)
Nitratos Naturais do Chile Ltda.   25    136    3,307    -    -    163    163 
Nitrate Corporation of Chile Ltd.   5,076    -    -    -    -    -    - 
SQM Corporation N.V.   7,696    145,893    3,583    -    -    28,511    28,585 
SQM Perú S.A.   178    -    1,166    -    -    (92)   (92)
SQM Ecuador S.A.   19,295    125    16,689    79    25,126    590    590 
SQM Brasil Ltda.   131    -    638    2,229    126    85    85 
SQI Corporation N.V.   56    31    70    -    -    (7)   (7)
SQMC Holding Corporation L.L.P.   26,390    16,444    1,611    -    -    3,694    3,694 
SQM Japan Co. Ltd.   59,759    338    57,806    168    132,718    (216)   (216)
subtotal   3,340,485    2,927,390    2,115,,214    309,744    2,027,103    585,809    585,572 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

85

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 8Background on companies included in consolidation and non-controlling interests (continued)

 

8.2Assets, liabilities, results of consolidated subsidiaries, continued

 

9/30/2018
   Assets   Liabilities          

Comprehensive

income

 
Subsidiary  Current   Non-current   Current   Non-current   Revenue   Profit (loss)   (loss) 
  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                             
SQM Europe N.V.   396,747    2,095    329,446    -    731,501    21,311    21,311 
SQM Italia SRL   1,194    -    15    -    -    -    - 
SQM Indonesia S.A.   3    -    -    -    -    -    - 
North American Trading Company   157    145    39    -    -    (1)   (1)
SQM Virginia LLC   14,807    14,349    14,807    -    -    -    - 
SQM Comercial de México S.A. de C.V.   101,046    2,830    70,769    -    150,509    2,160    2,160 
SQM Investment Corporation N.V.   52,365    86    13,131    944    -    (527)   (527)
Royal Seed Trading Corporation A.V.V.   31,085    -    49,808    -    -    56    56 
SQM Lithium Specialties LLP   15,755    3    1,264    -    -    -    - 
Soquimich SRL Argentina   78    -    161    -    -    (78)   (78)
Comercial Caimán Internacional S.A.   261    -    1,122    -    -    (1)   (1)
SQM France S.A.   345    6    114    -    -    -    - 
Administración y Servicios Santiago S.A. de C.V.   307    94    568    173    2,077    (1)   (1)
SQM Nitratos México S.A. de C.V.   89    11    62    10    550    11    11 
Soquimich European Holding B.V.   43,983    162,147    71,209    (215)   -    32,435    32,509 
SQM Iberian S.A.   76,550    1,806    66,468    -    112,561    1,825    1,825 
SQM Africa Pty Ltd.   64,799    1,487    52,919    -    87,304    5,526    5,526 
SQM Oceanía Pty Ltd.   5,491    -    3,399    -    1,637    (26)   (26)
SQM Beijing Commercial Co. Ltd.   14,046    10    12,430    -    8,748    (687)   (687)
SQM Thailand Limited   16,651    7    13,371    -    6,779    298    298 
298SQM Colombia SAS   4,377    150    3,992    -    2,655    (613)   (613)
SQM Australia Pty   2,668    24,908    3,462    -    -    179    179 
Sacal S.A.   2    -    -    -    -    -    - 
SQM Internacional   1,647    546    984    -    -    (6,822)   (6,822)
SQM Shangai Chemicals Co. Ltd.   4,234    36    2,563    -    1,969    (793)   (793)
Subtotal   848,687    210,716    712,103    912    1,106,290    54,252    54,326 
Total   4,189,172    3,138,106    2,827,317    310,656    3,133,393    640,061    639,898 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

86

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 8Background on companies included in consolidation and non-controlling interests (continued)

 

8.2Assets, liabilities, results of consolidated subsidiaries, continued

 

12/31/2017
   Assets   Liabilities           Comprehensive
income
 
 Subsidiary  Current   Non-current   Current   Non-current   Revenue   Profit (loss)   (loss) 
  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                             
SQM Nitratos S.A.   353,821    39,144    324,738    4,489    100,626    5,569    5,607 
Proinsa Ltda.   59    1    -    -    -    (3)   (3)
SQMC Internacional Ltda.   219    -    -    -    -    (3)   (3)
SQM Potasio S.A.   243,513    951,448    85,279    23,092    4,129    282,442    282,874 
Serv. Integrales de Tránsito y Transf. S.A.   27,822    36,606    57,208    1,596    35,210    1,727    1,712 
Isapre Norte Grande Ltda.   561    834    590    147    1,952    44    65 
Ajay SQM Chile S.A.   17,048    1,143    779    459    23,732    2,088    2,088 
Almacenes y Depósitos Ltda.   301    50    1    -    -    (7)   83 
SQM Salar S.A.   760,900    785,082    449,049    186,451    985,654    347,790    348,313 
SQM Industrial S.A.   982,835    666,097    618,289    94,135    685,294    48,988    49,011 
Exploraciones Mineras S.A.   540    31,691    6,206    -    -    (55)   (55)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.   372    624    551    353    887    43    27 
Soquimich Comercial S.A.   159,943    14,395    46,180    4,632    117,745    254    277 
Comercial Agrorama Ltda.   9,977    1,852    12,388    54    13,061    (1,342)   (1,341)
Comercial Hydro S.A.   4,944    41    63    11    30    140    140 
Agrorama S.A.   11,343    625    14,956    78    14,275    (2,041)   (2,059)
Orcoma SpA   -    2,360    14    -    -    -    - 
Orcoma Estudio SpA   341    4,356    50    -    -    -    - 
SQM MaG SPA   10    -    -    -    -    -    - 
SQM North America Corp.   131,452    15,442    162,180    782    250,522    (1,384)   (1,652)
RS Agro Chemical Trading Corporation A.V.V.   5,164    -    23    -    -    (30)   (30)
Nitratos Naturais do Chile Ltda.   -    141    3,451    -    -    (111)   (111)
Nitrate Corporation of Chile Ltd.   5,076    -    -    -    -    -    - 
SQM Corporation N.V.   668    133,876    3,575    -    -    21,089    21,065 
SQM Perú S.A.   270    -    1,166    -    -    24    24 
SQM Ecuador S.A.   21,642    116    19,651    80    26,025    622    622 
SQM Brasil Ltda.   187    -    663    2,345    336    (42)   (42)
SQI Corporation N.V.   16    26    61    -    -    (1)   (1)
SQMC Holding Corporation L.L.P.   24,600    15,193    1,000    -    -    2,263    2,263 
SQM Japan Co. Ltd.   43,656    302    40,992    626    114,006    (2,168)   (2,168)
Subtotal   2,807,280    2,701,445    1,849,103    319,330    2,373,484    705,896    706,706 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

87

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 8Background on companies included in consolidation and non-controlling interests (continued)

 

8.2Assets, liabilities, results of consolidated subsidiaries, continued

 

12/31/2017
   Assets   Liabilities           Comprehensive
income
 
 Subsidiary  Current   Non-current   Current   Non-current   Revenue   Profit (loss)   (loss) 
  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                             
SQM Europe N.V.   399,601    2,599    339,910    -    923,087    11,097    11,097 
SQM Italia SRL   1,236    -    16    -    -    (3)   (3)
SQM Indonesia S.A.   4    -    1    -    -    -    - 
North American Trading Company   158    145    39    -    -    -    - 
SQM Virginia LLC   14,807    14,348    14,807    -    -    (8)   (8)
SQM Comercial de México S.A. de C.V.   92,961    2,288    64,318    -    193,523    4,381    4,381 
SQM Investment Corporation N.V.   52,639    86    12,955    866    -    (7,198)   (7,198)
Royal Seed Trading Corporation A.V.V.   31,040    -    49,818    -    -    2,348    2,348 
SQM Lithium Specialties LLP   15,755    3    1,264    -    -    (8)   (8)
Soquimich SRL Argentina   168    -    173    -    -    (37)   (37)
Comercial Caimán Internacional S.A.   262    -    1,122    -    -    3    3 
SQM France S.A.   345    6    114    -    -    -    - 
Administración y Servicios Santiago S.A. de C.V.   162    86    531    58    2,813    47    47 
SQM Nitratos México S.A. de C.V.   49    8    30    7    301    6    6 
Soquimich European Holding B.V.   53,664    137,393    71,761    1,493    -    18,476    18,452 
SQM Iberian S.A.   57,241    1,720    48,891    -    175,936    119    119 
SQM Africa Pty Ltd.   76,888    1,514    70,561    -    101,152    1,135    1,135 
SQM Oceanía Pty Ltd.   4,151    -    2,033    -    2,045    301    301 
SQM Agro India Pvt. Ltd.   -    -    -    -    -    -    - 
SQM Beijing Commercial Co. Ltd.   8,804    16    6,518    -    3,691    151    151 
SQM Thailand Limited   12,113    5    9,128    -    5,694    43    43 
SQM Colombia SAS   278    131    33    -    -    (271)   (271)
SQM Australia Pty   25,654    24,800    -    -    -    -    - 
Sacal S.A.   6    -    -    -    -    -    - 
Subtotal   847,986    185,148    694,023    2,424    1,408,242    30,582    30,558 
Total   3,655,266    2,886,593    2,543,126    321,754    3,781,726    736,478    737,264 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

88

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 8Background on companies included in consolidation and non-controlling interests (continued)

 

8.3Detail of transactions between consolidated companies

 

a)Transactions conducted in 2018

 

On January 30, 2018, in SQM North America there was a capital increase of ThUS$36,251. All partners met this increase, maintaining share percentages.

 

On February 27, 2018, a capital contribution of ThUS$2,500 was made to SQM (Shanghai) Chemicals Co. Ltd. This company is a wholly-owned subsidiary of SQM Industrial S.A.

 

On March 28, 2018, in SQI Corporation N,V, there was a capital increase of ThUS$40. All partners met this increase, maintaining share percentages.

 

As of September 30, 2018, a total of ThUS$1,282 has been paid on the capital increase in SQM Colombia SAS subscribed during 2017 by SQM Industrial S.A. The transaction had no effect on consolidated earnings.

 

On August 1, 2018, the company Western Australia Lithium Pty changed its corporate name to Covalent Lithium Pty Ltd., maintaining all share percentages.

 

b)Transactions conducted in 2017

 

On January 1, 2017, the subsidiary SQM Iberian S.A. absorbed the joint venture SQM Vitas Spain.

 

On January 10, 2017, SQM Japan Co, Ltd, carried out a capital increase of ThUS$8,676, Only Soquimich European Holding B,V, subscribed shares, thereby increasing its interest from 46.24% to 84.03% and reducing the interest held by SQM S.A. from 0.54% to 0.16% and by SQM Potasio S.A. from 53.22% to 15.81%, This had no impact on the consolidated results of SQM S.A., which continues to hold 100% of SQM Japan Co, Ltd, in its consolidated statement of financial position.

 

On February 10, 2017, the subsidiary Compañía Minera Arfwedson SpA was created in Chile with a capital contribution from SQM S.A. equivalent to ThUS$10 for a 100% interest, On August 29, 2017, the company's name was changed to "SQM MAG SpA". The transaction had no impact on the Company's consolidated results.

 

On April 19, 2017, the subsidiary SACAL S.A. was incorporated with capital of ThUS$7. The company is owned by SQM Potasio S.A. (95%) and SQM Industrial S.A. (5%), The transaction had no impact on the Company's consolidated results.

 

On May 4, 2017 SQI Corporation NV carried out a capital increase of ThUS$15.7, which belongs to SQM S.A. (with a share of 0.01587%) and SQM Potasio S.A. (with a share of 99.98413%)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

89

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 8Background on companies included in consolidation (continued)

 

8.3Detail of transactions between consolidated companies, continued

 

b)Transactions conducted in 2017, continued

 

On July 31, 2017, SQM Trading was legally formed, A capital of ThUS$3,080 was recorded as of June 30, 2018. The subsidiary is owned by the Company (0.58%) and Soquimich European Holding (99.42%), The transaction had no impact on the Company's consolidated results, Subsequent to its creation, this company changed its name to SQM International N.V.

 

SQM International N,V, (previously SQM Trading N,V,) was incorporated on July 31, 2017, born from the partial separation of SQM Europe N.V. into SQM Europe N.V. and SQM International N.V., both of which retained the same ownership structure as before, For tax purposes in Belgium, this separation was made effective retroactively as of January 1, 2017. In the annual accounts for 2017 to be presented in 2018 to the local authorities in Belgium, the statement of financial position and transactions are separated as of the effective date. The effects of this corporation are considered in the consolidated financial statements as of June 30, 2018.

 

During July 2017, the subsidiary SQM Agro India Private Limited was closed, The transaction had no impact on the Company's consolidated results.

 

On August 14, 2017, SQM Colombia SAS agreed to carry out a capital increase of ThUS$1,814.64, which was subscribed by its owner SQM Industrial S.A., To date, it has paid ThUS$641.The transaction had no impact on the Company's consolidated results.

 

On August 29, 2017, Compañía Minera Arfwedson SpA, changed its name to SQM MaG SpA.

 

On August 31, 2017, the subsidiary SQM Australia Pty Ltd, was created with initial capital of ThUS$7,000 (ThAUD8,729),This subsidiary is fully owned (100%) by SQM Potasio S.A. The functional currency of SQM Australia Pty Ltd, is the Australian dollar (AUD). Later, on December 14 of the same year, additional capital of ThUS$18,500 (AUD 24,105.5) was invested. These transactions had no impact on the Company's consolidated results.

 

On November 27, 2017, the corporation ACN 623 090 139 was created in Australia, It later changed its corporate name to Western Australia Lithium pty with a capital of 10 Australian dollars. The corporation is owned by SQM Australia Pty Ltd (50%) and non-related third parties (50%).

 

On December 26, 2017, the company SQM (Shanghai) Chemicals Co. Ltd. was legally formed, No capital contributions had been recorded as of December 31, 2018.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

90

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 8Background on companies included in consolidation and non-controlling interests (continued)

 

8.4Background on non-controlling interests

 

  

% of interests in
the ownership
held by non-

controlling
interests,

   Profit (loss) attributable to
non-controlling interests
   Equity, non-controlling
interests
   Dividends paid to non-
controlling interests
 
Subsidiary      9/30/2018   12/31/2017   9/30/2018   12/31/2017   9/30/2018   12/31/2017 
       ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Proinsa Ltda.   0.1%   -    -    -    -    -    - 
SQM Potasio S.A.   0.0000001%   -    -    -    -    -    - 
Ajay SQM Chile S.A.   49%   856    1,023    8,723    8,306    440    989 
SQM Indonesia S.A.   20%   -    -    -    1    -    - 
Soquimich Comercial S.A.   39.3616784%   48    100    41,476    49,247    7,908    1,264 
Comercial Agrorama Ltda.   30%   (194)   (403)   (364)   (184)   -    - 
Agrorama S.A.   0.001%   -    -    -    -    -    - 
Orcoma Estudios SPA   49%   -    -    2,278    2,277    -    - 
SQM (Thailand) Limited.   0.004%   1    -    -    -    -    - 
Total        711    720    52,113    59,647    8,348    2,253 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

91

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 9Equity-accounted investees

 

9.1Investments in associates recognized according to the equity method of accounting

 

As of September 30, 2018 and December 31, 2017, in accordance with criteria established in Note 3.19, investment in associates recognized according to the equity method of accounting and joint ventures are as follows:

 

   Equity-accounted investees   Share in profit (loss) of
associates and joint
ventures accounted for
using the equity method
   Share in other comprehensive
income of associates and joint
ventures accounted for using the
equity method, net of tax
  

Share in total other
comprehensive income of
associates and joint

ventures accounted for

using the equity method

 
Associates  9/30/2018   12/31/2017   9/30/2018   12/31/2017   9/30/2018   12/31/2017   9/30/2018   12/31/2017 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Abu Dhabi Fertilizer Industries WWL   10,587    15,936    326    1,483    -    (1)   326    1,482 
Doktor Tarsa Tarim Sanayi AS   20,904    21,788    7,886    6,427    (8,854)   (2,184)   (968)   4,243 
Ajay North America   15,545    14,432    3,356    3,677    -    -    3,356    3,677 
Ajay Europe SARL   7,665    8,144    977    1,049    (305)   1,104    672    2,153 
Charlee SQM Thailand Co. Ltd.   2,141    2,301    316    393    (11)   166    305    559 
SQM Eastmed Turkey.   184    -    237    (25)   (6)   (6)   231    (31)
Kore Potash Ltd.   23,000    20,000    -    -    -    -    -    - 
Total   80,026    82,601    13,098    13,004    (9,176)   (921)   3,922    12,083 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

92

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 9Equity-accounted investees (continued)

 

9.1Investments in associates recognized according to the equity method of accounting, continued

 

   Description of the nature of the     Country of  Share of
ownership in
   Dividends received 
Associate  relationship  Domicile  incorporation  associates   9/30/2018   12/31/2017 
                ThUS$   ThUS$ 
                      
Abu Dhabi Fertilizer Industries WWL  Distribution and commercialization of specialty plant nutrients in the Middle East.  PO Box 71871, Abu Dhabi  United Arab Emirates   37%   5,641    - 
Doktor Tarsa Tarim Sanayi AS  Distribution and commercialization of specialty plant nutrients in Turkey.  Organize Sanayi Bolgesi, Ikinci Kisim, 22 cadde TR07100 Antalya  Turkey   50%   -    - 
Ajay North America  Production and distribution of iodine derivatives.  1400 Industry RD Power Springs GA 30129  United States   49%   2,105    1,123 
Ajay Europe SARL  Production and commercialization of iodine derivatives.  Z,I, du Grand Verger BP 227 53602 Evron Cedex  France   50%   811    968 
SQM Eastmed Turkey  Production and commercialization of specialty products.  Organize Sanayi Bolgesi, Ikinci Kisim, 22 cadde TR07100 Antalya  Turkey   50%   -    - 
Charlee SQM Thailand Co. Ltd.  Distribution and commercialization of specialty plant nutrients.  31 Soi 138 (Meesuk) LLapdrawrd, Bangkapi, 10240 Bangkok  Thailand   40%   362    - 
Kore Potash Ltd.  Prospecting, exploration and mining development.  L 3 88 William St Perth, was 6000  Australia   17,52%   -    - 
Total                 8,919    2,091 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

93

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 9Equity-accounted investees (continued)

 

9.1Investments in associates recognized according to the equity method of accounting, continued

 

The companies described in the table below are related parties of the following associates:

 

(1)Doktor Tarsa Tarim Sanayi AS

(2)Terra Tarsa B.V

(3)Abu Dhabi Fertilizer Industries WWL

 

   Description of the nature of the
relationship
  Domicile  Country of
incorporation
  Share of
ownership in
associates
   Dividends
received
 
Terra Tarsa B,V, (1)  Distribution and trading of specialty plant nutrients,  Herikerbergweg 238, Luna Arena, 1101CM Amsterdam PO Box 23393, 1100DW Amsterdam Zuidoost  Holland   50%   -    - 
Plantacote N,V, (1)  Sale of CRF and production and sales of WSNPK  Houtdok-Noordkaai 25a, 2030 Antwerpen, Belgium  Belgium   100%   -    - 
Doktolab Tarim Arastima San, Tic As (1)  Laboratory services  27, Cd, No:2, 07190 Aosb 2, Kısım/Döşemealtı, Antalya, Turkey  Turkey   100%   -    - 
Terra Tarsa Ukraine LLC (2)  Distribution and trading of specialty plant nutrients,  74800 Ukraine, Kakhovka, 4 Yuzhnaya Str,  Ukraine   100%   -    - 
Terra Tarsa Don LLC (2  Distribution and sale of specialty fertilizers  Zorge Street, house 17, 344090, Rostov-on-Don  Russian Federation   100%   -    - 
Abu Dhabi Fertilizer Industries WWL  Distribution and trading of specialty plant nutrients, in the Middle East  P.O Box148, code 315 Suwaiq, Sultanate of Oman  Oman   70%   -    - 
Internacional Technical and Trading Agenies Co. WLL  Distribution and trading of specialty plant nutrients, in the Middle East  P.O Box: 950918 Amman 11195  Jordania   50%   -    - 
Total                 -    - 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

94

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 9Equity-accounted investees (continued)

 

9.2Assets, liabilities, revenue and expenses of associates

 

9/30/2018
                                  Gain (loss)
from
    Other        
    Assets     Liabilities           continuing     comprehensive     Comprehensive  
    Current     Non-current     Current     Non-current     Revenue     operations     income     income  
    ThUS$     ThUS$     ThUS$     ThUS$     ThUS$     ThUS$     ThUS$     ThUS$  
                                                 
Abu Dhabi Fertilizer Industries WWL     30,426       2,000       3,814       -       21,857       880       (1 )     879  
Doktor Tarsa Tarim Sanayi AS     84,034       11,660       51,225       2,662       52,140       15,772       (17,707 )     (1,935 )
Ajay North America     22,351       12,683       3,309       -       30,728       6,849               6,849  
Ajay Europe SARL     21,119       1,264       7,053       -       29,855       1,954       (610 )     1,344  
Charlee SQM Thailand C. Ltd.     10,519       811       5,719       259       11,522       791       (28 )     763  
SQM Eastmed Turkey     2,466       2,190       2,831       1,456       2,266       473       (11 )     462  
Total     170,915       30,608       73,951       4,377       148,368       26,719       (18,357 )     8,362  

 

12/31/2017
                                  Gain (loss)
from
    Other        
    Assets     Liabilities           continuing     comprehensive     Comprehensive  
    Current     Non-current     Current     Non-current     Revenue      operations     income     income  
    ThUS$     ThUS$     ThUS$     ThUS$     ThUS$     ThUS$     ThUS$     ThUS$  
                                                 
Abu Dhabi Fertilizer Industries WWL     44,801       2,032       3,764       -       35,131       4,008       (4 )     4,004  
Doktor Tarsa Tarim Sanayi AS     81,057       10,731       36,960       11,251       75,269       12,854       (4,367 )     8,487  
Ajay North America     19,426       12,498       2,470       -       36,185       7,505       -       7,505  
Ajay Europe SARL     23,555       1,266       8,534       -       32,310       2,098       2,208       4,306  
Charlee SQM Thailand Co. Ltd.     8,585       712       3,292       255       13,618       981       414       1,395  
SQM Eastmed Turkey     3,981       2,671       4,487       2,260       2,389       (49 )     (12 )     (61 )
Total     181,405       29,910       59,507       13,766       194,902       27,397       (1,761 )     25,636  

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

95

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 9Investment in Associates (continued)

 

9.3Other information

 

The Company has no participation in unrecognized losses in investments in associates.

 

The Company has no investments that are not accounted for according to the equity method.

 

The equity method was applied to the Statement of Financial Position as of September 30, 2018 and December 31, 2017.

 

The basis of preparation of the financial information of associates corresponds to the amounts included in the financial statements in conformity with the entity’s IFRS.

 

9.4Disclosures on interest in associates

 

a) Transactions conducted in 2018:

 

During the first quarter, SQM S.A. increased its capital in Kore Potash Ltd, by ThUS$ 3,000.

 

In March 2018 the company Abu Dhabi Fertilizer Industries WLL paid dividends of ThUS$ 10,890. 50% of the distributed dividend was charged to retained earnings subsequent to 2014, in line with the Company’s statutes that establish that 37% of the distributed dividend corresponds to SQM. The remaining 50% was charged to retained earnings generated between 2004 and 2014, in line with the Company’s statutes that establish that 50% of the distributed dividend corresponds to SQM.

 

In March 2018 the company Ajay North America paid dividends of ThUS$ 1,432.

 

In June 2018, the associate company Doktor Tarsa Tarim, made a capital increase of 86 million Turkish Lira (ThUS$ 18,753), which was generated by the reclassification of retained earnings.

 

In June 2018 the company Abu Dhabi Fertilizer Industries WLL paid dividends of ThUS$ 4,348. 50% of the distributed dividend was charged to retained earnings subsequent to 2014, in line with the Company’s statutes that establish that 37% of the distributed dividend corresponds to SQM. The remaining 50% was charged to retained earnings generated between 2004 and 2014, in line with the Company’s statutes that establish that 50% of the distributed dividend corresponds to SQM.

 

In June 2018 the company Ajay North America paid dividends of ThUS$ 1,432.

 

In June 2018 the company Ajay North Europe SARL paid dividends of ThUS$ 1,622.

 

In June 2018 the company Charlee SQM Thailand Co. Ltd. paid dividends of ThUS$ 906.

 

In September 2018, the company Ajay North America paid dividends of ThUS$ 1,432.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

96

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 9Investment in Associates (continued)

 

9.4Disclosures on interest in associates, continued

 

b)Transactions conducted in 2017:

 

As of December 31, 2017, a capital increase was registered for Plantacote N,V, in a sum of ThUS$4,208 (equivalent to Th€3,500), which is 100% owned by the associate company Doktor Tarsa Tarim, The functional currency of Plantacote N.V, is the Euro. The contribution was made under the heading “Subordinated loan from Dr, Tarsa”, This contribution had no impact on the Company's consolidated results.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

97

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 10Joint Ventures

 

10.1Policy for the accounting of equity accounted investment in joint ventures

 

The method for recognizing joint ventures is that in which participation is initially recorded at cost, and subsequently adjusted, considering changes after the acquisition in the portion of the entity’s net assets that correspond to the investor. Profit or loss for the period will include the portion of the entity’s entire profit or loss that correspond to the investor. For these joint ventures there is no quoted market price to measure these investments.

 

There are no significant restrictions on these joint ventures for the transfer of funds as payment of dividends or others.

 

At the date of issuance of these financial statements, SQM is not aware of the existence of any significant contingent liabilities associated with the partnerships in joint ventures.

 

10.2Disclosures of interest in joint ventures

 

a)Operations conducted in 2018

 

During the first quarter of 2018, Minera Exar S.A. increased its capital by ThUS$13,000. The entity is a joint venture and contributions were made on January 25, 2018 (ThUS$6,000) and February 14, 2018 (ThUS$7,000) by SQM Potasio S.A. and Lithium Americas Corporation (LAC). Both partners share 50% ownership of the respective company, each contributing the same share in these capital increases.

 

On March 14, 2018, the company SQM Vitas Plantacote B.V. was closed.

 

As of the date of the presentation of these financial statements, Minera Exar S.A. has changed its functional currency from the Argentine peso to the United States dollar.

 

In April 2018, Minera Exar made a new capital increase of ThUS$7,000, which was contributed in equal parts by its partners.

 

On May 15, 2018, the subsidiary Soquimich European Holdings BV, signed a joint venture agreement with PAVONI & C., SpA in Italy. Euros 5.5 million were paid for a 50% share, generating a lower value of EUR2,602,180. The functional currency of the joint venture is the Euro.

 

As of September 30, 2018, the investments in Minera Exar S.A. and Sichuan SQM Migao Chemical Fertilizers Co Ltda. are presented in the item Non-current assets or groups of assets classified as held for sale, as mentioned in Note 33.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

98

Notes to the Consolidated Financial Statements as of September 30, 2018

 

 

Note 10Joint Ventures

 

10.2Disclosures of interest in joint ventures, continued

 

As of September 30, 2018, the conditions were met to recognize Covalent Lithium Pty Ltd. as a separate joint venture. In prior periods, the financial statements of that company were included in those of SQM Australia Pty.

 

As of September 30, 2018, the investment in Pavoni & C., SpA includes goodwill generated from the purchase of this joint venture of ThUS$3,206.

 

b)Operations conducted in 2017

 

On June 30, 2017, SQM Potasio S.A. recognized the goodwill value generated by the acquisition of 50% of the joint venture Minera Exar S.A. in the amount ThUS$6,205.

 

On October 6, 2017, a capital contribution of ThUS$13,300 (ThARS230,422,5) was made in mining company EXAR S.A., which is 50% owned by the subsidiary SQM Potasio S.A. The functional currency of EXAR S.A. is the Argentine peso (ARS). This contribution had no impact on the Company's consolidated results.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

99

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 10Joint Ventures (continued)

 

10.3Investment in joint ventures accounted for under the equity method of accounting

 

         Country of  Share of interest   Dividends received 
Joint venture  Description of the nature of the relationship  Domicile  incorporation  in ownership   9/30/2018   12/31/2017 
                ThUS$   ThUS$ 
Sichuan SQM Migao Chemical Fertilizers Co. Ltda. (1)  Production and distribution of soluble fertilizers,  Huangjing Road, Dawan Town, Qingbaijiang District, Chengdu Municipality, Sichuan Province  China   50%   -    - 
Coromandel SQM India  Production and distribution of potassium nitrate,  1-2-10,  Sardar Patel Road, Secunderabad – 500003 Andhra Pradesh  India   50%   -    - 
SQM Vitas Fzco.  Production and commercialization of specialty plant and animal nutrition and industrial hygiene,  Jebel ALI Free Zone P,O, Box 18222, Dubai  United Arab Emirates   50%   -    - 
SQM Star Qingdao Corp Nutrition, Co. Ltd.  Production and distribution of nutrient plant solutions with specialties NPK soluble  Longquan Town, Jimo City, Qingdao Municipality, Shangdong Province  China   50%   -    - 
SQM Vitas Holland B.V  Without information  Herikerbergweg 238, 1101 CM Amsterdam Zuidoost  Holland   50%   -    - 
Minera Exar S.A.(1)  Exploration and exploitation of minerals, processing and trading of such minerals  Dr, Sabín 1082 Ciudad de Nieva – San Salvador de Jujuy- Jujuy- República Argentina  Argentina   50%   -    - 
Pavoni & C.,Spa  Production of specialized fertilizers and other products for distribution in Italy and other countries  Corso Italia 172, 95129 Catania (CT), Sicily  Italy   50%   -    - 
Covalent Lithium Pty Ltd.  development and operation of the Mt Holland Lithium project, which will include the construction of a lithium extraction and refining mine  L18, 109 St. Georges Tce Perth WA 6000 PO Box Z5200 St Georges Tce Perth WA 6831  Australia   50%   -    - 

 

(1)September 30, 2018, these joint ventures are classified as Non-current assets or groups of assets classified as held for sale. See Note 33.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

100

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 10Joint Ventures (continued)

 

10.3Investment in joint ventures accounted for under the equity method of accounting, continued

 

The companies described in the following table are related to the following joint ventures:

 

(1)SQM Vitas Fzco.
(2)Pavoni & C Spa.
(3)SQM Vitas Holland B.V.

 

      Domicile  Country of
incorporation
  Share of interest
in ownership
   Dividends received 
SQM Vitas Brazil Agroindustria (1)  Production and commercialization of specialty plant and animal nutrition and industrial hygiene,  Via Cndeias, Km, 01 Sem Numero, Lote 4, Bairro Cia Norte, Candeias, Bahia,  Brazil   49.99%   -    - 
SQM Vitas Peru S.A.C (1),  Production and commercialization of specialty plant and animal nutrition and industrial hygiene  Av, Juan de Arona 187, Torre B, Oficina 301-II, San Isidro, Lima  Peru   50%   -    - 
Arpa Speciali S.R.L. (2)  Production of specialty fertilizers and other products for distribution in Italy and other countries.  Mantova (MN) via Cremona 27 Int. 25  Italy   50.48%   -      
SQM Vitas Plantacote B.V,(3)  Production and commercialization of controlled-released fertilizers  Herikerbergweg 238, 1101 CM Amsterdam Zuidoost  Holland   50%   -    - 

 

Joint Venture Final reporting period
date
Accounting method
     
Coromandel SQM India September 30, 2018 Equity method
SQM Vitas Fzco. September 30, 2018 Equity method
SQM Star Qingdao Corp Nutrition Co., Ltd. September 30, 2018 Equity method
SQM Vitas Brazil Agroindustria September 30, 2018 Equity method
SQM Vitas Perú S.A.C. September 30, 2018 Equity method
SQM Vitas Holland B.V. September 30, 2018 Equity method
Pavoni & C. Spa. September 30, 2018 Equity method
Arpa Speciali S.R.L. September 30, 2018 Equity method
Covalent Lithium Pty Ltd. September 30, 2018 Equity method

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

101

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 10Joint Ventures (continued)

 

10.3Investment in joint ventures accounted for under the equity method of accounting, continued:

 

Joint Venture  Equity-accounted investees   Share in profit (loss) of
associates and joint
ventures accounted for
using the equity method
   Share on other
comprehensive income of
associates and joint
ventures accounted for
using the equity method,
net of tax
   Share on total other
comprehensive income of
associates and joint
ventures accounted for
using the equity method
 
   9/30/2018   12/31/2017   9/30/2018   12/31/2017   9/30/2018   12/31/2017   9/30/2018   12/31/2017 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                 
Sichuan SQM Migao Chemical Fertilizers Co. Ltd. (1)   -    11,444    (686)   (535)   -    -    (686)   (535)
Coromandel SQM India   1,441    1,633    110    165    1    -    111    165 
SQM Vitas Fzco.   20,681    19,478    1,912    1,502    (1)   (5)   1,911    1,497 
SQM Star Qingdao Corp. Nutrition Co. Ltd.   3,074    2,980    95    361    -    -    95    361 
SQM Vitas Holland   1,368    1,429    (13)   (18)   -    -    (13)   (18)
Minera Exar S.A. (1)   -    26,860    (205)   (27)   (1)   -    (206)   (27)
Pavoni & C., Spa   7,459    -    376    -    -    -    376    - 
Covalent Lithium Pty Ltd.   32    -    18    -    -         18    - 
Total   34,055    63,824    1,607    1,448    (1)   (5)   1,606    1,443 

 

(1)As of September 30, 2018, the table below does not present investments in joint ventures transferred to the item non-current assets or groups of assets classified as held for sale. For more information, see Note 33.

 

Joint Venture  Equity-accounted investees   Share in profit (loss) of
associates and joint
ventures accounted for
using the equity method
   Share in other comprehensive
income of associates and joint
ventures accounted for using
the equity method, net of tax
   Share in total other
comprehensive income of
associates and joint ventures
accounted for using the equity
method
 
   9/30/2018   12/31/2017   9/30/2018   12/31/2017   9/30/2018   12/31/2017   9/30/2018   12/31/2017 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                 
SQM Vitas Brazil Agroindustria(1)   11,447    11,003    2,376    1,753    (1,613)   (51)   763    826 
SQM Vitas Peru S.A.C (1)   5,608    5,961    (166)   (216)   -    -    (166)   (108)
SQM Vitas Plantacote B.V. (2)   -    669    -    (1)   -    -    -    (1)
Total   17,055    17,633    2,210    1,536    (1,613)   (51)   597    717 

 

The following companies are subsidiaries of

 

(1)SQM Vitas Fzco.

 

(2)SQM Vitas Holland

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

102

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 10Joint Ventures (continued)

 

10.4Assets, liabilities, revenue and expenses from joint ventures:

 

   9/30/2018 
   Assets   Liabilities       Gain (loss)
from
continuing
   Other
comprehensive
   Comprehensive 
Joint Venture  Current   Non-current   Current   Non-current   Revenue   operations   income   income 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
               -                 
Sichuan SQM Migao Chemical Fertilizers Co. Ltd.   28,699    6,098    13,281    -    12    (1,372)   -    (1,372)
Coromandel SQM India   6,788    810    4,715    -    9,063    221    -    221 
SQM Vitas Fzco.   27,413    17,055    3,105    -    12,035    3,823    (1)   3,822 
SQM Star Qingdao Corp. Nutrition Co. Ltd.   7,226    130    1,208    -    9,365    189    -    189 
SQM Vitas Brazil Agroindustria   42,818    7,238    38,608    -    62,765    2,376    (1,613)   763 
SQM Vitas Peru S.A.C   18,782    8,136    15,456    5,854    21,048    (166)   -    (166)
SQM Vitas Holland B.V.   2,736    -    -    -    -    (25)   -    (25)
SQM Vitas Plantacote B.V.   -    -    -    -    -    -    -    - 
Minera Exar S.A.   4,409    132,011    65,163    -    -    (411)   -    (411)
Pavoni & C. Spa   13,069    6,161    10,072    651    13,070    752    -    752 
Arpa Speciali S.R.L.   -    -    -    -    -    -         - 
Covalent Lithium Pty Ltd.   529    85    551    -    -    36         36 
Total   152,469    177,724    152,159    6,505    127,358    5,423    (1,614)   3,809 

 

   12/31/2017 
   Assets   Liabilities       Gain (loss)
from
continuing
   Other
comprehensive
   Comprehensive 
Joint Venture  Current   Non-current   Current   Non-current   Revenue   operations   income   income 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                 
Sichuan SQM Migao Chemical Fertilizers Co. Ltda.   31,461    6,656    15,228    -    13,326    (1,070)   -    (1,070)
Coromandel SQM India   6,659    862    4,205    53    10,381    332    -    332 
SQM Vitas Fzco.   23,699    17,479    2,221    -    15,518    3,003    (9)   2,994 
SQM Star Qingdao Corp. Nutrition Co. Ltd.   6,941    171    1,152    -    12,631    721    -    721 
SQM Vitas Brazil Agroindustria   30,303    8,453    27,752    -    60,131    1,753    (101)   1,652 
SQM Vitas Peru S.A.C   20,933    8,534    17,380    6,126    35,299    (216)   -    (216)
SQM Vitas Holland B.V.   2,190    669    -    -    -    (36)   -    (36)
SQM Vitas Plantacote B.V.   679    -    10    -    -    (1)   -    (1)
Minera Exar S.A.   19,277    73,114    38,670    -    -    (53)   -    (53)
Total   142,142    115,938    106,618    6,179    147,286    4,433    (110)   4,323 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

103

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 10Joint Ventures (continued)

 

10.5Other Joint Venture disclosures:

 

   Cash and cash equivalents   Other current financial liabilities   Other non-current financial liabilities 
   9/30/2018   12/31/2017   9/30/2018   12/31/2017   9/30/2018   12/31/2017 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$$ 
                         
Sichuan SQM Migao Chemical Fertilizers Co. Ltd.   106    6,198    -    -    -    - 
Coromandel SQM India   191    1,118    -    -    -    - 
SQM Vitas Fzco.   16,620    15,307    -    -    -    - 
SQM Star Qingdao Corp. Nutrition Co. Ltd.   4,781    3,675    -    -    -    - 
SQM Vitas Brazil Agroindustria   725    5,139    13,565    7,342    -    - 
SQM Vitas Peru S.A.C.   400    687    3,835    2,215    871    1,372 
SQM Vitas Holland B.V   2,736    2,190    -    -    -    - 
SQM Vitas Plantacote B.V   -    679    -    -    -    - 
Minera Exar S.A.   1,496    9,189    -    -    -    - 
Pavoni &C., Spa   1,015    -    6,201    -    -    - 
Arpa Speciali S.R.L.   -    -    -    -    -    - 
Covalent Lithium Pty Ltd.   462    -    -    -    -    - 
Total   28,532    44,182    23,601    9,557    871    1,372 

 

   Depreciation and amortization
expense
   Interest expense   Income tax expense,
continuing operations
 
   9/30/2018   12/31/2017   9/30/2018   12/31/2017   9/30/2018   12/31/2017 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Sichuan SQM Migao Chemical Fertilizers Co. Ltd.   (948)   (696)   (1)   (25)   97    303 
Coromandel SQM India   (64)   -    (7)   (16)   (38)   (485)
SQM Vitas Fzco.   (509)   (553)   (6)   (19)   -    - 
SQM Star Qingdao Corp. Nutrition Co. Ltd.   (50)   (68)   -    -    (123)   (174)
SQM Vitas Brazil Agroindustria   (289)   (453)   (635)   (1,253)   (78)   (283)
SQM Vitas Peru S.A.C,   (268)   (375)   (325)   (432)   (50)   (214)
SQM Vitas Holland B.V   -    -    -    -    -    - 
SQM Vitas Plantacote B.V   -    -    -    (1)   -    - 
Minera Exar S.A.   -    (523)   -    (32)   (4)   (620)
Pavoni & C., Spa   (548)   -    (296)   -    -    - 
Arpa Speciali S.R.L.   -    -    -    -    -    - 
Covalent Lithium Pty Ltd.   (11)   -    -    -    -    - 
Total   (2,687)   (2,668)   (1,270)   (1,778)   (196)   (1,473)

 

The basis of preparation of the financial information of joint ventures corresponds to the amounts included in the financial statements in conformity with the entity’s IFRS.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

104

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 11 Cash and cash equivalents

 

11.1Types of cash and cash equivalents

 

As of September 30, 2018 and December 31, 2017, cash and cash equivalents are detailed as follows:

 

a)Cash

 

   9/30/2018   12/31/20171 
   ThUS$   ThUS$ 
Cash on hand   481    60 
Cash in banks   140,421    50,137 
Other demand deposits   3,526    1,530 
Total cash   144,428    51,727 

 

b)Cash equivalents

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
Short-term deposits, classified as cash equivalents   18,515    290,914 
Short-term investments, classified as cash equivalents   265,081    287,797 
Total cash equivalents   283,596    578,711 
           
Total cash and cash equivalents   428,024    630,438 

 

11.2Short-term investments, classified as cash equivalents

 

As of September 30, 2018 and December 31, 2017, the short-term investments classified as cash and cash equivalents relate to mutual funds (investment liquidity funds) for investments in:

 

Institution  9/30/2018
ThUS$
   12/31/2017
ThUS$
 
Legg Mason - Western Asset Institutional Cash Reserves   139,856    144,464 
JP Morgan US dollar Liquidity Fund Institutional   125,225    143,333 
Total   265,081    287,797 

 

Short-term investments are highly liquid fund manager accounts that are basically invested in short-term fixed rate notes in the U.S. market.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

105

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 11Cash and cash equivalents (continued)

 

11.3Information on cash and cash equivalents by currency

 

As of September 30, 2018 and December 31, 2017, information on cash and cash equivalents by currency is detailed as follows:

 

Original currency  9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
Chilean Peso (*)   3,113    579 
US Dollar   409,184    612,727 
Euro   11,819    9,782 
Mexican Peso   -    258 
South African Rand   24    4,074 
Japanese Yen   1,483    1,773 
Peruvian Sol   96    8 
Brazilian Real   298    38 
Chinese Yuan   1,311    1,143 
Argentine Peso   1    1 
Pound Sterling   -    55 
Australian dollar   695    - 
Total   428,024    630,438 

 

(*) The Company maintains financial derivative policies which allow to minimize the risk of the variation in Chilean pesos exchange rate.

 

11.4Amount restricted (unavailable) cash balances

 

Cash on hand and in current bank accounts are available resources, and their carrying value is equal to their fair value.

 

As of September 30, 2018 and December 31, 2017, restricted cash balances are presented in Note 14.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

106

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 11Cash and cash equivalents (continued)

 

11.5Short-term deposits, classified as cash equivalents

 

The detail at the end of each period is as follows:

 

2018

Receiver of the deposit

  Type of deposit  Original Currency  Interest rate   Placement date  Expiration date 

Principal

  

Interest accrued
to date

  

9/30/2018

 
                   ThUS$   ThUS$   ThUS$ 
Banco Crédito e Inversiones  Fixed term  US$   2.58   07/03/2018  10/01/2018   2,000    13    2,013 
Banco de Chile  Fixed term  US$   2.85   08/01/2018  10/01/2018   1,700    8    1,708 
Banco Crédito e Inversiones  Fixed term  US$   2.60   08/21/2018  10/30/2018   1,000    3    1,003 
Banco Crédito e Inversiones  Fixed term  US$   2.56   08/30/2018  10/01/2018   3,000    7    3,007 
Banco Crédito e Inversiones  Fixed term  US$   2.56   08/30/2018  10/01/2018   1,000    2    1,002 
Banco Itau Chile  Fixed term  US$   2.95   09/05/2018  10/31/2018   1,500    3    1,503 
Banco Itau Chile  Fixed term  US$   2.95   09/10/2018  10/31/2018   1,500    3    1,503 
Banco Crédito e Inversiones  Fixed term  US$   2.85   09/25/2018  10/22/2018   1,200    -    1,200 
Banco Crédito e Inversiones  Fixed term  US$   2.89   09/26/2018  10/12/2018   900    -    900 
Banco de Chile  Fixed term  US$   2.85   09/28/2018  10/05/2018   650    -    650 
ABN Amro Bank  On demand  US$   -   09/30/2018  10/01/2018   232    -    232 
Nedbank  On demand  US$   -   09/30/2018  10/01/2018   3,719    -    3,719 
BBVA Banco Francés  On demand  US$   0.26   09/30/2018  10/01/2018   75    -    75 
Total                    18,476    39    18,515 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

107

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 11Cash and cash equivalents (continued)

 

11.5Short-term deposits, classified as cash equivalents, continued

 

2017

Receiver of the deposit

  Type of deposit  Original Currency  Interest rate   Placement date  Expiration date 

Principal

  

Interest accrued
to-date

  

12/31/2017

 
                   ThUS$   ThUS$   ThUS$ 
Scotiabank Sud Americano  Fixed term      0.24   11/21/2017  1/02/2018   8,943    30    8,973 
Banco Itau Chile  Fixed term  Ch$   0.24   11/28/2017  1/02/2018   15,652    41    15,693 
Banco Itau Chile  Fixed term  Ch$   0.24   11/28/2017  1/02/2018   15,652    41    15,693 
Banco BBVA Chile  Fixed term  Ch$   0.23   11/28/2017  1/02/2018   15,652    40    15,692 
Banco BBVA Chile  Fixed term  Ch$   0.23   11/28/2017  1/02/2018   15,652    40    15,692 
Banco Itau Chile  Fixed term  Ch$   0.25   11/29/2017  2/27/2018   18,857    50    18,907 
Banco Crédito e Inversiones  Fixed term  Ch$   0.26   12/12/2017  1/11/2018   15,982    26    16,008 
Banco Crédito e Inversiones  Fixed term  Ch$   0.26   12/12/2017  1/11/2018   8,524    14    8,538 
Banco Itau Chile  Fixed term  Ch$   0.24   12/12/2017  1/11/2018   15,982    24    16,006 
Banco Itau Chile  Fixed term  Ch$   0.24   12/12/2017  1/11/2018   7,458    11    7,469 
Banco Crédito e Inversiones  Fixed term  Ch$   0.26   12/14/2017  1/16/2018   19,780    29    19,809 
Banco Crédito e Inversiones  Fixed term  Ch$   0.26   12/14/2017  1/16/2018   15,665    23    15,688 
Banco Crédito e Inversiones  Fixed term  Ch$   0.26   12/14/2017  1/16/2018   11,488    17    11,505 
Banco Crédito e Inversiones  Fixed term  Ch$   0.26   12/15/2017  1/16/2018   15,568    22    15,590 
Banco Crédito e Inversiones  Fixed term  Ch$   0.26   12/15/2017  1/16/2018   15,568    22    15,590 
Banco Crédito e Inversiones  Fixed term  Ch$   0.26   12/15/2017  1/16/2018   15,568    22    15,590 
Banco BBVA Chile  Fixed term  Ch$   0.24   12/29/2017  1/10/2018   4,107    1    4,108 
Banco BBVA Chile  Fixed term  Ch$   0.24   12/29/2017  1/10/2018   2,765    -    2,765 
Banco Santander - Santiago  Fixed term  US$   0.28   12/27/2017  1/18/2018   700    -    700 
Banco Santander - Santiago  Fixed term  US$   0.4   12/15/2017  2/13/2018   15,000    27    15,027 
Banco Santander - Santiago  Fixed term  US$   0.4   12/15/2017  2/13/2018   14,000    25    14,025 
Corpbanca  Fixed term  Ch$   0.22   12/28/2017  1/04/2018   1,301    -    1,301 
Scotiabank Sud Americano  Fixed term  Ch$   0.21   12/29/2017  1/05/2018   976    -    976 
Scotiabank Sud Americano  Fixed term  Ch$   0.21   12/29/2017  1/05/2018   569    -    569 
Banco Santander - Santiago  Fixed term  US$   2.45   12/06/2017  1/05/2018   3,500    6    3,506 
Scotiabank Sud Americano  Fixed term  US$   3.40   12/15/2017  1/16/2018   2,000    3    2,003 
Banco BBVA Chile  Fixed term  US$   2.80   12/26/2017  1/26/2018   2,200    1    2,201 
Banco Crédito e Inversiones  Fixed term  US$   2.3   12/27/2017  1/04/2018   2,300    1    2,301 
Banco Santander - Santiago  Fixed term  US$   2.88   12/27/2017  1/04/2018   2,300    1    2,301 
Banco BBVA Chile  Fixed term  US$   2.80   12/27/2017  1/04/2018   1,400    -    1,400 
BBVA Banco Francés  Fixed term  US$   0.19   12/11/2017  1/31/2018   163    -    163 
Nedbank  On demand  US$   -   12/01/2017  1/31/2018   3,686    -    3,686 
ABN Amro Bank  Fixed term  US$   -   12/31/2017  1/02/2018   1,439    -    1,439 
Total                    290,397    517    290,914 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

108

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 11Cash and cash equivalents (continued)

 

11.6Other information

 

Net Debt reconciliation

 

This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.

 

Net debt  9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
         
Cash and cash equivalents   428,024    630,438 
Other current financial assets   332,367    366,979 
Other non-current financial hedge assets   27,988    8,910 
Borrowings - repayable within one year (including overdraft)   (20,369)   (220,328)
Borrowings - repayable after one year   (1,216,491)   (1,031,507)
Net debt   (448,481)   (245,508)
           
Cash and liquid investments   788,379    1,006,327 
Gross debt - fixed interest rates   (1,236,860)   (1,251,835)
Net debt   (448,481)   (245,508)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

109

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 12Inventories

 

The composition of inventory at each period-end is as follows:

 

Type of inventory 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
         
Raw material reserves   8,438    9,457 
Supplies for production reserves   26,254    22,164 
Products-in-progress reserves   414,668    456,333 
Finished product reserves   460,847    414,120 
Total   910,207    902,074 

 

As of September 30, 2018, the Company has inventory of caliche ore (in piles or undergoing leaching process) available for processing valued at ThUS$333,458 and ThUS$333,194 as of December 31, 2017, (included in work in progress).

 

Inventory reserves recognized as of September 30, 2018 amount to ThUS$108,496, and ThUS$96,284 as of December 31, 2017. Inventory reserves have been made based on a technical study that covers the different variables affecting products in stock (density and humidity, among others).

 

In the case of inventories of raw materials, supplies, materials and parts, provisions have been made at the lower value associated with the proportion of obsolete, defective or slow-moving materials.

 

The breakdown of inventory reserves is detailed as follows:

 

Type of inventory 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
         
Raw material reserves   2,617    93 
Products-in-progress reserves   90,012    80,249 
Finished product reserves   15,867    15,942 
           
Total   108,496    96,284 

 

The Company has not delivered inventory as collateral for the periods indicated above.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

110

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 12Inventories, continued

 

As of September 30, 2018 and December 31, 2017, movements in provisions are detailed as follows:

 

Reconciliation  9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
Opening balance   96,284    81,295 
Changes          
Additional provisions   11,454    15,682 
Provision used   (1,639)   (4,921)
Increase (decrease) in existing provisions   2,397    4,228 
Total changes   12,212    14,989 
Final Balance   108,496    96,284 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

111

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 13Related party disclosures

 

13.1Related party disclosures

 

Balances pending at period-end are not guaranteed, accrue no interest and are settled in cash. No guarantees have been delivered or received for trade and other receivables due from related parties or trade and other payables due to related parties.

 

13.2Relationships between the parent and the entity

 

Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A., and Inversiones Global Mining (Chile) Ltda. are the owners of a number of shares that as of September 30, 2018 are equivalent to 32% of the current total amount of issued, subscribed and fully-paid shares in the Company. In addition, Kowa Company Ltd., Inversiones La Esperanza (Chile) Limitada, Kochi S.A. and Kowa Holdings America Inc. (the “Kowa Group”), are the owners of a number of shares equivalent to 2.11% of the total amount of issued, subscribed and fully-paid shares of the Company.

 

On December 21, 2006, The Pampa Group and the Kowa Group signed a joint operation agreement in relation to these shares.

 

On April 30, 2018, the Company was informed that the Pampa Group and the Kowa Group terminated the joint operation agreement, which allowed the Kowa Group to act as controller of the Company until its termination.

 

As explained in Note 6, as of September 30, 2018, the Pampa Group could be considered the Company's controller. Notwithstanding, and pursuant to letter c) of article 99 of the Securities Market Law, the CMF may determine that the Pampa Group is not the Company’s controller based on the distribution and dispersion of the Company’s ownership. The Company has requested a declaration from the CMF on the matter, which has not yet been issued.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

112

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 13Related party disclosures (continued)

 

13.3Detailed identification of the link between the Parent and subsidiary

 

As of September 30, 2018 and December 31, 2017, the detail of entities that are related parties of the SQM S.A. Group is as follows:

 

Tax ID No.   Name   Country of origin   Functional currency   Nature
Foreign   Nitratos Naturais Do Chile Ltda.   Brazil   US$   Subsidiary
Foreign   Nitrate Corporation Of Chile Ltd.   United Kingdom   US$   Subsidiary
Foreign   SQM North America Corp.   United States   US$   Subsidiary
Foreign   SQM Europe N.V.   Belgium   US$   Subsidiary
Foreign   Soquimich S.R.L. Argentina   Argentina   US$   Subsidiary
Foreign   Soquimich European Holding B.V.   The Netherlands   US$   Subsidiary
Foreign   SQM Corporation N.V.   The Netherlands   US$   Subsidiary
Foreign   SQI Corporation N.V.   The Netherlands   US$   Subsidiary
Foreign   SQM Comercial De México S.A. de C.V.   Mexico   US$   Subsidiary
Foreign   North American Trading Company   United States   US$   Subsidiary
Foreign   Administración y Servicios Santiago S.A. de C.V.   Mexico   US$   Subsidiary
Foreign   SQM Peru S.A.   Peru   US$   Subsidiary
Foreign   SQM Ecuador S.A.   Ecuador   US$   Subsidiary
Foreign   SQM Nitratos Mexico S.A. de C.V.   Mexico   US$   Subsidiary
Foreign   SQMC Holding Corporation L.L.P.   United States   US$   Subsidiary
Foreign   SQM Investment Corporation N.V.   The Netherlands   US$   Subsidiary
Foreign   SQM Brasil Limitada   Brazil   US$   Subsidiary
Foreign   SQM France S.A.   France   US$   Subsidiary
Foreign   SQM Japan Co.  Ltd.   Japan   US$   Subsidiary
Foreign   Royal Seed Trading Corporation A.V.V.   Aruba   US$   Subsidiary
Foreign   SQM Oceania Pty Limited   Australia   US$   Subsidiary
Foreign   Rs Agro-Chemical Trading Corporation A.V.V.   Aruba   US$   Subsidiary
Foreign   SQM Indonesia S.A.   Indonesia   US$   Subsidiary
Foreign   SQM Virginia L.L.C.   United States   US$   Subsidiary
Foreign   SQM Italia SRL   Italy   US$   Subsidiary
Foreign   Comercial Caiman Internacional S.A.   Panama   US$   Subsidiary
Foreign   SQM Africa Pty Ltd,   South Africa   US$   Subsidiary
Foreign   SQM Colombia SAS   Colombia   US$   Subsidiary
Foreign   SQM Internacional N.V.   Belgium   US$   Subsidiary
Foreign   SQM (Shanghai) Chemicals Co. Ltd.   China   US$   Subsidiary
Foreign   SQM Lithium Specialties LLC   United States   US$   Subsidiary
Foreign   SQM Iberian S.A.   Spain   US$   Subsidiary
Foreign   SQM Beijing Commercial Co. Ltd.   China   US$   Subsidiary
Foreign   SQM Thailand Limited   Thailand   US$   Subsidiary
Foreign   SQM Australia PTY   Australia   Australian dollar   Subsidiary
Foreign   SACAL S.A.   Argentina   Argentine peso   Subsidiary
96,801,610-5   Comercial Hydro  S.A.   Chile   US$   Subsidiary
96,651,060-9   SQM Potasio S.A.   Chile   US$   Subsidiary
96,592,190-7   SQM Nitratos S.A.   Chile   US$   Subsidiary
96,592,180-K   Ajay SQM Chile S.A.   Chile   US$   Subsidiary

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

113

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 13Related party disclosures (continued)

 

13.3Detailed identification of the link between the Parent and subsidiary, continued

 

As of September 30, 2018 and December 31, 2017, the detail of entities that are related parties of the SQM S,A: Group is as follows:

 

Tax ID No,   Name   Country of origin   Functional currency   Nature
86,630,200-6   SQMC Internacional Ltda.   Chile   Chilean peso   Subsidiary
79,947,100-0   SQM Industrial S.A.   Chile   US$   Subsidiary
79,906,120-1   Isapre Norte Grande Ltda.   Chile   Chilean peso   Subsidiary
79,876,080-7   Almacenes y Depósitos Ltda.   Chile   Chilean peso   Subsidiary
79,770,780-5   Servicios Integrales de Tránsitos y Transferencias S.A.   Chile   US$   Subsidiary
79,768,170-9   Soquimich Comercial S.A.   Chile   US$   Subsidiary
79,626,800-K   SQM Salar S.A.   Chile   US$   Subsidiary
78,053,910-0   Proinsa Ltda.   Chile   Chilean peso   Subsidiary
76,534,490-5   Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.   Chile   Chilean peso   Subsidiary
76,425,380-9   Exploraciones Mineras S.A.   Chile   US$   Subsidiary
76,064,419-6   Comercial Agrorama Ltda.   Chile   Chilean peso   Subsidiary
76,145,229-0   Agrorama S.A.   Chile   Chilean peso   Subsidiary
76,359,919-1   Orcoma Estudios SPA   Chile   US$   Subsidiary
76,360,575-2   Orcoma SPA   Chile   US$   Subsidiary
76,686,311-9   SQM MaG SpA   Chile   US$   Subsidiary
Foreign   Abu Dhabi Fertilizer Industries WWL   Arab Emirates   Arab Emirates dirham   Associate
Foreign   Doktor Tarsa Tarim Sanayi AS   Turkey   Turkish lira   Associate
Foreign   Ajay North America   United States   US$   Associate
Foreign   Ajay Europe SARL   France   Euro   Associate
Foreign   SQM Eastmed Turkey   Turkey   Euro   Associate
Foreign   Charlee SQM Thailand Co. Ltd.   Thailand   Thai baht   Associate
Foreign   Sichuan SQM Migao Chemical Fertilizers Co Ltda.   China   US$   Joint venture
Foreign   Coromandel SQM India   India   Indian rupee   Joint venture
Foreign   SQM Vitas Fzco.   Arab Emirates   Arab Emirates dirham   Joint venture
Foreign   SQM Star Qingdao Corp Nutrition Co., Ltd.   China   US$   Joint venture
Foreign   SQM Vitas Holland B.V.   Dutch Antilles   Euro   Joint venture
Foreign   Minera Exar S.A.   Argentina   US$   Joint control
Foreign   Covalent Lithium Pty Ltd.   Australia   Australian dollar   Joint venture
Foreign   Pavoni & C, SPA   Italy   Euro   Joint venture
96,511,530-7   Sociedad de Inversiones Pampa Calichera   Chile   US$   Joint control
96,529,340-k   Norte Grande S.A.   Chile   Chilean peso   Other related parties
79,049,778-9   Callegari Agricola S.A.   Chile   Chilean peso   Other related parties
Foreign   SQM Vitas Brazil Agroindustria   Brazil   US$   Other related parties
Foreign   SQM Vitas Peru S.A.C.   Peru   US$   Other related parties
Foreign   SQM Vitas Plantacote B.V   Dutch Antilles   Euro   Other related parties
Foreign   Terra Tarsa B.V.   Holland   Euro   Other related parties
Foreign   Plantacote N.V   Belgium   Euro   Other related parties
Foreign   Doktolab Tarim Arastima San. Tic As   Turkey   Turkish Lira   Other related parties
Foreign   Terra Tarsa Ukraine LLC   Ukraine   Ukrainian Grivna   Other related parties
Foreign   Terra Tarsa Don LLC   Russian Federation   Russian ruble   Other related parties
Foreign   Kore Potash Ltd.   Australia   US$   Other related parties
Foreign   Abu Dhabi Fertilizer Industries  WLL   Oman   United Arab Emirates dirham   Other related parties
Foreign   Internacional Technical and Trading Agencies CO WLL   Jordan   United Arab Emirates dirham   Other related parties

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

114

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 13Related party disclosures (continued)

 

13.3Detailed identification of the link between the Parent and subsidiary, continued

 

TAX ID No.   Name   Country of Origin   Functional currency   Relationship
N/A   Ara Dos Primera del Salar de Pampa Blanca, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Ara Tres Primera del Salar de Pampa Blanca, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Ara Cuatro Primera del Salar de Pampa Blanca, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Ara Cinco Primera del Salar de Pampa Blanca, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Curicó Dos Primera del Salar de Pampa Alta, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Curicó Tres Primera del Sector de Pampa Alta, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Evelyn Veinticuatro Primera de Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Filomena Tres Primera de Oficina Filomena, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Filomena Cuatro Primera de Oficina Filomena, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Francis Cuatro Primera de Pampa Blanca, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Francis Cuatro Segunda del Salar de Pampa Blanca, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Francis Cuatro Tercera de Pampa Blanca, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Francis Cuatro Cuarta de Pampa Blanca, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Francis Cuatro Quinta de Pampa Blanca, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Francis Primera del Salar de Pampa Blanca de Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Francis Segunda del Salar de Pampa Blanca de Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Francis Tercera del Salar de Pampa Blanca de Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Ivon Primera de Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Ivon Décima Segunda de Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Ivon Sexta de Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Julia Primera de Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Lorena Trigésimo Quinta de Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Perseverancia Primera de Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Tamara 40 Primera del Sector S.E. OF. Concepción, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Tamara Tercera de Oficina Concepción, Sierra Gorda   Chile   Chilean peso   Other related parties
N/A   Tamara 40 Segunda del Sector S.E. OF Concepción, Sierra Gorda   Chile   Chilean peso   Other related parties

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

115

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 13 Related party disclosures (continued)

 

13.4Detail of related parties and related party transactions

 

Transactions between the Parent and its subsidiaries, associated businesses, joint ventures and other related parties are part of the Company's common transactions. Their conditions are those customary for this type of transactions in respect of terms and market prices. In addition, these have been eliminated in consolidation and are not detailed in this note.

 

Maturity terms for each case vary by virtue of the transaction giving rise to them.

 

As of September 30, 2018 and December 31, 2017, the detail of significant transactions with related parties is as follows:

 

Tax ID No,  Company  Nature  Country of
origin
  Transaction 

9/30/2018

  

12/31/2017

 
               ThUS$   ThUS$ 
Foreign  Doktor Tarsa Tarim Sanayi As  Associate  Turkey  Sale of products   10,179    17,538 
Foreign  Ajay Europe S.A.R.L.  Associate  France  Sale of products   15,172    15,706 
Foreign  Ajay Europe S.A.R.L.  Associate  France  Dividends   811    969 
Foreign  Ajay North America LLC.  Associate  United States  Sale of products   11,898    13,206 
Foreign  Ajay North America LLC.  Associate  United States  Dividends   2,105    1,123 
Foreign  Abu Dhabi Fertilizer Industries WWL  Associate  United Arab Emirates  Sale of products   4,159    4,351 
Foreign  Abu Dhabi Fertilizer Industries WWL  Associate  United Arab Emirates  Dividends   5,641    - 
Foreign  Charlee SQM Thailand Co. Ltd.  Associate  Thailand  Sale of products   4,916    5,102 
Foreign  Charlee SQM Thailand Co. Ltd.  Associate  Thailand  Dividends   362    - 
77.557.430-5  Sales de Magnesio Ltda.  Associate  Chile  Sale of products   -    45 
Foreign  Kowa Company Ltd. (1)  Other related parties  Japan  Sale of products   -    132,495 
Foreign  SQM Vitas Brasil Agroindustria  Joint control or significant influence  Brazil  Sale of products   35,207    31,137 
Foreign  SQM Vitas Peru S.A.C.  Joint control or significant influence  Peru  Sale of products   11,485    23,058 
Foreign  SQM Vitas Fzco.  Joint venture  United Arab Emirates  Sale of products   2    85 
Foreign  Sichuan SQM Migao Chemical Fertilizers Co Ltda.  Joint venture  China  Sale of services   -    252 
Foreign  Coromandel SQM India  Joint venture  India  Sale of products   6,369    8,011 
Foreign  SQM Star Qingdao Corp Nutrition Co., Ltd.  Joint venture  China  Sale of products   -    200 
79.049.778-9  Callegari Agrícola S.A.  Other related parties  Chile  Sale of products   -    210 
Foreign  Minera Exar S.A.  Joint venture  Argentina  Loans   8,500    11,000 
Foreign  Minera Exar S.A.  Joint venture  Argentina  Loan interest   1,700    - 
Foreign  Terra Tarsa Ukraine LLC  Associate  Turkey  Sale of services   1,645    1,218 
Foreign  Terra Tarsa Don LLC  Associate  Russian Federation  Sale of products   187    423 
Foreing  Plantacote N.V.  Associate  Belgium  Sale of products   3,962    2,108 
Foreing  SQM eastmed Turkey  Associate  Turkey  Sale of products   30    - 
Foreing  Pavoni & C., Spa  Joint venture  Italy  Sale of products   15    - 
                       
Total               124,345    268,237 

 

(1)As of September 30, 2018, Kowa Company Ltd. is not considered a related party.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

116

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 13Related party disclosures (continued)

 

13.5Trade receivables due from related parties, current:

 

Transactions between the Company, its subsidiaries, joint ventures and other related parties are considered customary transactions. These transactions are carried out under arm’s length conditions, or those that are normally in effect for this type of transaction in terms of time frames and market prices. In addition, they have been eliminated upon consolidation and are not disclosed in this note.

 

Tax ID N°  Company  Nature  Country of origin  Currency  9/30/2018
   12/31/2017
 
               ThUS$   ThUS$ 
Foreign  Charlee SQM Thailand Co. Ltd.  Associate  Thailand  US$   3,623    1,204 
Foreign  Ajay Europe S.A.R.L.  Associate  France  Euro   4,399    4,689 
Foreign  Ajay North America LLC.  Associate  United States  US$   1,503    2,005 
Foreign  Abu Dhabi Fertilizer Industries WWL  Associate  United Arab Emirates  Arab Emirates dirham   808    73 
Foreign  Kowa Company Ltd.(1)  Jointly controlled entity  Japan  US$   -    5,008 
96.511.530-7  Soc.de Inversiones Pampa Calichera  Jointly controlled entity  Chile  US$   6    6 
Foreign  SQM Vitas Brasil Agroindustria  Joint venture  Brazil  US$   23,816    17,293 
Foreign  SQM Vitas Peru S.A.C.  Joint venture  Peru  US$   9,955    13,766 
Foreign  Coromandel SQM India  Joint venture  India  Indian rupee   4,211    3,804 
Foreign  SQM Star Qingdao Corp Nutrition Co., Ltd.  Joint venture  China  US$   573    50 
Foreign  Plantacote N.V.  Associate  Belgium  Euro   467    190 
Foreign  Terra Tarsa Don LLC  Associate  Russian Federation  Russian ruble   41    44 
Foreign  Minera Exar S.A.  Joint venture  Argentina  US$   21,215    11,000 
Foreign  Terra Tarsa Ukraine LLC  Associate  Ukraine  Ukrainian Grivna   77    - 
Foreing  SQM Pavoni & C. SPA  Joint venture  Italy  Euro   15    - 
Foreing  Covalent Lithium Pty Ltd  Joint venture  Australia  AU$   153    - 
Total               70,862    59,132 

 

(1)As of September 30, 2018, Kowa Company Ltd. is not considered a related party.

 

13.6Trade payables due to related parties, current:

 

Tax ID No.  Company  Nature  Country of origin  Currency  9/30/2018
   12/31/2017
 
               ThUS$   ThUS$ 
Foreign  Doktor Tarsa Tarim Sanayi AS  Associate  Turkey  YTL   15    11 
Foreign  Terra Tarsa Ukraine LLC  Other related parties  Ukraine  Ukrainian Grivna   -    7 
Foreign  SQM Star Qingdao Corp Nutrition Co,, Ltd.  Joint venture  China  US$   -    725 
Foreign  Sichuan SQM Migao Chemical Fertilizers Co Ltda.  Joint venture  China  US$   -    584 
Foreign  SQM Vitas Fzco.  Joint venture  United Arab Emirates  Arab Emirates dirham   361    38 
Foreign  SQM Eastmed Turkey  Associate  Turkey  Euro   15      
Current Total               391    1,365 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

117

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14 Financial instruments

 

Financial instruments in accordance with IAS 39 are detailed as follows:

 

14.1Types of other financial assets

 

Description of other financial assets 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
         
Other current financial assets (1)   310,304    360,941 
Derivatives (2)   5,423    6,038 
Hedging assets   16,640    - 
Total other current financial assets   332,367    366,979 
           
Other non-current financial assets (3)   31,930    42,879 
Total other non-current financial assets   31,930    42,879 

 

(1)Relates to term deposits with maturities exceeding 90 days and less than 360 days from the investment date.
(2)Relates to forwards and options that were not classified as hedging instruments (see detail in Note 14.3).
(3)The detail of other financial assets, non-current is as follows:

 

  

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
         
Non-current investments not accounted for using the equity accounting method, classified as available for sale   3,868    9,179 
Hedging assets   27,988    8,910 
Contribution for constitution of Joint Venture (1)   -    24,745 
Other financial assets, non-current   74    45 
Total other financial assets, non-current   31,930    42,879 

 

(1)SQM Potasio S.A., aportó MUS$ 24,745 a Western Australia Lithium (WAL). Esto al 31 de diciembre de 2017 no se había constituido legalmente como Compañía, por lo que los fondos permanecieron en fideicomiso a la espera de ser transferidos a WAL.

 

Detail of other current financial assets

 

Institution 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
Banco Santander   50,060    163,269 
Banco de Crédito e Inversiones   133,787    71,748 
Banco Itaú - Corpbanca   102,547    77,527 
Banco Security   -    28,592 
Scotiabank Sud Americano   19,897    13,764 
Banco Chile   4,013    4,834 
Banco BBVA Chile   -    1,207 
Total   310,304    360,941 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

118

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14 Financial instruments, (continued)

 

14.2Trade and other receivables

 

   9/30/2018   12/31/2017 
   Current   Non-current   Total   Current   Non-current   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$$   ThUS$ 
Trade receivables   391,477    -    391,477    412,321    -    412,321 
Prepayments   23,204    -    23,204    16,177    -    16,177 
Other receivables   13,969    2,415    16,384    18,377    1,912    20,289 
Total trade and other receivables   428,650    2,415    431,065    446,875    1,912    448,787 

 

   9/30/2018   12/31/2017 
   Assets before
allowances
   Allowance for
doubtful trade
receivables
   Assets for trade
receivables, net
   Assets before
allowances
   Allowance for
doubtful trade
receivables
   Assets for trade
receivables, net
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Receivables related to credit operations, current   406,330    (14,853)   391,477    427,400    (15,079)   412,321 
Trade receivables, current   406,330    (14,853)   391,477    427,400    (15,079)   412,321 
Prepayments, current   24,063    (859)   23,204    16,877    (700)   16,177 
Other receivables, current   18,452    (4,483)   13,969    23,409    (5,032)   18,377 
Current trade and other receivables   42,515    (5,342)   37,173    40,286    (5,732)   34,554 
Other receivables, non-current   2,415    -    2,415    1,912    -    1,912 
Non-current receivables   2,415    -    2,415    1,912    -    1,912 
Total trade and other receivables   451,260    (20,195)   431,065    469,598    (20,811)   448,787 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

119

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments, (continued)

 

14.2Trade and other receivables, continued

 

Portfolio stratification, continued

 

The Company’s policy is to require guarantees (such as letters of credit, guarantee clauses and others) and/or maintaining insurance policies for certain accounts as deemed necessary by management.

 

Uncollateralized portfolio

 

As of September 30, 2018 the detail of the uncollateralized portfolio is as follows:

 

2018
   Total uncollateralized portfolio 
Past due
segments
  Number of
customers non-
renegotiated
portfolio
   Gross non-
renegotiated
portfolio ThCh$
   Number of
customers
renegotiated
portfolio
   Gross
renegotiated
portfolio ThCh$
 
Current   1,493    366,372    18    600 
1-30 days   187    16,433    109    310 
31-60 days   88    2,863    151    358 
61-90 days   133    2,216    236    599 
91-120 days   415    2,849    89    299 
121-150 days   403    1,738    40    127 
151-180 days   483    1,028    33    134 
181-210 days   715    1,282    18    119 
211-250 days   226    1,348    24    51 
>250 days   1,713    6,201    236    1,403 
Total   5,856    402,330    954    4,000 

 

As of December 31, 2017 the detail of the uncollateralized portfolio is as follows:

 

2017
   Total uncollateralized portfolio 
Past due
segments
  Number of
customers non-
renegotiated
portfolio
   Gross non-
renegotiated
portfolio ThCh$
   Number of
customers
renegotiated
portfolio
   Gross
renegotiated
portfolio ThCh$
 
Current   3,039    344,802    23    706 
1-30 days   1,598    41,510    376    924 
31-60 days   824    8,813    130    272 
61-90 days   756    3,740    50    119 
91-120 days   548    7,367    22    54 
121-150 days   182    2,914    22    56 
151-180 days   443    5,602    45    75 
181-210 days   365    4,470    27    45 
211-250 days   682    112    29    138 
>250 days   1,837    3,050    350    2,631 
Total   10,274    422,380    1,074    5,020 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

120

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments, (continued)

 

14.2Trade and other receivables, continued

 

As of September 30, 2018 and December 31, 2017, movements in provisions are as follows:

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
Provision   18,237    18,225 
Non-renegotiated provision   1,958    2,586 
Total   20,195    20,811 
Impairment   (990)   (13,434)
Recoveries   893    126 

 

Credit risk concentration.

 

Credit risk concentration with respect to trade receivables is reduced due to the great number of entities in the Company’s client base and their distribution throughout the world.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

121

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.3Hedging assets and liabilities

 

The balance represents derivative instruments measured at fair value which have been classified as hedges from exchange and interest rate risks related to the total obligations associated with bonds in Chilean pesos and UF . As of September 30, 2018, the notional amount of cash flows in Cross Currency Swap contracts agreed upon in US dollars amounted to ThUS$ 461,659, as of June 30, 2018 ThUS$ 471,297 and as of December 31, 2017 such contracts amounted to ThUS$ 266,335.

 

Hedging assets with
underlying debt
  Derivative
instruments
(Fwds)
  

Effect on profit or
loss for the period

Derivative
instruments

   Hedging reserve
in gross equity
   Deferred tax
hedging
reserve in
equity
   Hedging
reserve in
equity
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
September 30, 2018   26,747    (13,369)   13,377    -    12,408 
                     
Hedging liabilities
with underlying debt
 

Derivative
instruments

(CCS)

  

Effect on profit or
loss for the period

Derivative
instruments

   Hedging reserve
in gross equity
   Deferred tax
hedging
reserve in
equity
   Hedging
reserve in
equity
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                          
September 30, 2018   5,489    (10,614)   (5,124)   -    226 
                     
Hedging assets with
underlying
investments
 

Derivative
instruments

(CCS)

   Effect on profit or
loss for the period
Derivative
instruments
   Hedging reserve
in gross equity
   Deferred tax
hedging
reserve in
equity
   Hedging
reserve in
equity
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
September 30, 2018   16,639    18,039    (1,400)   -    (2,062)
                     
Hedging assets with
underlying debt
  Derivative
instruments
(Fwds)
  

Effect on profit or
loss for the period

Derivative
instruments

   Hedging reserve
in gross equity
   Deferred tax
hedging
reserve in
equity
   Hedging
reserve in
equity
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
December 31, 2017   8,910    5,641    2,170    -    2,170 
                     
Hedging liabilities
with underlying debt
  Derivative
instruments
(CCS)
  

Effect on profit or
loss for the period

Derivative
instruments

   Hedging reserve
in gross equity
   Deferred tax
hedging
reserve in
equity
   Hedging
reserve in
equity
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                          
December 31, 2017   17,128    33,696    41    -    41 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

122

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.3Hedging assets and liabilities, continued

 

Hedging liabilities with
underlying
investments
 

Derivative
instruments

(CCS)

   Effect on profit or
loss for the period
Derivative
instruments
   Hedging reserve
in gross equity
   Deferred tax
hedging
reserve in
equity
   Hedging
reserve in
equity
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
December 31, 2017   (20,159)   (20,256)   97    -    97 

 

The balances in the “effect on profit or loss” column consider the interim effects of the contracts in force As of September 30, 2018 and December 31, 2017.

 

Derivative contract maturities are detailed as follows:

 

Series 

Contract amount

   Currency  Maturity date
   ThUS$       
H   155,214   UF  01/05/2023
O   58,748   UF  02/01/2022
P   134,228   UF  01/15/2028

 

The Company uses cross currency swap derivative instruments to hedge the possible financial risk associated with the volatility of the exchange rate associated with Chilean pesos and UF. The objective is to hedge the exchange rate financial risks associated with bonds payable, Hedges are documented and tested to measure their effectiveness.

 

Based on a comparison of critical terms, hedging is highly effective, given that the hedged amount is consistent with obligations maintained for bonds denominated in Chilean pesos and UF, Likewise, hedging contracts are denominated in the same currencies and have the same expiration dates of bond principal and interest payments.

 

Hedge Accounting

 

The Company classifies derivative instruments as hedging that may include derivative or embedded derivatives either as fair value hedge derivative instruments, cash flow hedge derivative instruments, or hedge derivative instruments for net investment in a business abroad.

 

a) Fair value hedge

 

Changes in fair values of derivative instruments classified as fair value hedge derivative instruments are accounted for in gains and losses immediately along with any change in the fair value of the hedged item that is attributable to the risk being hedged.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

123

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.3Hedging assets and liabilities, continued

 

b)Cash flow hedges

 

Cash flow hedges cover exposure to the cash flow variations attributable to a risk associated with a specific transaction that is very likely to be executed, which may have material effects on the results of the Company.

 

The Company documents the relationship between hedge instruments and the hedged item along with the objectives of its risk management and strategy to carry out different hedging transactions, In addition, upon commencement of the period hedged and then on a quarterly basis, the Company documents whether hedge instruments have been efficient and met the objective of hedging market fluctuations. For this purpose, we use the effectiveness test, A hedge instrument is deemed effective if the effectiveness test result is between 80% and 125%.

 

The hedge instruments are classified as effective or not effective on the basis of the effectiveness test results, At present, hedges are classified as effective on the basis of the effectiveness tests, This note includes the detail of fair values of derivatives classified as hedging instruments.

 

14.4Financial liabilities

 

Other current and non-current financial liabilities

 

As of September 30, 2018 and December 31, 2017, the detail is as follows:

 

   9/30/2018   12/31/2017 
   Current   Non-current   Total   Current   Non-current   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Bank borrowings   864    68,852    69,716    163,568    -    163,568 
Obligations with the public (bonds)   14,764    1,144,982    1,159,746    13,494    1,031,507    1,045,001 
Derivatives   668    -    668    5,979    -    5,979 
Hedging liabilities   4,073    2,657    6,730    37,287    -    37,287 
Total   20,369    1,216,491    1,236,860    220,328    1,031,507    1,251,835 

  

Current and non-current bank borrowings

 

As of September 30, 2018 and December 31, 2017, the detail is as follows:

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
Long-term bank borrowings   68,852    - 
Short-term bank borrowings   -    163,568 
Current portion of long-term loans   864    - 
Short-term borrowings and current portion of long-term borrowings   69,716    163,568 
Total bank borrowings   69,716    163,568 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

124

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

a)Bank borrowings, current:

 

As of September 30, 2018 and December 31, 2017, the detail of this caption is as follows:

 

Debtor  Creditor  Currency or
adjustment
     Effective   Nominal 
Tax ID No  Company   Country   Tax ID No,  Financial institution  Country   index  Repayment  rate   rate 
93,007,000-9   SQM.S.A.    CHILE   0-E  Scotiabank Cayman   USA   US$  Upon maturity   4.246%   3.59%

 

      9/30/2018   9/30/2018 
Debtor  Creditor  Nominal amounts   Current amounts 
Company  Financial institution 

Up to 90
days

  

90 days
to 1 year

  

Total

  

Up to 90
days

  

90 days
to 1 year

  

Subtotal

   Borrowing
 costs
   Total  
      ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM S.A.  Scotiabank Cayman   -    -    -    864    -    864    -    864 
Total      -    -    -    864    -    864    -    864 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

125

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

Debtor  Creditor  Currency or
adjustment
     Effective
   Nominal
 
Tax ID No  Company  Country  Tax ID No,  Financial institution  Country  index  Repayment  rate   rate 
93,007,000-9  SQM.S.A.  CHILE  97,018,000-1  Scotiabank Sud Americano  CHILE  US$  Upon maturity   1.63%   1.63%
93,007,000-9  SQM.S.A.  CHILE  97,018,000-1  Scotiabank Sud Americano  CHILE  US$  Upon maturity   1.73%   1.73%
93,007,000-9  SQM.S.A.  CHILE  97,018,000-1  Scotiabank Sud Americano  CHILE  US$  Upon maturity   1.73%   1.73%
93,007,000-9  SQM S.A.  CHILE  97,018,000-1  Banco Estado  CHILE  US$  Upon maturity   1.64%   1.64%
93,007,000-9  SQM S.A.  CHILE  97,018,000-1  Banco Estado  CHILE  US$  Upon maturity   1.67%   1.67%
93,007,000-9  SQM S.A.  CHILE  97,018,000-1  Banco Estado  CHILE  US$  Upon maturity   1.67%   1.67%
79,626,800-K  SQM Salar S.A.  CHILE  97,018,000-1  Banco Estado  CHILE  US$  Upon maturity   1.91%   1.91%
79,626,800-K  SQM Salar S.A.  CHILE  97,018,000-1  Scotiabank Sud Americano  CHILE  US$  Upon maturity   1.94%   1.94%
79,947,100-0  SQM Industrial S.A.  CHILE  97,030,000-7  Banco Estado  CHILE  US$  Upon maturity   1.74%   1.74%
79,947,100-0  SQM Industrial S.A.  CHILE  97,030,000-7  Banco Estado  CHILE  US$  Upon maturity   1.65%   1.65%

 

      12/31/2017   12/31/2017 
Debtor  Creditor  Nominal amounts   Current amounts 
Company  Financial institution 

Up to 90
days

  

90 days
to 1 year

  

Total

  

Up to 90
days

  

90 days
to 1 year

  

Subtotal

   Borrowing
costs
   Total 
      ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM,S.A.  Scotiabank Sud Americano   -    20,000    20,000    -    20,137    20,137    -    20,137 
SQM,S.A.  Scotiabank Sud Americano   -    17,000    17,000    -    17,140    17,140    -    17,140 
SQM,S.A.  Scotiabank Sud Americano   -    3,000    3,000    -    3,025    3,025    -    3,025 
SQM,S.A.  Banco Estado   15,000    -    15,000    15,011    -    15,011    -    15,011 
SQM,S.A.  Banco Estado   15,000    -    15,000    15,011    -    15,011    -    15,011 
SQM,S.A.  Banco Estado   15,000    -    15,000    15,011    -    15,011    -    15,011 
SQM Salar S.A.  Banco Estado   -    20,000    20,000    -    20,071    20,071    -    20,071 
SQM Salar S.A.  Scotiabank Sud Americano   -    20,000    20,000    -    20,072    20,072    -    20,072 
SQM Industrial S.A.  Banco Estado   -    20,000    20,000    -    20,064    20,064    -    20,064 
SQM Industrial S.A.  Banco Estado   18,000    -    18,000    18,026    -    18,026    -    18,026 
Total      63,000    100,000    163,000    63,059    100,509    163,568    -    163,568 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

126

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

b)Unsecured obligations, current:

 

As of September 30, 2018 and December 31, 2017, the detail of current unsecured interest-bearing obligations is composed of promissory notes and bonds, as follows:

Bonds

 

Tax ID No.  Company  Country   Number of
registration or
ID of the
instrument
   Series   Maturity
date
  Currency or
adjustment
index
  Payment of
interest
   Repayment  Effective
rate
   Nominal
rate
 
93,007,000-9  SQM S.A.   CHILE    -    MMUS$250   10/21/2018  US$   Semiannual   Upon maturity   1.21%   5.50%
93,007,000-9  SQM S.A.   CHILE    -    MMUS$250   7/28/2018  US$   Semiannual   Upon maturity   2.75%   4.38%
93,007,000-9  SQM S.A.   CHILE    -    MMUS$300   10/03/2018  US$   Semiannual   Upon maturity   1.94%   3.63%
93,007,000-9  SQM S.A.   CHILE    564    H   7/05/2018  UF   Semiannual   Semiannual   1.90%   4.90%
93,007,000-9  SQM S.A.   CHILE    699    O   8/01/2018  UF   Semiannual   Upon maturity   2.60%   3.80%
93,007,000-9  SQM S.A.   CHILE    563    P   7/15/2018  UF   Semiannual   Upon maturity   3.07%   3.25%

 

      9/30/2018   9/30/2018 
      Nominal maturities   Current maturities 
Company  Country  Series  Up to 90
days
   91 days to 1
year
   Total   Up to 90
days
   91 days to 1
year
   Subtotal   Bond
issuance
costs
   Total 
         ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM S.A.  CHILE  ThUS$250,000   6,073    -    6,073    6,073    -    6,073    (386)   5,687 
SQM S.A.  CHILE  ThUS$250,000   -    1,884    1,884    -    1,884    1,884    (433)   1,451 
SQM S.A.  CHILE  ThUS$300,000   5,347    -    5,347    5,347    -    5,347    (615)   4,732 
SQM S.A.  CHILE  H   -    1,894    1,894    -    1,894    1,894    (139)   1,755 
SQM S.A.  CHILE  O   -    383    383    -    383    383    (66)   317 
SQM S.A.  CHILE  P   -    835    835    -    835    835    (13)   822 
Total         11,420    4,996    16,416    11,420    4,996    16,416    (1,652)   14,764 

 

Effective rates of bonds in Chilean pesos and UF are expressed and calculated in U,S, dollars based on the flows agreed in Cross Currency Swap Agreements.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

127

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

Tax ID No.  Company  Country  Number of
registration or
ID of the
instrument
   Series  Maturity
date
  Currency or
adjustment
index
  Payment of
interest
  Repayment  Effective
rate
   Nominal
rate
 
                                  
93,007,000-9  SQM S.A.  CHILE   -   ThUS$250,000  04/21/2018  US$  Semiannual  Upon maturity   1.47%   5.50%
93,007,000-9  SQM S.A.  CHILE   -   ThUS$250,000  01/28/2018  US$  Semiannual  Upon maturity   3.17%   4.38%
93,007,000-9  SQM S.A.  CHILE   -   ThUS$300,000  04/03/2018  US$  Semiannual  Upon maturity   2.12%   3.63%
93,007,000-9  SQM S.A.  CHILE   564   H  01/05/2018  UF  Semiannual  Semiannual   2.18%   4.90%
93,007,000-9  SQM S.A.  CHILE   699   O  02/01/2018  UF  Semiannual  Upon maturity   2.80%   3.80%

 

      12/31/2017   12/31/2017 
      Nominal maturities   Current maturities 
Company  Country  Series  Up to 90
days
   91 days to 1
year
   Total   Up to 90
days
   91 days to 1
year
   Subtotal   Bond
issuance
costs
   Total 
         ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM S.A.  CHILE  ThUS$250,000   -    -    -    -    2,674    2,674    (385)   2,289 
SQM S.A.  CHILE  ThUS$250,000   -    -    -    4,648    -    4,648    (433)   4,215 
SQM S.A.  CHILE  ThUS$300,000   -    -    -    -    2,658    2,658    (615)   2,043 
SQM S.A.  CHILE  H   -    -    -    4,127    -    4,127    (139)   3,988 
SQM S.A.  CHILE  O   -    -    -    1,026    -    1,026    (67)   959 
Total         -    -    -    9,801    5,332    15,133    (1,639)   13,494 

 

Effective rates of bonds in Chilean pesos and UF are expressed and calculated in U,S, dollars based on the flows agreed in Cross Currency Swap Agreements.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

128

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

c)Classes of interest-bearing loans, non-current

 

The following table shows the details of bank loans that accrue non-current interest as of September 30, 2018. As of December 31, there were no loans:

 

Debtor  Creditor  Currency
or
           
Chilean Tax
ID
  Company  Country  Chilean Tax
ID
  Financial institution  Country  adjustment
index
  Type of
amortization
  Effective
rate
   Nominal
rate
 
93,007,000-9  SQM.S.A.  Chile  0-E  Scotiabank Cayman  USA  USD  Maturity   3.59%   3.59%

  

      9/30/2018  9/30/2018 
Creditor  Creditor  Nominal non-current maturities  Non-current maturities 
Company  Financial institution 

Between 1
and 2

  Between 2
and 3
   Between 3
and 4
  

Total

  

Between 1
and 2

   Between 2
and
3
   Between 3
and 4
   Subtotal
  

Costs of
obtaining
loans

   Total 
      ThUS$  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM S.A.  Scotiabank Cayman      -    70,000    70,000    -    -    70,000    70,000    (1,148)   68,852 
Total     -   -    70,000    70,000    -    -    70,000    70,000    (1,148)   68,852 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

129

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

d)Non-current unsecured interest-bearing bonds

 

The breakdown of non-current unsecured interest-bearing bonds as of September 30, 2018 and December 31, 2017 is detailed as follows:

 

                        Periodicity         
Tax ID No.  Company  Country   Number of
registration or ID
of the instrument
   Series   Maturity
date
  Currency or
adjustment index
  Payment of
interest
   Repayment  Effective
rate
   Nominal
rate
 
93.007.000-9  SQM S.A.   CHILE    -    ThUS$250,000   04/21/2020  US$   Semiannual   Upon maturity   5.50%   5.50%
93.007.000-9  SQM S.A.   CHILE    -    ThUS$250,000   01/28/2025  US$   Semiannual   Upon maturity   4.38%   4.38%
93.007.000-9  SQM S.A.   CHILE    -    ThUS$300,000   04/03/2023  US$   Semiannual   Upon maturity   3.63%   3.63%
93.007.000-9  SQM S.A.   CHILE    564    H   01/05/2030  UF   Semiannual   Semiannual   4.90%   4.90%
93.007.000-9  SQM S.A.   CHILE    699    O   02/01/2033  UF   Semiannual   Upon maturity   3.80%   5.50%
93.007.000-9  SQM S.A.   CHILE    563    P   01/15/2028  UF   Semiannual   Upon maturity   3.25%   3.25%

 

Nominal non-current maturities

9/30/2018

 

Non-current maturities

9/30/2018

 
Series  Over 1
year to 2
   Over 2
years to 3
   Over 3
Years to 4
   Over 4
Years to 5
  

Over 5
years

 

   Total   Over 1
year to 2
   Over 2
years to 3
   Over 3
Years to 4
   Over 4
Years to 5
  

Over 5
years

 

   Subtotal   Bond
issuance
costs
   Total 
    ThUS$    ThUS$    ThUS$    ThUS$    ThUS$    ThUS$    ThUS$    ThUS$    ThUS$    ThUS$    ThUS$    ThUS$    ThUS$    ThUS$ 
MUS$250   250,000    -    -    -    -    250,000    250,000    -    -    -    -    250,000    (228)   249,772 
MUS$250   -    -    -    -    250,000    250,000    -    -    -    -    250,000    250,000    (2,311)   247,689 
MUS$300   -    -    300,000    -    -    300,000    -    -    300,000    -    -    300,000    (2,159)   297,841 
H   -    -    -    -    165,697    165,697    -    -    -    -    165,697    165,697    (1,427)   164,270 
O   -    -    -    -    62,136    62,136    -    -    -    -    62,136    62,136    (895)   61,241 
P   -    -    -    -    124,273    124,273    -    -    -    -    124,273    124,273    (104)   124,169 
Total   250,000    -    300,000    -    602,106    1,152,106    250,000    -    300,000    -    602,106    1,152,106    (7,124)   1,144,982 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

130

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

d)Non-current unsecured interest-bearing bonds, continued

 

As of September 30, 2018 and December 31, 2017, the breakdown of unsecured interest-bearing liabilities, non-current is as follows:

 

                      Periodicity        
Tax ID No,  Company  Country  Number of
registration or ID
of the instrument
   Series 

Maturity

date

  Currency or
adjustment index
  Payment of
interest
  Repayment  Effective
rate
   Nominal
rate
 
93.007.000-9  SQM S.A.  CHILE   -   MMUS$250  04/21/2020  US$  Semiannual  Upon maturity   5.50%   5.50%
93.007.000-9  SQM S.A.  CHILE   -   MMUS$250  01/28/2025  US$  Semiannual  Upon maturity   4.38%   4.38%
93.007.000-9  SQM S.A.  CHILE   -   MMUS$300  04/03/2023  US$  Semiannual  Upon maturity   3.63%   3.63%
93.007.000-9  SQM S.A.  CHILE   564   H  01/05/2030  UF  Semiannual  Semiannual   4.90%   6.01%
93.007.000-9  SQM S.A.  CHILE   699   O  01/02/2033  UF  Semiannual  Upon maturity   3.80%   3.80%

 

Nominal non-current maturities

12/31/2017

 

Non-current maturities

6/30/2017

 
Series  Over 1
year to 2
   Over 2
years to 3
   Over 3
Years to 4
   Over 4
Years to 5
   Over 5
years
   Total   Over 1
year to 2
   Over 2
years to 3
   Over 3
Years to 4
   Over 4
Years to 5
   Over 5
years
   Subtotal   Bond
issuance
costs
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
MUS$250   250,000    -    -    -    -    250,000    250,000    -    -    -    -    250,000    (517)   249,483 
MUS$250   -    -    -    -    250,000    250,000    -    -    -    -    250,000    250,000    (2,636)   247,364 
MUS$300   -    -    -    -    300,000    300,000    -    -    -    -    300,000    300,000    (2,618)   297,382 
H   -    -    -    -    174,367    174,367    -    -    -    -    174,367    174,367    (1,532)   172,835 
O   -    -    -    -    65,388    65,388    -    -    -    -    65,388    65,388    (945)   64,443 
Total   250,000    -    -    -    789,755    1,039,755    250,000    -    -    -    789,755    1,039,755    (8,248)   1,031,507 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

131

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

e)Additional information

 

Bonds

 

On September 30, 2018 and December 31, 2017, short term bonds of ThUS$14,764 and ThUS$13,494 respectively were classified as short-term, consisting of the current portion due plus accrued interest to date; debt is presented net of bond issuance costs. The non-current portion consisted of ThUS$1,144,982 on September 30, 2018 and ThUS$1,031,507 on December 31, 2017, corresponding to the issuance series H bonds second issue single series bonds (ThUS$250), series M bonds, series O bonds, third issue single series bonds (ThUS$300) and fourth issue single series bonds (ThUS$250) and Series P bonds, excluding bond issuance costs.

 

As of September 30, 2018 and December 31, 2017, the details of each issuance are as follows:

 

Series “C” bonds

 

On January 24, 2006, the Company placed Series C bonds for UF 3,000,000 (ThUS$101,918) at an annual rate of 4.00%.

 

On July 5, 2017, the Series C bond was prepaid.

 

As of September 30, 2018, and December 31 2017, the Company has made the following payments with a charge to the Series C bonds:

 

Payments made  12/31/2017 
   ThUS$ 
Principal payment   57,290 
Interest payment   1,515 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

132

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

Series “G” and “H” bonds

 

On January 13, 2009, the Company placed two bond series in the domestic market. The first was Series H for UF 4,000,000 (ThUS$139,216) at an annual interest rate of 4.9%, with a term of 21 years and payment of the principal beginning in 2019. The second was Series G for ThCh$21,000,000 (ThUS$34,146), which was placed at a term of 5 years with a single payment at the maturity of the term and an annual interest rate of 7%.

 

As of September 30, 2018, and December 31, 2017, the Company has made the following payments with a charge to the Series H bonds:

 

Payments made 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
Payments of interest, Series H bonds   8,325    7,691 

 

Single series bonds, second issue ThUS$250,000

 

On April 21, 2010, the Company informed the CMF of its placement in international markets of an unsecured bond of ThUS$250,000 with a maturity of 10 years beginning on the aforementioned date with an annual interest rate of 5.5% and destined to refinance long-term liabilities.

 

As of September 30, 2018, and December 31, 2017, the detail of payments charged to the line of single series bonds, second issue is as follows:

 

Payments made 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
Interest payment   6,875    13,750 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

133

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

Series “M” and “O” bonds

 

On April 4, 2012, the Company placed two bond series in the domestic market. Series M for UF 1,000,000 (ThUS$46,601) was placed at a term of 5 years with a single payment at the maturity of the term and an annual interest rate of 3.3%. On February 1, 2017, the M bond was canceled.

 

Payments made 

12/31/2017

 
   ThUS$ 
Principal payment Series M bonds   40,726 
Payment of interest, Series M bonds   667 

 

Series O for UF 1,500,000 (ThUS$69,901) was placed at a term of 21 years with a single payment at the maturity of the term and an annual interest rate of 3.80%.

 

As of September 30, 2018, and December 31, 2017the Company has made the following payments with a charge to the Series O bonds:

 

Payments made 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
Payment of interest, Series O bonds   2,457    2,301 

 

Single series bonds, third issue ThUS$300,000

 

On April 3, 2013, the Company issued a non-guaranteed bond in the United States with a value of US$300 million. The bond is for a 10-year term with an annual coupon rate of 3.625% and an annual yield of 3.716%. This rate equates to a difference of 180 basis points to comparable US Treasury bonds, The funds raised will be used to refinance long term liabilities and finance general corporate objectives.

 

As of September 30, 2018, and December 31, 2017, the following payments have been made with a debit to the line of single-series bonds, third issue:

 

Payments made 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
Payment of interest   5,437    10,875 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

134

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.4Financial liabilities, continued

 

Single series bonds, fourth issuance ThUS$250

 

On October 23, 2014, the Company informed the CMF that Sociedad Química y Minera de Chile S.A. had agreed to issue and place unsecured bonds of ThUS$250,000 in international markets. These mature in 2025 and have annual interest rate of 4.375%, equivalent to a spread of 215 basis points on comparable US Treasury bonds, which were offered to investors at a price of 99.410% with respect to capital. The aforementioned agreement was agreed on October 23, 2014 and the issuance and placement of such bonds was performed in conformity with the provisions of Rule 144A of the US Securities Act of 1933 and these bonds will not be publicly offered in Chile.

 

As of September 30, 2018, and December 31, 2017, the following payments have been made.

 

Payments made 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
Payment of interest   10,938    10,938 

 

Series “P” bonds

 

On April 5, 2018, the Company informed the Financial Markets Commission that it had authorized the placement on the stock market of the Series “P” bond with a value of UF 3 million, with a charge to the 10 year Bonds Line registered in the FMC Securities Registry dated December 31, 2008 under number 563.

 

The Bonds (i) mature on January 15, 2028; (ii) will accrue on the unpaid principal, expressed in UF, at an annual interest rate of 3.25% from January 15, 2018; and (iii) can be called early by the Company as of the date of placement, that is, as of April 5, 2018.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

135

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.5Trade and other payables

 

   9/30/2018   12/31/2017 
   Current   Non-
current
   Total   Current   Non-
current
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Accounts payable   181,448    -    181,448    195,858    -    195,858 
Other accounts payable   330    -    330    422    -    422 
Total   181,778    -    181,778    196,280    -    196,280 

 

As of September 30, 2018 and December 31, 2017, the balance of current and past due suppliers is as follows:

 

Suppliers current on all payments

 

   Amounts according to payment periods as of 9/30/2018 
   Up to 30   31 - 60   61 - 90   91 - 120   121 - 365   366 and
more
   Total 
Type of Supplier  Days   days   Days   days   days   days   ThUS$ 
Goods   77,111    4,401    412    400    8    -    82,332 
Services   18,529    587    52    13    26    -    19,207 
Others   53,167    39    6    32    5    -    53,249 
Total   148,807    5,027    470    445    39    -    154,788 

 

   Amounts according to payment periods as of 31/12/2017 
   Up to 30   31 - 60   61 - 90   91 - 120   121 - 365   366 and
more
   Total 
Type of Supplier  days   days   days   days   days   days   ThUS$ 
Goods   72,567    -    -    -    -    -    72,567 
Services   36,855    -    -    -    -    3    36,858 
Others   45,104    -    -    -    -    -    45,104 
Total   154,526    -    -    -    -    3    154,529 

 

Suppliers past due on payments

 

   Amounts according to payment periods as of 9/30/2018     
   Up to 30   31 - 60   61 - 90   91 - 120   121 - 365   366 and
more
   Total 
Type of Supplier  days   days   days   days   days   days   ThUS$ 
Goods   5,906    647    92    355    273    291    7,564 
Services   7,709    174    306    118    228    103    8,638 
Others   9,452    468    91    74    178    195    10,458 
Total   23,067    1,289    489    547    679    589    26,660 

 

   Amounts according to payment periods as of 12/31/2017     
   Up to 30   31 - 60   61 - 90   91 - 120   121 - 365   366 and
more
   Total 
Type of Supplier  days   days   days   days   days   days   ThUS$ 
Goods   16,693    448    3,965    1,784    1,602    42    24,534 
Services   11,704    1,913    547    681    1,325    17    16,187 
Others   479    9    13    20    46    41    608 
Total   28,876    2,370    4,525    2,485    2,973    100    41,329 

 

Purchase commitments held by the Company are recognized as liabilities when the goods and services are received by the Company, As of September 30, 2018, the Company has purchase orders amounting to ThUS$67,101 (ThUS$41,601 as of December 31, 2017).

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

136

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.6Financial liabilities at fair value through profit or loss

 

This balance relates to derivative instruments measured at their fair value, which have generated balances against the Company. The detail of this type of instrument is as follows:

 

Financial liabilities at fair value with an
impact on profit or loss
  9/30/2018  

Effect on
profit or

loss as of
9/30/2018

   12/31/2017   Effect on profit
or loss as of
12/31/2017
 
   ThUS$   ThUS$   ThUS$   ThUS$ 
Current                    
Derivative instruments (IRS)   (8)   -    -    - 
Total   (8)   -    -    - 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

137

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.7Financial asset and liability categories

 

As of September 30, 2018 and December 31, 2017 there are no balances corresponding to derivative instruments measured at their fair value,

 

a)Financial Assets

 

      9/30/2018   12/31/2017 
   Financial  Current   Non-current   Total   Current   Non-current   Total 
Description of financial assets 

instruments

 

Amount

  

Amount

  

Amount

  

Amount

  

Amount

  

Amount

 
      ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Cash and cash equivalent      428,024    -    428,024    630,438    -    630,438 
Trade receivables due from related parties      70,862    -    70,862    59,132    -    59,132 
Financial assets measured at amortized cost  Term deposits   310,304    74    310,378    360,941    45    360,986 
Loans and receivables measured at amortized cost  Trade and other receivables   428,650    2,415    431,065    446,875    1,912    448,787 
Total financial assets measured at amortized cost      1,237,840    2,489    1,240,329    1,497,386    1,957    1,499,343 
                                  
                                  
Financial assets at fair value with an impact on profit or loss  Derivative instruments   22,063    27,988    50,051    6,038    8,910    14,948 
Financial assets classified as available for sale at fair value through equity  Other investments   -    3,868    3,868    -    33,924    33,924 
Total financial assets at fair value      22,063    31,856    53,919    6,038    42,834    48,872 
Total financial assets      1,259,903    34,345    1,294,248    1,503,424    44,791    1,548,215 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

138

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.7Financial asset and liability categories (continued)

 

b)Financial liabilities

 

      9/30/2018   12/31/2017 
   Financial  Current   Non-current   Total   Current   Non-current   Total 
Description of financial liabilities 

instruments

 

Amount

  

Amount

  

Amount

  

Amount

  

Amount

  

Amount

 
      ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                            
Trade payables due to related parties     391   -   391   1,365   -   1,365 
Financial liabilities at fair value through profit or loss  Derivative instruments   4,741    2,657    7,398    43,266    -    43,266 
Financial liabilities at fair value through profit or loss      5,132    2,657    7,789    44,631    -    44,631 
                                  
                                  
Financial liabilities measured at amortized cost  Bank borrowings   864    68,852    69,716    163,568    -    163,568 
Financial liabilities measured at amortized cost  Obligations with the public   14,764    1,144,982    1,159,746    13,494    1,031,507    1,045,001 
Financial liabilities measured at amortized cost  Trade and other payables   181,778    -    181,778    196,280    -    196,280 
Total financial liabilities measured at amortized cost      197,406    1,213,834    1,411,240    373,342    1,031,507    1,404,849 
Total financial liabilities      202,538    1,216,491    1,419,029    417,973    1,031,507    1,449,480 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

139

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.8Fair value measurement of assets and liabilities

 

Financial assets and liabilities measured at fair value consist of Options and Forwards hedging the mismatch in the balance sheet and cash flows, Cross Currency Swaps (CCS) to hedge bonds issued in local currency ($/UF), and Interest Rate Swaps (IRS) to hedge LIBOR rate debt issued.

 

The value of the Company’s assets and liabilities recognized by CCS contracts is calculated as the difference between the present value of discounted cash flows of the asset (pesos/UF) and liability (US$) parts of the derivative. In the case of the IRS, the asset value recognized is calculated as the difference between the discounted cash flows of the asset (variable rate) and liability (fixed rate) parts of the derivative, Forwards: Are calculated as the difference between the strike price of the contract and the spot price plus the forwards points at the date of the contract, Options: The value recognized is calculated using the Black-Scholes method.

 

In the case of CCS, the entry data used for the valuation models are UF, peso, USD and basis swap rates, In the case of fair value calculations for IRS, the FRA (Forward Rate Agreement) rate and ICVS 23 Curve (Bloomberg: cash/deposits rates, futures, swaps). In the case of forwards, the forwards curve for the currency in question is used, Finally, with options, the spot price, risk-free rate and volatility of exchange rate are used, all in accordance with the currencies used in each valuation. The financial information used as entry data for the Company’s valuation models is obtained from Bloomberg, the well-known financial software company, Conversely, the fair value provided by the counterparties of derivatives contracts is used only as a control and not for valuation.

 

The effects on profit or loss of movements in these amounts may be recognized in the caption Finance costs, foreign currency translation gain (loss) or cash flow hedges in the statement of comprehensive income, depending on each particular case.

 

The fair value measurement of debt is only performed to determine the present market value of secured and unsecured long-term obligations; bonds denominated in local currency (Ch$/UF) and foreign currency (US$), credits denominated in foreign currency (US$), which is classified under Level 2 in the fair value hierarchy established by IFRS.

 

The value of the Company’s reported liabilities is calculated as the present value of discounted cash flows at market rates at the time of valuation, taking into account the maturity date and exchange rate. The entry data used for the model includes the UF and peso rates, which are obtained using Bloomberg, the well-known financial software company and the ‘Asociación de Bancos e Instituciones Financieras’ (ABIF) (Association of Banks and Financial Institutions’).

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

140

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.8Fair value measurement of assets and liabilities, continued

 

Fair value hierarchy

 

The fair value hierarchy is detailed as follows:

 

a)Level 1: using quoted prices (unadjusted) only in active markets,

 

b)Level 2: when in any phase in the valuation process inputs other than quoted prices have been used in Level 1 that are observable directly in markets.

 

c)Level 3: inputs for the asset or liability that are not based on observable market data.

 

The valuation technique used for determining fair value of our hedging instruments is that indicated in Level 2.

 

   Fair value   Measurement methodology 
   9/30/2018   Level 1   Level 2   Level 3 
   ThUS$   ThUS$   ThUS$   ThUS$ 
Financial assets                    
Investment                    
Shares   3,848    3,848    -    - 
Non-hedging derivatives                    
Forwards   1,942    -    1,942    - 
Options   3,481    -    3,481    - 
Hedging derivatives                    
Swaps   43,387    -    43,387    - 
Deposits, more than 90 days   310,304    -    310,304    - 
Other   1,334    -    1,334    - 
Financial liabilities                    
Non-hedging derivatives                    
Forwards   622    -    622    - 
Options   46    -    46    - 
Hedging derivatives                    
Swaps   5,489    -    5,489    - 
Bank loans   70,864    -    70,864    - 
Non-guaranteed bonds   1,168,522    -    1,168,522    - 
Other   (8,682)   -    (8,682)   - 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

141

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.8Fair value measurement of assets and liabilities, continued

 

   Fair value   Measurement methodology 
   12/31/2017   Level 1   Level 2   Level 3 
   ThUS$   ThUS$   ThUS$   ThUS$ 
Financial assets                    
Investment                    
Investment SQM Australia   24,746    24,746    -    - 
Shares   9,159    9,159    -    - 
Non-hedging derivatives                    
Forwards   2,744    -    2,744    - 
Options   110    -    110    - 
Swaps   3,184    -    3,184    - 
Hedging derivatives                    
Swaps   8,726    -    8,726    - 
Deposits, more than 90 days   360,941         360,941    - 
Other   249    -    249    - 
Financial liabilities                    
Non-hedging derivatives                    
Forwards   5,534    -    5,534    - 
Options   445    -    445    - 
Hedging derivatives                    
Swaps   37,287    -    37,287    - 
Bank loans   163,568    -    163,568    - 
Non-guaranteed bonds   1,039,956    -    1,039,956    - 
Other   5,945    -    5,945    - 

 

14.9Financial assets pledged as a guarantee

 

On November 4, 2004, Isapre Norte Grande maintains a guarantee equivalent to the total amount owed to its members and healthcare providers, which is managed and maintained by Banco de Chile.

 

As of September 30, 2018 and December 31, 2017, assets pledged as guarantees are as follows:

 

Restricted cash 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
Isapre Norte Grande Ltda,   771    771 
Total   771    771 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

142

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.10Estimated fair value of financial instruments and financial derivatives

 

As required by IFRS 7, the following information is presented for the disclosure of the estimated fair value of financial assets and liabilities.

 

Although inputs represent Management's best estimate, they are subjective and involve significant estimates related to the current economic and market conditions, as well as risk features.

 

Methodologies and assumptions used depend on the risk terms and characteristics of instruments and include the following as a summary:

 

-Cash equivalent approximates fair value due to the short-term maturities of these instruments.

 

-The fair value of trade receivables, current is considered to be equal to the carrying amount due to the maturity of such accounts at short-term.

 

-The fair value of other current financial liabilities is considered to be equal to their carrying values.

 

-For interest-bearing liabilities with original maturity of more than a year, fair values are calculated by discounting contractual cash flows at their original current market rates with similar terms.

 

-The fair value of debt is considered in Level 2.

 

-For forward and swap contracts, fair value is determined using quoted market prices of financial instruments with similar characteristics.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

143

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 14Financial instruments (continued)

 

14.10Estimated fair value of financial instruments and financial derivatives, continued

 

The detail of the Company’s instruments at carrying value and estimated fair value is as follows:

 

   9/30/2018   12/31/2017 
   Carrying value   Fair value   Carrying value   Fair value 
   ThUS$   ThUS$   ThUS$   ThUS$ 
Cash and cash equivalents   428,024    428,024    630,438    630,438 
Current trade and other receivables   428,650    428,650    446,875    446,875 
Receivables due from related parties, current   70,862    70,862    59,132    59,132 
Other financial assets, current:                    
- Time deposits   310,304    310,304    360,941    360,941 
- Derivative instruments   5,423    5,423    6,038    6,038 
- Hedging assets   16,640    16,640    -    - 
   Total other current financial assets   332,367    332,367    366,979    366,979 
Non-Current Trade Receivables   2,415    2,415    1,912    1,912 
Other non-current financial assets:   31,930    31,930    42,879    42,879 
  Total other non-current financial assets:   31,930    31,930    42,879    42,879 
Other financial liabilities, current:                    
- Bank loans   864    864    163,568    163,568 
- Derivative instruments   668    668    5,979    5,979 
- Hedging liabilities   4,073    4,073    37,287    37,287 
- Unsecured obligations   14,764    14,764    13,494    13,494 
  Other financial liabilities, current   20,369    20,369    220,328    220,328 
Current and non-current accounts payable   181,778    181,778    196,280    196,280 
Payables due to related parties, non-current   391    391    1,365    1,365 
Other non-current financial liabilities:                    
- Bank loans   68,852    73,562    -    - 
- Unsecured obligations   1,144,982    1,239,875    1,031,507    1,131,639 
- Non-current hedging liabilities   2,657    2,657    -    - 
  Other non-current financial liabilities:   1,216,491    1,316,094    1,031,507    1,131,639 

 

All the fair value estimates are included in levels 1 and 2.

 

Note 14Financial instruments (continued)

  

14.11Nature and scope of risks arising from financing instruments

 

As indicated in paragraphs 33 to 42 of IFRS 7 the disclosure of information associated with the nature and scope of risks arising from financial instruments is presented in Note 4 - Financial Risk Management.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

144

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 15Intangible assets and goodwill

 

15.1Balances

 

   6/30/2018   12/31/2017 
   ThUS$   ThUS$ 
Intangible assets other than goodwill   128,152    113,787 
Goodwill (1)   34,758    44,177 
Total   162,910    157,964 

 

15.2Disclosures on intangible assets and goodwill

 

Intangible assets relate to goodwill, water rights, trademarks, industrial patents, rights of way, software, and mining claims which correspond to exploitation rights acquired from third-parties.

 

Balances and movements in the main classes of intangible assets as of September 30, 2018 and December 31, 2017 are detailed as follows:

 

      9/30/2018 
Intangible assets and goodwill  Useful
life
 

Gross amount

  

Accumulated

Amortization

  

Net Value

 
      ThUS$   ThUS$   ThUS$ 
                
Software  Finite   28,665    (24,706)   3,959 
Intellectual property rights, patents and other industrial property rights, service  Finite   1,252    (1,087)   165 
Mining property, water rights and rights of way.  Indefinite   122,285    (59)   122,226 
Customer-related intangible assets  Indefinite   1,648    -    1,648 
Other intangible assets  Indefinite   154    -    154 
Intangible assets other than goodwill      154,004    (25,852)   128,152 
Goodwill  Indefinite   34,758    -    34,758 
Total intangible assets and goodwill      188,762    (25,852)   162,910 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

145

Notes to the Consolidated Financial Statements as of September 30, 2018

 

 

Note 15Intangible assets and goodwill (continued)

 

15.2Disclosures on intangible assets and goodwill, continued

 

      12/31/2017 
Intangible assets and goodwill  Useful
life
 

Gross amount

  

Accumulated

Amortization

  

Net Value

 
      ThUS$   ThUS$   ThUS$ 
                
Software  Finite   25,060    (19,769)   5,291 
Intellectual property rights, patents and other industrial property rights, service  Finite   1,250    (1,061)   189 
Mining property, water rights and rights of way  Indefinite   106,358    -    106,358 
Customer-related intangible assets  Indefinite   1,778    -    1,778 
Other intangible assets  Indefinite   171    -    171 
Intangible assets other than goodwill      134,617    (20,830)   113,787 
Goodwill  Indefinite   44,177    -    44,177 
Total intangible assets and goodwill      178,794    (20,830)   157,964 

 

a)Estimated useful lives or amortization rates used for finite identifiable intangible assets

 

Finite useful life measures the length of, or number of production or similar units constituting that useful life.

 

The estimated useful life for software is 2-6 years, for other assets with a finite useful life, the useful life over which they are amortized corresponds to the periods defined by the contracts or rights from which they originate.

 

Intellectual property rights, patents and other industrial property rights, service and exploitation rights, mainly relate to water rights and have a finite useful life to the extent to which they are subject to a fixed-term contract or otherwise they are considered to be indefinite.

 

b)Method used to express the amortization of identifiable intangible assets (life or rate)

 

The recoverable value of the cash-generating unit has been determined based on a calculation of value-in-use using cash flow projections for a period of 5 years, plus perpetuity. The present value of future cash flows generated by these assets was calculated given a variation in sales volumes, market prices and costs, discounted at a WACC rate of 8.04%.

 

The Company has mining property and concession rights from the Chilean State for the exploration and extraction of caliche and brine. These rights have not incurred an initial cost beyond registration costs. Meanwhile, the Company has acquired mining concessions from third parties other than the Chilean State, which have been registered at the acquisition cost. Therefore, the mining claims from CORFO must eventually be returned, which is why they are amortized until the end of the lease agreement in December 2030.

 

Expenses prior to obtaining the mining concessions are recognized in profit or loss for the year in which they are incurred.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

146

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 15Intangible assets and goodwill (continued)

 

15.2Disclosures on intangible assets and goodwill, continued

 

c)Minimum and maximum amortization lives or rates of intangible assets:

 

Estimated useful lives or amortization rate   Minimum life or rate   Maximum life or rate
         
Mining property, water rights and rights of way   Indefinite   Indefinite
Intangible assets other than goodwill   Indefinite   Indefinite
Intellectual property rights, patents and other industrial property rights, service and exploitation rights   1 year   16 years
Trademarks   1 year   5 years
Software   2 years   6 years

 

The following table shows the movements in goodwill as of September 30, 2018:

 

Company 

Goodwill

01/01/2018

   Additional
recognition
   Impairment
losses
   Transferred to
available for sale
  

Goodwill

06/30/2018

 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
SQM Industrial S.A.   3,214    -    (3,214)   -    - 
SQM S.A.   22,255    -    -    -    22,255 
SQM Investment Corporation   86    -    -    -    86 
Soquimich Comercial S.A.   320    -    -    -    320 
Soquimich European Holding   11,373    -    -    -    11,373 
SQM Potasio S.A.   6,929    -    -    (6,205)   724 
Total   44,177    -    (3,214)   (6,205)   34,758 

 

d)Information to be disclosed on assets generated internally

 

The Company has no intangible assets generated internally,

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

147

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 15Intangible assets and goodwill (continued)

 

15.2Disclosures on intangible assets and goodwill, continued

 

e)Movements in identifiable intangible assets as of September 30, 2018:

 

Movements in identifiable intangible assets, gross  Trademarks   Software   Intellectual property rights,
patents and other industrial
property rights, service,
rights of way
   Intellectual property rights,
patents and other industrial
property rights, service,
rights of way
   Other
intangible
assets
   Goodwill   Identifiable
intangible
assets
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Opening Balance   25,060    1,250    106,358    1,778    171    44,177    178,794 
Additions   940    3    16,289    -    11    -    17,243 
Increases (decreases) for transfers   -    -    -    -    -    -    - 
Other increases / decreases for foreign currency exchange rates
   (3)   (1)   (2)   -    -    -    (6)
(-) Impairment losses recognized in profit or loss for the year   -    -    (1,654)   (225)   -    (3,214)   (5,093)
Transferred to available for sale   -    -    -    -    -    (6,205)   (6,205)
Other increases (decreases)   2,668    -    1,294    95    (28)   -    4,029 
Total increases (decreases)   3,605    2    15,927    (130)   (17)   (9,419)   9,968 
Final balance   28,665    1,252    122,285    1,648    154    34,758    188,762 

 

Accumulated amortization

Movements in Identifiable intangible assets

  IT programs   Intellectual property rights,
patents and other industrial
property rights, service. Finite
   Mining property, water rights
and rights of way Indefinite
  

Customer-
related intangible
assets

 

   Other
intangible
assets
   Goodwill   Identifiable
intangible assets
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Opening Balance   (19,769)   (1,061)   -    -    -    -    (20,830)
Additions   -    -    -    -    -    -    - 
Other increases / decreases for foreign currency exchange rates   3    -    -    -    -    -    3 
Amortization   (2,106)   (26)   (59)   -    -    -    (2,191)
Other increases (decreases)   (2,834)   -    -    -    -    -    (2,834)
Total increases (decreases)   (4,937)   (26)   (59)   -    -    -    (5,022)
Final balance   (24,706)   (1,087)   (59)   -    -    -    (25.852)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

148

Notes to the Consolidated Financial Statements as of September 30, 2018

 

 

Note 15Intangible assets and goodwill (continued)

 

15.2Disclosures on intangible assets and goodwill, continued

 

f)Movements in identifiable intangible assets as of September 30, 2018, continued

 

Net value

Movements in Identifiable intangible assets

  IT programs   Intellectual property rights,
patents and other industrial
property rights, service.
Finite
   Mining property, water rights
and rights of way Indefinite
   Customer-
related
intangible
assets
   Other
intangible
assets
   Goodwill   Identifiable
intangible assets
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Opening Balance   5,291    189    106,358    1,778    171    44,177    157,964 
Additions   940    3    16,289    -    11    -    17,243 
Increases (decreases) for transfers   -    -    -         -    -    - 
Amortization   (2,106)   (26)   (59)   -    -    -    (2,191)
Impairment losses recognized in profit or loss for the year   -    -    (1,654)   (225)   -    (3,214)   (5,093)
Other increases / decreases for foreign currency exchange rates   -    (1)   (2)   -    -    -    (3)
Transferred to available for sale   -    -    -    -    -    (6,205)   (6,205)
Other increases (decreases)   (166)   -    1,294    95    (28)   -    1,195 
Total increases (decreases)   (1,332)   (24)   15,868    (130)   (17)   (9,419)   4,946 
Final balance   3,959    165    122,226    1,648    154    34,758    162,910 

 

g)Movements in identifiable intangible assets as of December 31, 2017:

 

Gross value

Movements in Identifiable intangible assets

  IT programs   Intellectual property rights,
patents and other industrial
property rights, service.
Finite
   Mining property, water rights
and rights of way Indefinite
   Customer-
related
intangible
assets
   Other
intangible
assets
   Goodwill   Identifiable
intangible assets
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Opening Balance   23,280    1,483    106,436    2,942    -    37,972    172,113 
Additions   939    8    -    -    171    6,205    7,323 
Increases (decreases) for transfers   -    -    (205)   -    -    -    (205)
(-) Impairment losses recognized in profit or loss for the year   -    -    -    -    -    -    - 
Other increases (decreases)   841    (241)   127    (1,164)   -    -    (437)
Total increases (decreases)   1,780    (233)   (78)   (1,164)   171    6,205    6,681 
Final balance   25,060    1,250    106,358    1,778    171    44,177    178,794 

 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

149

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 15Intangible assets and goodwill (continued)

 

15.2Disclosures on intangible assets and goodwill, continued

 

g)Movements in identifiable intangible assets as of December 31, 2017:

 

Movements in identifiable intangible assets,
accumulated amortization
  Software   Intellectual property rights,
patents and other industrial
property rights, service,
rights of way
   Mining property, water
rights and rights of way.
Indefinite.
   Customer-
related
intangible
assets
   Other
intangible
assets
   Goodwill   Identifiable
intangible
assets
 
  ThUS$   ThUS$   ThUS$       ThUS$   ThUS$   ThUS$ 
Opening balance   (16,234)   (1,023)   -    -    -    -    (17,257)
Additions   -    -    -    -    -    -    - 
Amortization   (2,653)   (38)   -    -    -    -    (2,691)
Other increases (decreases)   (882)   -    -    -    -    -    (882)
Total Increases (decreases)   (3,535)   (38)   -    -    -         (3,573)
Final balance   (19,769)   (1,061)   -    -    -    -    (20,830)

 

Movements in identifiable intangible assets, net  Software   Intellectual property rights,
patents and other industrial
property rights, service,
rights of way
   Mining property, water
rights and rights of way.
Indefinite.
   Customer-
related
intangible
assets
   Other
intangible
assets
   Goodwill   Identifiable
intangible
assets
 
  ThUS$   ThUS$   ThUS$       ThUS$   ThUS$   ThUS$ 
Opening balance   7,046    460    106,436    2,942    -    37,972    154,856 
Additions   939    8    -    -    171    6,205    7,323 
Increases (decreases) for transfers   -    -    (205)   -    -    -    (205)
Amortization   (2,653)   (38)   -    -    -    -    (2,691)
Impairment   -    -    -    -    -    -    - 
Increases (decreases) for transfers   -    -    -         -    -    - 
Other increases (decreases)   (41)   (241)   127    (1,164)   -    -    (1,319)
Total Increases (decreases)   (1,755)   (271)   (78)   (1,164)   171    6,205    3,108 
Final balance   5,291    189    106,358    1,778    171    44,177    157,964 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

150

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 16Property, plant and equipment

 

As of September 30, 2018 and December 31, 2017, the detail of property, plant and equipment is as follows:

 

16.1Types of property, plant and equipment

 

Description of types of property, plant and equipment 

9/30/2018

ThUS$

  

12/31/2017

ThUS$

 
Property, plant and equipment, net          
Land   24,721    24,900 
Buildings   212,290    230,319 
Other property, plant and equipment   22,732    24,862 
Transport equipment   2,878    3,257 
Supplies and accessories   2,532    1,872 
Office equipment   480    487 
Network and communication equipment   684    1,050 
Mining assets   12,634    16,237 
IT equipment   4,323    3,401 
Energy generating assets   6,515    7,861 
Constructions in progress   286,122    165,054 
Machinery, plant and equipment (1)   857,275    950,054 
Total   1,433,186    1,429,354 
Property, plant and equipment, gross          
Land   24,721    24,900 
Buildings   614,203    610,264 
Other property, plant and equipment   239.403    244,831 
Transport equipment   11,315    11,195 
Supplies and accessories   21,583    19,498 
Office equipment   11,271    11,105 
Network and communication equipment   7,368    7,356 
Mining assets   131,853    129,028 
IT equipment   28,888    27,038 
Energy generating assets   36,870    36,643 
Constructions in progress   286,122    165,054 
Machinery, plant and equipment   2,972,498    2,938,287 
Total   4,386,095    4,225,199 
           
Accumulated depreciation and value impairment of property, plant and equipment, total          
Accumulated depreciation and impairment of buildings   (401,913)   (379,945)
Accumulated depreciation and impairment of other property, plant and equipment   (216,671)   (219,969)
Accumulated depreciation and impairment of transport equipment   (8,437)   (7,938)
Accumulated depreciation and impairment of supplies and accessories   (19,051)   (17,626)
Accumulated depreciation and impairment of office equipment   (10,791)   (10,618)
Accumulated depreciation and impairment of network and communication equipment   (6,684)   (6,306)
Accumulated depreciation and impairment of mining assets   (119,219)   (112,791)
Accumulated depreciation and impairment of IT equipment   (24,565)   (23,637)
Accumulated depreciation and impairment of energy generating assets   (30,355)   (28,782)
Accumulated depreciation and impairment of machinery, plant and equipment   (2,115,223)   (1,988,233)
Total   (2,952,909)   (2,795,845)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

151

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 16Property, plant and equipment, (continued)

 

16.1Types of property, plant and equipment, continued

 

(1)The detail of machinery, plant and equipment is as follows:

 

Description of classes of property, plant and equipment 

9/30/2018

ThUS$

  

12/31/2017

ThUS$

 
Property, plant and equipment, net          
Pumps   25,647    33,614 
Conveyor belt   22,153    24,832 
Crystallizer   14,054    15,519 
Plant equipment   165,187    186,885 
Water tanks   9,705    11,296 
Filter   16,825    18,572 
Facilities/electrical equipment   95,865    105,600 
Other machinery, plant and equipment   63,249    72,812 
Piping   100,381    113,641 
Pond   256,092    275,731 
Well   39,719    46,802 
Parts   48,398    44,750 
Total   857,275    950,054 

 

* The net balance of other machinery, plant and equipment includes capitalized site closure expenses of ThUS$13,195 as of September 30, 2018 and ThUS$14,104 as of December 31, 2017.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

152

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 16Property, plant and equipment (continued)

 

16.2Reconciliation of changes in property, plant and equipment by type:

 

Reconciliation of changes in property, plant and equipment by class as of September 30, 2018 and December 31, 2017:

 

Reconciliation of changes in property,
plant and equipment by class as of
September 30, 2018, gross amount
  Land   Buildings   Other
property,
plant and
equipment
   Transport
equipment
   Supplies and
accessories
   Equipment
office
   Network and
communication
equipment
   Mining assets   IT equipment   Energy
generating
assets
   Assets under
construction
   Machinery,
plant and
equipment
   Property, plant
and equipment
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                     
Opening balance   24,900    610,264    244,831    11,195    19,498    11,105    7,356    129,028    27,038    36,643    165,054    2,938,287    4,225,199 
Changes                                                                 
Additions   -    26    676    -    11    2    -    -    373    -    188,484    937    190,509 
Disposals   -    (38)   (6,250)   (51)   -    -    -    -    -    -    -    (1,000)   (7,339)
Increase (decrease) in foreign currency translation difference   (38)   (81)   (4)   (2)   (11)   (4)   -    -    (7)   -    -    (90)   (237)
Reclassifications   -    4,032    2,644    173    2,153    169    12    2,825    1,213    227    (42,291)   28,845    2 
Other increases (decreases) (*)   -    -    (2,494)   -    (68)   (1)   -    -    271    -    (19,028)   5,519    (15,801)
Decreases for classification as held for sale (1)   (141)   -    -    -    -    -    -    -    -    -    (6,097)   -    (6,238)
Total changes   (179)   3,939    (5,428)   120    2,085    166    12    2,825    1,850    227    121,068    34,211    160,896 
Closing balance   24,721    614,203    239,403    11,315    21,583    11,271    7,368    131,853    28,888    36,870    286,122    2,972,498    4,386,095 

 

Reconciliation of changes in property, plant
and equipment by class as of September
30, 2018, accumulated depreciation
  Land   Buildings   Other
property,
plant and
equipment
   Transport
equipment
   Supplies and
accessories
   Equipment
office
   Network and
communication
equipment
   Mining assets   IT equipment   Energy
generating
assets
   Assets under
construction
   Machinery,
plant and
equipment
   Property, plant
and equipment
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                     
Opening balance   -    (379,945)   (219,969)   (7,938)   (17,626)   (10,618)   (6,306)   (112,791)   (23,637)   (28,782)   -    (1,988,233)   (2,795,845)
Changes                                                                 
Disposals   -    48    6,250    8    -    -    -    -    -    -    -    1,010    7,316 
Depreciation expense   -    (22,316)   (4,682)   (539)   (1,360)   (195)   (362)   (6,428)   (791)   (1,580)   -    (125,245)   (163,498)
Impairment   -    -    -    -    -    -    -    -    -    -    -    (1,390)   (1,390)
Increase (decrease) in foreign currency translation difference    -    25    3    1    7    2    -    -    (1)   -    -    36    73 
Reclassifications   -    247    (458)   -    (85)   (16)   (20)   -    94    1    -    237    - 
Other increases (decreases) (*)   -    28    2,185    31    13    36    4    -    (230)   6    -    (1,638)   435 
Decreases for classification as held for sale (1)   -    -    -    -    -    -    -    -    -    -    -    -    - 
Total changes   -    (21,968)   3,298    (499)   (1,425)   (173)   (378)   (6,428)   (928)   (1,573)   -    (126,990)   (157,064)
Closing balance   -    (401,913)   (216,671)   (8,437)   (19,051)   (10,791)   (6,684)   (119,219)   (24,565)   (30,355)   -    (2,115,223)   (2,952,909)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

153

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 16Property, plant and equipment (continued)

 

16.2Reconciliation of changes in property, plant and equipment by type, continued:

 

Reconciliation of changes in property,
plant and equipment by class as of
September 30, 2018, net amount
  Land   Buildings   Other
property,
plant and
equipment
   Transport
equipment
   Supplies and
accessories
   Equipment
office
   Network and
communication
equipment
   Mining assets   IT equipment   Energy
generating
assets
   Assets under
construction
   Machinery,
plant and
equipment
   Property, plant
and equipment
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                     
Opening balance   24,900    230,319    24,862    3,257    1,872    487    1,050    16,237    3,401    7,861    165,054    950,054    1,429,354 
Changes                                                                 
Additions   -    26    676    -    11    2    -    -    373    -    188,484    937    190,509 
Disposals   -    10    -    (43)   -    -    -    -    -    -    -    10    (23)
Depreciation expense   -    (22,316)   (4,682)   (539)   (1,360)   (195)   (362)   (6,428)   (791)   (1,580)   -    (125,245)   (163,498)
Impairment   -    -    -    -    -    -    -    -    -    -    -    (1,390)   (1,390)
Increase (decrease) in foreign currency translation difference   (38)   (56)   (1)   (1)   (4)   (2)   -    -    (8)   -    -    (54)   (164)
Reclassifications   -    4,279    2,186    173    2,068    153    (8)   2,825    1,307    228    (42,291)   29,082    2 
Other increases (decreases) (*)   -    28    (309)   31    (55)   35    4    -    41    6    (19,028)   3,881    (15,366)
Decreases for classification as held for sale (1)   (141)   -    -    -    -    -    -    -    -    -    (6,097)   -    (6,238)
Total changes   (179)   (18,029)   (2,130)   (379)   660    (7)   (366)   (3,603)   922    (1,346)   121,068    (92,779)   3,832 
Closing balance   24,721    212,290    22,732    2,878    2,532    480    684    12,634    4,323    6,515    286,122    857,275    1,433,186 

 

(*) The net balance of other increases (decreases) corresponds to all those items that are reclassified to or from property, plant and equipment, They can have the following origin:1) work in progress which is expensed to profit or loss, forming part of operating costs or other expenses per function, as appropriate. 2) the variation representing the purchase and use of materials and spare parts. 3) projects corresponding mainly to exploration expenditures and ground studies that are reclassified to the item other non-current financial assets. 4) Software that is reclassified to Intangibles.

 

(1) Any property, plant and equipment (disposal group) that, at the closing date of the financial statements, is subject to a commitment for sale or where the sales process has been initiated and where the sale is expected to occur within twelve months of that date, is classified by the Company as non-current assets held for sale.

 

These assets or disposal groups are valued at the lower of carrying amount or the estimated sales value less the costs to sell and stop being amortized from the moment they are classified as non-current assets held for sale.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

154

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 16Property, plant and equipment (continued)

 

16.2Reconciliation of changes in property, plant and equipment by type, continued:

 

Reconciliation of changes in property,
plant and equipment by class as of
December 31, 2017, gross amount
  Land   Buildings   Other
property,
plant and
equipment
   Transport
equipment
   Supplies and
accessories
   Equipment
office
   Network and
communication
equipment
   Mining assets   IT equipment   Energy
generating
assets
   Assets under
construction
   Machinery,
plant and
equipment
   Property, plant
and equipment
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                     
Opening balance   32,702    582,082    253,555    10,819    18,259    17,731    7,522    158,514    20,316    34,812    170,710    2,833,819    4,140,841 
Changes                                                                 
Additions   -    189    541    -    115    42    12    -    899    122    149,133    10,747    161,800 
Disposals   -    (59)   (11,623)   (321)   -    (23)   -    (30,082)   (57)   -    -    (3,374)   (45,539)
Increase (decrease) in foreign currency translation difference   45    103    3    1    -    -    -    -    (2)   -    1    118    269 
Reclassifications   -    23,336    8,255    696    1,044    172    123    596    122    1,709    (135,988)   99,744    (191)
Other increases (decreases) (*)   (7,436)   4,669    (5,900)   -    80    (6,817)   (301)   -    5,760    -    (18,802)   (2,767)   (31,514)
Decreases for classification as held for sale (1)   (411)   (56)   -    -    -    -    -    -    -    -    -    -    (467)
Total changes   (7,802)   28,182    (8,724)   376    1,239    (6,626)   (166)   (29,486)   6,722    1,831    (5,656)   104,468    84,358 
Closing balance   24,900    610,264    244,831    11,195    19,498    11,105    7,356    129,028    27,038    36,643    165,054    2,938,287    4,225,199 

  

Reconciliation of changes in property, plant
and equipment by class as of December 31,
2017, accumulated depreciation
  Land   Buildings   Other
property,
plant and
equipment
   Transport
equipment
   Supplies and
accessories
   Equipment
office
   Network and
communication
equipment
   Mining assets   IT equipment   Energy
generating
assets
   Assets under
construction
   Machinery,
plant and
equipment
   Property, plant
and equipment
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                     
Opening balance   -    (344,497)   (227,138)   (7,464)   (16,486)   (14,089)   (5,836)   (133,871)   (19,950)   (26,621)   -    (1,812,179)   (2,608,131)
Changes                                                                 
Disposals   -    58    11,622    312    -    3    -    30,083    25    -    -    3,210    45,313 
Depreciation expense   -    (33,306)   (6,759)   (730)   (1,047)   (357)   (665)   (10,638)   (909)   (2,184)   -    (170,565)   (227,160)
Impairment   -    -    -    -    -    -    -    -    -    -    -    (5,205)   (5,205)
Increase (decrease) in foreign currency translation difference   -    (35)   (3)   (2)   -    -    -    -    (11)   -    -    (58)   (109)
Reclassifications   -    (62)   38    (32)   (110)   (69)   (25)   -    (46)   26    -    344    64 
Other increases (decreases) (*)   -    (2,102)   2,271    (22)   17    3,894    220    1,635    (2,746)   (3)   -    (3,780)   (616)
Decreases for classification as held for sale (1)   -    (1)   -    -    -    -    -    -    -    -    -    -    (1)
Total changes   -    (35,448)   7,169    (474)   (1,140)   3,471    (470)   21,080    (3,687)   (2,161)   -    (176,054)   (187,714)
Closing balance   -    (379,945)   (219,969)   (7,938)   (17,626)   (10,618)   (6,306)   (112,791)   (23,637)   (28,782)   -    (1,988,233)   (2,795,845)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

155

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 16Property, plant and equipment (continued)

 

16.2Reconciliation of changes in property, plant and equipment by type, continued:

 

Reconciliation of changes in property,
plant and equipment by class as of
December 31, 2017, net amount
  Land   Buildings   Other
property,
plant and
equipment
   Transport
equipment
   Supplies and
accessories
   Equipment
office
   Network and
communication
equipment
   Mining assets   IT equipment   Energy
generating
assets
   Assets under
construction
   Machinery,
plant and
equipment
   Property, plant
and equipment
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                                     
Opening balance   32,702    237,585    26,417    3,355    1,773    3,642    1,686    24,643    366    8,191    170,710    1,021,640    1,532,710 
Changes                                                                 
Additions   -    189    541    -    115    42    12    -    899    122    149,133    10,747    161,800 
Disposals   -    (1)   (1)   (9)   -    (20)   -    1    (32)   -    -    (164)   (226)
Depreciation expense   -    (33,306)   (6,759)   (730)   (1,047)   (357)   (665)   (10,638)   (909)   (2,184)   -    (170,565)   (227,160)
Impairment   -    -    -    -    -    -    -    -    -    -    -    (5,205)   (5,205)
Increase (decrease) in foreign currency translation difference   45    68    -    (1)   -    -    -    -    (13)   -    1    60    160 
Reclassifications   -    23,274    8,293    664    934    103    98    596    76    1,735    (135,988)   100,088    (127)
Other increases (decreases) (*)   (7,436)   2,567    (3,629)   (22)   97    (2,923)   (81)   1,635    3,014    (3)   (18,802)   (6,547)   (32,130)
Decreases for classification as held for sale (1)   (411)   (57)   -    -    -    -    -    -    -    -    -    -    (468)
Total changes   (7,802)   (7,266)   (1,555)   (98)   99    (3,155)   (636)   (8,406)   3,035    (330)   (5,656)   (71,586)   (103,356)
Closing balance   24,900    230,319    24,862    3,257    1,872    487    1,050    16,237    3,401    7,861    165,054    950,054    1,429,354 

 

(*) The net balance of other increases (decreases) corresponds to all those items that are reclassified to or from property, plant and equipment, They can have the following origin:1) work in progress which is expensed to profit or loss, forming part of operating costs or other expenses per function, as appropriate. 2) the variation representing the purchase and use of materials and spare parts. 3) projects corresponding mainly to exploration expenditures and ground studies that are reclassified to the item other non-current financial assets. 4) assets for retirement obligations and 5) Software that is reclassified to Intangibles.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

156

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 16Property, plant and equipment (continued)

 

16.3Detail of property, plant and equipment pledged as guarantee

 

There are no restrictions in title or guarantees for compliance with obligations that affect property, plant and equipment.

 

16.4Impairment of assets

 

As indicated in Note 3,28 to the financial statements, the recoverable amount of property, plant and equipment is measured provided that there is an indication that the asset could be impaired. As of September 30, 2018, impairment of ThUS$1,390 was recorded, while impairment of ThUS$5,205 was recorded as of December 31, 2017.

 

16.5Información adicional

 

Capitalized interest

 

As of September 30, 2018, capitalized interest totaled ThUS$3,766, while for the period January to December 2017, this item totaled ThUS$4,382.

 

No borrowing costs are capitalized for periods beyond the normal period for acquiring, constructing or installing an asset such as delays, interruptions or temporary suspension of projects due to technical, financial or other problems that render the asset unusable.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

157

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 17Other current and non-current non-financial assets

 

As of September 30, 2018, and December 31, 2017, the detail of other current and non-current assets is as follows:

 

Other non-financial  assets, current  9/30/2018   12/31/2017 
  ThUS$   ThUS$ 
Domestic Value Added Tax   20,455    7,488 
Foreign Value Added Tax   6,258    5,122 
Prepaid mining licenses   3,323    1,205 
Prepaid insurance   2,243    2,446 
Other prepayments   3,403    1,443 
Refund of Value Added Tax to exporters   107    4,937 
Other taxes   3.533    4,027 
Other assets   258    215 
Total   39,580    26,883 

 

Other non-financial  assets, non-current  9/30/2018   12/31/2017 
  ThUS$   ThUS$ 
Stain development expenses and prospecting expenses (1)   24,396    17,721 
Guarantee deposits   746    771 
Other assets   670    770 
Total   25,812    19,262 

 

1)Reconciliation of changes in assets for exploration and mineral resource evaluation, by type

 

Movements in assets for the exploration and evaluation of mineral resources as of September 30, 2018, and December 31, 2017:

 

Reconciliation  9/30/2018   12/31/2017 
  ThUS$   ThUS$ 
         
Opening balance   17,721    23,008 
Changes          
Additions, other than business combinations   8,546    - 
Reclassifications   1,566    595 
Increase (decrease) due to transfers and other charges   (3,437)   (5,882)
Total changes   6,675    (5,287)
Total   24,396    17,721 

 

As of the presentation date, no reevaluations of assets for exploration and assessment of mineral resources have been conducted.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

158

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 18Employee benefits

 

18.1Provisions for employee benefits

 

Classes of benefits and expenses by employee  9/30/2018   12/31/2017 
  ThUS$   ThUS$ 
Current        
Profit sharing and bonuses   14,669    22,421 
Total   14,669    22,421 
           
Non-current          
Profit sharing and bonuses   9,478    6,487 
Severance indemnity payments   26,977    27,445 
Total   36,455    33,932 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

159

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 18Employee benefits (continued)

 

18.2Policies on defined benefit plan

 

This policy is applied to all benefits received for services provided by the Company's employees.

 

Short-term benefits for active employees are represented by salaries, social welfare benefits, paid time off, sickness and other types of leave, profit sharing and incentives and non-monetary benefits; e.g.,, healthcare service, housing, subsidized or free goods or services. These will be paid in a term which does not exceed twelve months.

 

The Company only provides compensation and benefits to active employees, with the exemption of SQM North America, which applies the definitions under 18,4 below.

 

SQM maintains incentive programs for its employees based on their personal performance, the Company’s performance and other short-term and long-term indicators.

 

For each incentive bonus delivered to the Company’s employees, there will be a disbursement in the first quarter of the following year and this will be calculated based on profit for the period at the end of each period applying a factor obtained subsequent to each employee’s appraisal process.

 

Employee benefits include retention bonuses for the Company’s executives, which are linked to the Company’s share price and are paid in cash, The short-term portion is presented as a provision for current employee benefits and the long-term portion as non-current.

 

Staff severance indemnities are agreed and payable based on the final salary, calculated in accordance with each year of service to the Company, with certain maximum limits in respect of either the number of years or in monetary terms, In general, this benefit is payable when the employee or worker ceases to provide his/her services to the Company and there are a number of different circumstances through which a person can be eligible for it, as indicated in the respective agreements; e.g., retirement, dismissal, voluntary retirement, incapacity or disability, death, etc.

 

Law No, 19,728 published on May 14, 2001 which became effective on October 1, 2002 required “Compulsory Unemployment Insurance” in favor of all dependent employees regulated by the Chilean Labor Code, Article 5 of this law established that this insurance is paid through monthly contribution payments by both the employee and the employer.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

160

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 18Employee benefits (continued)

 

18.3Other long-term benefits

 

The other long-term benefits relate to staff severance indemnities and are recorded at their actuarial value, and an executive compensation plan (see Note 16).

 

Staff severance indemnities at actuarial value  9/30/2018   12/31/2017 
  ThUS$   ThUS$ 
Staff severance indemnities, Chile   26,543    25,893 
Executive severance plan   9,478    6,487 
Severance for foreigners   434    1,552 
Total other non-current liabilities   36,455    33,932 

 

The actuarial assessment method has been used to calculate the Company’s obligations with respect to staff severance indemnities, which relate to defined benefit plans consisting of days of remuneration per year served at the time of retirement under conditions agreed in the respective agreements established between the Company and its employees.

 

Under this benefit plan, the Company retains the obligation to pay staff severance indemnities related to retirement, without establishing a separate fund with specific assets, which is referred to as not funded, The discount interest rate of expected flows to be used was 4,89%.

 

Benefit payment conditions

 

The staff severance indemnity benefit relates to remuneration days for years worked for the Company without a limit being imposed in regard of amount of salary or years of service. It applies when employees cease to work for the Company because they are made redundant or in the event of their death, This benefit is applicable up to a maximum age of 65 for men and 60 for women, which are the usual retirement ages according to the Chilean pensions system as established in Decree Law 3,500 of 1,980.

 

Methodology

 

The Company’s benefits obligation under IAS 19 Projected Benefit Obligation (PBO) is determined as follows:

 

To determine the Company's total liability, we used computer software to develop a mathematical simulation model using the data for each individual employee.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

161

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 18Employee benefits (continued)

 

18.3Other long-term benefits, continued

 

This model considered months as discrete time; i.e., the Company determined the age of each person and his/her salary on a monthly basis according to the growth rate. This, information on each person was simulated from the beginning of his/her employment contract or when he/she started earning benefits up to the month in which he/she reaches normal retirement age, generating in each period the possible retirement according to the Company’s turnover rate and the mortality rate according to the age reached. When he/she reaches the retirement age, the employee finishes his/her service for the Company and receives a retirement indemnity.

 

The methodology followed to determine the accrual for all the employees covered by agreements took account of the turnover rates and the mortality rate RV-2009 established by the CMF to calculate pension-related life insurance reserves in Chile according to the Accumulated Benefit Valuation or Accrued Cost of Benefit Method. This methodology is established in IAS 19 on Retirement Benefit Costs.

 

18.4Post-employment benefit obligations

 

Our subsidiary SQM North America, together with its employees established a pension plan until 2002 called the “SQM North America Retirement Income Plan”. This obligation is calculated measuring the expected future forecast staff severance indemnity obligation using a net salary gradual rate of restatements for inflation, mortality and turnover assumptions, discounting the resulting amounts at present value using the interest rate defined by the authorities.

 

Since 2003, SQM North America offers to its employees benefits related to pension plans based on the 401-K system, which do not generate obligations for the Company.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

162

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 18Employee benefits (continued)

 

18.5Staff severance indemnities

 

As of September 30, 2018 and 2016, severance indemnities calculated at the actuarial value are as follows:

 

  

9/30/2018

ThUS$

  

12/31/2017

ThUS$

 
Opening balance   (27,445)   (22,532)
Current cost of service   (1,148)   (934)
Interest cost   (1,308)   (1,488)
Actuarial gain/loss   (709)   (1,144)
Exchange rate difference   2,040    (2,284)
Benefits paid during the year   1,593    937 
Balance   (26,977)   (27,445)

 

a)Actuarial assumptions

 

The liability recorded for staff severance indemnity is valued at the actuarial value method, using the following actuarial assumptions:

 

   9/30/2018   12/31/2017  
            
Mortality rate   RV - 2014    RV - 2014    
Actual annual interest rate   5,027%   5,114%   
Voluntary retirement rate:             
Men   6,49%   6,49%  annual
Women   6,49%   6,49%  annual
Salary increase   3,00%   3,00%  annual
Retirement age:             
Men   65    65   years
Women   60    60   years

 

b)Sensitivity analysis of assumptions

 

As of September 30, 2018 and December 31, 2017, the Company has conducted a sensitivity analysis of the main assumptions of the actuarial calculation, determining the following:

 

Sensitivity analysis 9/30/2018 

Effect + 100 basis points

ThUS$

  

Effect - 100 basis points

ThUS$

 
Discount rate   (2,078)   2,542 
Employee turnover rate   (263)   293 

 

 

Sensitivity analysis 12/31/2017 

Effect + 100 basis points

ThUS$

  

Effect - 100 basis points

ThUS$

 
Discount rate   (1,991)   2,436 
Employee turnover rate   (252)   281 

 

Sensitivity relates to an increase/decrease of 100 basis points.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

163

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 18Employee benefits (continued)

 

18.6Executive compensation plan

 

The Company currently has a compensation plan with the purpose of motivating the Company’s executives and encouraging them to remain with the Company, by granting payments based on the change in the price of SQM’s shares. There is a partial payment of the share benefit program in the event of termination of the contract for causes other than the resignation and application of Article 160.

 

Average Share Price Spread

 

Plan characteristics

 

This compensation plan is related to the Company’s performance through the SQM Series B share price (Santiago Stock Exchange).

 

Plan participants

 

A total of 39 Company executives are entitled to this plan, provided that they continue to work for the Company through to the end of 2020. The payment dates, if applicable, will be during the first quarter of 2021.

 

Compensation

 

The compensation payable to each executive is calculated by multiplying a) by b):

 

a)The average price of Series B shares on the Santiago Stock Exchange during the fourth quarter of 2020, at its equivalent amount in dollars (with a maximum amount or limit amount of US$54 per share).

b)By a number equal to the quantity of shares that have been individually assigned to each executive included in the plan.

 

This compensation plan was approved by the Company’s Board of Directors and its application started on January 1, 2017.

 

The effect of the plan considers 510,402 shares reflected as a cost of ThUS$2,991 in the results for the period ending September 30, 2018. As of December 31, 2017, the effect of the plan was 533,476 shares, equal to ThUS$6,487 in costs in the profit or loss for 2017.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

164

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 19Provisions and other non-financial liabilities

 

19.1Types of provisions

 

   9/30/2018   12/31/2017 
   Current   Non-current   Total   Current   Non-current   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                         
Provision for legal complaints (*)   11,749    3,000    14,749    16,419    3,000    19,419 
Provision for dismantling, restoration and rehabilitation cost (**)   -    26,491    26,491    -    26,954    26,954 
Other provisions(***)   78,656    -    78,656    47,026    47    47,073 
Total   90,405    29,491    119,896    63,445    30,001    93,446 

 

(*) These provisions correspond to legal processes that are pending resolution or that have not yet been disbursed. These provisions are mainly related to litigation involving the subsidiaries located in Chile, Brazil and the United States (see note 19.1).

 

(**) The commitments related to Sernageomin have been incorporated through the issuance of the guarantee for the restoration of the place where the production sites are located.

 

(***)See Note 19.2

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

165

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 19Provisions and other non-financial liabilities (continued)

 

19.2Description of other provisions

 

Current provisions, other short-term provisions  9/30/2018   12/31/2017 
  ThUS$   ThUS$ 
Rent under Lease contract with Corfo(*)   61,632    32,331 
Provision for additional tax related to foreign loans   599    416 
End of agreement bonus   4,390    4,522 
Directors’ per diem allowance   2,302    2,630 
Provision for subsidiary restructuring   6,000    6,000 
Foreign mining company property tax provision   2,689    - 
Miscellaneous provisions   1,044    1,127 
Total   78,656    47,026 
Other long-term provisions          
Investments with negative equity   -    47 
Total   -    47 

 

(*)Rent for the lease contract with CORFO: This relates to the lease of mining properties that SQM Salar S.A. pays on a quarterly basis to the state entity Corporación de Fomento de la Producción (“Corfo”). The amount payable for the lease is calculated based on the sales of products extracted from the Salar de Atacama. 2018 includes the quarterly payment to Corfo and the provision for contributions to research and development of the communities and regional governments in proportion to the lifetime of the contract and which are paid annually. 2017 includes US$20.4 million corresponding to the payment that forms part of the agreement reached between SQM Salar and Corfo (see note 22.1).

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

166

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 19Provisions and other non-financial liabilities (continued)

 

19.3Other current liabilities

 

Other liabilities non-financial current

 

Description of other liabilities  9/30/2018   12/31/2017 
  ThUS$   ThUS$ 
Tax withholdings   8,698    7,404 
VAT payable   3,304    3,344 
Guarantees received   2,638    2,638 
Accrual for dividend   83,537    110,529 
Monthly tax provisional payments   15,543    11,684 
Deferred income   18,440    5,301 
Withholdings from employees and salaries payable   6,232    6,725 
Accrued vacations (*)   20,070    19,042 
Other current liabilities   5,591    2,137 
Total   164,053    168,804 

 

(*) Vacation benefit (short-term benefits to employees, current) is in line with the provisions established in Chile’s Labor Code, which indicates that employees with more than a year of service will be entitled to annual vacation for a period of at least fifteen paid business days, The Company provides the benefit of two additional vacation days.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

167

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 19Provisions and other non-financial liabilities (continued)

 

19.4Changes in provisions

 

Description of items that gave rise to variations as  Legal
complaints
   Provision for
dismantling,
restoration and
rehabilitation
cost
   Other
provisions
   Total 
of 9/30/2018  ThUS$   ThUS$   ThUS$   ThUS$ 
                 
Total provisions, initial balance   19,419    26,954    47,073    93,446 
Changes in provisions:                    
Additional provisions   750    1,889    71,847    74,486 
Provision used   (5,420)   (2,352)   (40,208)   (47,980)
Increase(decrease) in foreign currency exchange   -    -    -    - 
others   -    -    (56)   (56)
Total Increase (decreases)   (4,670)   (463)   31,583    26,450 
Total provisions, final balance   14,749    26,491    78,656    119,896 

 

Description of items that gave rise to variations as  Legal
complaints
   Provision for
dismantling,
restoration and
rehabilitation
cost
   Other
provisions
   Total 
of 12/31/2017  ThUS$   ThUS$   ThUS$   ThUS$ 
                 
Total provisions, initial balance   23,867    5,890    21,089    50,846 
Changes in provisions:                    
Additional provisions   6,352    21,064    33,507    60,923 
Provision used   (10,800)   -    (7,538)   (18,338)
Increase(decrease) in foreign currency exchange   -    -    9    9 
Others   -    -    6    6 
Total Increase (decreases)   (4,448)   21,064    25,984    42,600 
Total provisions, final balance   19,419    26,954    47,073    93,446 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

168

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 20Disclosures on equity

 

The detail and movements in the funds of equity accounts are shown in the consolidated statement of changes in equity.

 

20.1Capital management

 

The main object of capital management relative to the administration of the Company’s financial debt and equity is to ensure the regular conduct of operations and business continuity in the long term, with the constant intention of maintaining an adequate level of liquidity and in compliance with the financial safeguards established in the debt contracts in force. Within this framework, decisions are made in order to maximize the value of SQM.

 

Capital management must comply with, among others, the limits contemplated in the Financing Policy approved by the Shareholders’ Meeting, which establish a maximum consolidated indebtedness level of 1,5 times the debt to equity ratio. This limit can be exceeded only if the Company’s management has first obtained express approval at an Extraordinary Shareholders’ Meeting.

 

In addition, capital management must comply with the external capital requirements (or covenants) imposed in its financial obligations, which regulate the indebtedness level to 1,2 times, its strictest level.

 

In conjunction with the level of indebtedness, it is also important for the Company to maintain a comfortable profile of maturities for its financial obligations, in order to oversee the relation between its short-term financial obligations and the long-term maturities, and the relation they have with the Company’s asset distribution. Consequently, the Company has maintained a liquidity level of 3 times during the last periods.

 

The Company’s management controls capital management based on the following ratios:

 

CAPITAL
MANAGEMENT
  9/30/2018   12/31/2017   Description (1)  Calculation (1)
Net Financial Debt ThUS$   448,481    245,508   Financial Debt – Financial Resources  Other current Financial Liabilities + Other Non-Current Financial Liabilities – Cash and Cash Equivalents – Other Current Financial Assets – Hedging Assets, non-current
Liquidity   4.34    3.29   Current Asset divided by Current Liability  Total Current Assets / Total Current Liabilities
Net Debt / Capitalization   0.17    0.10   Net Financial Debt divided by Total Equity  Net financial debt / ( Net financial debt + Total Equity)
ROE   20.7%   19.1%  Income divided by Total Equity  Total Income / Equity (UH 12 months)
Adjusted EBITDA (ThUS$)   910,724    902,057   Adjusted EBITDA  Profit for the Year + Depreciation and Amortization Expenses + Finance Costs + Income Tax – Other income and Share of profit of associates and joint ventures + Other expenses – Finance income – Currency differences
EBITDA (ThUS$)   892,812    885,440   EBITDA  Profit for the Year + Depreciation and Amortization Expenses + Finance Costs + Income Tax
ROA   21.28%   21.3%  EBITDA – Depreciation divided by Net Total Assets of financial resources less  related parties’ investments  (Gross Income – Administrative Expenses)/ (Total Assets – Cash and Cash Equivalents – Other Current Financial Assets – Other Non-Current Financial Assets – Equity-accounted Investees) (UH 12 months)
Indebtedness   0.93    0.91   Total Liability on Equity  Total Liabilities / Total Equity

 

 

(1) Assumes the absolute value of the accounting records

 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

169

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 20Disclosures on equity (continued)

 

20.1Capital management, continued

 

The Company’s capital requirements change according to variables such as working capital needs, new investment financing and dividends, among others, The Company manages its capital structure and makes adjustments on the basis of the predominant economic conditions so as to mitigate the risks associated with adverse market conditions and take advantage of the opportunities there may be to improve the liquidity position.

 

There have been no changes in the capital management objectives or policy within the years reported in this document. No breaches of external requirements of capital imposed (or covenants) have been recorded.

 

20.2Disclosures on preferred share capital

 

Issued share capital is divided into 263,196,524 fully paid and subscribed shares composed of 142,819,552 Series "A" shares and 120,376,972 Series “B” shares. All such shares are nominative, have no par value and are fully issued, subscribed and paid.

 

Series B shares may not exceed 50% of the total issued, subscribed and paid-in shares of the Company and have a limited voting right, in that all of them can only elect one director of the Company, regardless of their equity interest and preferences:

 

(a)require the calling of an Ordinary or Extraordinary Shareholders' Meeting when so requested by Series B shareholders representing at least 5% of the issued shares thereof; and

 

(b)         require the calling of an extraordinary meeting of the board of directors, without the president being able to qualify the need for such a request, when so requested by the director who has been elected by the shareholders of said Series B.

 

The limitation and preferences of Series B shares have a duration of 50 consecutive and continuous years as of June 3, 1993.

 

The Series A shares have the preference of being able to exclude the director elected by the Series B shareholders in the voting process in which the president of the board of directors and of the Company must be elected and which follows the one in which the tie that allows such exclusion resulted.

 

The preference of the Series A shares will have a term of 50 consecutive and continuous years as of June 3, 1993. The form of the titles of the shares, their issuance, exchange, disablement, loss, replacement, assignment and other circumstances thereof shall be governed by the provisions of Law No. 18,046 and its regulations.

 

At September 30, 2018 and December 31, 2017, the Group does not hold shares of the Parent Company either directly or through its investees.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

170

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 20Disclosures on equity (continued)

 

20.2Disclosures on preferred share capital, continued

 

Detail of types of capital in preference shares:

 

Type of capital in preferred shares  9/30/2018   12/31/2017 
Description of type of capital in
preferred shares
  Series A   Series B   Series A   Series B 
Number of authorized shares   142,819,552    120,376,972    142,819,552    120,376,972 
Number of fully subscribed and paid shares   142,819,552    120,376,972    142,819,552    120,376,972 
Number of subscribed, partially paid shares   -    -    -    - 
Par value of shares in ThUS$   0.9435    2.8464    0.9435    2.8464 
Increase (decrease) in the number of current shares   -    -    -    - 
Number of current shares   142,819,552    120,376,972    142,819,552    120,376,972 
Number of shares owned by the entity or its subsidiaries or associates   -    -    -    - 
Number of shares whose issuance is reserved due to the existence of options or agreements to dispose shares   -    -    -    - 
Capital amount in shares ThUS$   134,750    342,636    134,750    342,636 
Amount of premium issuance ThUS$   -    -    -    - 
Amount of reserves ThUS$   -    -    -    - 
Total number of subscribed shares, total   142,819,552    120,376,972    142,819,552    120,376,972 

 

As of September 30, 2018 and December 31, 2017, the Company has not placed any new issuances of shares on the market.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

171

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 20Disclosures on equity (continued)

 

20.3Disclosures on reserves in equity

 

As of September 30, 2018 and December 31, 2017, this caption comprises the following:

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
Reserve for currency exchange conversion   (37,215)   (24,913)
Reserve for cash flow hedges   17,042    2,248 
Reserve for gains and losses from financial assets measured at fair value through other comprehensive income   (939)   2,937 
Reserve for actuarial gains or losses in defined benefit plans   (5,394)   (5,953)
Other reserves   10,331    11,332 
Total other reserves   (16,175)   (14,349)

 

Reserves for foreign currency translation differences

 

This balance reflects retained earnings for changes in the exchange rate when converting the financial statements of subsidiaries whose functional currency is that of each company’s origin country and the presentation currency is the US dollar.

 

Reserve for cash flow hedges

 

The Company maintains, as hedge instruments, financial derivatives related to obligations with the public issued in UF and Chilean pesos, Changes from the fair value of derivatives designated and classified as hedges are recognized under this classification.

 

Reserve for gains and losses from financial assets measured at fair value through other comprehensive income

 

This caption includes investments in shares where the Company has no significant influence and these have accordingly been measured at fair value through equity, In the event that such equity instruments are fully or partially disposed of, the proportional accumulated effect of accumulated fair value will be transferred to profit or loss.

 

Reserve for actuarial gains or losses in defined benefit plans

 

For domestic subsidiaries the effects of changes in assumptions are considered, mainly changes in the discount rate.

 

The subsidiary SQM North America has established pension plans for its retired employees that are calculated by measuring the projected obligation of staff severance indemnities using a net salary progressive rate net of adjustments to inflation, mortality and turnover assumptions, deducting the resulting amounts at present value using a 5,5% interest rate for 2017 and 2016.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

172

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 20Disclosures on equity (continued)

 

20.3Disclosures on reserves in equity, continued

 

Movements in other reserves and changes in interest were as follows:

 

   Foreign
currency
translation
difference
   Reserve for cash flow hedges   Reserve for actuarial
gains and losses from
defined benefit plans
   Reserve for gains
(losses) from financial
assets measured at fair
value through other
comprehensive income
   Other reserves   Total reserves 
Movements  Before taxes   Before taxes   Tax   Before
taxes
   Deferred
taxes
   Before
taxes
   Deferred
taxes
   Before taxes   Reserves   Deferred
taxes
   Total
reserves
 
  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Opening balance as of 1/1/2017   (19,463)   89    (25)   (5,446)   612    4,813    (1,300)   7,832    (12,175)   (713)   (12,888)
                                                        
Increase (decrease) in reserves   (5,450)   2,159    -    (1,401)        (26)   -    3,500    (1,218)   -    (1,218)
Deferred taxes   -    -    25    -    282    -    (550)   -    -    (243)   (243)
Reclassification of loss in reserves   -    -    -    -    -    -    -    -    -    -    - 
                                                        
Closing balance as of 12/31/2017   (24,913)   2,248    -    (6,847)   894    4,787    (1,850)   11,332    (13,393)   (956)   (14,349)
                                                        
Increase (decrease) in reserves   (12,302)   14,794    -    674         (5,310)   -    (1,001)   (3,145)   -    (3,145)
Deferred taxes   -    -    -    -    (115)   -    1,434    -    -    1,319    1,319 
Reclassification of loss in reserves   -    -    -    -    -    -    -    -    -    -    - 
                                                        
Closing balance as of 9/30/2018   (37,215)   17,042    -    (6,173)   779    (523)   (416)   10,331    (16,538)   363    (16,175)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

173

Notes to the Consolidated Financial Statements as of September 30, 2018

 

 

 

Note 20Disclosures on equity (continued)

 

20.3Disclosures on reserves in equity, continued

 

Other reserves

 

This caption corresponds to the legal reserves reported in the individual financial statements of the subsidiaries that are mentioned below and that have been recognized in SQM’s equity through the application of the equity method.

 

(*) In the case of SQM Iberian S.A., the balance corresponds to the results obtained in the previous financial year which are presented as forming part of other reserves because of local regulations.

 

   9/30/2018   12/31/2017 
Subsidiary - Associate  ThUS$   ThUS$ 
SQM Iberian S.A. (*)   9,464    9,464 
SQM Europe NV   1,957    1,957 
Soquimich European holding B,V,   614    828 
Abu Dhabi Fertilizer Industries WWL(**)   (332)   455 
Doktor Tarsa Tarim Sanayi AS   305    305 
Total   12,008    13,009 
           
Corresponds to the acquisition of the subsidiary SQM Iberian S.A., which was already under Company ownership at the acquisition date (IAS 27 R).   (1,677)   (1,677)
           
Total Other reserves   10,331    11,332 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

174

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 20- Disclosures on equity (continued)

 

20.4Dividend policies

 

As required by Article 79 of the Chilean Companies Act, unless otherwise decided by unanimous vote of the holders of issued and subscribed shares, we must distribute a cash dividend in an amount equal to at least 30% of our consolidated profit for the year ended as of December 31, unless and except to the extent it has a deficit in retained earnings (losses not absorbed in prior years).

 

On May 23, 2018, the Company’s Board of Directors approved the following:

 

To pay a provisional dividend equivalent to US$0.43247 per share with a charge to profit for 2018. Such amount will be paid in its equivalent in Chilean pesos, the domestic currency, according to the observed U.S. dollar exchange rate published in the Official Gazette on May 31, 2018.

 

On August 22, 2018, the Board approved payment of a provisional dividend equivalent to US$0.50864 per share with a charge to profit for 2018. Such amount will be paid in its equivalent in Chilean pesos, the domestic currency, according to the observed U.S. dollar exchange rate published in the Official Gazette on August 31, 2018.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

175

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 20- Disclosures on equity (continued)

 

20.4Dividend policies, continued

 

Dividend policy for commercial year 2018.

 

The Company has defined the following dividend policy:

 

(a) To distribute and pay a dividend to the respective shareholders a percentage of the profits to be determined as follows:

 

-100% of the profit for 2018 if all the following financial parameters are met: (a) that the total of cash and cash equivalents and other current financial assets (“Cash”) divided by the addition of other current financial liabilities (the “Short-term Financial Liabilities”) is equal to or more than 2.5 times, and (b) the total of current liabilities and non-current liabilities (“Total Liabilities”) divided by total equity (“Equity”) is equal to or less than 1.1 times.

 

-80% of the profit for 2018 if all the following financial parameters are met: (a) that Cash divided by Short-term Financial Liabilities is equal to or more than 2.0 times, and (b) Total Liabilities divided by Total Equity is equal to or less than 1.2 times.

 

-60% of the profit for 2018 if all the following financial parameters are met: (a) that Cash divided by Short-term Financial Liabilities is equal to or more than 1.5 times, and (b) Total Liabilities divided by Total Equity is equal to or less than 1.3 times.

 

Should none of these parameters be met, the Company will distribute and pay to the respective shareholders a dividend of 50% of the profit for 2018.

 

(b) To distribute and pay, if possible, during 2018, three provisional dividends which will be set against the definitive dividend. These provisional dividends will probably be paid in the month following that in which the interim financial statements for March, June and September 2018 are approved. Their amounts will be calculated as follows:

 

For those provisional dividends with a charge to retained earnings reflected in the interim financial statements as of June 2018, the percentage corresponding to the financial parameters outlined in (a) above will be distributed.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

176

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 20Disclosures on equity (continued)

 

20.4Dividend policies, continued

 

-For those provisional dividends with a charge to retained earnings reflected in the interim financial statements as of June 2018, the percentage corresponding to the financial parameters outlined in (a) above will be distributed, discounting the amount of the provisional dividends previously distributed during 2018.

 

-For those provisional dividends with a charge to retained earnings reflected in the interim financial statements as of September 2018, the percentage corresponding to the financial parameters outlined in (a) above will be distributed, discounting the amount of the provisional dividends previously distributed during 2018.

 

(c) The amount of these provisional dividends could be higher or lower, provided that, according to the information available to the Board of Directors on the date when their distribution is agreed, this will not have a material and negative effect on the Company's capacity to carry out its approved investments and financing in general and that it complies with the investment and financing policy approved by the Ordinary Shareholders’ Meeting.

 

(d) For the ordinary meeting held in 2019, the Board of Directors will propose a definitive dividend in line with the percentage corresponding to the financial parameters outlined in (a) above, discounting the amount of the provisional dividends previously distributed during 2018.

 

(e) Any remaining amount from the net profits from 2018 can be retained and used to finance the Company’s own operations or one or more of its investment projects, without prejudice to a possible distribution of dividends charged to accumulated profit that might be approved by the shareholders’ meeting or the possible future capitalization of all or part of it.

 

(f) The payment of additional dividends is not being considered.

 

It must be expressly stated that this dividends policy details the intention of the Board of Directors and its fulfillment depends on the actual profits obtained, as well as on the results indicated by the projections the Company makes from time to time or on the existence of particular conditions, as appropriate. In any event, if the dividends policy established by the Board should be subject to any substantial change, the Company will communicate this as a material event.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

177

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 20Disclosures on equity (continued)

 

20.5Interim and provisional dividends

 

At the General Ordinary Shareholders' Meeting of April 27, 2018, the shareholders agreed to the payment of a dividend of US$1.62501 per share from the net profit for distribution obtained during the 2017 fiscal year, from which must be discounted the sum of US$1.20533 per share, which was already paid as a provisional dividend. This results in a remaining balance of US$0.41968 per share. This dividend will be paid to shareholders on May 10, 2018.”

 

“The Ordinary Shareholders’ Meeting held on April 27, 2018 agreed to change the Company’s Dividend Policy for 2017 which was presented to the Ordinary Shareholders’ Meeting held on April 28, 2017, by incorporating a potential dividend of US$100,000,000, equivalent to US$0.37994 per share which would be paid with a charge to the Company’s retained earnings. This dividend was paid to shareholders on May 10, 2018.

 

On November 22, 2017, the Board approved payment of a provisional dividend equivalent to US$0.42879 per share with a charge to earnings for 2017. Such amount will be paid in its equivalent in Chilean pesos, the domestic currency, according to the observed U.S. dollar exchange rate published in the Official Gazette on November 30, 2017.

 

On August 23, 2017, the Board approved payment of a provisional dividend equivalent to US$0.38432 per share with a charge to earnings for 2017. Such amount will be paid in its equivalent in Chilean pesos, the domestic currency, according to the observed U.S. dollar exchange rate published in the Official Gazette on August 31, 2017.

 

On May 17, 2017, the Board approved payment of a provisional dividend equivalent to US$0.39222 per share with a charge to earnings for 2017. Such amount will be paid in its equivalent in Chilean pesos, the domestic currency, according to the observed U.S. dollar exchange rate published in the Official Gazette on Wednesday, May 31, 2017.

 

At the General Ordinary Shareholders' Meeting of April 28, 2017, the shareholders agreed to the payment of a dividend of US$1.05735 per share from the net profit for distribution obtained during the 2016 fiscal year, from which must be discounted the sum of US$0.85487 per share, which was already paid as a provisional dividend, resulting in a remaining balance of US$0.20248 per share.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

178

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 20- Disclosures on equity (continued)

 

20.5Interim and provisional dividends, continued

 

The dividends presented as deducted from equity are as follows:

 

  

9/30/2018

ThUS$

  

12/31/2017

ThUS$

 
Dividends attributable to owners of the parent   440    55,501 
Provisional dividend   247,698    317,243 
Potential dividend   107,871    - 
Dividend payable   83,537    110,529 
Total   439,546    483,273 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

179

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 21Earnings per share

 

Basic earnings per share are calculated by dividing net income attributable to the Company’s shareholders by the weighted average of the number of shares in circulation during that period.

 

As expressed, earnings per share are detailed as follows:

  

Basic earnings per share 

9/30/2018

ThUS$

  

9/30/2017

ThUS$

 
           
Earnings (losses) attributable to owners of the parent   331,198    317,243 

 

  

9/30/2018

Units

  

12/31/2017

Units

 
Number of common shares in circulation   263,196,524    263,196,524 

 

   9/30/2018   9/30/2017 
           
Basic earnings per share (US$ per share)   1.2583    1.2053 

 

The Company has not made any operations with a potential dilutive effect that assumes diluted earnings per share are different from the basic earnings per share.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

180

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions

 

In accordance with note 18,1, the Company has only registered a provision for those lawsuits in which there is a probability that the judgments will be unfavorable to the Company. The Company is party to the following lawsuits and other relevant legal actions:

 

22.1Lawsuits and other relevant events

 

1. Plaintiff : Nancy Erika Urra Muñoz,
  Defendants : Fresia Flores Zamorano, Duratec-Vinilit S.A. and the Company and their Insurers.
  Date : December 2008.
  Court : 1st Civil Court of Santiago.
  Reason : Labor Accident.
  Status : Judgment favorable for the Company. Dated March 11, 2016. Appeal filed by the plaintiff which has not been pronounced on. Awaiting notification of the sentence. case filed on December 28, 2016
  Nominal value : ThUS$550.
       
2. Plaintiff : City of Pomona, California USA.
  Defendant : SQM North America Corporation.
  Date : December 2010.
  Court : United States District Court Central District of California.
  Reason : Payment of expenses and other amounts related to the treatment of groundwater to allow for its consumption by removing the existing perchlorate in such groundwater that allegedly comes from Chilean fertilizers.
  Status : On May 17, 2018 district judge Gary Klausner sentenced in favor of SQM NA following the verdict of the jury with regard to the appeal of the plaintiffs.
  Nominal value : ThUS$32,000.
       
3. Plaintiff : City of Lindsay, California USA.
  Defendant : SQM NA and the Company (still not noticed)
  Date : December 2010.
  Court : United States District Court Eastern District of California.   
  Reason : Payment of expenses and other amounts related to the treatment of groundwater to allow for its consumption by removing the existing perchlorate in such groundwater that allegedly comes from Chilean fertilizers.
  Status : Filing of the case, Processing suspended.
  Nominal value : Not possible to determine.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

181

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.1Lawsuits and other relevant events, continued

 

4. Plaintiff : H&V Van Mele N.V.
  Defendant : :NV Euroports, SQM Europe N,V, and its insurance companies,
  Date : July 2013.
  Court : Commercial Court of Dendermonde,
  Reason : Alleged indirect responsibility for the absence of adequate specifications for the SOP–WS by the Belgian distributor.
   Status : Sentencing against NV Euroports and subsidy SQM Europe N,V,, for EUR 206,675,91, Appeal presented in November 2017.
  Nominal value : ThUS$430.
       
5. Plaintiff : Carlos Aravena Carrizo et al,
  Defendant : SQM Nitratos S.A. (“SQM Nitratos”)  and its insurers,
  Date : May 2014.
  Court : 18th Civil Court of Santiago.
  Reason : Lawsuit seeking compensation for damages for alleged civil liability under tort as a result of an explosion that occurred during 2010 near Baquedano, causing the death of 6 employees.
  Status : Summons to hear sentence
  Nominal value : ThUS$1,235.
       
6. Plaintiff : Evt Consulting SpA.
  Defendant : SQM Nitratos.
  Date : October 2014.
  Court : 23th Civil Court of Santiago,
  Reason : Lawsuit seeking compensation for damages related to the termination of the purchase and sale agreement for metallic structures,
  Status : On November 13, 2017, the Santiago Appeals Court sentenced SQM Nitratos S.A. to pay US$304,620. Cassation in form and substance presented before the Supreme Court in December 2017.
  Nominal value : ThUS$835.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

182

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.1Lawsuits and other relevant events, continued

 

7. Plaintiff : SQM Salar and the Company.
  Defendant :  Seguros Generales Suramericana S.A. (formerly - RSA Seguros Chile S.A.)
  Date : August 29, 2016.
  Court : Arbitration Court – Arbitrator Mr, Gonzalo Fernández.
  Reason : Complaint for forced compliance and collection of indemnification for insurance claim of February 7 and 8, 2013.
  Status : Evidence stage.
  Nominal value : ThUS$20,658.
       
8. Plaintiff : Tyne and Wear Pension Fund as represented by the Council of the Borough of South Tyneside acting as Lead Plaintiff.
  Defendant : The Company
  Date : January 2016.
  Court : United States District Court – Southern District of New York.
  Reason : Alleged damage to ADS holders of the Company resulting from alleged noncompliance with the securities regulations in the United States by the Company.
  Status : Initial stage of disclosure of background information.
  Nominal value : Not determined.
       
9. Plaintiff : Ernesto Saldaña González et al.
  Defendant : SQM Salar S.A., SQM Industrial S.A. (“SQM Industrial”) and their insurance companies.
  Date : May 2016.
  Court : 13th Civil Court of Santiago.
  Reason : Lawsuit seeking compensation for damages for alleged civil liability under tort law arising from the accident that occurred in July 2014 in the María Elena location.
  Status : Summons to hear sentence
  Nominal value : ThUS$515.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

183

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.1Lawsuits and other relevant events, continued

 

10. Plaintiff : María Yolanda Achiardi Tapia et al.
  Defendant : SQM Salar and its insurance companies and other 5 defendants
  Date : February 2015.
  Court : 1st Civil Court of Antofagasta.
  Reason : Lawsuit seeking compensation for damages for alleged civil liability under tort law arising from a traffic accident that occurred in April 2011 in the city of Antofagasta.
  Status : Summons to hear sentence.
  Nominal value : ThUS$1,265.
       
11. Plaintiff : The Company
  Defendants : AES Gener S.A. (“Gener”) and Empresa Eléctrica Cochrane SpA (“Cochrane”).
  Date : May 11, 2017.
  Court : Arbitration award in accordance with the arbitration rules established by the Center for Arbitration and Mediation of the Santiago Chamber of Commerce (“CAM).
  Reason : Request for the interpretation of an electricity supply agreement alleging the right by the plaintiff to receive a collection in conformity with such agreement.
  Instance : Conciliation stage.
  Nominal value : Not determined.
       
12. Plaintiff : Gener and Cochrane.
  Defendant : The Company.
  Date : May 2017.
  Court : Arbitration in accordance with the rules established by the Center for Arbitration and Mediation (CAM).
  Reason : Discrepancy with respect to the amount of an alleged right by the plaintiff to receive a collection in conformity with the agreement entered into by the parties.
  Instance : Conciliation stage.
  Nominal value : Not determined.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

184

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.1Lawsuits and other relevant events, continued

 

13. Plaintiffs : Employee Union No. 2 of SQN Nitratos Nueva Victoria.
  Defendant : SQM Nitratos S.A.
  Date : November 23, 2016.
  Court : Labor Court of Iquique.
  Reason : Lawsuit alleging differences in the calculation of the bonus payable under the collective bargaining agreement.
  Instance : On June 20, 2018, the court ruled in favor of SQM Nitratos, and on July 4, 2018 it was certified that this case was closed.
  Nominal value : ThUS$385.
       
14. Plaintiffs : Transportes Buen Destino
  Defendant : SQM Salar.
  Date : None.
  Court : Arbitration in accordance with the rules established by the Center for Arbitration and Mediation (CAM).
  Reason : Discrepancies generated in the implementation of the following contracts  entered into between TBD and SQM Salar: (i) lithium brine transportation; and (ii) salt transportation.
  Instance : The case has not been presented yet.
  Nominal value : Undetermined.
       
15. Plaintiffs : Castillo, Hernán et al.
  Defendants : Servicios Integrales de Tránsitos y Transferencias S.A. and SQM Industrial S.A.
  Date : September 15, 2017.
  Court : 1st Labor Court of Santiago.
  Reason : Lawsuit to assert labor rights, seeking collection of wages owed and other amounts.
  Instance : On August 24, 2018, a judgment is issued rejecting the application in its entirety. On September 6, 2018, plaintiffs deduct an appeal for nullity before the Santiago Court of Appeals, which is still in branch.
  Nominal value : ThUS$1,940.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

185

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.1Lawsuits and other relevant events, continued

 

16. Plaintiffs : Acosta Tapia, Eloisa del Tránsito and others as successors and assigns  of Araya Castillo, Raimundo del Rosario.
  Defendants : SQM Salar.
  Date : January 19, 2018.
  Court : 2nd Labor Court of Santiago.
  Reason : Lawsuit for damages
      for pain and suffering as a result of occupational illness.
  Instance : Pending final judgement
  Nominal value : ThUS$472.
       
17. Plaintiffs : Roa Maluenda, Rosa del Carmen as successor and assign of Sánchez Gamboa, Gerónimo Iván.
  Defendants : SQM S.A., SQM Nitratos S.A. and SQM Industrial S.A.
  Date : January 23, 2018.
  Court : 1st Labor Court of Santiago.
  Reason : Lawsuit for damages.
      for pain and suffering as a result of occupational illness.
  Instance : On August 21, 2018, the plaintiff completely abandons the filed lawsuit.
  Nominal value : ThUS$472.
       
18. Appellants : Asociación Indígena Consejo Pueblos Atacameños and others.
  Appellees : Corfo, the Company, SQM Salar and SQM Potasio S.A.
  Date of appeal : February 15, 2018.
  Court : Santiago Court of Appeals
  Reason : Appeal requesting annulment of amendments to contracts signed by the defendants on January 17, 2018.
  Instance : On September 25, the Court of Appeals of Santiago rejected the appeal for protection. On October 12, the Supreme Court ordered the revision of the appeal filed by the appellants.
  Nominal value : Undetermined.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

186

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.1Lawsuits and other relevant events, continued

 

19 Plaintiffs: : Monroy Castillo, Patricio.
  Defendants : SQM Nitratos.
  Date : May 5, 2018.
  Court : Labor Court of Iquique.
  Reason : Lawsuit for damages  for consequential damages, loss of earnings and moral damages as a result of  an accident at work.
  Instance : Final hearing pending.
  Nominal value : ThUS$254.
       
20. Claimant : The Company.
  Defendant : Office of the Superintendent of the Environment (“SMA”).
  Date : July 20, 2017.
  Court : Second Environmental Court of Santiago.
  Reason : Appeal against the resolution rejecting the compliance program.
  Instance : On August 21, 2018, the Second Environmental Court  accepted the Company’s claim, ordering the SMA to take the procedure back to the stage prior to their resolution rejecting the compliance program presented by the Company. Said sentence was the subject of an appeal for cassation, which entered the Supreme Court on August 8, 2018.
  Nominal value : Undetermined.
       
21. Claimant : The Company
  Defendant : Office of the Superintendent of the Environment (“SMA”).
  Date : January 4, 2018.
  Court : First Environmental Court of Antofagasta
  Reason : Appeal against urgent, transitory measure
  Instance : On October 2018, the First Environmental Court of Antofagasta accepted the claim of the Company, except for the preparation of reports to deepen knowledge of ecosystems.
  Nominal value : Undetermined.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

187

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.1Lawsuits and other relevant events, continued

 

22. Claimant : The Company
  Defendant : Office of the Superintendent of the Environment (“SMA”).
  Date : May 15, 2018.
  Court : First Environmental Court of Antofagasta
  Reason : Appeal against urgent, transitory measure
  Instance : On October 2018, the First Environmental Court of Antofagasta accepted the claim of the Company, except for the preparation of reports to deepen knowledge of ecosystems.
  Nominal value : Undetermined.
       
23. Claimant : Congresspersons Claudia Nathalie Mix Jiménez, Gael Fernanda Yeomans Araya, Camila Ruslay Rojas Valderrama et al.
  Defendant : CORFO. The entity has intervened as an independent third party.
  Date : September 6, 2018.
  Court : Special Magistrate, Mr. Alejandro Madrid Crohare.
  Reason : To render null and void the contract for the Salar de Atacama Project signed between CORFO and SQM Salar.
  Instance : Pending ruling on dilatory pleas and independent third-party status of companies and subsidiaries.
  Nominal value : Undetermined.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

188

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.1Lawsuits and other relevant events, continued

 

The Company and its subsidiaries have been involved and will probably continue to be involved either as plaintiffs or defendants in certain judicial proceedings that have been and will be heard by the arbitration or ordinary courts of justice that will make the final decision. Those proceedings that are regulated by the appropriate legal regulations are intended to exercise or oppose certain actions or exceptions related to certain mining claims either granted or to be granted and that do not or will not affect in an essential manner the development of the Company and its subsidiaries.

 

Soquimich Comercial S.A. has been involved and will probably continue being involved either as plaintiff or defendant in certain judicial proceedings through which it intends to collect and receive the amounts owed, the total nominal value of which is approximately US$1,2 million.

 

The Company has made efforts and continues making efforts to obtain payment of certain amounts that are still owed it on occasion of their activities. Such amounts will continue to be required using judicial or non-judicial means by the plaintiffs, and the actions and exercise related to these are currently in full force and effect.

 

The Company and its subsidiaries have received no legal notice on lawsuits other than those indicated above, which exceed US$0,2 million.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

189

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.2Restrictions to management or financial limits

 

Contracts subscribed the issuance of bonuses in the local and international market require the Company to comply with the following level of consolidated financial indicators, calculated for a moving period that considers the last twelve months:

 

To maintain a Total Indebtedness Ratio not higher than 1,2 times at its strictest level. The total Indebtedness level is defined as the Total Liabilities divided by Total Equity.

 

As of September 30, 2018, the above mentioned financial indicators have the following values:

 

Indicator  9/30/2018   12/31/2017 
Leverage   0.93    0.91 

 

Bond issue agreements issued abroad require the Company to neither merge or dispose of the whole or a substantial part of its assets, unless all the following conditions are met: (i) the legal successor company is an entity subject to either Chilean or United States law, and assumes SQM S.A.’s obligations under a complimentary contract, (ii) the Issuer does not fail to comply immediately after the merger or disposal, and (iii) the Issuer delivers a legal opinion stating that the merger or disposal and the complimentary contract meet the requirements described in the original contract.

 

In addition, SQM S.A. is committed to disclosing financial information on quarterly basis.

 

The Company and its subsidiaries have complied and are fully complying with all the aforementioned limitations, restrictions and obligations.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

190

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.3Environmental contingencies

 

On June 6, 2016, the “SMA” filed charges against the Company with respect to the Pampa Hermosa project for possible noncompliance with RCA 890/2010.

 

This relates to charges related to certain variables of the follow-up plan and the implementation of a mitigation measure included in the respective environmental impact assessment. The Company has presented for the approval of SMA a compliance program detailing the actions and commitments it will carry out to address the SMA's objections.

 

On June 29, 2017, the SMA rejected the compliance program presented by the Company. On July 10, 2017, the Company presented its rebuttals to the charges made by the SMA. On August 21, 2018, the Second Environmental Court accepted the Company’s claim, ordering the SMA to take the procedure back to the stage prior to their resolution rejecting the compliance program presented by the Company.

 

On December 13, 2017, the First Environmental Court of Antofagasta ordered the temporary and partial closure of the water extraction wells located in the Salar de Llamara. These wells allow the Company to extract around 124 liters/second of water, which is approximately 15% of the water used in Chile’s First Region. On October 2018, the First Environmental Court of Antofagasta accepted the claim of the Company, except for the preparation of reports to deepen knowledge of ecosystems.

 

Through a ruling dated November 28, 2016, which was modified by a ruling dated December 23, 2016, the SMA filed charges against SQM Salar for extracting brine in excess of authorized amounts, progressively impacting the vitality of algarrobo trees, delivering incomplete information, modifying variables and other matters.

 

SQM Salar has presented a compliance program detailing the actions and commitments it will carry out to address the SMA's objections. The SMA is reviewing the compliance program.

 

In keeping with the monitoring plans established in the current environmental qualification resolution for the operation at the Salar de Atacama, SQM Salar periodically monitors the flora, fauna, hydrogeological and meteorological variables, along with 225 monitoring points and 48 continuous measuring points for the brine and water levels in different parts of the salar basin, which it periodically reports to the corresponding authorities. If any of the monitoring points falls below predefined levels, various actions are considered, which are part of the environmental monitoring plan.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

191

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.3Environmental contingencies, continued

 

On May 20, 2018, 2 of the 225 points were 1cm below the predefined level for those points. These points are on the route of one of the outlets for a lagoon located on the eastern edge of the Salar de Atacama. Historically flows from the lagoons of the deposit have varied in location and route. That has happened in this case and the flow has moved with regard to the location of the monitoring well in question. Both the levels and the flows from the lagoons have behaved normally and no changes in the ecosystem that is being monitored in the area have been observed.

 

Following the protocol established for these cases, total pumping flow from SQM Salar operations in the Salar de Atacama has been reduced for a 6-month period, from a maximum annual average of 1,500 liters per second to an average annual flow of 1,250 liters per second.

 

The Company estimates that an average annual reduction of 250 l/s will not have an impact on current and projected lithium carbonate and hydroxide production levels. For potassium chloride, the company estimates that the reduction in pumping would imply a reduction in production and sales of approximately 170,000 tons per year.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

192

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.4Tax contingency, continued

 

During 2015, the Company, SQM Salar and SQM Industrial submitted to the Chilean IRS four tax amendments (two by the Company, one by SQM Salar and one by SQM Industrial).

 

The first two (one for SQM and one for SQM Salar), after being approved by the SII, generated payments for taxes, interests and other charges for US$8,1 million. A provision for such amount was made in the profit or loss for the first quarter of 2015.

 

Additionally, during August 2015, the Chilean IRS was provided, for its review and approval, with the documentation necessary for amending the annual tax returns of the Company and SQM Industrial. As a result of such amendments, the Company paid an approximate sum of US$1,4 million for taxes, interests and other charges. This amount was recorded in a provision in the profit or loss for the second quarter of 2015.

 

Finally, during 2016, the last 12 invoices were amended with a payment of approximately US$50,000.

 

Accordingly, the SQM Group understands the internal analysis they have been performing has ended, the purpose of which was the identification of the expenses incurred by them during the fiscal years 2008 to 2014 and which could be a matter of tax amendment.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

193

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.4Tax contingency, continued

 

Because of the aforementioned amendments, the Company, SQM Salar and SQM Industrial might be affected by additional penalties established in the first subparagraph, No, 4 of Article 97 of the Tax Code, for an amount ranging between 50% and 300% of the taxes paid. The Company has not considered it necessary to make any provisions related to this possible additional penalty.

 

On August 26, 2016, SQM Salar filed with the Third Tax and Customs Court of the Metropolitan Region a tax claim against tax assessments Nos, 169, 170, 171 and 172, which seek to expand the application of the specific tax on mining activities for the exploitation of lithium. The amount involved is approximately ThUS$17.8. A summons to hear sentence has been received for this claim.

 

On March 24, 2017, SQM Salar filed with the Third Tax and Customs Court of the Metropolitan Region a tax claim against tax assessment No, 207 of 2016 and ruling No, 156 of 2016, both issued by the Chilean IRS, which seek to expand application of the specific tax on mining activities to include lithium exploitation for tax years 2015 and 2016. The amount involved is approximately US$14,4 million. A summons to hear sentence has been received for this claim.

 

These amounts are classified as taxes for current assets, non-current, as of December 31, 2017 and the same as of September 30, 2018.

 

Of the US$32,2 million under dispute, approximately US$25,2 million correspond to the potential specific tax on mining activities related to lithium and US$7,0 million correspond to an excess charge levied by the Chilean IRS.

 

The Chilean IRS has not issued an assessment claiming differences in the specific tax on mining activities filed for the years 2016, 2017 and 2018. As of the date of these financial statements, the Company has not made any provisions for these possible differences.

 

If the Chilean IRS uses criteria similar to that used in previous years, it may issue an assessment in the future for the 2016, 2017 and 2018 financial years. It is reasonable to expect that should these assessments for the period 2016 to the third half of 2018 be issued, the value would be approximately US$52 million (without considering potential interest and fines).

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

194

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 22Contingencies and restrictions (continued)

 

22.5Contingencies regarding the Changes to the Contracts with Corfo. Appeal No. 10301-2018, Santiago Court of Appeals:

 

(a)In January 2018, indigenous communities and various parties presented an appeal for legal protection against Corfo, the Company, SQM Salar and SQM Potasio (the “Companies”), with regard to the changes to the contract for the project in the Salar de Atacama and the OMA mining property lease contract dated January 17, 2018, both granted as a result of a conciliation process proposed by the arbitration court which took place at the end of arbitration between the parties (the “Changes”). According to the appellants, the Changes will deprive, disturb and threaten in an illegal and arbitrary way the constitutional rights of the appellants established in article 19, numbers 8, 21 and 24 of the Political Constitution. The appellants have therefore requested the following: (i) that the acts subject to appeal be declared invalid, vacated or without effect, (ii) that the Changes be reviewed according to the provisions of Convention 169 (iii) that the counterparts be expressly made liable for the costs, given the clearly illegal and arbitrary nature of what has occurred.

 

Once informed of the appeal, the Companies requested that it be rejected for the following reasons. Firstly because it is extemporaneous. Secondly, as the matter is one that requires the interpretation and verification of the application or effects of contractual clauses, it goes beyond the scope of this cautionary action. Thirdly it should be challenged because of the principle of specialty, because there is a special procedure which would better apply. In terms of substance, the Companies have indicated to the Court that an increase in the lithium quota, authorized through contractual changes adopted through a conciliation process proposed by the Arbitration Judge does not constitute an arbitrary or illegal act and that no indigenous consultation took place as per article 6 of Convention 169 because these changes were not legislative or administrative measures likely to directly affect the indigenous peoples. The Companies have sustained that the Changes are the implementation of a conciliation agreement, that is the jurisdictional equivalent of res judicata, which was proposed by the arbitration judge and does not correspond to the exercise of public powers, as required in article 6 of Convention 169.

 

On September 25, 2018, the Santiago Court of Appeals rejected the appeal for legal protection. The case is now in the Supreme Court, which is examining the motions for appeal filed by the appellants.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

195

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.5Contingencies regarding the Changes to the Contracts with Corfo. Appeal No. 10301-2018, Santiago Court of Appeals (continued)

 

In the event that a ruling is made to leave without effect the Changes and if there are no appeals by the parties, the contracts prior to the Changes will once again be valid, although this resolution should not affect the efficiency and validity of the conciliation reached regarding the matters debated in arbitration.

 

The court has the faculties to adopt the decisions it considers necessary to reestablish the rule of law and ensure the protection of the affected party.

 

(b)On September 6, 2018, a public law annulment lawsuit was filed by the congresspersons Ms. Claudia Nathalie Mix Jiménez, Gael Fernanda Yeomans Araya and Camila Ruslay Rojas Valderrama and the Citizen Power Party (Partido Poder Ciudadano) to render null and void the contract for the Salar de Atacama Project signed between Corfo and the companies. These companies have joined the suit as interested third parties.

 

In the suit, the plaintiffs request a pretrial measure against Corfo for the signing of agreements and contracts related to the exploitation of lithium. On October 31, 2018, the special magistrate rejected the measure, which was appealed by the plaintiffs.

 

In the event that the contract for the Salar de Atacama Project is rendered null and void, SQM Salar could be unable to exploit the mining claims in the Salar de Atacama that it has leased from Corfo.

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

196

Notes to the Consolidated Financial Statements as of September 30, 2018

  

Note 22Contingencies and restrictions (continued)

 

22.6Restricted or pledged cash

 

The subsidiary Isapre Norte Grande Ltda., in compliance with the provisions established by the Chilean Superintendence of Healthcare, which regulates the running of pension-related health institutions, maintains a guarantee in financial instruments delivered in deposits, custody and administration to Banco de Chile.

 

This guarantee, according to the regulations issued by the Chilean Superintendence of Healthcare is equivalent to the total sum owed to its members and medical providers, Banco de Chile reports the present value of the guarantee to the Chilean Superintendence of Healthcare and Isapre Norte Grande Ltda, on a daily basis, As of September 30, 2018, the guarantee amounts to ThUS$749.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

197

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 22Contingencies and restrictions (continued)

 

22.7Securities obtained from third parties

 

The main security received (exceeding ThUS$100) from third parties to guarantee Soquimich Comercial S.A.’s compliance with obligations in contracts of commercial mandates for the distribution and sale of fertilizers amounted to ThUS$9,791 and ThUS$12,103 on September 30, 2018 and December 31, 2017 respectively; which is detailed as follows:

 

Grantor  Relationship  9/30/2018   12/31/2017 
      ThUS$   ThUS$ 
            
Ferosor Agrícola S.A.  Unrelated third party   3,785    4,067 
Tattersall Agroinsumos S.A.  Unrelated third party   2,000    2,000 
Contador Frutos S.A.  Unrelated third party   1,657    1,743 
Agrícola Lobert Ltda.  Unrelated third party   -    1,264 
Covepa SPA  Unrelated third party   757    813 
Johannes Epple Davanzo  Unrelated third party   338    363 
Hortofrutícola La Serena  Unrelated third party   307    323 
Juan Luis Gaete Chesta  Unrelated third party   205    262 
Arena Fertilizantes y Semillas  Unrelated third party   227    244 
Vicente Oyarce Castro  Unrelated third party   232    244 
Soc. Agrocom. Julio Polanco  Unrelated third party   151    163 
Bernardo Guzmán Schmidt  Unrelated third party   132    138 
Gilberto Rivas Y Cia. Ltda.  Unrelated third party   -    138 
Lemp Martin Julian  Unrelated third party   -    124 
Comercial Agrosal Ltda.  Unrelated third party   -    116 
Soc.Comercial el Mimbral  Unrelated third party   -    101 
Total      9,791    12,103 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

198

Notes to the Consolidated Financial Statements as of September 30, 2018

 

 

Note 22Contingencies and restrictions (continued)

 

22.8Indirect guarantees

 

Guarantees in which there is no pending balance indirectly reflect that the respective guarantees are in force, have been approved by the Company’s Board of Directors and have not been used by the respective subsidiary.

 

The bonds which disclose a balance as of September 30, 2018 and December 31, 2017 are detailed below:

 

   Debtor  Type of   Balances as of the
closing date of the
financial statements
 
Creditor of the guarantee  Name  Relationship  guarantee   9/30/2018
ThUS$
    12/31/2017
ThUS$
 
Australian and New Zealand Bank  SQM North America Corp  Subsidiary  Bond   -    - 
Australian and New Zealand Bank  SQM Europe N,V,  Subsidiary  Bond   -    - 
Generale Bank  SQM North America Corp  Subsidiary  Bond   -    - 
Generale Bank  SQM Europe N,V,  Subsidiary  Bond   -    - 
Kredietbank  SQM North America Corp  Subsidiary  Bond   -    - 
Kredietbank  SQM Europe N,V,  Subsidiary  Bond   -    - 
Banks and financial institutions  SQM Investment Corp, N,V,  Subsidiary  Bond   -    - 
Banks and financial institutions  SQM Europe N,V,  Subsidiary  Bond   -    - 
Banks and financial institutions  SQM North America Corp  Subsidiary  Bond   -    - 
Banks and financial institutions  Nitratos Naturais do Chile Ltda,  Subsidiary  Bond   -    - 
Banks and financial institutions  SQM México S.A. de C,V,  Subsidiary  Bond   -    - 
Banks and financial institutions  SQM Brasil Ltda,  Subsidiary  Bond   -    - 
“BNP”  SQM Investment Corp, N,V,  Subsidiary  Bond   -    - 
Sociedad Nacional de Mineria A,G,  SQM Potasio S.A.  Subsidiary  Bond   -    - 
Scotiabank & Trust (Cayman) Ltd,  Royal Seed Trading A,V,V,  Subsidiary  Bond   -    - 
Scotiabank & Trust (Cayman) Ltd,  Royal Seed Trading A,V,V,  Subsidiary  Bond   -    - 
Bank of America  Royal Seed Trading A,V,V,  Subsidiary  Bond   -    - 
Export Development Canada  Royal Seed Trading A,V,V,  Subsidiary  Bond   -    - 
The Bank of Tokyo-Mitsubishi UFJ Ltd,  Royal Seed Trading A,V,V,  Subsidiary  Bond   -    - 
JP Morgan Chase Bank  SQM Industrial S.A.  Subsidiary  Bond   -    - 
The Bank of Nova Scotia  SQM Investment Corp, N,V,  Subsidiary  Bond   -    - 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

199

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 22Contingencies and restrictions (continued)

 

22.8Indirect guarantees, continued

 

   Debtor  Type of   Pending balances as of
the closing date of the
financial statements
 
Creditor of the guarantee  Name  Relationship  guarantee   9/30/2018
ThUS$
    12/31/2017
ThUS$
 
Credit Suisse International  SQM Investment Corp, N,V,  Subsidiary  Bond   -    - 
Morgan Stanley Capital Services  SQM Investment Corp, N,V,  Subsidiary  Bond   -    - 
The Bank of Tokyo-Mitsubishi UFJ Ltd,  SQM Investment Corp, N,V,  Subsidiary  Bond   -    - 
HSBC  SQM Investment Corp, N,V,  Subsidiary  Bond   -    - 
Deutsche Bank AG  SQM Investment Corp, N,V,  Subsidiary  Bond   -    - 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

200

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 23Lawsuits and complaints

 

Lawsuits and complaints

 

During 2015, the Chilean IRS has filed several lawsuits and complaints against a number of individuals related to the so-called “SQM Case”, which are associated with the irregular financing of politicians, Amongst those affected by these legal claims are the legal representatives of the Company: the CEO, Patricio de Sominihac T. and the Vice President of Corporate Services, Ricardo Ramos R, Basically, those lawsuits and complaints relate to alleged tax crimes associated with a possible undue decrease in the taxable net income of the Company and two of its subsidiaries over the last seven years by recording as expenses in their accounting records invoices and fee receipts, which could be considered to be ideologically false. Such legal actions are also filed against the taxpayers who provided the tax documents that allowed the alleged performance of the related illicit acts. In December 2017, the Public Prosecutor confirmed that no charges will be brought against the CEO or Vice President of Corporate Services.

 

Actions performed by the Authority

 

The Public Ministry and the Chilean IRS (Servicio de Impuestos Internos (SII)) have performed a number of actions within the framework of the so-called “SQM Case”, where the Company and its executives have provided their cooperation, Several of the Company’s executives have granted access to their computers and made several statements at the request of the Prosecutors responsible for the investigation. Additionally, SQM has provided physical and digital copies of its accounting records and its subsidiaries’ accounting records, In addition, SQM has also provided the Public Ministry with its email files and all the documentation that has been required by the related authority.

 

On August 17, 2018, the Eighth Guarantee Court declared the definitive dismissal of the Company, SQM Salar and SQM Nitratos with respect to the case in which their criminal liability was being investigated

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

201

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 23Lawsuits and complaints, (continued)

 

Shearman & Sterling and Ad-Hoc Committee

 

On February 26, 2015, the Board of Directors of SQM established an ad-hoc committee comprised of three directors (the “Ad-hoc Committee”), which was authorized to conduct an investigation on the matters described in the preceding paragraph and to request any external advisory services it deemed necessary, The original members of the Ad-hoc Committee were José María Eyzaguirre B., Juan Antonio Guzmán M, and Wolf von Appen B.

 

The Ad-hoc Committee hired its own legal counsel in Chile and the United States as well as forensic accountants in the United States to support its internal investigation. The U.S. attorneys hired by the Ad-hoc Committee were mainly charged with reviewing the important facts and analyzing them in the context of the United States Foreign Corrupt Practices Act (“FCPA”). However, the Ad-hoc Committee’s factual conclusions were shared with both Chilean authorities and U.S. authorities.

 

On December 15, 2015, the Ad-hoc Committee presented the conclusions of its investigation to the Board of Directors. In addition to discussing the facts related to the referenced payments, the Ad-hoc Committee concluded that, for the purposes of the FCPA:

 

a.payments were identified that had been authorized by the former CEO of SQM for which the Company did not find sufficient supporting documentation;
b.no evidence was identified that demonstrated that such payments were made in order to prompt a public official to act or abstain from acting in order to help SQM obtain economic benefits;
c.in relation to the cost centers managed by the former CEO of SQM, it was concluded that the Company's books did not accurately reflect the transactions in question but that these transactions were determined to be quantitatively immaterial in comparison to SQM's equity, sales, expenses and profits during that period; and that.
d.SQM's internal controls were insufficient to supervise the expenses within the cost center managed by the former CEO of SQM and relied on the proper use of resources by Patricio Contesse G, himself.

 

After the Ad-hoc Committee presented its conclusions to the Board of Directors, the Company voluntarily shared these conclusions with the Chilean and U.S. Authorities (including the SEC and the U.S. Department of Justice (“DOJ”)) and has since collaborated by handing over documents and additional information requested by these authorities regarding this investigation.”

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

202

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 23Lawsuits and complaints, (continued)

 

Investigation by the Department of Justice and the Securities Exchange Commission

 

SQM informed the US regulating entities (Department of Justice and Securities and Exchange Commission) about the investigation being performed by Shearman & Sterling, in conformity with the standards effective in the United States of America. The outcome of the investigation was delivered to these regulating entities, which have started investigations to determine the existence of possible noncompliance with FCPA (Foreign Corruption Practices Act) or internal control standards.

 

On January 13, 2017, the Company entered into agreements with the Department of Justice (the “DOJ”) and the Securities and Exchange Commission (the “SEC”), both based in the United States of America (the “United States”), with respect to the investigations that those agencies had conducted as a result of payments to suppliers and entities that might have been related to politically exposed persons during the years from 2008 through 2015, which resulted in the performance of an internal investigation at the Company through an Ad-hoc Committee from its Board of Directors and which was led by the law firm Shearman & Sterling (the “Investigated Facts”). Because the Company’s securities are traded in the United States, the Company is subject to U,S, legislation. The Company has voluntarily provided the results of its internal investigation and supporting documentation to the DOJ, the SEC and the relevant Chilean authorities.

 

In conformity with the terms of the agreement entered into with the DOJ, referred to as Deferred Prosecution Agreement (the “DPA”), the Company has accepted that the DOJ presents (i) a charge for the infractions referred to the absence of implementation of effective internal accounting systems and internal accounting controls and (ii) a charge for infractions related to failure to properly maintain accounting ledgers, records and sections with respect to the Investigated Facts. By virtue of the DPA, the DOJ has agreed not to prosecute those charges against the Company for a period of 3 years, releasing the Company from such responsibility after such period to the extent that within such term the Company complies with the terms in the DPA, which include the payment of a fine of US$15,487,500 (“U.S. dollars”) and the acceptance of an external monitor for a term of 24 months (the “Monitor”) who will evaluate the Company’s compliance program and a subsequent independent report by the Company for an additional year.

 

With respect to the agreement entered into with the SEC, the Company has agreed to (i) pay a fine of US$15 million and (ii) maintain the Monitor for the aforementioned term.

 

The SEC has issued a Cease and Desist Order which does not identify any other events of noncompliance with the standards applicable in the United States.

 

The aforementioned amounts of approximately US$30.5 million were reflected in the profit or loss of SQM during the fourth quarter of 2016 in the line item Other expenses by function.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

203

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 24Sanction proceedings

 

On April 1, 2015, the SVS started an administrative proceeding against five Directors of the Company for allegedly not having provided to the market on a timely and truthful basis information which could be significant for making investment decisions. Such information mainly relates to the preliminary estimate of the impact on the Company’s financial statements of certain expenses paid by the Company between 2008 and 2014 and which might not qualify as expenses under current Chilean tax regulations because of the absence of supporting documentation.

 

On December 31, 2015, Sociedad Química y Minera de Chile S.A. informed the CMF that it had decided to penalize Patricio Contesse Fica, Julio Ponce Lerou, Juan Antonio Guzmán Molinari and Wolf von Appen Berhmann, all former directors of the Company, and Hernan Büchi Buc – a current director – for not having informed the market in a timely manner in March 2015 in the form of an essential event as directors of the Company at that time regarding the expenses SQM incurred during certain years for which the Company did not have sufficient supporting documentation or that could be considered expenses not necessary for producing income. This penalty, consisting of a fine of UF 1,000 for each person, can be appealed by the affected parties before the CMF or the courts of law.

 

On April 03, 2018, the National Directorate of the ‘Dirección Nacional del Servicio Nacional de Geología y Minería’ (National Geology and Mining Service) filed charges against SQM Industrial for the alleged violation of Article 40 letter c) of Law No, 20,551 that regulates the closure of mining works and facilities for Pampa Blanca, located in the district of Sierra Gorda. On April 26, 2018, SQM Industrial gave its deposition, According to current regulations, the National Geology and Mining Service can impose fines of up to 10 UTMs (monthly tax units) for each day of infringement, with a total maximum of 10,000 UTMs per month.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

204

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment

 

25.1Disclosures of disbursements related to the environment

 

The Company is continuously concerned with protecting the environment both in its production processes and with respect to products manufactured. This commitment is supported by the principles indicated in the Company’s Sustainable Development Policy. The Company is currently operating under an Environmental Management System (EMS) that has allowed it to strengthen its environmental performance through the effective application of the Company’s Sustainable Development Policy.

 

Operations that use caliche as a raw material are carried out in desert areas with climatic conditions that are favorable for drying solids and evaporating liquids using solar energy. Operations involving the open-pit extraction of minerals, due to their low waste-to-mineral ratio, generate remaining deposits that slightly alter the environment. A portion of the ore extracted is crushed, a process in which particle emissions occur, Currently this operation is conducted only at the Pedro de Valdivia worksite and no ore crushing process is conducted in the María Elena sector.

 

Many of the Company’s products are shipped in bulk at the Port of Tocopilla. In 2007, the city of Tocopilla was declared a zone saturated with MP10 Particles mainly due to the emissions from the electric power plants that operate in that city, In October 2010, the Decontamination Plan for Tocopilla was put in place. Accordingly, the Company has committed to taking several measures to mitigate the effects derived from bulk product movements in the port. These measures have been successfully implemented since 2007.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

205

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued

 

25.1Disclosures of disbursements related to the environment, continued

 

The Company carries out environmental follow-up and monitoring plans based on specialized scientific studies. Within this context, the Company entered into a contract with the National Forestry Corporation (CONAF) aimed at researching the activities of flamingo groups that live in the Salar de Atacama (Atacama Saltpeter Deposit) lagoons. Such research includes a population count of the birds, as well as breeding research. Environmental monitoring activities carried out by the Company at the Salar de Atacama and other systems in which it operates are supported by a number of studies that have integrated diverse scientific efforts from prestigious research centers, including Dictuc from the Pontificia Universidad Católica in Santiago and the School of Agricultural Science of the Universidad de Chile.

 

Furthermore, within the framework of the environmental studies which the Company is conducting, the Company performs significant activities in relation to the recording of Pre-Columbian and historical cultural heritage, as well as the protection of heritage sites, in accordance with current Chilean laws. These activities have been especially performed in the areas surrounding Maria Elena and the Nueva Victoria plant. This effort is being accompanied by cultural initiatives within the community and the organization of exhibits in local and regional museums.

 

As emphasized in its Sustainable Development Policy, the Company strives to maintain positive relationships with the communities surrounding the locations in which it carries out its operations, as well as to participate in communities’ development by supporting joint projects and activities which help to improve the quality of life for residents. For this purpose, the Company has focused its efforts on activities involving the rescue of historical heritage, education and culture, as well as development.

 

In order to do so, it acts both individually and in conjunction with private and public entities.

 

25.2Detail of information on disbursements related to the environment

 

The cumulative disbursements which the Company had incurred as of September 30, 2018 for the concept of investments in production processes, verification and control of compliance with ordinances and laws relative to industrial processes and facilities, including prior year disbursements related to these projects amounted to ThUS$13,308 and are detailed as follows:

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

206

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.2Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 9/30/2018

 

Parent Company or
Subsidiary
  Project Name  Reason for Disbursement  Asset / Expense  Description of
Asset or Expense
  Disbursement
ThUS$
   Exact or
Estimated Date
of Disbursement
Miscellaneous  Environment - Operating Area  Not classified  Expense  Not classified   5,953   9/30/2018
SQM S.A.  01-I005500 - Standardization of SO2 plants  Environmental processing  Assets  Not classified   27   9/30/2018
SQM S.A.  01-I007300 - Compliance with Iodine Gas Exposure Standard  Environmental processing  Assets  Not classified   58   9/30/2018
SQM S.A.  01-I013800 - Increase height of Absorber Tower  Sustainability: Environment and Risk Prevention  Asset  Not classified   120   9/30/2018
SQM S.A.  01-I017200 - CEDAM at Puquíos (ponds) at Llamara  Sustainability: Environment and Risk Prevention  Expense  Not classified   19   9/30/2018
SQM S.A.  01-I017400 - Development of Pintados and surrounding area.  Sustainability: Environment and Risk Prevention  Expense  Not classified   5   9/30/2018
SQM S.A.  01-I018300 - Cultural Heritage Baseline Environmental Impact Statement (EIS) Mina Oeste N.V.  Environmental processing  Asset  Not classified   117   9/30/2018
SQM S.A.  01-I018700 - Penalization Process for Salar de Llamara  Environmental processing  Asset  Not classified   969   9/30/2018
SQM S.A.  01-I019400 - EIA Expansion of TEA and Seawater Impulsion  Environmental processing  Asset  Not classified   1,101   9/30/2018
SQM Industrial S.A.  04-J007000 - Environmental Impact Statement  Environmental processing  Expense  Not classified   30   9/30/2018
SQM Industrial S.A.  04-J010200 - NK CS (KNO3-NaNO3 salt production at NPT2 plant)  Sustainability: Environment and Risk Prevention  Asset  Not classified   46   9/30/2018
SQM Industrial S.A.  04-I015600 - Recovery of Reject Water from Osmosis Plant, NV Iodine Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   86   9/30/2018
SQM Industrial S.A.  04-J012200 - Environmental Impact Statement and Regularization of CS Ponds  Environmental processing  Asset  Not classified   126   9/30/2018
SQM Industrial S.A.  04-M002000 - Recovery of Drinking Water María Elena  Sustainability: Environment and Risk Prevention  Asset  Not classified   67   9/30/2018

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

207

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.2Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 9/30/2018

 

Parent Company or
Subsidiary
  Project Name  Reason for Disbursement  Asset / Expense  Description of
Asset or Expense
  Disbursement
ThUS$
   Exact or
Estimated Date
of Disbursement
SIT S.A.  03-T003400 - 2016 Port maintenance Capex  Sustainability: Environment and Risk Prevention  Asset  Not classified   28   9/30/2018
SIT S.A.  03-T001900 - Storage Warehouse Cover  Sustainability: Environment and Risk Prevention  Asset  Not classified   25   9/30/2018
SIT S.A.  03-T001800 - Mechanization of Shipment from Ca  Sustainability: Environment and Risk Prevention  Asset  Not classified   50   9/30/2018
SIT S.A.  03-T003200 - Mechanization of Shipment from Ca  Sustainability: Environment and Risk Prevention  Asset  Not classified   153   9/30/2018
SIT S.A.  03-T003600 - Improved P bulk storage  Sustainability: Environment and Risk Prevention  Asset  Not classified   33   9/30/2018
SIT S.A.  03-T004200 - Encapsulation and Collectors Yards 8 and 9  Sustainability: Environment and Risk Prevention  Asset  Not classified   340   9/30/2018
SIT S.A.  03-T004500 - Belt 5 Extension and Overhaul  Environmental processing  Asset  Not classified   326   9/30/2018
SIT S.A.  03-T005000 - Ground leveling and paving of warehouse  Sustainability: Environment and Risk Prevention  Asset  Not classified   224   9/30/2018
SIT S.A.  03-T006400 - Pollution Control Equipment and Maintenance  Sustainability: Environment and Risk Prevention  Asset  Not classified   776   9/30/2018
SQM Salar S.A.  19-L014700 - Industrial Waste Management  Sustainability: Environment and Risk Prevention  Expense  Not classified   122   9/30/2018
SQM Salar S.A.  19-L014900 - Sludge Drying Project  Sustainability: Environment and Risk Prevention  Asset  Not classified   180   9/30/2018
SQM Salar S.A.  19-L012200 - Installation of flow meters per environmental standard  Sustainability: Environment and Risk Prevention  Asset  Not classified   94   9/30/2018
SQM Salar S.A.  19-C002300 - Extension of LIOH 7,000 TPA Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   2,097   9/30/2018
SQM Nitratos S.A  12-I012700 - Mine Site Workshop Water Recovery Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   137   9/30/2018
Total               13,309    

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

208

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.1Detail of information on disbursements related to the environment, continued

 

Future expenses as of 9/30/2018

 

Parent Company or 

Subsidiary

  Project Name  Reason for Disbursement  Asset / Expense 

Description of 

Asset or Expense

  Disbursement
ThUS$
   Exact or
Estimated Date
of Disbursement
Miscellaneous  Environment - Operating Area  Not classified  Expense  Not classified   3,567   12/31/2018
SQM S.A.  01-I005500 - Standardization of SO2 plants  Environmental processing  Asset  Not classified   10   12/31/2018
SQM S.A.  01-I007300 - Compliance with Iodine Gas Exposure Standard  Environmental processing  Asset  Not classified   90   12/31/2018
SQM S.A.  01-I012200 - Repair or replacement of well  Sustainability: Environment and Risk Prevention  Asset  Not classified   21   12/31/2018
SQM S.A.  01-I013800 - Increase height of Absorber Tower  Sustainability: Environment and Risk Prevention  Asset  Not classified   43   12/31/2018
SQM S.A.  01-I017200 - CEDAM at Puquíos (ponds) at Llamara  Sustainability: Environment and Risk Prevention  Expense  Not classified   41   12/31/2018
SQM S.A.  01-I017400 - Development of Pintados and surrounding area.  Sustainability: Environment and Risk Prevention  Expense  Not classified   3   12/1/2018
SQM S.A.  01-I018700 - Penalization Process for Salar de Llamara  Environmental processing  Asset  Not classified   531   1/1/2019
SQM S.A.  01-I019400 - EIA Expansion of TEA and Seawater Impulsion  Environmental processing  Asset  Not classified   19   1/2/2019
SQM Industrial S.A.  04-J007000 - Environmental Impact Statement  Environmental processing  Expense  Not classified   49   12/31/2018
SQM Nitratos S.A  12-I012700 - Mine Site Workshop Water Recovery Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   23   12/31/2018
SQM Industrial S.A.  04-I015600 - Recovery of Reject Water from Osmosis Plant, NV Iodine Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   44   12/31/2018
SQM Industrial S.A.  04-J012200 - Environmental Impact Statement and Regularization of CS Ponds  Environmental processing  Asset  Not classified   157   1/5/2019
SQM Industrial S.A.  04-M002000 - Recovery of Drinking Water María Elena  Sustainability: Environment and Risk Prevention  Asset  Not classified   333   1/6/2019
SQM Salar S.A.  19-L012100 – Regularization of weather station  Sustainability: Environment and Risk Prevention  Asset  Not classified   52   12/31/2018
SQM Salar S.A.  19-L012200 - Installation of flow meters per environmental standard  Sustainability: Environment and Risk Prevention  Asset  Not classified   17   5/31/2018
SQM Salar S.A.  19-C002300 - Extension of LIOH 7,000 TPA Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   400   12/31/2018
SQM Salar S.A.  19-L014700 - Industrial Waste Management  Sustainability: Environment and Risk Prevention  Expense  Not classified   100   12/31/2018
SQM Salar S.A.  19-L018000 - Regularize TT lighting  Sustainability: Environment and Risk Prevention  Asset  Not classified   80   1/9/2019

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

209

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.2Detail of information on disbursements related to the environment, continued

 

Future expenses as of 9/30/2018

 

Parent Company or
Subsidiary
  Project Name  Reason for Disbursement  Asset / Expense  Description of
Asset or Expense
  Disbursement
ThUS$
   Exact or
Estimated Date
of Disbursement
SIT S.A.  03-T003400 - 2016 Port maintenance Capex  Sustainability: Environment and Risk Prevention  Asset  Not classified   28   12/31/2018
SIT S.A.  03-T001900 - Storage Warehouse Cover  Sustainability: Environment and Risk Prevention  Asset  Not classified   25   12/31/2018
SIT S.A.  03-T001800 - Mechanization of Shipment from Ca  Sustainability: Environment and Risk Prevention  Asset  Not classified   50   12/31/2018
SIT S.A.  03-T003200 - Mechanization of Shipment from Ca  Sustainability: Environment and Risk Prevention  Asset  Not classified   230   12/31/2018
SIT S.A.  03-T003600 - Improved P bulk storage  Sustainability: Environment and Risk Prevention  Asset  Not classified   33   12/31/2016
SIT S.A.  03-T004200 - Encapsulation and Collectors Yards 8 and 9  Sustainability: Environment and Risk Prevention  Asset  Not classified   842   12/31/2018
SIT S.A.  03-T004500 - Belt 5 Extension and Overhaul  Environmental processing  Asset  Not classified   345   12/31/2018
SIT S.A.  03-T005000 - Ground leveling and paving of warehouse.  Sustainability: Environment and Risk Prevention  Asset  Not classified   224   12/31/2018
SIT S.A.  03-T006200 - Warehouses, yard 6  Sustainability: Environment and Risk Prevention  Asset  Not classified   100   1/7/2019
SIT S.A.  03-T006400 - Pollution Control Equipment and Maintenance  Sustainability: Environment and Risk Prevention  Asset  Not classified   279   1/8/2019
Total               7,736    

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

210

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.2Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2017

 

Parent Company or
Subsidiary
  Project Name  Reason for Disbursement  Asset / Expense  Description of
Asset or Expense
  Disbursement
ThUS$
   Exact or
Estimated Date
of Disbursement
Miscellaneous  Environment - Operating Area  Not classified  Expense  Not classified   9,552   12/31/2017
SQM Industrial S.A.  04-IQWZ00 - Normalization TK NV liquid fuels  Environmental processing  Asset  Not classified   37   4/1/2014
SQM Industrial S.A.  04-PPZU00 - Standardize and Certify Plant Fuel Tanks  Environmental processing  Asset  Not classified   48   7/1/2011
SQM Industrial S.A.  04-J007000 - Environmental Impact Statement  Environmental processing  Expense  Not classified   151   12/31/2017
SQM Industrial S.A.  04-P003600 - Opening of NPT IV Project (NK engineering studies)  Sustainability: Environment and Risk Prevention  Asset  Not classified   181   12/31/2017
SQM Industrial S.A.  04-I012400 - Acquisition of Power Generator to Back up the Injection System at Puquios in Salar de Llamara  Sustainability: Environment and Risk Prevention  Asset  Not classified   34   12/31/2016
SQM Industrial S.A.  04-J004300 - Energy efficiency study  Sustainability: Environment and Risk Prevention  Expense  Not classified   56   12/31/2017
SQM Industrial S.A.  04-J010200 - NK CS (KNO3-NaNO3 salt production at NPT2 plant)  Sustainability: Environment and Risk Prevention  Asset  Not classified   1   4/30/2019
SQM Industrial S.A.  04-I015600 - Recovery of Reject Water from Osmosis Plant, NV Iodine Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   12   12/31/2018
SQM S.A.  01-I005500 - Standardization of SO2 plants  Environmental processing  Asset  Not classified   81   12/31/2018
SQM S.A.  01-I007100 - Environmental Follow-up Plan for Pampa del Tamarugal for 2015-2016  Environmental processing  Expense  Not classified   2   1/31/2018
SQM S.A.  01-I007200 - Environmental Follow-up Plan for Salar de Llamara for 2015-2016  Sustainability: Environment and Risk Prevention  Expense  Not classified   2   1/31/2018
SQM S.A.  01-I013800 - Increase height of Absorber Tower  Sustainability: Environment and Risk Prevention  Asset  Not classified   62   12/31/2018
SQM S.A.  01-I007300 - Compliance with Iodine Gas Exposure Standard  Environmental processing  Asset  Not classified   961   12/31/2017

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

211

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.2Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2017, continued

 

Parent Company or
Subsidiary
  Project Name  Reason for Disbursement  Asset / Expense  Description of
Asset or Expense
  Disbursement
ThUS$
   Exact or
Estimated Date
of Disbursement
SQM S.A.  01-I012200 - Repair or replacement of well  Sustainability: Environment and Risk Prevention  Asset  Not classified   41   12/31/2018
SQM Salar S.A.  19-L008100 - EIS Salar 2015  Environmental processing  Expense  Not classified   488   12/31/2017
SQM Salar S.A.  19-L012200 - Installation of flow meters per environmental standard  Sustainability: Environment and Risk Prevention  Asset  Not classified   240   6/1/2018
SQM Salar S.A.  19-C002300 - Extension of LIOH 7,000 TPA Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   230   12/31/2018
SQM Salar S.A.  19-L012100 – Renovation of equipment with certification required for Environmental Assessment Resolution  Sustainability: Environment and Risk Prevention  Asset  Not classified   13   6/1/2018
SIT S.A.  03-T003400 - 2016 Port maintenance Capex  Sustainability: Environment and Risk Prevention  Asset  Not classified   42   3/31/2018
SIT S.A.  03-T001900 - Storage Warehouse Cover  Sustainability: Environment and Risk Prevention  Asset  Not classified   37   3/31/2018
SIT S.A.  03-T001800 - Mechanization of Shipment from Ca  Sustainability: Environment and Risk Prevention  Asset  Not classified   982   5/31/2018
SIT S.A.  03-T003200 - Mechanization of Shipment from Ca  Sustainability: Environment and Risk Prevention  Asset  Not classified   1,296   5/31/2018
SIT S.A.  03-T004200 - Encapsulation and Collectors Yards 8 and 9  Sustainability: Environment and Risk Prevention  Asset  Not classified   58   8/30/2018
SIT S.A.  03-T004500 - Belt 5 Extension and Overhaul  Environmental processing  Asset  Not classified   180   8/30/2018
Total               14,787    

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

212

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.2Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2017, continued

 

Parent Company or
Subsidiary
  Project Name  Reason for Disbursement  Asset / Expense  Description of
Asset or Expense
  Disbursement 
ThUS$
   Exact or
Estimated Date
of Disbursement
Miscellaneous  Environment - Operating Area  Not classified  Expense  Not classified   10,450   12/31/2018
SQM Industrial S.A.  04-J010200 - NK CS (KNO3-NaNO3 salt production at NPT2 plant)  Sustainability: Environment and Risk Prevention  Asset  Not classified   140   4/30/2019
SQM Industrial S.A.  04-I015600 - Recovery of Reject Water from Osmosis Plant, NV Iodine Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   130   12/31/2018
SQM S.A.  01-I005500 - Standardization of SO2 plants  Environmental processing  Asset  Not classified   37   12/31/2018
SQM S.A.  01-I012200 - Repair or replacement of well  Sustainability: Environment and Risk Prevention  Asset  Not classified   76   12/31/2018
SQM S.A.  01-I013800 - Increase height of Absorber Tower  Sustainability: Environment and Risk Prevention  Asset  Not classified   111   12/31/2018
SQM S.A.  01-I017200 - CEDAM at Puquíos (ponds) at Llamara  Sustainability: Environment and Risk Prevention  Expense  Not classified   260   12/31/2018
SQM S.A.  01-I017400 - Development of Pintados and surrounding area  Sustainability: Environment and Risk Prevention  Expense  Not classified   124   12/31/2018
SIT S.A.  03-T001900 - Storage Warehouse Cover  Sustainability: Environment and Risk Prevention  Asset  Not classified   10   3/31/2018
SIT S.A.  03-T001800 - Mechanization of Shipment from Ca  Sustainability: Environment and Risk Prevention  Asset  Not classified   103   5/31/2018
SIT S.A.  03-T003200 - Mechanization of Shipment from Ca  Sustainability: Environment and Risk Prevention  Asset  Not classified   254   5/31/2018
SIT S.A.  03-T004200 - Encapsulation and Collectors Yards 8 and 9  Sustainability: Environment and Risk Prevention  Asset  Not classified   854   8/30/2018
SIT S.A.  03-T004500 - Belt 5 Extension and Overhaul  Environmental processing  Asset  Not classified   336   8/30/2018
SIT S.A.  03-T005000 - Ground leveling and paving of warehouse  Sustainability: Environment and Risk Prevention  Asset  Not classified   210   9/30/2018
SQM Salar S.A.  19-L012100 – Renovation of equipment with certification required for Environmental Assessment Resolution  Sustainability: Environment and Risk Prevention  Asset  Not classified   52   6/1/2018

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

213

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.2Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2017, continued

 

Parent Company or
Subsidiary
  Project Name  Reason for Disbursement  Asset /
Expense
  Description of
Asset or
Expense
  Disbursement 
ThUS$
   Exact or
Estimated Date
of Disbursement
SQM Salar S.A.  19-L012200 - Installation of flow meters per environmental standard  Sustainability: Environment and Risk Prevention  Asset  Not classified   10   6/1/2018
SQM Salar S.A.  19-C002300 - Extension of LIOH 7,000 TPA Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   28   12/31/2018
SQM Nitratos S.A  12-I012700 - Mine Site Workshop Water Recovery Plant  Sustainability: Environment and Risk Prevention  Asset  Not classified   160   12/31/2018
Total               13,345    

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

214

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.3Description of each project, indicating whether these are in process or have been finished

 

SQM S.A.

 

I0055: In the SO2 plant, the gas/liquid ratio is deficient, preventing the absorption of SO2; producing a loss of free iodine through inadequate stripping of kerosene and prilling air. This also causes the ducts and furnaces to be blocked (unplanned shutdowns), a very polluted environment for people (aberration in health and hygiene), excessive acid rain (corrosion of facilities) and a high sulfur and sodium metabisulfite consumption factor. By changing the gas extractors to increase air flows and the SO2 absorption towers for prilling, the diameter of the ducts will be increased. This will ensure that the gas/liquid ratio is increased and sustained. In order to decrease SO2, emissions, a scrubber unit (tower, pump, gas extractor and piping) needs to be installed following the same concept as was developed at the ME Iodine SO2 plant.

 

I0073: The system for capturing iodine gases is operating very inefficiently. The iodine steam levels are between 150% and 4,900% above the levels allowed for jobs at iodine plants and warehouses as established in Article 61 of Supreme Decree No, 594/1999, approving Basic Sanitary and Environmental Conditions in Workplaces. This project is in progress.

 

I0122: The project consists of repairing and/or replacing the environmental follow-up wells that need to be deepened. It also includes implementing improvements in mine shaft type wells to avoid risk conditions. The priority wells are Nos. 8 and 10-S-1 in Pampa del Tamarugal and PO-5 in Salar de Llamara.

 

I0138: This project is to increase the height of each SO2 absorber tower (regular and stand-by towers) by 2,5 meters. The towers’ additional height will allow the height of the packing to be increased by 2,5, thereby improving the efficiency of the SO2 absorption. The main activities are: Basic and detailed engineering; supply of the bodies of the absorber towers (frp), liquid distributors, tower brine pump pad, tri-pack packing type, polyethylene pipes and fitting; gas measurement service; metallic structure manufacturing and installation services; and project start-up.

 

I0172: The commitments of the Pampa Hermosa project for the Salar de Llamara include the Tamarugos Environmental Management Plan (PMAT), which contemplates an Environmental Education Program that includes the design, construction and start-up of an Environmental Education Center (CEDAM) at Puquios de Llamara. Conceptual design, detailed design, construction and start-up are necessary for the CEDAM, which will be subject to approval by the authorities so its duration and costs are subject to the approval of third parties.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

215

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.3Description of each project, indicating whether these are in process or have been finished, continued

 

I0174: One of the commitments of the Pampa Hermosa project involves developing the former Pintados station. The development proposal was presented to the authorities and once approved, it needs to be implemented (parking, footpath, shader and information panels). One of the commitments for the Nueva Victoria and Pampa Hermosa mining area projects is to prepare a storage place in Humberstone for storing the archaeological materials that are recovered. This is part of the archaeological compensation measures involved in these projects. A proposal needs to be developed and subsequently developed for the Humberstone deposit, which is subject to approval by the authorities so its duration and costs are subject to the approval of third parties.

 

I0183: A heritage baseline will be taken for the eastern mine sector, required for the EIS

 

I0187: The project involves the implementation of measures that were committed to during the penalty process, including urgent and transitory measures. Actions to be implemented include monthly biotic monitoring, quarterly landscape monitoring, metagenomic analysis, study accrediting the nonexistence of environmental effects in puquios (aquatic biota) and study accrediting the implementation of adequate water quality control of water injected into the system, both accredited by a center for excellence in a state or state-recognized university.

 

I0194: Tender and awarding of environmental permits, implement archeology, biota, human environment campaigns, etc,, develop marine studies, prepare reports and enter study into the assessment system, monitor and respond to addenda until the system is approved. Prepare and submit claims to third parties associated with the request for rights of way.

 

SQM Industrial S.A.

 

I0156: The project will enable the recovery of reject water from the osmosis plant to be used in the leach pile area, increasing the efficiency of water use.

 

J0070: This project relates to the preparation and processing of an Environmental Impact Statement (EIS), with the purpose of obtaining the environmental authorization (RCA) for the yards. The information to be presented includes the air quality baseline, so a PM 2.5 and gas monitoring station has been installed to complement the existing stations at ME. This project is in progress.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

216

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.3Description of each project, indicating whether these are in process or have been finished, continued

 

J0102: It is proposed to build a new PTS plant that is integrated into the NPT 2 crystallization process. The engineering design of this plant considers the reuse of the equipment already acquired for the NK PV plant. The plant includes a new raw materials yard, a grinder stage (sizer), a wet mill, a dissolution stage with reactors and thickener and a filtration and centrifuge unit for discarded salt. The crystallization from the NPT1 and NPT2 plants will be reused, as well as the refining plant at the NPT2 plant.

 

J0122: The project consists of entering the Coya Sur wells into the environmental impact assessment system (SEIA) and processing the permits for these wells with the General Directorate of Water Resources (DGA).

 

P0036: The project consists of enabling the reuse of the crystallization plant and all of its facilities associated with the production of nitrate salts.

 

J0135: This project consists of dealing with all the oils and components that contain 50ppm or more of PCB by 2025 at the latest. The activities to be undertaken will be to deal with all those elements with oil that have previously been identified as having more than 50ppm of PCB.

 

M0020: The Project consists in concluding the system of sectors of the water supply, besides renewing several sections of the same source, due to the deterioration of the original pipes. In addition, it is intended to acquire equipment that will better deal with water flow in the town and problems in sewer chambers. Regarding the management of wastewater, it is necessary to install a mono-fill that allows realizing the final disposition of the sludge, in accordance with the current norm.

 

SIT S.A.

 

T0018: The project consists of the installation of an underground conveyor belt running outside of the storage boxes in yards Nos. 8 and 9, connected to belt 5 and subsequently to the shipment system. While this is an operating improvement, the project has an environmental component as the project involves the implementation and purchase of belt covers as an internal emissions control measure to improve compliance with the Tocopilla EDP. This project is in progress

 

T0019: This project consists of the installation of covers (ceiling and side cover) in the 4 new storage boxes, which will be built in the area of current yards Nos. 8 and 9. While this is an operating improvement, the project has an environmental component as the project involves the building of a warehouse as an emissions control measure to improve compliance with the Tocopilla EDP and reduce dust emissions. This project has been completed.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

217

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.3Description of each project, indicating whether these are in process or have been finished, continued

 

T0032: The project consists of the installation of an underground conveyor belt running outside of the storage boxes in Yard No. 6, with feeding points of access directly connected to belt 6 and subsequently to the shipment system. While this is an operating improvement, the project has an environmental component as it includes the implementation of conveyor belt No. 6 from Yard No. 6, which is an action to control emissions as per the commitments within the Tocopilla EDP. This project is at the start-up stage.

 

T0034: The project seeks to make all the investments associated with maintaining the port’s operating capacity, guaranteeing high equipment availability for shipment purposes. While this is an operating improvement, the project also has an environmental component. The project consists of the replenishment and/or replacement of the impaired wind barrier membranes in Yard No. 3, which is an action to control emissions, as committed to in the Tocopilla EDP. This project has been completed.

 

T0036: The project involves the installation of rainwater collection channels in the storage warehouses and engineering that studies the possibility of storing multiple products in a single silo and the possibility of installing vibrating floors that enable free runoff of the product, thereby preventing the risks of manual operation and the effect that this provokes in shipments.

 

T0042: In order to comply with Article 13 of Supreme Decree No. 70/2010 Tocopilla EDP must incorporate dust collectors on the TV-1 and TV-2 hoppers in yard Nos.8 and 9.

 

T0045: The conveyor belts in yard numbers 8 and 9 will be completed by being connected to conveyor belt no. 5 and thus forming part of the shipment system. This involves the extension, connection and overhaul of conveyor belt no. 5, together with the connection to pan feeder 3 and the corresponding improvements to become an integral part of the shipment system. This will be done in compliance with the environmental regulations established in the Tocopilla Decontamination Plan. Atmospheric Decontamination Plan for the City of Tocopilla and surrounding area Supreme Decree No. 70/2010, Art.13 II.3.

 

T0050: The loose earth soil around the storage warehouse in yard 17 is uneven, which creates operational difficulties and poses a risk both for the warehouse and operationally. The area of land to be paved measures 2100 m2. A hazardous waste patio is also to be built.

 

T0062: A 35 x 110 m hangar will be installed on yard 6 to stockpile bulk product that also permits loading and unloading from trucks and front loaders as well as proper stacking. The warehouse in yard 6 will be expanded into boxes 5 and 6 in order to stockpile bulk product.

 

T0064: Purchase of Sentinal sweeper - Purchase critical operating equipment.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

218

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 25Environment (continued)

 

25.3Description of each project, indicating whether these are in process or have been finished, continued

 

SQM Salar.

 

L0122: The project considers the change in flow meters to the new standard in addition to adding standby flow meters. This project is in progress.

 

C0023: A new plant extension is to be built with the capacity for 7,000 TPA of product. This project is in progress.

 

L0121: Change of the weather station equipment to comply with the standard.

 

L0147: This project involves the elimination of these unauthorized industrial waste storage points. This work will be undertaken by an external company that separates, organizes and packages different types of industrial waste according to the environmental authorization and legislation in force. The waste can then be removed from the same points for final disposal off site.

 

L0180: Normalization of lighting and electrical circuits at ground transportation facilities in Salar Atacama.

 

L0149: This project includes building a dehydrating plant at SQM Salar's current facilities to be used for treatment, storage, transport and final disposal of sludge generated by the different sewage treatment plants and providing the solutions necessary to comply with DS No. 04/09, Regulation for Managing Sludge at Sewage Treatment Plants.

 

SQM Nitratos S.A.

 

I0127: By installing a reverse osmosis system or a process that enables the recovery of industrial water and that reduces the hardness of the water for cleaning the equipment, we can reuse this water to wash equipment again, thereby reducing the damage to the electrical systems of the equipment as a result of corrosion.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

219

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 26Mineral resource exploration and evaluation expenditure

 

Because of the nature of the operations of Sociedad Química y Minera de Chile S.A. and its subsidiaries and the type of exploration they conduct (which is different from other mining businesses, where the exploration process takes a significant amount of time), the exploration process and the definition of economic feasibility normally occur within the year, Accordingly, although expenditure is initially capitalized, it could be recognized in profit or loss for the same year should it not be technically and commercially feasible, This means that there is no significant expenditure that lacks a feasibility study at the end of the year.

 

Prospecting expenditure can be found in 4 different stages: execution, economically feasible, not economically feasible and under exploitation:

 

1.         Execution: prospecting expenditures that are under execution and where the economic feasibility is not yet known are classified in the caption property, plant and equipment, As of September 30, 2018 and December 31, 2017, the balance amounted to ThUS$18,470 and ThUS$ 21,013, respectively.

 

2.         Economically feasible: prospecting expenditure, which upon completion, has been determined to be economically feasible is classified in the caption non-current assets in other non-current non-financial assets, As of September 30, 2018 and December 31, 2017, this totaled ThUS$24,396 and ThUS$ 17,721 respectively.

 

3.         Not economically feasible: Prospecting disbursements, which were concluded not to be economically feasible once finalized, are applied to the results, As of September 30, 2018, the amount is ThUS$142 and as of December 31, 2017, there are no disbursements for this concept.

 

4.         Under exploitation: Prospecting expenditure under exploitation is classified in the caption current assets in current inventories, These are amortized considering the exploited material. As of September 30, 2018 and December 31, 2017, the balance amounted to ThUS$790 and ThUS$ 521 respectively.

 

For the amount of capitalized expenditure, the total amount disbursed in exploration and evaluation of mineral resources as of September 30, 2018 was ThUS$6,637, and corresponded to non-metallic projects, Such expenditure mainly corresponds to research, including topographical, geological, exploratory drilling and sampling studies.

 

With respect to this expenditure, the Company classifies it in accordance with paragraph 9 IFRS 6.

 

Exploration expenditure where the mineral has low ore grade that is not economically exploitable is debited directly to profit or loss.

 

If studies determine that the ore grade is economically exploitable, it is classified in other non-current assets in the caption ground studies and prospecting expenses. At the time of making the decision to exploit the zone, it is classified in the caption inventories as part of the cost of raw materials required for production purposes.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

220

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 27Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature

 

27.1Revenue from customer activities

 

The group obtains revenue from transferring goods and services throughout time and at a point in time, detailed by geographic areas and main product line:

 

a)Geographic areas:

 

   09/30/2018 
Geographic
areas
  Specialty
plant
nutrition
   Iodine and
derivatives
   Lithium and
derivatives
   Potassium   Industrial
chemicals
   Other   Total
ThUS$
 
Chile   75,043    735    600    14,994    3,401    32,183    126,956 
Latin America and the Caribbean   61,027    4,984    3,100    73,172    9,776    137    152,196 
Europe   164,977    80,957    71,805    36,486    14,452    340    369,017 
North America   189,505    62,070    46,504    41,684    21,041    583    361,387 
Asia and Others   116,797    94,365    378,929    53,480    45,907    1,542    691,020 
Total   607,349    243,111    500,938    219,816    94,577    34,785    1,700,576 

 

   09/30/2017 
Geographic
areas
  Specialty
plant
nutrition
   Iodine and
derivatives
   Lithium and
derivatives
   Potassium   Industrial
chemicals
   Other   Total
ThUS$
 
Chile   57,657    847    699    14,767    1,712    30,734    106,416 
Latin America and the Caribbean   58,450    4,609    2,195    120,646    6,544    131    192,575 
Europe   132,552    59,624    61,568    57,962    11,377    286    323,369 
North America   180,303    52,616    32,231    55,752    19,431    478    340,811 
Asia and Others   82,425    73,632    368,508    51,834    41,882    1,097    619,378 
Total   511,387    191,328    465,201    300,961    80,946    32,726    1,582,549 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

221

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Nota 27Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature

 

27.1Revenue from customer activities, continued

 

b) Main product lines:

 

   January to September 
   2018   2017 
Products and Services  ThUS$   ThUS$ 
Specialty plant nutrition   607,349    511,387 
Sodium Nitrates   15,912    13,630 
Potassium nitrate and sodium potassium nitrate   417,273    350,431 
Specialty Blends   106,561    87,239 
Other specialty fertilizers   67,603    60,087 
Iodine and derivatives   243,111    191,328 
Lithium and derivatives   500,938    465,201 
Potassium   219,816    300,961 
Industrial chemicals   94,577    80,946 
Other   34,785    32,726 
Total   1,700,576    1,582,549 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

222

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Nota 27Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature

 

27.1Revenue from customer activities, continued

 

27.2Cost of sales

 

   9/30/2018   9/30/2017 
   ThUS$   ThUS$ 
Raw materials and consumables used   (190,243)   (167,530)
Classes of employee benefit expenses   (149,282)   (120,213)
Depreciation expense   (164,837)   (179,511)
Amortization expense   (6,646)   (6,758)
Operating leases   (56,472)   (56,137)
Investment plan expenses   (9,883)   (8,035)
Contractors   (59,518)   (54,181)
Mining concessions   (6,080)   (6,003)
Operations transport   (48,717)   (50,145)
Freight and product transport costs   (35,272)   (40,629)
Purchase of products from third parties   (184,928)   (149,214)
Insurance   (7,233)   (7,563)
CORFO rights   (119,310)   (34,226)
Export costs   (69,398)   (62,233)
Variation in inventory   9,866    (76,686)
Other expenses, by nature   (21,877)   (17,098)
Total   (1,119,830)   (1,036,162)

 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

223

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 27Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

27.3Other income

 

   9/30/2018   9/30/2017 
   ThUS$   ThUS$ 
Discounts obtained from suppliers   530    252 
Fines charged to suppliers   525    115 
Taxes recovered   536    687 
Amounts recovered from insurance   519    154 
Overestimate of provisions for third-party obligations   69    566 
Sale of materials, spare parts and supplies   86    275 
Other operating income   1,056    896 
Options on mining claims   4,080    1,343 
Easements, pipelines and roads   2,306    4,656 
Reimbursement mining licenses and notary expenses   377    891 
Shares obtained in junior mining companies through options   -    2,263 
Total   10,084    12,098 

 

27.4Administrative expenses

 

   9/30/2018   9/30/2017 
   ThUS$   ThUS$ 
Employee benefit expenses by nature          
Remuneration and benefits to employees   (44,098)   (36,907)
Marketing costs   (2,089)   (1,969)
Amortization expenses   (10)   (6)
Entertainment expenses   (2,929)   (3,158)
Advisory services   (9,642)   (10,938)
Rent buildings and facilities   (3,620)   (2,966)
Insurance   (1,328)   (1,353)
Office expenses   (6,342)   (4,116)
Contractors   (4,193)   (3,375)
Other expenses, by nature   (9,311)   (7,817)
Total   (83,562)   (72,605)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

224

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 27Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

27.5Other expenses by function

 

   9/30/2018   9/30/2017 
   ThUS$   ThUS$ 
Classes of Employee Benefit Expenses          
Depreciation and amortization expense          
Depreciation of assets not in use   (51)   (67)
Subtotal   (51)   (67)
Impairment losses (reversals of impairment losses) recognized in profit (loss) for the year          
Impairment of doubtful accounts   (928)   (4,469)
Subtotal   (928)   (4,469)
Other expenses, by nature          
Legal expenses   (10,494)   (6,546)
VAT and other unrecoverable taxes   (836)   (1,046)
Fines paid   (286)   (1,055)
Investment plan expenses   (9,049)   (4,284)
Donations not accepted as tax credit   (3,176)   (1,676)
Other operating expenses   (3,297)   (7,729)
Subtotal   (27,138)   (22,336)
Total   (28,117)   (26,872)

 

27.6Other income (expenses)

 

   9/30/2018   9/30/2017 
   ThUS$   ThUS$ 
Adjust previous year application method of participation   (2,928)   (941)
Termination expenses   -    192 
Others   2,216    (119)
Total   (712)   (868)

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

225
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 27Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

This table corresponds to the summary required by the CMF and considers notes 27.2, 27.4 and 27.5.

 

27.7Summary of expenses by nature

 

   January to September   July to September 
   2018   2017   2018   2017 
   ThUS$   ThUS$   ThUS$   ThUS$ 
                 
Raw materials and consumables   (190,243)   (167,530)   (64,223)   (56,454)
Classes of Employee Benefit Expenses                    
Personnel expenses   (193,380)   (157,120)   (67,869)   (57,088)
Depreciation and amortization expense                    
Depreciation expense   (164,888)   (179,578)   (52,286)   (58,781)
Amortization expense   (6,656)   (6,764)   (4,179)   (4,454)
Impairment of uncollectible debts   (928)   (4,469)   (40)   (1,772)
Operating leases   (60,092)   (59,103)   (17,432)   (17,451)
Fines paid   (10,494)   (6,546)   (4,921)   (1,254)
Investment plan expenses   (18,932)   (12,319)   (4,178)   (7,928)
Contractors   (65,039)   (58,909)   (23,110)   (17,222)
Mining concessions   (6,080)   (6,003)   (2,036)   (2,067)
Operation transport   (48,717)   (50,145)   (16,939)   (18,052)
Freight and product transport costs   (35,272)   (40,629)   (5,664)   (11,902)
Purchase of products from third parties   (184,928)   (149,214)   (70,978)   (60,169)
Insurance   (13,575)   (11,679)   (5,720)   (3,250)
CORFO rights   (119,310)   (34,226)   (51,460)   (12,614)
Export costs   (69,398)   (62,233)   (22,226)   (21,534)
Advisory services   (2,929)   (3,158)   (830)   (1,148)
Marketing costs   (9,642)   (10,938)   (3,080)   (5,049)
Variation in inventory   9,866    (76,686)   6,173    (35,471)
Other expenses, by nature   (40,872)   (38,390)   (6,578)   (16,481)
Other expenses by nature   (1,231,509)   (1,135,639)   (417,576)   (410,141)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

226
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 27Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

27.8Finance expenses

 

   January to September 
   2018   2017 
   THUS$   THUS$ 
Interest expense from bank borrowings and overdrafts   (1,274)   (1,240)
Interest expense from bonds   (40,956)   (37,363)
Interest expense from loans   (2,367)   (1,508)
Capitalized interest expenses   3,766    3,259 
Other finance costs   (1,252)   (959)
Total   (42,083)   (37,811)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

227
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 28Reportable segments

 

28.1Reportable segments

 

General information:

 

The amount of each item presented in each operating segment is equal to that reported to the maximum authority that makes decisions regarding the operation, in order to decide on the allocation of resources to the defined segments and to assess its performance.

 

These operating segments mentioned are consistent with the way the Company is managed and how results will be reported by the Company. These segments reflect separate operating results that are regularly reviewed by the person responsible for operational decisions in order to make decisions about the resources to be allocated to the segment and assess its performance (See Note 25.2).

 

The performance of each segment is measured based on net income and revenues. Sales between segments are conducted using terms and conditions at current market rates.

 

Factors used to identify segments on which a report should be presented:

 

The segments covered in the report are strategic business units that offer different products and services. These are managed separately because each business requires different technology and marketing strategies.

 

Description of the types of products and services from which each reportable segment obtains its income from ordinary activities

 

The operating segments, which obtain income from ordinary activities, generate expenses and whose operating results are reviewed on a regular basis by the maximum authority who makes decisions regarding operations, relate to the following groups of products:

 

1.Specialty plant nutrients
2.Iodine and its derivatives
3.Lithium and its derivatives
4.Industrial chemicals
5.Potassium
6.Other products and services

 

Description of income sources for all the other segments

 

Information regarding assets, liabilities, profits and expenses that cannot be assigned to the segments indicated above, due to the nature of production processes, is included under the "Unassigned amounts” category of the disclosed information.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

228
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

 

 

Note 28 Reportable segments (continued)

 

28.1Reportable segments, continued

 

Basis of accounting for transactions between reportable segments

 

Sales between segments are made under the same conditions as those made to third parties, and how they are presented in the income statement is constantly monitored.

 

Description of the nature of the differences between measurements of results of reportable segments and the result of the entity before the expense or income tax expense of incomes and discontinued operations,

 

The information reported in the segments is extracted from the Company’s consolidated financial statements and therefore there is no need to prepare reconciliations between the data mentioned above and those reported in the respective segments, according to what is stated in paragraph 28 of IFRS 8, "Operating Segments".

 

For the process of cost allocation in inventory valuation, we identify the direct costs (can be assigned directly to a product) and the common costs (belong to processes of co-production, for example costs of common leaching for the production of iodine and nitrates). The direct costs are directly associated with the product and the common costs are allocated using percentages of sales, prices and inventory rotation.

 

The allocation of other common costs that are not included in the inventory valuation process, but go straight to the cost of sales, use similar criteria: the costs associated with a product or sales in particular are assigned to that particular product or sales, and the common costs associated with different products or business lines are allocated according to the sales.

 

Description of the nature of the differences between measurements of assets of reportable segments and the Company´s assets

 

Assets are not shown classified by segments, as this information is not readily available. Some of these assets are not separable by the type of activity by which they are affected since this information is not used by management in decision-making with respect to resources to be allocated to each defined segment. All assets are disclosed in the "unallocated amounts" category.

 

Description of the nature of the differences between measurements of liabilities of reportable segments and the Company’s liabilities

 

Liabilities are not shown classified by segments, as this information is not readily available. Some of these liabilities are not separable by the type of activity by which they are affected, since this information is not used by management in decision-making regarding resources to be allocated to each defined segment. All liabilities are disclosed in the "unallocated amounts" category.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

229
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 28 Reportable segments (continued)

 

28.2Reportable segment disclosures:

 

   Specialty
plant
nutrients
   Iodine and its
derivatives
   Lithium and
its derivatives
   Industrial
chemicals
   Potassium   Other
products
and
services
   Reportable
segments
   Operating
segments
   Unallocated
amounts
  

Total

9/30/2018

 
Operating segment items  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                         
Revenue   607,349    243,111    500,938    94,577    219,816    34,785    1,700,576    1,700,576    -    1,700,576 
Revenues from transactions with other operating segments of the same entity   -    -    -    -    -    -    -    -    -    - 
                                                   
Revenues from external customers and transactions with other operating segments of the same entity   607,349    243,111    500,938    94,577    219,816    34,785    1,700,576    1,700,576    -    1,700,576 
                                                   
Costs of sales   (478,989)   (164,781)   (187,775)   (66,106)   (190,651)   (31,528)   (1,119,830)   (1,119,830)   -    (1,119,830)
Administrative expenses   -    -    -    -    -    -    -    -    (83,562)   (83,562)
Interest expense   -    -    -    -    -    -    -    -    (42,083)   (42,093)
Depreciation and amortization expense   (61,698)   (34,163)   (14,167)   (13,215)   (48,006)   (295)   (171,544)   (171,544)   -    (171,544)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    -    -    14.705    14,705 
Income tax expense, continuing operations   -    -    -    -    -    -    -    -    (126,232)   (126,232)
Other items other than significant cash                                                  
Income (loss) before taxes   128,360    78,330    313,162    28,471    29,165    3,258    580,746    580,746    (122,605)   458,141 
                                                   
Net income (loss) from continuing operations   128,360    78,330    313,162    28,471    29,165    3,258    580,746    580,746    (248,837)   331,909 
Net income (loss) from discontinued operations                                                  
Net income (loss)   128,360    78,330    313,162    28,471    29,165    3,258    580,746    580,746    (248,837)   331,909 
                                                   
Assets   -    -    -    -    -    -    -    -    4,124,423    4,124,423 
Equity-accounted investees   -    -    -    -    -    -    -    -    114,081    114,081 
Incorporation of non-current assets other than financial instruments, deferred tax assets, net defined benefit assets and rights arising from insurance contracts                                           (43,074)   (43,074)
Increase of non-current assets   -    -    -    -    -    -    -    -           
Liabilities   -    -    -    -    -    -    -    -    1,986,315    1,986,315 
Impairment loss recognized in profit or loss   (2,836)   (1,150)   1,075    (620)   (6,070)   13    (9,588)   (9,588)   2,395    7,193 
Reversal of impairment losses recognized in profit or loss for the period   -    -    -    -    -    -    -    -    -    - 
Cash flows from (used in) operating activities   -    -    -    -    -    -    -    -    412,947    412,947 
Cash flows from (used in) investing activities   -    -    -    -    -    -    -    -    (176,130)   (176,130)
Cash flows from (used in) financing activities   -    -    -    -    -    -    -    -    (425,297)   (425,297)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

230
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 28 Reportable segments (continued)

 

28.2Reportable segment disclosures, continued

 

   Specialty
plant
nutrients
   Iodine and its
derivatives
   Lithium and
its derivatives
   Industrial
chemicals
   Potassium   Other
products
and
services
   Reportable
segments
   Operating
segments
   Unallocated
amounts
  

Total

9/30/2017

 
Operating segment items  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                         
Revenue   511,387    191,328    465,201    80,946    300,961    32,726    1,582,549    1,582,549    -    1,582,549 
Revenues from transactions with other operating segments of the same entity   -    -    -    -    -    -    -    -    -    - 
                                                   
Revenues from external customers and transactions with other operating segments of the same entity   511,387    191,328    465,201    80,946    300,961    32,726    1,582,549    1,582,549    -    1,582,549 
                                                   
Costs of sales   (415,849)   (153,366)   (131,949)   (55,293)   (249,936)   (29,769)   (1,036,162)   (1,036,162)   -    (1,036,162)
Administrative expenses   -    -    -    -    -    -    -    -    (72,605)   (72,605)
Interest expense   -    -    -    -    -    -    -    -    (37,811)   (37,811)
Depreciation and amortization expense   (58,128)   (33,739)   (15,773)   (12,370)   (65,927)   (405)   (186,342)   (186,342)   -    (186,342)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    -    -    10,566    10,566 
Income tax expense, continuing operations   -    -    -    -    -    -    -    -    (123,376)   (123,376)
Other items other than significant cash                                                  
Income (loss) before taxes   95.539    37.962    333.252    25.252    25.653    51.025    2.957    546.387    (106,081)   (440,306)
                                                   
Net income (loss) from continuing operations   95.539    37.962    333.252    25.252    25.653    51.025    2.957    546.387    (229,457)   (316,930)
Net income (loss) from discontinued operations                                                  
Net income (loss)   95.539    37.962    333.252    25.252    25.653    51.025    2.957    546.387    (229,457)   (316,930)
                                                   
Assets   -    -    -    -    -    -    -    -    4,144,828    4,144,828 
Equity-accounted investees   -    -    -    -    -    -    -    -    146,425    146,425 
Incorporation of non-current assets other than financial instruments, deferred tax assets, net defined benefit assets and rights arising from insurance contracts                                           (91,487)   (91,487)
Increase of non-current assets   -    -    -    -    -    -    -    -    -    - 
Liabilities   -    -    -    -    -    -    -    -    1,893,332    1,893,332 
Impairment loss recognized in profit or loss   (4,424)   (6,287)   874    (976)   164    (258)   (10,907)   (10,907)   (4,936)   (15,843)
Reversal of impairment losses recognized in profit or loss for the period   -    -    -    -    -    -    -    -    -    - 
Cash flows from (used in) operating activities   -    -    -    -    -    -    -    -    515,379    515,379 
Cash flows from (used in) investing activities   -    -    -    -    -    -    -    -    (182,196)   (182,196)
Cash flows from (used in) financing activities   -    -    -    -    -    -    -    -    (327,278)   (327,278)

  

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

231
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 28 Reportable segments (continued)

 

28.3Statement of comprehensive income classified by reportable segments based on groups of products

 

   9/30/2018 
Items in the statement of comprehensive income 

Specialty plant
nutrients

ThUS$

  

Iodine and its
derivatives

ThUS$

  

Lithium and its
derivatives

ThUS$

  

Industrial
chemicals

ThUS$

  

Potassium

ThUS$

  

Other products
and services

ThUS$

   Corporate Unit
ThUS$
  

Total segments and
Corporate unit

ThUS$

 
                                 
Revenue   607,349    243,111    500,938    94,577    219,816    34,785    -    1,700,576 
Cost of sales   (478,989)   (164,781)   (187,775)   (66,106)   (190,651)   (31,528)   -    (1,119,830)
                                         
Gross profit   128,360    78,330    313,163    28,471    29,165    3,257    -    580,746 
                                         
Other incomes by function   -    -    -    -    -    -    10.084    10.084 
Administrative expenses   -    -    -    -    -    -    (83,562)   (83,562)
Other expenses by function   -    -    -    -    -    -    (28,117)   (28,117)
Other gains (losses)   -    -    -    -    -    -    (712)   (712)
Financial income   -    -    -    -    -    -    16,518    16,518 
Financial costs   -    -    -    -    -    -    (42,083)   (42,083)
interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    14,705    14,705 
Exchange differences   -    -    -    -    -    -    (9,438)   (9,438)
Profit (loss) before taxes   128,360    78,330    313,163    28,471    29,165    3,257    (122,605)   458,141 
Income tax expense   -    -    -    -    -    -    (126,232)   (126,232)
Profit (loss) from continuing operations   128,360    78,330    313,163    28,471    29,165    3,257    (248,837)   331,909 
Profit (loss) from discontinued operations   -    -    -    -    -    -    -    - 
Profit (loss)   128,360    78,330    313,163    28,471    29,165    3,257    (248,837)   331,909 
Profit (loss), attributable to                                        
Profit (loss) attributable to the controller´s owners   -    -    -    -    -    -    -    331,198 
Profit (loss) attributable to the non-controllers   -    -    -    -    -    -    -    711 
Profit (loss)   -    -    -    -    -    -    -    331,909 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

232
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 28 Reportable segments (continued)

 

28.3Statement of comprehensive income classified by reportable segments based on groups of products, continued

 

   9/30/2017 
Items in the statement of comprehensive income 

Specialty plant
nutrients

ThUS$

  

Iodine and its
derivatives

ThUS$

  

Lithium and its
derivatives

ThUS$

  

Industrial
chemicals

ThUS$

  

Potassium

ThUS$

  

Other products
and services

ThUS$

   Corporate Unit
ThUS$
  

Total segments and
Corporate unit

ThUS$

 
Revenue   511,387    191,328    465,201    80,946    300,961    32,726    -    1,582,549 
Cost of sales   (415,849)   (153,366)   (131,949)   (55,293)   (249,936)   (29,769)   -    (1,036,162)
Gross profit   95,538    37,962    333,252    25,653    51,025    2,957    -    546,387 
Other incomes by function   -    -    -    -    -    -    12,098    12,098 
Administrative expenses   -    -    -    -    -    -    (72,605)   (72,605)
Other expenses by function   -    -    -    -    -    -    (26,872)   (26,872)
Other gains (losses)   -    -    -    -    -    -    (868)   (868)
Financial income   -    -    -    -    -    -    8,809    8,809 
Financial costs   -    -    -    -    -    -    (37,811)   (37,811)
interest in the profit or loss of associates and joint ventures accounted for by the equity method   -    -    -    -    -    -    10,566    10,566 
Exchange differences   -    -    -    -    -    -    602    602 
Profit (loss) before taxes   95,538    37,962    333,252    25,653    51,025    2,957    (106,081)   440,306 
Income tax expense   -    -    -    -    -    -    (123,376)   (123,376)
Profit (loss) from continuing operations   95,538    37,962    333,252    25,653    51,025    2,957    (229,457)   316,930 
Profit (loss) from discontinued operations   -    -    -    -    -    -    -    - 
Profit (loss)   95,538    37,962    333,252    25,653    51,025    2,957    (229,457)   316,930 
Profit (loss), attributable to                                        
Profit (loss) attributable to the controller´s owners   -    -    -    -    -    -    -    316,930 
Profit (loss) attributable to the non-controllers   -    -    -    -    -    -    -    313 
Profit (loss)   -    -    -    -    -    -    -    317,243 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

233
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 28 Reportable segments (continued)

 

28.4Revenue from transactions with other Company’s operating segments

 

9/30/2018
Items in the statement of
comprehensive income
 

Specialty plant
nutrients

ThUS$

  

Iodine and its
derivatives

ThUS$

  

Lithium and
its derivatives

ThUS$

  

Industrial
chemicals

ThUS$

  

Potassium

ThUS$

  

Other
products
and services

ThUS$

  

Total segments
and Corporate
unit

ThUS$

 
                                    
Revenue   607,349    243,111    500,938    94,577    219,816    34,785    1,700,576 

 

9/30/2017
Items in the statement of
comprehensive income
 

Specialty plant
nutrients

ThUS$

  

Iodine and its
derivatives

ThUS$

  

Lithium and
its derivatives

ThUS$

  

Industrial
chemicals

ThUS$

  

Potassium

ThUS$

  

Other
products
and services

ThUS$

  

Total segments
and Corporate
unit

ThUS$

 
                                    
Revenue   511,387    191,328    465,201    80,946    300,961    32,726    1,582,549 

 

28.5Disclosures on geographical areas

 

As indicated in paragraph 33 of IFRS 8, the entity discloses geographical information on its revenue from operating activities with external customers and from non-current assets that are not financial instruments, deferred income tax assets, assets related to post-employment benefits or rights derived from insurance contracts.

 

28.6Disclosures on main customers

 

With respect to the degree of dependency of the Company on its customers, in accordance with paragraph N° 34 of IFRS N° 8, the Company has no external customers who individually represent 10% or more of its revenue. Credit risk concentrations with respect to trade and other accounts receivable are limited due to the significant number of entities in the Company’s portfolio and its worldwide distribution.

 

The Company’s policy requires guarantees (such as letters of credit, guarantee clauses and others) and/or to maintain insurance policies for certain accounts as deemed necessary by the Company's Management.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

234
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 28 Reportable segments (continued)

 

28.7Segments by geographical areas as of September 30, 2018 and 2017

 

   9/30/2018 
Items 

CHILE

ThUS$

  

Latin America and
the Caribbean

ThUS$

  

Europe

ThUS$

   North America
ThUS$
   Asia and others
ThUS$
  

Total

ThUS$

 
Revenue   126,956    152,196    369,017    361,387    691,020    1,700,576 
Investment accounted for under the equity method   (5,346)   -    39,383    16,444    63,600    114,081 
Intangible assets other than goodwill   111,286    -    419    158    16,289    128,152 
Goodwill   23,299    -    11,459    -    -    34,758 
Property, plant and equipment, net   1.424,036    340    4,022    3,157    1,631    1,433,186 
Investment property   -    -    -    -    -    - 
Other non-current assets   17,244    22    -    -    8,546    25,812 
Non-current assets that are not financial instruments   1,570,519    362    55,283    19,759    90,066    1,735,989 

 

   9/30/2017 
Items 

CHILE

ThUS$

  

Latin America and
the Caribbean

ThUS$

  

Europe

ThUS$

   North America
ThUS$
   Asia and others
ThUS$
  

Total

ThUS$

 
Revenue   106,416    192,575    323,369    340,811    619,378    1,582,549 
Investment accounted for under the equity method   (6,324)   15,368    33,603    14,689    74,042    131,378 
Intangible assets other than goodwill   107,492    -    484    190    -    108,166 
Goodwill   23,732    6.290    11,373    724    2,058    44,177 
Property, plant and equipment, net   1,427,133    217    3.511    2,534    1,639    1,435,034 
Investment property   -    -    -    -    -    - 
Other non-current assets   27,682    28    -    -    -    27,710 
Non-current assets that are not financial instruments   1,579,715    21,903    48,971    18,137    77,739    1,746,465 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

235
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 28 Reportable segments (continued)

 

28.8Property, plant and equipment classified by geographical areas

 

The company's main production facilities are located near their mines and extraction facilities in northern Chile. The following table presents the main production facilities as of September 30, 2018 and December 31, 2017:

 

    Location       Products
             
-   Pedro de Valdivia   :   Production of iodine and nitrate salts
-   María Elena   :   Production of iodine and nitrate salts
-   Coya Sur   :   Production of nitrate salts
-   Nueva Victoria   :   Production of iodine and nitrate salts
-   Salar de Atacama   :   Potassium chloride, lithium chloride, boric acid and potassium sulfate
-   Salar del Carmen   :   Production of lithium carbonate and lithium hydroxide
-   Tocopilla   :   Port facilities

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

236
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 29 Borrowing costs

 

The cost of interest is recognized as an expense in the year in which it is incurred, except for interest that is directly related to the acquisition and construction of tangible property, plant and equipment assets and that complies with the requirements of IAS 23. As of September 30, 2018, total interest expenses incurred amount to ThUS$42,083 (ThUS$37,811 as of September 30, 2017).

 

The Company capitalizes all interest costs directly related to the construction or to the acquisition of property, plant and equipment, which require a substantial time to be suitable for use.

 

29.1Costs of capitalized interest, property, plant and equipment

 

The cost of capitalized interest is determined by applying the average or weighted average of all financing costs incurred by the Company to the monthly end balances of works-in-progress meeting the requirements of IAS 23.

 

The rates and costs for capitalized interest of property, plant and equipment are detailed as follows:

 

   9/30/2018   9/30/2017 
         
Capitalization rate of costs for capitalized interest, property, plant and equipment    4%   4%
           
Amount of costs for interest capitalized in ThUS$    3,766    3,259 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

237
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 30 Effect of fluctuations in foreign currency exchange rates

 

a)Foreign currency exchange differences recognized in profit or loss except for financial instruments measured at fair value through profit or loss:

 

  

9/30/2018

ThUS$

  

9/30/2017

ThUS$

 
         
Conversion foreign exchange gains (losses) recognized in the result of the year.   (9,438)   602 
           
Conversion foreign exchange reserves attributable to the owners of the controlling entity.   (12,302)   (1,701)
           
Conversion foreign exchange reserves attributable to the non-controlling entity.   110    - 

 

b)Reserves for foreign currency exchange differences:

 

As of September 30, 2018 and 2017, foreign currency exchange differences are detailed as follows:

 

Detail 

9/30/2018

  

12/31/2017

 
   ThUS$   ThUS$ 
Changes in equity generated by conversion of equity value:          
Comercial Hydro S.A.   1,004    1,004 
SQMC Internacional Ltda.   (11)   (2)
Proinsa Ltda,   (9)   (7)
Comercial Agrorama Ltda,   (29)   (44)
Isapre Norte Grande Ltda.   (120)   (74)
Almacenes y Depósitos Ltda,   93    97 
Sacal S.A.   16    - 
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.   (6)   - 
Agrorama S.A.   36    (98)
Doktor Tarsa   (23,073)   (14,447)
SQM Vitas Fzco   (2,838)   (1,779)
Ajay Europe   (1,136)   (831)
SQM Eastmed Turkey   (98)   (92)
Charlee SQM (Thailand) Co. Ltd.   (296)   (285)
Coromandel SQM India   (454)   (234)
SQM Italia SRL   (201)   (154)
SQM Oceania Pty Ltd,   (634)   (634)
SQM Indonesia S.A.   (125)   (124)
Abu Dhabi Fertilizers Industries WWL.   (435)   (435)
SQM Vitas Holland   (149)   (101)
SQM Thailand Limited   (68)   (68)
SQM Europe N.V.   (1,550)   (1,550)
Minera Exar S.A.   (5,256)   (5,209)
SQM Australia Pty Ltd.   (1,565)   154 
Pavoni & C. , Spa   (311)   - 
Total   (37,215)   (24,913)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

238
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 30 Effect of fluctuations in foreign currency exchange rates

 

c)Functional and presentation currency

 

The functional currency of these companies corresponds to the currency of the country of origin of each entity, and its presentation currency is the U,S, dollar.

 

d)Reasons to use one presentation currency and a different functional currency

 

-The total revenues of these subsidiaries are associated with the local currency.
-The commercialization cost structure of these companies is affected by the local currency.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

239
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 31 Disclosures on the effects of fluctuations in foreign currency exchange rates

 

Assets held in foreign currency subject to fluctuations in exchange rates are detailed as follows:

 

Class of assets  Currency 

9/30/2018

  

12/31/2017

 
      ThUS   ThUS$ 
Current assets:             
Cash and cash equivalents  ARS   1    1 
Cash and cash equivalents  BRL   298    38 
Cash and cash equivalents  CLP   3,113    579 
Cash and cash equivalents  CNY   1,311    1,143 
Cash and cash equivalents  EUR   11,819    9,782 
Cash and cash equivalents  GBP   -    55 
Cash and cash equivalents  AUD   695    - 
Cash and cash equivalents  MXN   -    258 
Cash and cash equivalents  PEN   96    8 
Cash and cash equivalents  YEN   1,483    1,773 
Cash and cash equivalents  ZAR   24    4,074 
Subtotal cash and cash equivalents      18,840    17,711 
Other current financial assets  CLF        - 
Other current financial assets  CLP   23,871    39,126 
Subtotal other current financial assets      23,871    39,126 
Other current non-financial assets  BRL   -    1 
Other current non-financial assets  ARS   2    - 
Other current non-financial assets  AUD   135    - 
Other current non-financial assets  COP   -    30 
Other current non-financial assets  CLF   45    46 
Other current non-financial assets  CLP   21,416    12,172 
Other current non-financial assets  CNY   10    12 
Other current non-financial assets  EUR   1,554    235 
Other current non-financial assets  MXN   2,678    1,429 
Other current non-financial assets  THB   -    279 
Other current non-financial assets  PEN   -    20 
Other current non-financial assets  YEN   39    18 
Other current non-financial assets  ZAR   1,397    2,941 
Subtotal other current non-financial assets      27,276    17,183 
Trade and other receivables  ARS   -    6 
Trade and other receivables  BRL   19    23 
Trade and other receivables  CLF   471    427 
Trade and other receivables  CLP   81,631    85,837 
Trade and other receivables  CNY   12,151    10,426 
Trade and other receivables  EUR   33,745    49,627 
Trade and other receivables  GBP   475    90 
Trade and other receivables  MXN   270    195 
Trade and other receivables  AED   1,440    546 
Trade and other receivables  THB   350    791 
Trade and other receivables  YEN   57,915    41,582 
Trade and other receivables  ZAR   18,714    23,825 
Subtotal trade and other receivables      207,181    213,375 
Receivables from related parties  EUR   95    58 
Receivables from related parties  THB   1,339    74 
Receivables from related parties  CNY   -    - 
Subtotal receivables from related parties      1,434    132 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

240
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 31 Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Class of assets  Currency 

9/30/2018

  

12/31/2017

 
      ThUS$   ThUS$ 
Current tax assets  ARS   1    4 
Current tax assets  CLP   863    1,413 
Current tax assets  EUR   3,272    183 
Current tax assets  ZAR   376    431 
Current tax assets  MXN   768    - 
Current tax assets  PEN   133    201 
Subtotal current tax assets      5,413    2,232 
Subtotal current assets      284,015    289,759 
Non-current assets             
Other non-current financial assets  CLP   20    20 
Other non-current financial assets  YEN   70    42 
Subtotal other non-current financial assets      90    62 
Other non-current non-financial assets  BRL   23    27 
Other non-current non-financial assets  CLP   794    822 
Subtotal other non-current non-financial assets      817    849 
Non-current right receivable  CLF   391    209 
Non-current right receivable  COP   48    47 
Non-current right receivable  CLP   1,634    1,256 
Subtotal non-current rights receivable      2,073    1,512 
Equity-accounted investees  AED   31,302    35,414 
Equity-accounted investees  EUR   15,125    8,144 
Equity-accounted investees  INR   1,442    1,632 
Equity-accounted investees  THB   2,416    2,491 
Equity-accounted investees  TRY   21,088    21,741 
Subtotal equity-accounted investees      71,373    69,422 
Intangible assets other than goodwill  CLP   95    48 
Subtotal intangible assets other than goodwill      95    48 
Property, plant and equipment  CLP   3,304    3,574 
Subtotal property, plant and equipment      3,304    3,574 
Total non-current assets      77,752    75,467 
Total assets      361,767    365,226 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

241
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 31 Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Liabilities held in foreign currencies are detailed as follows:

 

      9/30/2018   12/31/2017 
Class of liability  Currency 

91 days to
1 year

  

91 days to
1 year

  

Total

  

Up to 90
days

  

91 days to
1 year

  

Total

 
      ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Current liabilities                                 
Other current financial liabilities  CLF   -    2,894    2,894    4,947    -    4,947 
Subtotal other current financial liabilities      -    2,894    2,894    4,947    -    4,947 
Trade and other payables  BRL   31    -    31    37    -    37 
Trade and other payables  THB   46    -    46    91    -    91 
Trade and other payables  CLP   73,830    -    73,830    61,310    4,361    65,671 
Trade and other payables  EUR   23,919    -    23,919    32,896    -    32,896 
Trade and other payables  GBP   19    -    19    11    -    11 
Trade and other payables  INR   -    -    -    1    -    1 
Trade and other payables  MXN   43    -    43    13    -    13 
Trade and other payables  PEN   3    -    3    3    -    3 
Trade and other payables  ZAR   3,056    -    3,056    2,541    -    2,541 
Subtotal trade and other payables      100,947    -    100,947    96,903    4,361    101,264 
Other current provisions  ARS   2    -    2    -    12    12 
Other current provisions  BRL   684    -    684    739    -    739 
Other current provisions  CLP   64    -    64    -    80    80 
Other current provisions  EUR   6    -    6    243    -    243 
Subtotal other current provisions      756    -    756    982    92    1,074 
Current tax liabilities  CLP   -    39    39    -    326    326 
Current tax liabilities  BRL   -    -    -    -    6    6 
Current tax liabilities  CNY   -    -    -    3    -    3 
Current tax liabilities  EUR   611    1,000    1,611    -    644    644 
Current tax liabilities  ZAR   -    264    264    264    -    264 
Current tax liabilities  MXN   -    47    47    3    3,071    3,074 
Subtotal current tax liabilities      611    1,350    1,961    270    4,047    4,317 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

242
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 31 Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

      9/30/2018   12/31/2017 
Class of liability  Currency 

Up to 90
days

  

over 90
days to
1 year

  

Total

  

Up to 90
days

  

Over 90
days to
1 year

  

Total

 
      ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Other current non-financial liabilities  BRL   2    -    2    15    -    15 
Other current non-financial liabilities  CLP   7,844    2,855    10,699    8,708    1,824    10,532 
Other current non-financial liabilities  CNY   19    -    19    7    -    7 
Other current non-financial liabilities  EUR   515    1,021    515    2,955    -    2,955 
Other current non-financial liabilities  MXN   93    -    1,114    346    34    380 
Other current non-financial liabilities  YEN   -    -    -    -    -    - 
Other current non-financial liabilities  PEN   70    -    70    70    -    70 
Other current non-financial liabilities  ZAR   5    -    5    12    -    12 
Subtotal other current non-financial liabilities      8,548    3,876    12,424    12,113    1,858    13,971 
Total current liabilities      110,862    8,120    118,982    115,215    10,358    125,573 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

243
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 31 Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

      9/30/2018         
Class of liability  Currency 

1 to 2
years

  

2 to 3
years

  

3 to 4
years

  

4 to 5
years

  

Over 5
years

  

Total

 
      ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Non-current liabilities                                 
Other non-current financial liabilities  CLF   -    -    -    -    349,680    349,680 
Subtotal other non-current financial liabilities      -    -    -    -    349,680    349,680 
Non-current provisions for employee benefits  CLP   -    -    -    -    544    544 
Non-current provisions for employee benefits  MXN   -    -    -    -    183    183 
Non-current provisions for employee benefits  YEN   -    -    -    -    168    168 
Subtotal non-current provisions for employee benefits      -    -    -    -    895    895 
Total non-current liabilities      -    -    -    -    350,575    350,575 

 

      12/31/2017         
Class of liability  Currency 

1 to 2
years

  

2 to 3
years

  

3 to 4
years

  

4 to 5
years

  

Over 5
years

  

Total

 
      ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Non-current liabilities                                 
Other non-current financial liabilities  CLF   -    -    -    -    237,279    237,279 
Subtotal other non-current financial liabilities      -    -    -    -    237,279    237,279 
Non-current provisions for employee benefits  CLP   -    -    -    -    601    601 
Non-current provisions for employee benefits  MXN   -    -    -    -    65    65 
Non-current provisions for employee benefits  YEN   -    -    -    -    626    626 
Subtotal non-current provisions for employee benefits      -    -    -    -    1,292    1,292 
Total non-current liabilities      -    -    -    -    238,571    238,571 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

244
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes

 

Accounts receivable from taxes as of September 30, 2018 and December 31, 2017, are as follows:

 

32.1Current and non-current tax assets

 

a)Current tax assets

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
Monthly provisional income tax payments, Chilean companies   15,841    2,802 
Monthly provisional income tax payments, foreign companies   5,694    808 
Corporate tax credits (1)   376    456 
Taxes in recovery process   30,178    28,225 
Total   52,089    32,291 

 

b)Non-current tax assets

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
Monthly provisional income tax payments, Chilean companies   6,398    6,398 
Specific tax on mining activities paid (on consignment)   25,781    25,781 
Total   32,179    32,179 

 

(1)These credits are available to companies and relate to the corporate tax payment in April of the following year. These credits include, amongst other items, training expense credits (SENCE) and property, plant and equipment acquisition credits that are equivalent to 4% of the property, plant and equipment purchases made during the year. In addition, some credits relate to the donations the Group has made during 2018 and 2017.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

245
  

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.2Current tax liabilities

 

Current tax liabilities  9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
1st Category income tax   30,186    45,479 
Foreign company income tax   32,030    28,996 
Article 21 single tax   972    927 
Total   63,188    75,402 

 

Income tax is calculated based on the profit or loss for tax purposes that is applied to the effective tax rate applicable in Chile. As established by Law No.20.780, a progressive income tax rate has been established, which from 2018 is 27%.

 

The royalty is determined by applying the taxable rate to the net operating income obtained. In line with the current table, the Company is paying 5%.

 

The income tax rate for the main countries where the Company operates is presented below:

 

Country  

Income tax

2018

    

Income tax

2017

Spain   25%   25%
Belgium   29.58%   33.99%
Mexico   30%   30%
United States   21% + 6%   34%+6%
South Africa   28%   28%

 

Both items represent the amount that the Company estimates it will have to pay in income tax and the specific tax on mining.

 

32.3Income tax and deferred taxes

 

Assets and liabilities recognized in the statement of financial position are offset if and only if:

 

1The Company has legally recognized before the right of the tax authority to offset the amounts recognized in these entries; and

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

246

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes

 

2Deferred income tax assets and liabilities are derived from income tax related to the same tax authority on:

 

(i)the same entity or tax subject; or

 

(ii)different entities or tax subjects who intend either to settle current fiscal assets and liabilities for their net amount, or to realize assets and pay liabilities simultaneously in each of the future periods in which the Company expects to settle or recover significant amounts of deferred tax assets or liabilities.

 

Recognized deferred income tax assets are the income taxes that are to be recovered in future periods, related to:

 

a)deductible temporary differences.

b)the offsetting of losses obtained in prior periods and not yet subject to tax deduction; and

c)the offsetting of unused credits from prior periods.

 

The Company recognizes a deferred tax asset when there is certainty that these can be offset with tax income from subsequent periods, losses or fiscal credits not yet used, but solely as long as it is more likely than not that there will be tax earnings in the future against which to charge these losses or unused fiscal credits.

 

Recognized deferred tax liabilities refer to the amounts of income taxes payable in future periods related to taxable temporary differences.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

247

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes, continued

 

d.1)Income tax assets and liabilities as of September 30, 2018 are detailed as follows:

 

   Net liability position 
Description of deferred tax assets and liabilities  Assets   Liabilities 
   ThUS$   ThUS$ 
         
Unrealized loss   76,293    - 
Property, plant and equipment and capitalized interest   -    (196,227)
Facility closure provision   3,581    - 
Manufacturing expenses   -    (99,296)
Staff severance indemnities ,unemployment insurance   -    (6,681)
Vacation accrual   5,165    - 
Inventory provision   29,212    - 
Materials provision   6,726    - 
Forwards   4,618    - 
Employee benefits   3,023    - 
Research and development expenses   -    (2,211)
Accounts receivable   3,955    - 
Provision for legal complaints and expenses   3,982    - 
Loan approval expenses   -    (2,434)
Junior mining companies (valued based on stock price)   -    (1,040)
Royalty   -    (3,683)
Tax loss benefit   1,748    - 
Other   3,930    - 
Foreign items (other)   314    - 
Balances to date   142,547    (311,572)
Net balance   -    (169,025)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

248

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes, continued

 

d.2)Income tax assets and liabilities as of December 31, 2017 are detailed as follows

 

   Net liability position 
Description of deferred tax assets and liabilities  Assets   Liabilities 
   ThUS$   ThUS$ 
Unrealized loss   68,544    - 
Property, plant and equipment and capitalized interest   -    (211,374)
Facility closure provision   3,469    - 
Manufacturing expenses   -    (102,748)
Staff severance indemnities ,unemployment   -    (6,792)
Vacation accrual   4,887    - 
Inventory provision   25,172    - 
Materials provision   7,107    - 
Forwards   624    - 
Employee benefits   2,317    - 
Research and development expenses   -    (3,501)
Accounts receivable   4,253    - 
Provision for legal complaints and expenses   5,243    - 
Loan approval expenses   -    (2,670)
Junior mining companies (valued based on stock price)   -    (2,474)
Royalty   -    (4,084)
Tax loss benefit   1,437    - 
Other   5,002    - 
Foreign items (other)   305    - 
Balances to date   128,360    (333,643)
Net balance   -    (205,283)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

249

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes, continued

 

d.3)Reconciliation of changes in deferred tax liabilities (assets) as of September 30, 2018

 

   Deferred tax
liability
(asset) at
beginning
of period
   Deferred tax
expense
(benefit)
recognized in
profit (loss)
for the year
   Deferred
taxes
related to
items
credited
(charged)
directly to
equity
   Total increases
(decreases) in
deferred tax
liabilities
(assets)
   Deferred tax
liability (asset)
at end of
period
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Unrealized loss   (68,544)   (7,749)   -    (7,749)   (76,293)
Property, plant and equipment and capitalized interest   211,374    (15,147)   -    (15,147)   196,227 
Facility closure provision   (3,469)   (112)   -    (112)   (3,581)
Manufacturing expenses   102,748    (3,452)   -    (3,452)   99,296 
Individual savings plans, unemployment insurance   6,792    95    (206)   (111)   6,681 
Vacation accrual   (4,887)   (278)   -    (278)   (5,165)
Inventory provision   (25,172)   (4,040)   -    (4,040)   (29,212)
Materials provision   (7,107)   381    -    381    (6,726)
Forwards   (624)   (3,994)   -    (3,994)   (4,618)
Employee benefits   (2,317)   (706)   -    (706)   (3,023)
Research and development expenses   3,501    (1,290)   -    (1,290)   2,211 
Accounts receivable   (4,253)   298    -    298    (3,955)
Provision for legal complaints and expenses   (5,243)   1.261    -    1,261    (3,982)
Loan approval expenses   2,670    (236)   -    (236)   2,434 
Junior mining companies (valued based on stock price)   2,474    -    (1.434)   (1,434)   1,040 
Royalty   4,084    (393)   (8)   (401)   3,683 
Tax loss benefit   (1,437)   (311)   -    (311)   (1,748)
Other   (5,002)   1,072    -    1,072    (3,930)
Foreign items (other)   (305)   (9)   -    (9)   (314)
                          
Total temporary differences, unused losses and unused tax credits   205,283    (34,610)   (1,648)   (36,258)   169,025 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

250

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes, continued

 

d.4)Reconciliation of changes in deferred tax liabilities (assets) as of December 31, 2017

 

   Deferred tax
liability
(asset) at
beginning of
period
   Deferred tax
expense
(benefit)
recognized in
profit (loss)
for the year
   Deferred
taxes
related to
items
credited
(charged)
directly to
equity
   Total increases
(decreases) in
deferred tax
liabilities
(assets)
   Deferred tax
liability (asset)
at end of
period
 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Unrealized loss   (86,156)   17,612    -    17,612    (68,544)
Property, plant and equipment and capitalized interest   225,124    (13,750)   -    (13,750)   211,374 
Facility closure provision   (1,589)   (1,880)   -    (1,880)   (3,469)
Manufacturing expenses   110,630    (7,882)   -    (7,882)   102,748 
Individual savings plans, unemployment insurance   5,214    1,876    (298)   1,578    6,792 
Vacation accrual   (4,061)   (826)   -    (826)   (4,887)
Inventory provision   (20,684)   (4,488)   -    (4,488)   (25,172)
Materials provision   (7,776)   669    -    669    (7,107)
Forwards   (10,206)   9,582    -    9,582    (624)
Employee benefits   (6,783)   4,466    -    4,466    (2,317)
Research and development expenses   4,641    (1,140)   -    (1,140)   3,501 
Accounts receivable   (4,305)   52    -    52    (4,253)
Provision for legal complaints and expenses   (7,686)   2,443    -    2,443    (5,243)
Loan approval expenses   3,115    (445)   -    (445)   2,670 
Junior mining companies (valued based on stock price)   1,300    624    550    1,174    2,474 
Royalty   6,457    (2,389)   16    (2,373)   4,084 
Tax loss benefit   (1,302)   (135)   -    (135)   (1,437)
Other   (266)   (4,736)   -    (4,736)   (5,002)
Foreign items (other)   (212)   (93)   -    (93)   (305)
                          
Total temporary differences, unused losses and unused tax credits   205,455    (440)   268    (172)   205,283 

 

During the period ended September 30, 2018 and December 31, 2017, the Company calculated and accounted for taxable income considering a rate of 27% and 25,5% respectively, in conformity with Law No, 20,780, Tax Reform, published in the Official Gazette on September 29, 2014.

 

The main amendments include a gradual increase in the corporate income tax rate up to 27% starting from 2018.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

251

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes, continued

 

d.5)Deferred taxes related to benefits for tax losses

 

The Company’s tax loss carryforwards (NOL carryforwards) were mainly generated by losses in Chile, which in accordance with current Chilean tax regulations have no expiration date.

 

As of September 30, 2018 and December 31, 2017, tax loss carryforwards are detailed as follows:

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
         
CHILE   1,748    1,437 
Total   1,748    1,437 

 

Tax losses as of September 30, 2018 correspond mainly to SQM S.A., Exploraciones Mineras S.A., SQMC S.A., Comercial Agrorama S.A., Agrorama and Orcoma SpA.

 

d.6)       Unrecognized deferred income tax assets and liabilities

 

Unrecognized deferred tax assets and liabilities as of September 30, 2018 and December 31, 2017 are as follows:

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
   Assets
(liabilities)
   Assets
(liabilities)
 
         
Tax losses (NOLs)   -    37 
Doubtful accounts impairment   -    48 
Inventory impairment   -    1,347 
Pensions plan   -    1 
Accrued vacations   -    19 
Depreciation   -    (139)
Other   -    (36)
Balances to date   -    1,277 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

252

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes, continued

 

d.7)Movements in deferred tax assets and liabilities

 

Movements in deferred tax assets and liabilities as of September 30, 2018 and December 31, 2017 are detailed as follows:

 

   9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
   Liabilities
(assets)
   Liabilities
(assets)
 
           
Deferred tax assets and liabilities, net opening balance   (205,283)   (205,455)
Increase (decrease) in deferred taxes in profit or loss   34,610    440 
Increase (decrease) in deferred taxes in equity   1,648    (268)
Balances to date   (169,025)   (205,283)

 

d.8)Disclosures on income tax expense (income)

 

The Company recognizes current and deferred taxes as income or expenses, and they are included in profit or loss, unless they arise from:

 

(a)a transaction or event recognized in the same period or in a different period, outside profit or loss either in other comprehensive income or directly in equity; or

 

(b)a business combination

 

Current and deferred tax expenses (income) are detailed as follows:

 

   9/30/2018   9/30/2017 
   ThUS$   ThUS$ 
   Income
(expenses)
   Income
(expenses)
 
         
Current income tax expense          
Current income tax expense   (159,352)   (128,514)
Adjustments to prior year current income tax   (1,490)   5,064 
Current income tax expense, net, total   (160,842)   (123,450)
           
Deferred tax expense          
Deferred tax expense (income) relating to the creation and reversal of temporary differences   34,610    74 
Deferred tax expense, net, total   34,610    74 
Tax expense (income)   (126,232)   (123,376)

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

253

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes, continued

 

Tax expenses (income) for foreign and domestic parties are detailed as follows:

 

   9/30/2018   9/30/2017 
   ThUS$   ThUS$ 
   Income
(expenses)
   Income
(expenses)
 
         
Current income tax expense by foreign and domestic parties, net          
Current income tax expense, foreign parties, net   (6,271)   (4,794)
Current income tax expense, domestic, net   (154,571)   (118,656)
Current income tax expense, net, total   (160,842)   (123,450)
           
Deferred tax expense by foreign and domestic parties, net          
Deferred tax expense, foreign parties, net   (2,416)   (207)
Deferred tax expense, domestic, net   37,026    281 
Deferred tax expense, net, total   34,610    74 
Income tax expense   (126,232)   (123,376)

 

d.9)Equity interest in taxation attributable to equity-accounted investees

 

The Company does not recognize any deferred tax liability in all cases of taxable temporary differences associated with investments in subsidiaries, branches and associated companies or interest in joint ventures, because as indicated in the standard, the following two conditions are jointly met:

 

(a)the parent, investor or interest holder is able to control the time for reversal of the temporary difference; and

 

(b)It is more likely than not that the temporary difference will not be reversed in the foreseeable future.

 

In addition, the Company does not recognize deferred income tax assets for all deductible temporary differences from investments in subsidiaries, branches and associated companies or interests in joint ventures because it is unlikely that they will meet the following requirements:

 

(a)       Temporary differences are reversed in a foreseeable future; and

 

(b)       The Company has tax earnings, against which temporary differences can be used.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

254

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes, continued

 

d.10)Disclosures on the tax effects of other comprehensive income components:

 

Income tax related to other income and expense components
with a charge or credit to net equity
  Amount before
taxes (expense)
gain
   (Expense)
income for
income taxes
   Amount after
taxes
 
   9/30/2018   9/30/2018   9/30/2018 
   ThUS$   ThUS$   ThUS$ 
             
Gain (loss) from defined benefit plans   338    214    552 
Cash flow hedge   14,794    -    14,794 
Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income   (5,310)   1,434    (3,876)
Total   9,822    1,648    11,470 

 

 

Income tax related to other income and expense
components with a charge or credit to net equity
  Amount
before taxes
(expense) gain
   (Expense)
income for
income taxes
   Amount after
taxes
 
   9/30/2017   9/30/2017   9/30/2017 
   ThUS$   ThUS$   ThUS$ 
Gain (loss) from defined benefit plans   79    (79)   - 
Cash flow hedge   1,826    -    1,826 
Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income   (57)   (544)   (601)
Total   1,848    (623)   (1,225)

 

d.11)Explanation of the relationship between expense (income) for tax purposes and accounting income.

 

Based on IAS 12, paragraph 81, letter “c”, the company has estimated that the method that reveals the most significant information for users of the financial statements is the numeric conciliation between the tax expense (income) and the result of multiplying the accounting profit by the current rate in Chile. The aforementioned election is based on the fact that the main office and subsidiaries established in Chile generate a large part of the company’s tax expense (income).

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

255

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes, continued

 

Reconciliation of numbers in income tax expenses (income) and the result of multiplying financial gain by the rate prevailing in Chile,

 

   Income (expense) 
   9/30/2018   9/30/2017 
   ThUS$   ThUS$ 
Consolidated income before taxes   458,141    440,306 
Income tax rate in force in Chile   27%   25,5%
           
Tax expense using the legal rate   (123,698)   (112,278)
Effect of royalty tax expense and passive income   (3,980)   (2,775)
Tax effect of non-taxable revenue   4,163    2,454 
Effect of taxable rate of non-deductible expenses for determination of taxable income (loss)   (2,357)   (4,406)
Tax effect of tax rates borne abroad   (2,260)   (7,023)
Variation in assets and liabilities for unrecognized deferred taxes   1,276    - 
Other tax effects from the reconciliation between the accounting income and tax expense   624    652 
Tax expense using the effective rate   (126,232)   (123,376)

 

d.12)Tax periods potentially subject to verification:

 

The Group’s Companies are potentially subject to income tax audits by tax authorities in each country. These audits are limited to a number of interim tax periods, which, in general, when they elapse, give rise to the expiration of these inspections.

 

Tax audits, due to their nature, are often complex and may require several years. Below, we provide a summary of tax periods that are potentially subject to verification, in accordance with the tax regulations in force in the country of origin:

 

Chile

 

According to article 200 of Decree Law No 830, the taxes will be reviewed for any deficiencies in terms of payment and to generate any taxes that might arise. There is a 3-year prescriptive period for such review, dating from the expiration of the legal deadline when payment should have been made. This prescriptive period can be extended to 6 years for the revision of taxes subject to declaration, when such declaration has not been filed or has been presented with maliciously false information.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

256

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 32 Income tax and deferred taxes (continued)

 

32.3Income tax and deferred taxes, continued

 

United States

 

In the United States, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return. In the event that an omission or error is detected in the tax return of sales or cost of sales, the review can be extended for a period of up to 6 years.

 

SQM North America Corp, a subsidiary of the Company, is being reviewed by the United States’ tax authorities. This review could lead to adjustments to the tax declarations made by the subsidiary in the United States.

 

Mexico:

 

In Mexico, the tax authority can review tax returns up to 5 years from the expiration date of the tax return.

 

Spain:

 

In Spain, the tax authority can review tax returns up to 4 years from the expiration date of the tax return.

 

Belgium:

 

In Belgium, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return if no tax losses exist. In the event of detecting an omission or error in the tax return, the review can be extended for a period of up to 5 years.

 

South Africa:

 

In South Africa, the tax authority may review tax returns for up to 3 years from the expiration date of the tax return. In the event that an omission or error in the tax return is detected, the review can be extended for a period of up to 5 years.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

257

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 33 Assets held for sale

 

The non-current assets held for sale and the components of the disposal groups classified as held for sale are presented in the Consolidated Statement of Financial Position under the item “Non-current assets or groups of assets classified as held for sale”.

 

The following table shows the movements in assets held for sale:

 

Assets held for sale  9/30/2018   12/31/2017 
   ThUS$   ThUS$ 
        
Investment in Minera Exar S.A.   47,390    - 
           
Investment in Sichuan SQM Migao Chemical Fertilizers Co Ltd.   10,758    - 
           
Terrenos Soquimich Comercial S.A.   1,443    1,480 
Facilities and fixtures at Soquimich Comercial S.A.   -    109 
Total assets held for sale   60,131    1,589 

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

258

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 34 Events occurred after the reporting date

 

34.1Authorization of the financial statements

 

The consolidated financial statements of Sociedad Química y Minera de Chile S.A. and subsidiaries, prepared in accordance with International Financial Reporting Standards for the period ended September 30, 2018, were approved and authorized for issuance by the Management on November 21, 2018.

 

34.2Disclosures on events occurring after the reporting date

 

On October 19, 2018, the following contractual mining companies were incorporated. The Company owns 20 shares in each entity, or 20% of share capital: (i) Don Patricio 65, numbers 1 to 20 in María Elena, (ii) Paciencia 203 numbers 1 to 30 in María Elena, (iii) Paciencia 202 numbers 1 to 28 in María Elena, (iv) Paciencia 200 numbers 1 to 28 in María Elena, (v) Paciencia 199 numbers 1 to 28 in María Elena, (vi) Paciencia 198 numbers 1 to 30 in María Elena, (vii) Paciencia 197 numbers 1 in 30 in María Elena, and (viii) Paciencia 196 numbers 1 to 30 in María Elena. For all these companies, the remaining 80% of the share capital is held by Arena Minerals SpA. All these companies are registered in the María Elena Mining Registrar for the year 2018.

 

On October 24, 2018, the Board asked the Company’s CEO, Mr. Patricio de Solminihac Tampier, to postpone his resignation (communicated as a material event on July 25, 2018) until January 7, 2019, instead of December 31, 2018, as originally communicated by the Company. This change was requested to ensure a proper transition.

 

The Board agreed that the appointment of Mr. Ricardo Ramos Rodríguez should take effect on January 8, 2019.

 

The conditions established by SQM Potasio S.A., Minera Exar S.A., GFL International Co. Ltd. and Lithium Americas Corp., under the English language contract entitled Transaction Agreement informed as a material event on August 13, 2018, and complemented on August 16, 2018, were fully met on October 31, 2018. Therefore, SQM Potasio S.A sold its total share capital and irrevocable contributions in Minera Exar, the company that owns the Caucharí-Olaroz lithium project, to Ganfeng Lithium Netherlands Co., BV; (ii) Exar prepaid all loans maintained with SQM Potasio S.A.; and (iii) Minera Exar paid the Company for the services it provided during the development stage for the Caucharí-Olaroz project.

 

SQM Potasio S.A. received US$87.5 million, which represents after-tax profit of around US$5.5 million. This transaction will be accounted for in fourth quarter results.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

259

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 34 Events occurred after the reporting date (continued)

 

34.2Disclosures on events occurring after the reporting date (continued)

 

SQM Potasio S.A. and Ganfeng Lithium Netherlands Co., BV, have signed a Deferred Payment Agreement, under which a deferred payment of US$50 million will be made to SQM Potasio S.A., which will become due once Minera Exar reaches accumulated sales of (i) 25,000 tons (measured in lithium carbonate equivalent) of lithium products from the Caucharí-Olaroz project, (ii) at a price of at least US$10,000 per ton.

 

On October 31, 2018, the placement on the stock market of Series “Q” bonds with a value of UF 3 million was authorized. This placement will be charged to the 30-year Bond Line registered in the FMC Securities Registry dated February 14, 2012, under number 700.

 

The bonds (i) mature on June 1, 2038; (ii) will accrue interest on the unpaid principal, expressed in UF, at an annual interest rate of 3.45% from June 1, 2018; and (iii) can be called early by the Company as of the date of placement, that is, as of November 8, 2018.

 

On November 8, 2018, all Series Q bonds have been placed and sold to Euroamerica S.A., for a total of Ch$83,567,623,842, which was fully paid in cash by Euroamerica S.A. to the Company.

 

Approximately 90% of the funds obtained from this placement will be used to finance expansion plans for the lithium, potassium nitrate and iodine plants in Chile. The remainder will be allocated to the investment plan of the Company and its subsidiaries in order to finance working capital.

 

On November 14, 2018, Soquimich European Holdings B.V. signed an agreement to sell its full interest in Charlee SQM (Thailand) Company Limited for THB 70 million (approximately US$ 2.1 million). This transaction is subject to compliance of conditions precedent and is expected to take place in December 2018.

 

On November 21, 2018, the Board agreed to amend the general policy on customary related party transactions, approved in its meeting on November 7, 2016, and also approved a new combined text, which was communicated as a material event on that date and has been published on the Company’s website.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

260

Notes to the Consolidated Financial Statements as of September 30, 2018

 

Note 34 Events occurred after the reporting date (continued)

 

34.3Details of dividends declared after the reporting date

 

Payment of Provisional Dividend

 

On November 21, 2018, the Company’s Board of Directors approved the following:

 

To pay a provisional dividend equivalent to US$0.31726 per share with a charge to profit for 2018. Such amount will be paid in its equivalent in Chilean pesos, the domestic currency, according to the observed U.S. dollar exchange rate published in the Official Gazette on November 30, 2018.

 

This dividend will be paid to shareholders, in person or through their duly authorized representatives, starting at 9.00 a.m. on December 12, 2018. The shareholders who are registered in the Shareholders’ Registry five business days prior to the date of payment will be entitled to the dividend.

 

Management is not aware of any other significant events that occurred between September 30, 2018, and the date of issuance of these consolidated financial statements that may significantly affect them.

 

El Trovador 4285
Las Condes, Santiago, Chile
75500
sqm.com

261

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

  CHEMICAL AND MINING COMPANY OF CHILE INC.
   
  (Registrant)
   
Date: December 17, 2018 /s/ Gerardo Illanes
   
  By: Gerardo Illanes
   
  CFO

 

Persons who are to respond to the collection of information contained SEC 1815 (04-09) in this form are not required to respond unless the form displays currently valid OMB control number.

 

 262