UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13A-16 OR 15D-16
OF THE SECURITIES AND EXCHANGE ACT OF 1934
For the nine month period ended on September 30, 2003.
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
---------------------------------------
(Exact name of registrant as specified in its charter)
CHEMICAL AND MINING COMPANY OF CHILE INC.
-----------------------------------------
(Translation of registrant's name into English)
El Trovador 4285, 6th Floor, Santiago, Chile (562) 425-2000
-----------------------------------------------------------
(Address and phone number of principal executive offices)
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 whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No x
----- -----
If "Yes" is marked, indicate below the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82___________
On November 12, 2003, the Registrant filed with the Superintendencia de Valores
y Seguros of Chile (the "SVS") a report that included information as to the
Registrant's consolidated financial condition and results of operations for the
nine-month period ended on September 30, 2003. Attached is a summary of such
consolidated financial information included in the summary and in the report
filed with the Superintendencia de Valores y Seguros of Chile. This financial
information was prepared on the basis of accounting principles generally
accepted in Chile and does not include a reconciliation of such information to
accounting principles generally accepted in the United States of America.
--------------------------------------------------------------------------------
THIS REPORT IS AN ENGLISH TRANSLATION OF, AND A CHILEAN GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES PRESENTATION OF, A NINE MONTH PERIOD ENDED SEPTEMBER 30,
2003 REPORT FILED WITH THE SUPERINTENDENCIA DE VALORES Y SEGUROS (SVS) IN CHILE,
AND UNLESS OTHERWISE INDICATED, FIGURES ARE IN US DOLLARS.
--------------------------------------------------------------------------------
Consolidated Financial Statements
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
As of September 30, 2003 and 2002
and for the years ended September 30, 2003 and 2002
(A translation of the original in Spanish- see note 2 (a))
Contents
Consolidated Financial Statements
Consolidated Balance Sheets .............................................. 2
Consolidated Statements of Income......................................... 4
Consolidated Statements of Cash Flows..................................... 5
Notes to the Consolidated Financial Statements ........................... 6
Ch$ - Chilean pesos
ThCh $ - Thousands of Chilean pesos
US$ - United States dollars
ThUS$ - Thousands of United States dollars
UF - The UF is an inflation-indexed, Chilean peso-denominated monetary
unit. The UF rate is set daily in advance, based on the change
in the Consumer Price Index of the previous month.
1
Sociedad QuImica y MinerA de Chile S.A.
Consolidated Balance Sheets
(A translation of the original in Spanish- see note 2 (a))
As of September 30,
Note 2003 2002
---- ----
ThUS$ ThUS$
ASSETS
Current assets
Cash 14,066 10,797
Time deposits 10,849 3,063
Marketable securities 04 49,811 24,534
Accounts receivable, net 05 159,069 111,748
Other accounts receivable, net 05 8,658 9,710
Accounts receivable from related companies 06 25,339 37,750
Inventories, net 07 227,238 227,745
Recoverable taxes 13,865 11,372
Prepaid expenses 2,808 3,603
Other current assets 17,819 18,067
--------------- --------------
Total current assets 529,522 458,389
--------------- --------------
Property, plant and equipment, net 08 675,980 684,598
--------------- --------------
Other Assets
Investments in related companies 09 80,599 77,542
Goodwill, net 10 13,085 11,565
Negative goodwill, net 10 (543) (956)
Intangible assets, net 4,774 4,021
Long-term accounts receivable, net 05 8,105 11,969
Long-term accounts receivable from related companies 06 380 509
Other long-term assets 11 50,161 49,157
--------------- --------------
Total other assets 156,561 153,807
--------------- --------------
Total assets 1,362,063 1,296,794
=============== ==============
The accompanying notes form an integral part of these consolidated financial
statements.
2
As of September 30,
Note 2003 2002
---- ----
ThUS$ ThUS$
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Short-term bank debt 12 1,274 996
Current portion of long-term debt 12 33,683 61,668
Dividends payable 238 301
Accounts payable 49,879 45,397
Other accounts payable 1,857 1,258
Notes and accounts payable to related companies 06 5,910 5,680
Accrued liabilities 13 17,229 12,085
Withholdings 3,048 3,408
Income taxes 2,747 2,327
Deferred revenues 3,436 1
Deferred income taxes 14 1,865 446
Other current liabilities 669 77
---------------- --------------
Total current liabilities 121,835 133,644
---------------- --------------
Long-term liabilities
Long-term bank debt 12 308,000 280,000
Other accounts payable 2,878 3,652
Deferred income taxes 14 22,100 11,902
Staff severance indemnities 15 9,878 7,957
---------------- --------------
Total long-term liabilities 342,856 303,511
---------------- --------------
Minority interest 16 26,036 21,919
---------------- --------------
Shareholders' equity
Paid-in capital 17 477,386 477,386
Other reserves 17 132,136 122,424
Retained earnings 17 261,814 237,910
---------------- --------------
Total shareholders' equity 871,336 837,720
---------------- --------------
Total liabilities and shareholders' equity 1,362,063 1,296,794
================ ==============
The accompanying notes form an integral part of these consolidated financial
statements.
3
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Statements of Income
(A translation of the original in Spanish- see note 2 (a))
For the period ended
September 30,
Note 2003 2002
---- ----
ThUS$ ThUS$
Operating results
Sales 528,176 413,771
Cost of sales (424,706) (320,773)
--------------- --------------
Gross margin 103,470 92,998
Selling and administrative expenses (36,321) (32,331)
--------------- --------------
Operating income 67,149 60,667
--------------- --------------
Non-operating results
Non-operating income 19 12,821 9,046
Non-operating expenses 19 (29,526) (29,699)
--------------- --------------
Non-operating loss (16,705) (20,653)
--------------- --------------
Income before income taxes 50,444 40,014
Income tax expense 14 (12,304) (8,086)
--------------- --------------
Income before minority interest 38,140 31,928
Minority interest 16 (2,453) (1,855)
--------------- --------------
Net income before extraordinary items and negative goodwill 35,687 30,073
Amortization of negative goodwill 10 420 310
--------------- --------------
Net income for the year 36,107 30,383
=============== ==============
The accompanying notes form an integral part of these consolidated financial
statements.
4
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Consolidated Statements of Cash Flows
(A translation of the original in Spanish- see note 2 (a))
Period Ended September 30,
2003 2002
---- ----
ThUS$ ThUS$
Cash flows from operating activities
Net income for the year 36,107 30,383
Loss on sale of fixed assets (57) (50)
Charges (credits) to income not representing cash flows
Depreciation expense 45,124 46,357
Amortization of intangible assets 220 146
Write-offs and accruals 12,711 9,642
Gain on equity investments in related companies (4,794) (2,742)
Accrued loss in investments with related companies - 138
Amortization of goodwill 844 896
Amortization of negative goodwill (420) (310)
Exchange difference (2,845) 733
Other credits to income not representing cash flows (2,299) (5,244)
Other charges to income not representing cash flows 21,492 15,016
Net changes in operating assets and liabilities:
(Increase) decrease in trade accounts receivable (26,510) (3,113)
Decrease (increase) in inventories 10,583 (19,409)
Increase in other assets 16,264 4,920
(Increase) decrease in accounts payable (18,254) 14,469
Increase in interest payable (1,961) (6,055)
Increase in net income taxes payable (734) 85
Decrease in other accounts payable (1,501) (1,816)
Decrease in VAT and taxes payable 1,942 900
Minority interest 2,453 1,855
------------ ---------
Net cash provided from operating activities 88,365 86,801
------------ ---------
Cash flows from financing activities
Payment of dividends (21,302) (16,082)
Payment of loans (3,886) (130,584)
Payment of documented loans to related companies (5,275) -
------------ ---------
Net cash used in from financing activities (30,463) (146,666)
------------ ---------
Cash flows from investing activities
Sales of property, plant and equipment 129 661
Sales of investments 532 13,974
Other income 7,320 614
Additions to property, plant and equipment (42,307) (25,450)
Capitalized interest (1,827) (1,678)
Purchase of permanent investments (8,049) (9,801)
Investments in financial instruments (31) (224)
Other disbursements - -
------------ ---------
Net cash used in investing activities (44,233) (21,904)
------------ ---------
Effect of inflation on cash and cash equivalents (352) (529)
------------ ---------
Net change in cash and cash equivalents 13,317 (82,298)
Beginning balance of cash and cash equivalents 65,204 121,536
------------ ---------
Ending balance of cash and cash equivalents 78,521 39,238
============ =========
The accompanying notes form an integral part of these consolidated financial
statements.
5
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 1 - Company Background
Sociedad Quimica y Minera de Chile S.A. (the "Company") was registered with the
Chilean Superintendency of Securities and Insurance ("SVS") on March 18, 1983.
Note 2 - Summary of Significant Accounting Policies
a) Basis for the preparation of the consolidated financial statements
The accompanying consolidated financial statements have been prepared in
U.S. dollars in accordance with accounting principles generally accepted
in Chile ("Chilean GAAP") and the regulations of the SVS. For the
convenience of the reader, the consolidated financial statements and
their accompanying notes have been translated from Spanish into English.
Certain accounting practices applied by the Company that conform with
Chilean GAAP may not conform with generally accepted accounting
principles in the United States ("US GAAP")
The consolidated financial statements include the accounts of Sociedad
Quimica y Minera de Chile S.A. (the "Parent Company") and subsidiaries
(companies in which the Parent Company holds a controlling participation,
generally equal to direct or indirect ownership of more than 50%). The
Parent Company and its subsidiaries are referred to as the "Company".
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities, disclosures of contingent assets and liabilities as of the
date of the financial statements and the reported amounts of revenues and
expenses during the reported period. Actual results could differ from
those estimates.
In accordance with regulations set forth by the SVS in its Circular No.
368 and Technical Bulletins Nos. 42 and 64 of the Chilean Association of
Accountants, the consolidated financial statements include the following
subsidiaries:
6
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
a) Basis for the preparation of the consolidated financial statements
(continued)
Direct or indirect ownership
2003 2002
---- ----
Foreign subsidiaries: % %
Nitrate Corporation of Chile Limited (United Kingdom) 100.00 100.00
Soquimich SRL - Argentina 100.00 100.00
Nitratos Naturais do Chile Ltda. (Brazil) 100.00 100.00
SQM Europe NV (Belgium) 100.00 100.00
SQM North America Corp. (USA) 100.00 100.00
North American Trading Company (USA) 100.00 100.00
SQM Peru S.A. 100.00 100.00
SQM Corporation NV (Holland) 100.00 100.00
S.Q.I. Corporation NV (Holland) 100.00 100.00
Soquimich European Holding BV (Holland) 100.00 100.00
PTM - SQM Iberica S.A. (Spain) 100.00 100.00
SQMC Holding Corporation LLP (USA) 100.00 100.00
SQM Ecuador S.A. 100.00 100.00
Cape Fear Bulk LLC (USA) 51.00 51.00
SQM Colombia Ltda. 100.00 100.00
SQM Investment Corporation NV (Holland) 100.00 100.00
PSH Limited (Cayman Islands) 100.00 100.00
SQM Brasil Ltda. 100.00 100.00
Royal Seed Trading Corporation AVV (Aruba) 100.00 100.00
SQM Japan K.K. 100.00 100.00
SQM Oceania PTY Limited (Australia) 100.00 100.00
SQM France S.A. 100.00 100.00
Fertilizantes Naturales S.A. (Spain) 50.00 50.00
Rs Agro-Chemical Trading AVV (Aruba) 100.00 100.00
SQM Comercial de Mexico S.A. de C.V. 100.00 100.00
SQM Indonesia 80.00 80.00
SQM Virginia LLC (USA) 100.00 100.00
Agricolima S.A. De C.V. (Mexico) 100.00 100.00
SQM Venezuela S.A. 100.00 100.00
SQM Italia SRL (Italy) 95.00 95.00
Comercial Caiman Internacional S.A. (Cayman Islands) 100.00 -
Fertilizantes Olmeca y SQM S.A. De C.V. (Mexico) 100.00 -
Mineag SQM Africa Limited 100.00 -
7
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
a) Basis for the preparation of the consolidated financial statements
(continued)
Direct or indirect ownership
2003 2002
---- ----
% %
Domestic subsidiaries:
Servicios Integrales de Transito y Transferencias S.A. 100.00 100.00
Cia. Industrial y Minera S.A. - 100.00
Soquimich Comercial S.A. 60.64 60.64
Sociedad Minera de Chile S.A. - 100.00
Energia y Servicios S.A. - 100.00
Isapre Norte Grande Ltda. 100.00 100.00
Almacenes y Depositos Ltda. 100.00 100.00
SQM Quimicos S.A. - 99.99
Ajay SQM Chile S.A. 51.00 51.00
SQM Nitratos S.A. 99.99 100.00
Proinsa Ltda. 60.58 60.58
SQM Potasio S.A. 100.00 100.00
SQMC International Limitada 60.64 60.64
SQM Salar S.A. 100.00 100.00
SCM SQM Boratos - 100.00
Norsk Hydro Chile S.A. 60.64 -
All significant inter-company balances, transactions and unrealized gains
and losses arising from transactions between these companies have been
eliminated in consolidation.
As the Company exerts control over the subsidiary Fertilizantes Naturales
S.A. it has been included in the consolidation for the period ended
September 30, 2003 and 2002.
At September 30, 2003 and 2002, the subsidiary Lithium Specialties LLP
was in development stage and therefore was not included in the
consolidation.
At September 30, 2002, the subsidiary SCM Antucoya was in development
stage and therefore was not included in the consolidation.
8
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
b) Period
These consolidated financial statements have been prepared for the
nine-month period between January 1st and September 30, 2003 and 2002.
c) Reporting currency and monetary correction
The financial statements of the Company are prepared in U.S. dollars. As
a significant portion of the Company's operations are transacted in U.S.
dollars, the U.S. dollar is considered the currency of the primary
economic environment in which the Company operates.
The Parent Company and those subsidiaries which maintain their accounting
records in U.S. dollars are not required, or permitted, to restate the
historical dollar amounts for the effects of inflation.
The financial statements of domestic subsidiaries, which maintain their
accounting records in Chilean pesos have been restated to reflect the
effects of variations in the purchasing power of Chilean pesos during the
period. For this purpose, and in accordance with Chilean regulations,
non-monetary assets and liabilities, equity and income statement accounts
have been restated in terms of periods -end constant pesos based on the
change in the consumer price index during the period (1,2% and 1,3% in
2003 and 2002, respectively). The resulting net charge or credit to
income arises as a result of the gain or loss in purchasing power from
the holding of non-U.S. dollar denominated monetary assets and
liabilities exposed to the effects of inflation.
Prior period financial statements presented for comparative purposes have
not been restated to reflect the change in the purchasing power of the
Chilean pesos during the most recent year-end. In accordance with Chilean
GAAP, amounts expressed in U.S. dollars, including amounts included in
the consolidated financial statements as determined in prior years from
the translation of financial statements of those Chilean subsidiaries
which maintain their accounting records in Chilean pesos, are not
adjusted for price-level changes.
9
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
d) Foreign currency
i) Foreign currency transactions
Monetary assets and liabilities denominated in Chilean pesos and other
currencies have been translated to U.S. dollars at the observed exchange
rates determined by the Central Bank of Chile in effect at each
period-end of Ch$660.97 per US$ 1 at September 30, 2003 and Ch$748,73 per
US$ 1 at September 30, 2002.
ii) Translation of non-U.S. dollar financial statements
In accordance with Chilean GAAP, the financial statements of
foreign and domestic subsidiaries that do not maintain their
accounting records in U.S. dollars are translated from the
respective local currencies to U.S. dollars in accordance with
Technical Bulletin No. 64 of the Chilean Association of
Accountants ("BT 64") as follows:
a) For those subsidiaries and affiliates located in Chile which
keep their accounting records in price-level adjusted Chilean
pesos:
- Balance sheet accounts are translated to U.S. dollars at
the period-end exchange rate without eliminating the
effects of price-level restatement.
- Income statement accounts are translated to U.S. dollars
at the average exchange rate each month. The monetary
correction account on the income statement, which is
generated by the inclusion of price-level restatement on
the non-monetary assets and liabilities and shareholders'
equity, is translated to U.S. dollars at the average
exchange rate for each month.
- Translation gains and losses, as well as the price-level
restatement to the balance sheet mentioned above, are
included as an adjustment in shareholders' equity, in
conformity with Circular No. 368 of the SVS.
10
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
d) Foreign currency (continued)
b) The financial statements of those foreign subsidiaries that
keep their accounting records in currencies other than U.S.
dollar have been translated at historical exchange rates as
follows:
- Monetary assets and liabilities are translated at period-end
exchange rates between the US dollar and the local currency.
- All non-monetary assets and liabilities and shareholders'
equity are translated at historical exchange rates between
the US dollar and the local currency.
- Income and expense accounts are translated at average
exchange rates between the US dollar and the local currency.
- Any exchange differences are included in the results of
operations for the period.
Foreign exchange differences for the period ended September 30, 2003 and
2002 generated net earnings (loss) of ThUS$ 2,845 and ThUS$ (733),
respectively, which have been charged to the consolidated statements of
income in each respective period. The monetary assets and liabilities of
foreign subsidiaries were translated into U.S. dollars at the exchange
rates per US dollar prevailing at September 30, as follows:
2003 2002
---- ----
Brazilian Real 2.94 3.85
New Peruvian Sol 3.48 3.64
Colombian Peso 2,850.30 2,808.04
Argentine Peso 2.93 3.74
Japanese Yen 111.25 122.60
Sucre Ecuador 1.00 1.00
Euro 1.17 1.01
Mexican Peso 11.04 10.23
Indonesian Rupee 8,389.00 9,015.10
Australian Dollar 1.52 1.84
Pound Sterling 1.66 0.64
Rand 7.22 -
The Company uses the "observed exchange rate", which is the rate
determined daily by the Chilean Central Bank based on the average
exchange rates at which bankers conduct authorized transactions.
11
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
e) Cash and cash equivalents
The Company considers all highly liquid investments with a remaining
maturity of less than 90 days as of the closing date of the financial
statements to be cash equivalents.
f) Time Deposits
Time deposits are recorded at cost plus accrued interest.
g) Marketable securities
Marketable securities are recorded at the lower of cost plus accrued
interest or market value.
h) Allowance for doubtful accounts
The Company records an allowance for doubtful accounts based on estimated
probable losses.
i) Inventories and materials
Inventories of finished products and work in process are valued at
average production cost. Raw materials and products acquired from third
parties are stated at average cost and materials-in-transit are valued at
cost. All such values do not exceed net realizable values.
Inventories of non-critical spare parts and supplies are classified as
other current assets, except for those items which the Company estimates
to have a turnover period of one year or more, which are classified as
other long-term assets.
j) Income taxes and deferred income taxes
Prior to 2000, income taxes were charged to results in the same period in
which the income and expenses were recorded and were calculated in
accordance with the enacted tax laws in Chile and the other jurisdictions
in which the Company operated.
12
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
j) Income and deferred taxes (continued)
Under Chilean law, the Parent Company and its subsidiaries are required
to file separate tax declarations.
Beginning January 1, 2000, the Company records deferred income taxes in
accordance with Technical Bulletin Nos. 60, 69, 71 and 73 of the Chilean
Association of Accountants, and with Circular No. 1466 issued on January
27, 2000 by the SVS, recognizing the deferred tax effects of temporary
differences between the financial and tax values of assets and
liabilities, using the liability method.
The effect of the temporary differences at December 31, 1999 were
recorded in complementary asset and liability accounts, which are
recognized in the statement of operations over the estimated period in
which they reverse.
k) Property, plant and equipment
Property, plant, equipment and property rights are recorded at cost,
except for certain assets that were restated according to a technical
appraisal in 1988. Depreciation expense has been calculated using the
straight-line method based upon the estimated useful lives of the assets
and is charged directly to expense.
Fixed assets acquired through financing lease agreements are accounted
for at the present value of the minimum lease payments plus the purchase
option based on the interest rate included in each contract. The Company
does not legally own these assets and therefore cannot freely dispose of
them.
In conformity with Technical Bulletin No. 31 of the Chilean Association
of Accountants, the Company capitalizes interest cost associated with the
financing of new assets during the construction period of such assets.
Maintenance costs of plant and equipment are charged to expenses as
incurred.
The Company obtains property rights and mining concessions from the
Chilean state. Other than minor filing fees, the property rights are
usually obtained without initial cost, and once obtained, are retained
perpetually by the Company as long as the annual fees are paid. Such
fees, which are paid annually in March, are recorded as prepaid assets to
be amortized over the following twelve months. Values attributable to
these original mining concessions are recorded in property, plant and
equipment and are being amortized on a straight-line basis over 50 years.
13
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
l) Investments in related companies
Investments in related companies over which the Company has significant
influence, are included in other assets and are recorded using the equity
method of accounting. Accordingly, the Company's proportional share in
the net income or loss of each investee is recognized in the
non-operating income and expense classification in the consolidated
statements of income on an accrual basis, after eliminating any
unrealized profits from transactions with the related companies.
The translation adjustment to U.S. dollars of investments in domestic
subsidiaries, which maintain their accounting records and are controlled
in Chilean pesos is recognized in the other reserves component of
stockholders' equity. Direct and indirect investments in foreign
subsidiaries or affiliates are controlled in U.S. dollars.
m) Goodwill and negative goodwill
Goodwill is calculated as the excess of the purchase price of companies
acquired over their net book value, whereas negative goodwill occurs when
the net book value exceeds the purchase price of companies acquired.
Goodwill and negative goodwill resulting from equity method investments
are maintained in the same currency in which the investment was made and
are amortized based on the estimated period of investment return,
generally 20 and 10 years for goodwill and negative goodwill,
respectively.
n) Intangible assets
Intangible assets are stated at cost plus acquisition expenses and are
amortized over a period of up to a maximum of 40 years, in accordance
with Technical Bulletin No. 55 of the Chilean Association of Accountants.
o) Mining development cost
Mining development costs are recorded in other long-term assets and are
amortized utilizing the unit of production basis.
14
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
p) Accrued employee severance
The Company calculates the liability for staff severance indemnities
based on the present value of the accrued benefits for the actual years
of service worked assuming an average employee tenure of 24 years and a
real annual discount rate of 9%.
q) Vacations
The cost of employee vacations is recognized in the financial statements
on an accrual basis.
r) Dividends
Dividends are generally declared in U.S. dollars but are paid in Chilean
pesos.
s) Derivative Contracts
The Company maintains derivative contracts to hedge against movements in
foreign currencies, which are recorded in conformity with Technical
Bulletin No. 57 of the Chilean Association of Accountants. Such contracts
are recorded at fair value with net losses recognized on an accrual basis
and gains recognized when realized.
t) Reclassifications
Certain reclassifications have been made in the 2003 and 2002 numbers to
conform to the current period presentation.
u) Revenue recognition
Revenue is recognized on the date goods are physically delivered or when
they are considered delivered according to the terms of the contract.
15
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 2 - Summary of Significant Accounting Policies (continued)
v) Computer software
In accordance with Circular No. 981 dated March 28, 1990 of the SVS,
computer systems acquired by the Company are recorded at cost.
w) Research and development expenses
Research and development cost are charged to the income statement in the
period in which they are incurred. Fixed assets which are acquired for
their use in research and development activities and are determined to
provide additional benefits to the Company are recorded under the
relevant item within property, plant and equipment.
Note 3 - Changes in Accounting Principles
There were no changes in the accounting principles used by the Company during
2003 and 2002.
Note 4 - Marketable Securities
As of September 30 marketable securities are detailed as follows:
2003 2002
ThUS$ ThUS$
Mutual funds 49,811 24,534
--------------- ----------------
Total 49,811 24,534
=============== ================
16
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 5 - Short-term and long-term Accounts Receivable
a) Short term accounts receivable and other accounts receivable as of
September 30 are detailed as follows:
Between 90 days Total
Up to 90 days and 1 year 2003 Short-term (net)
2003 2002 2003 2002 Subtotal 2003 2002
---- ---- ---- ---- -------- ---- ----
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
Trade accounts receivable 108,444 87,809 24,399 7,396 132,843 126,235 90,984
Allowance for doubtful accounts (6,608)
Notes receivable 20,424 18,346 15,500 5,171 35,924 32,834 20,764
Allowance for doubtful accounts (3,090)
--------- ---------
Accounts receivable, net 159,069 111,748
========= =========
Other accounts receivable 6,113 9,228 3,103 1,320 9,216 8,658
9,710
Allowance for doubtful accounts (558)
--------- ---------
Other accounts receivable, net 8,658 9,710
========= =========
17
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 5 - Short-term and Long-term Accounts Receivable (continued)
Consolidated Short-term and Long-term Receivables - by Geographic Location
Europe, Africa and Asia and USA, Mexico
Chile the Middle East Oceania and Canada
2003 2002 2003 2002 2003 2002 2003 2002
---- ---- ---- ---- ---- ---- ---- ----
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
---------------------------------------------------------------------------------
Net short-term trade accounts receivable
Balance 46,196 29,768 33,729 21,379 3,309 4,009 29,143 27,089
% of total 36.59% 32.72% 26.72% 23.50% 2.62% 4.41% 23.09% 29.77%
Net short-term notes receivable
Balance 29,237 17,465 1,145 878 20 30 481 386
% of totalb 89.05% 84.11% 3.49% 4.23% 0.06% 0.14% 1.46% 1.86%
Net short-term other accounts receivable
Balance 4,699 5,905 1,281 1,089 3 5 2,451 2,398
% of total 54.27% 60.81% 14.80% 11.22% 0.03% 0.05% 28.31% 24.70%
---------------------------------------------------------------------------------
Subtotal short-term accounts receivable, net
Balance 80,132 53,138 36,155 23,346 3,332 4,044 32,075 29,873
% of total 47.78% 43.75% 21.56% 19.22% 1.98% 3.33% 19.12% 24.60%
Long-term accounts receivable, net
Balance 6,993 10,820 69 58 - - 1,028 51
% of total 86.28% 90.40% 0.85% 0.48% - - 12.68% 0.43%
---------------------------------------------------------------------------------
Total short and long-term accounts receivable, net
Balance 87,125 63,958 36,224 23,404 3,332 4,044 33,103 29,924
% of total 49.55% 47.93% 20.60% 17.54% 1.89% 3.03% 18.83% 22.43%
=================================================================================
Latin America
and the Caribbean Total
2003 2002 2003 2002
---- ---- ---- ----
ThUS$ ThUS$ ThUS$ ThUS$
----------------------------------------------
Net short-term trade accounts receivable
Balance 13,858 8,739 126,235 90,984
% of total 10.98% 9.60% 100.00% 100.00%
Net short-term notes receivable
Balance 1,951 2,005 32,834 20,764
% of totalb 5.94% 9.66% 100.00% 100.00%
Net short-term other accounts receivable
Balance 224 313 8,658 9,710
% of total 2.59% 3.22% 100.00% 100.00%
----------------------------------------------
Subtotal short-term accounts receivable, net
Balance 16,033 11,057 167,727 121,458
% of total 9.56% 9.10% 100.00% 100.00%
Long-term accounts receivable, net
Balance 15 1,040 8,105 11,969
% of total 0.19% 8.69% 100.00% 100.00%
----------------------------------------------
Total short and long-term accounts receivable, net
Balance 16,048 12,097 175,832 133,427
% of total 9.13% 9.07% 100.00% 100.00%
==============================================
18
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 6 - Balances and Transactions with Related Parties
Accounts receivable from and payable to related companies are stated in US
dollars and accrue no interest. Transactions are made under terms and conditions
which are similar to those offered to unrelated third parties.
a) Amounts included in balances with related parties as of September 30 2003
and 2002 are as follows:
--------------------------------------------------------------------------------------------------------
Short-term Long-term
2003 2002 2003 2002
---- ---- ---- ----
Accounts receivable ThUS$ ThUS$ ThUS$ ThUS$
--------------------------------------------------------------------------------------------------------
Ajay Europe S.A.R.L. 4,176 4,591 - -
Nutrisi Holding N.V. 1,935 - - -
Generale de Nutrition Vegetale S.A. 171 165 - -
Fertilizantes Olmeca S.A. - 3,988 - -
Mineag SQM Africa Limited - 3,987 - -
Abu Dhabi Fertilizer Ind. WLL 4,366 5,573 - -
NU3 N.V. 24 3,593 - -
Doktor Tarsa -SQM Turkey 2,481 135 -
Comercial Caiman Internacional S.A. - 3,107 - -
SQM Lithium Specialties Limited 666 666 - -
Empresas Melon S.A. - - 380 509
Sales de Magnesio S.A. 19 31 - -
Ajay North America LLC 258 243 - -
Norsk Hydro ASA 27 192 - -
Hydro Agri Int.-France - 1,816 - -
Hydro Asia Trade 893 1,239 - -
Hydro Agri France S.A. 1,050 379 - -
Hydro Poland SP 95 132 - -
Hydro Agri Benelux B.V 129 100 - -
Hydro Agri Hellas S.A. 62 77 - -
Hydro Agri Australia Ltd. 465 602 - -
Hydro Agri UK Ltd.. 104 137 -
Hydro Agri GMBH & CO KG 166 59 - -
Hydro Agri AB 44 39 - -
Hydro Agri Colombia 981 28 - -
PCS Yumbes 224 4,366 - -
NU3 B.V. 530 545 - -
Hydro Agri Argentina 54 653 - -
Adubo Trevo S.A. 16 - - -
Hydro Plant Nutr. OSLO 32 13 - -
Hydro Czech Republic 2 - - -
Hydro Agricola Internacional 71 451 - -
Impronta SRI 4,632 - - -
Hydro Agri Espana S.A. 1,627 - - -
Hydro Agri North America 7 71 - -
Hydro Agri Norge 11 - - -
Hydro Agri Venezuela - 772
Hydro Agri Mexico S.A. de C.V. 21 - - -
------------ ------------ ------------ ------------
Total 25,339 37,750 380 509
============ ============ ============ ============
19
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 6 - Balances and Transactions with Related Parties (continued)
a) Amounts included in balances with related parties as of September 30, 2003
and 2002, continued:
Short-term
2003 2002
---- ----
Accounts payable ThUS$ ThUS$
Ajay Europe S.A.R.L. - 820
Adm. y Servicios Santiago S.A. de C.V. 58 99
Abu Dhabi Fertilizar Ind. WLL - 90
NU3 N.V. 706 1,682
SCM Antucoya - 100
Rotem Amfert Negev Limited 1,527 168
Hydro Agri Porsgrunn 189 104
Hydro Agricola Internacional - 103
Hydro Agri North America - 182
Hydro Agri Mexico de S.A de C.V. - 109
Hydro Agri Int - France 2,407 496
Hydro Agri Colombia - 84
NU3 B.V. - 433
Hydro Fertilizante Ltda. 1,023 847
Fertilizantes Olmeca - 16
Mineag SQM Africa Limited - 347
--------------- ---------------
Total 5,910 5,680
=============== ===============
There were no outstanding long-term accounts payable with related parties
as September 30, 2003 and 2002
20
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 6 - Balances and Transactions with Related Parties (continued)
b) During 2003 and 2002, principal transactions with related parties were as
follows:
Type of Amount of Impact on income
Company Relationship transaction Transaction (charge) credit
------- ------------ ----------- ----------- ---------------
2003 2002 2003 2002
---- ---- ---- ----
ThUS$ ThUS$ ThUS$ ThUS$
NU3 N.V. (Belgica) Indirect Sales of products 3,376 912 1,322 360
Doktor Tarsa Indirect Sales of products 1,679 471 1,090 345
Mineag SQM Africa Ltd. Indirect Sales of products - - 10,289 2,638
Abu Dhabi Fertilizer WLL Indirect Sales of products 1,523 298 1,878 502
Hydro Agri Venezuela Shareholder Sales of product - - 826 363
Ajay Europe S.A.R.L. Indirect Sales of products 4,804 1,659 5,369 1,234
NU3 B.V. Indirect Sales of products 3,380 1,329 2,631 847
Adubo Trevo S.A. Indirect Sales of products 5,148 1,220 380 173
PCS Yumbes SCM Shareholder Purchases of 14,815 2,570 - -
products
PCS Yumbes SCM Shareholder Sales of products 8,755 5,562 11,252 6,976
Hydro Agri (U.K) Ltd. Shareholder Sales of product 723 216 697 169
Hydro Asia trade Pte Ltd. Shareholder Sales of product 3,516 781 4,113 764
Hydro Agri France S.A. Shareholder Sales of product 5,214 1,202 3,190 602
Hydro Agri International Shareholder Sales of product 2,528 149 3,677 573
Hydro Agri International Shareholder Sales of product 5,214 1,202 3,364 1,103
France
Hydro Agri Hellas S.A. Shareholder Sales of product 1,129 253 502 142
Hydro Agri Benelux B.V. Shareholder Sales of product 4,849 983 3,854 394
Hydro agri Rotterdam B.V. Shareholder Sales of product - - 534 175
Hydro Agri Australia Ltd. Shareholder Sales of product 1,195 317 987 191
Hydro Agri Espana S.A. Shareholder Sales of product 3,504 694 - -
Hydro Agri Argentina Shareholder Sales of product 6,076 1,526 1,215 212
Hydro Agri Colombia Ltda Shareholder Sales of product 1,815 586 28 5
Hydro Agri GMBH & CO KG Shareholder Sales of products 936 265 322 85
Hydro Agri Planta Nutri Shareholder Sales of products 1,156 464 581 194
Poland
Ajay North America LLC Indirect Sales of products 5,468 1,730 3,789 1,240
Nutrisi Holding NV Indirect Sales of products - - 1,538 471
21
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 7 - Inventories
Inventories are summarized as follows:
2003 2002
---- ----
ThUS$ ThUS$
Finished products 126,938 126,202
Work in process 88,983 90,961
Supplies 11,317 10,582
---------------- ----------------
Total 227,238 227,745
================ ================
Note 8 - Property, Plant and Equipment
Property, plant and equipment are summarized as follows:
2003 2002
---- ----
ThUS$ ThUS$
Land
Land 20,003 13,453
Mining Concessions 29,790 16,708
Other Lands 13,157 12,777
--------------- ---------------
62,950 42,938
--------------- ---------------
Buildings and infrastructure
Buildings 149,168 156,268
Installations 278,210 280,133
Construction-in-progress 37,746 28,006
Other 20,190 940
--------------- ---------------
485,314 465,347
--------------- ---------------
Machinery and Equipment
Machinery 387,914 388,084
Equipment 104,661 100,174
Construction-in-progress 18,048 13,871
Other 16,407 10,487
--------------- ---------------
527,030 512,616
--------------- ---------------
22
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 8 - Property, Plant and Equipment (continued)
2003 2002
---- ----
ThUS$ ThUS$
Other fixed assets
Tools 7,631 7,968
Furniture and office equipment 13,582 18,190
Project-in-progress 13,987 19,755
Other 5,859 401
--------------- ---------------
41,059 46,314
--------------- ---------------
Amounts relating to technical revaluation of fixed assets
Land 8,651 8,651
Buildings and infrastructure 40,627 40,627
Machinery and equipment 12,109 12,127
Other assets 53 53
--------------- ------------------
61,440 61,458
--------------- ------------------
Total property, plant and equipment 1,177,793 1,128,673
--------------- ------------------
Less: Accumulated depreciation
Land (9,413) (9,135)
Buildings and infrastructure (178,049) (153,942)
Machinery and equipment (265,103) (234,915)
Other fixed assets (16,612) (15,177)
Technical appraisal (32,636) (30,906)
--------------- ------------------
Total accumulated depreciation (501,813) (444,075)
--------------- ------------------
Net property, plant and equipment 675,980 684,598
=============== ==================
2003 2002
Depreciation for the period ended September 30: ThUS$ ThUS$
Buildings and infrastructure 18,977 19,088
Machinery and equipment 23,810 25,013
Other fixed assets 1,030 937
Technical revaluation 1,307 1319
--------------- ------------------
Total depreciation 45,124 46,357
=============== ==================
23
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 8 - Property, Plant and Equipment (continued)
The Company has capitalized assets obtained through leasing, which are included
in other fixed assets and are as follows:
2003 2002
ThUS$ ThUS$
Administrative office buildings 2,086 1,988
Accumulated depreciation (401) (355)
------------------ ----------------
Total assets in leasing 1,685 1,633
================== ================
Note 9 - Investments in and Receivables from Related Parties
a) Information on foreign investments:
There are no plans for the foreign investments to pay dividends, as it is
the Company's policy to reinvest those earnings.
The Company has not designated their foreign investments as net
investment hedges.
b) Transactions performed during the year 2003
On January 27, 2003, SQM Comercial de Mexico S.A. de C.V. and SQM
Nitratos S.A. acquired 8,750 shares of the related company Fertilizantes
Olmeca y SQM S.A. de C.V. which represented 50% of its ownership.
Consequently, Fertilizantes Olmeca y SQM S.A. de C.V. became a subsidiary
of SQM S.A. This transaction gave rise to goodwill for the amount of
ThUS$ 279.
Subsequently, SQM Nitratos S.A. acquired from SQM Comercial de Mexico
S.A. de C.V. 8,749 shares in Fertilizantes Olmeca y SQM S.A. de C.V. This
transaction gave rise to no goodwill or negative goodwill.
On January 31, 2003, SQM S.A. acquired shares owned by SQM Nitratos S.A.
in Sociedad Contractual Minera Antucoya for an amount of ThUS$ 100. This
gave rise to the ownership of all the shares of SCM Antucoya in just one
shareholder. Consequently, this transaction resulted in the legal and
immediate liquidation of SCM Antucoya and the acquisition by SQM S.A. of
all this company's equity, assets and liabilities.
24
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 9 - Investments in and Receivables from Related Parties (continued)
On March 30, 2003, Fertilizantes Olmeca y SQM S.A. de C.V. increased its
capital by ThUS$ 2,000 through the issuance of 431,200 shares, which were
subscribed in full by SQM Nitratos S.A. As a result, SQM Nitratos S.A.
has ownership interest of 78.29% and SQM Comercial de Mexico has
ownership interest of 21.71%.
On March 30, 2003, Soquimich European Holding acquired 50% of the
ownership interest of Mineag SQM Africa Ltd. from Ravlin Investment
Limited for an amount of ThUS$ 990. This transaction gave rise to
goodwill of ThUS$ 705. Consequently, Mineag SQM Africa Ltd. became a
subsidiary of SQM S.A.
On April 28, 2003, SQM Comercial S.A. acquired from Norsk Hydro ASA ,
819,999 shares from Norsk Hydro Chile S.A. and SQM Comercial
Internacional Ltda., as subsidiary company of SQMC, acquired one
remaining share, with which, SQMC becomes the owner and controls 100% of
Norsk Hydro Chile S.A. This transaction generated a goodwill of ThUS$
1,282.
On June 30, 2003, SQM Nitratos S.A. acquired the shares owned by SQM S.A.
in Sociedad Energia y Servicios S.A.. This transaction amounted to ThUS$
2,422 . The above mentioned operation resulted in the consolidation of
all the shares of Energia y Servicios, in one single shareholder, SQM
Nitratos S.A., and as a consequence, through this fact and in full right,
this resulted in the immediate dissolution of Energia y Servicios S.A.
SQM Nitratos S.A. acquired 100% of the shareholder's equity, the assets
and liabilities from the dissolved company.
On June 30, 2003, the subsidiaries SQM Virginia LLC and North American
Trading Company, made a capital contribution in the subsidiary SQM
Lithium Specialties LLP. This capital contribution amounted to ThUS$
1,678, by 99% and 1%, respectively.
On September 30, 2003, the subsidiaries SQM Virginia LLC and North
American Trading Company, made a capital contribution in the subsidiary
SQM Lithium Specialties LLP. amounting to ThUS$ 367, by 99% and 1%,
respectively.
On September 30 2003, SQM Corporation N.V. participated to a capital
increase of Ajay Europe SARL in equal parts with chemicals INC. Both
maintaining its ownership percentages.
25
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 9 - Investments in and Receivables from Related Parties (continued)
c) Transactions performed during the year 2002.
On March 21, 2002, SQM North America Corporation acquired ownership
interest of 50% of the related company SQM Venezuela S.A. for ThUS$ 250,
which added to the ownership interest maintained by SQM Nitratos S.A. in
the aforementioned company, results in SQM Venezuela S.A. being a 100%
indirect subsidiary of SQM S.A. This transaction gave rise to goodwill of
ThUS$ 166.
On April 5, 2002, the subsidiary Royal Seed Trading Corportaion A.V.V.
made a contribution of Th.US$ 120.5 to form a joint venture with Rui Xin
Packaging Materials, Sanhe Co. Ltd.
On May 1, 2002, the subsidiary Soquimich European Holdings B.V. acquired
50% ownership of the affiliate Nutrichem N.V., which subsequently changed
its name to Nutrisi Holding N.V.
On May 7, 2002, SQM Nitratos S.A. concurred to a capital increase in SQM
Brasil Ltda. , which resulted in ownership of 88.54%, SQM Quimicos S.A.
did not concur to this increase and reduced its ownership to 11.46%.
During May 2002, P.S.H. Limited made a capital increase of Th.US$ 250 in
its affiliate Ajay Europe S.A.R.L.
During May 2002, Soquimich European Holding increased its ownership in
its affiliate FNC Italy S.R.L. to 95%, thereby becoming an indirect
subsidiary of SQM S.A. Subsequently, FNC Italy S.R.L. changed its name to
SQM Italia S.R.L.
On May 28, 2002, the subsidiary Inversiones y Asesorias SQM Limitada
changed its name to Almacenes y Depositos Limitada.
On June 12, 2002, Soquimich European Holding acquired 50% of Impronta
S.R.L.
On August 31, 2002, SQM S.A acquired shares, which were owned by SQM
Nitratos S.A. over Cia. Industrial y Minera S.A. (Cimin S.A) in MUS$
5,016. This situation produced that all shares of Cimin S.A. are
concentrated on an only one shareholder, SQM S.A., and consequently, it
was impacted on the immediate dissolution of Cimin S.A, owning SQM S.A.
the total equity, assets and liabilities of this entity.
26
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 9 - Investments in and Receivables from Related Parties (continued)
On September 27, 2002, SQM Nitratos S.A made an contribution of capital
of MUS$ 12,040 over SQM North America Corporation, acquiring the
ownership of 39.946782% over this entity. No concurrence for the increase
of equity made the participation of the old owners decreased. SQM S.A.
reduced its ownership from 81.75% to 49.093506% and Soquimich European
Holding reduced its ownership from 18.25% to 10.959712%.
On September 30, 2002, SQM SA acquired shares which were owned by SQM
Nitratos S.A. over the subsidiary SCM SQM Boratos by MU$ 887. This
situation produced that all shares of SCM SQM Boratos are concentrated on
an only one shareholder, SQM S.A., and consequently, it was impacted on
the immediate dissolution of SCM SQM Boratos, acquiring SQM S.A. the
total shareholder`s equity, assets and liabilities of this entity.
27
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 9 - Investments in and Receivables from Related Companies (continued)
d) Detail of investments in related companies
---------------------------------------------------------------------------------------------------------------------------------
Tax Country of Controlling Number Ownership Equity of
Registration of interest companies
------------------- ----------------------
Number Company origin currency shares 2003 2002 2003 2002
% % ThUS$ ThUS$
---------------------------------------------------------------------------------------------------------------------------------
93390000-2 Empresas Melon S.A.. Chile - 653,748,837 14.05 14.05 302,33 247,340
0-E SQM Lithium Specialties USA US$ - 100.00 100.00 26,392 25,558
Limited*
0-E Ajay North America LLC USA US$ - 49.00 49.00 11,416 14,038
77093830-9 SCM Antucoya* Chile - 490 100.00 100.00 - 6,650
0-E Abu Dhabi Fertilizer UAE US$ 1,961 37.00 37.00 3,177 3,675
Industries WL
0-E Fertilizantes Olmeca y Mexico Mex. $ 183,000 100.00 50.00 - 1,717
SQM S.A. de C.V
0-E Nutrisi Holding N.V. Belgium US$ - 50.00 50.00 3,296 742
0-E Doktor Tarsa Turkey US$ - 50.00 50.00 1,588 471
0-E Mineag SQM Africa Limited South US$ - 100.00 50.00 (217) 640
Africa
0-E Ajay Europe S.A.R.L. France US$ 36,700 50.00 50.00 3,350 634
77557430-5 Sales de Magnesio Ltda. Chile US$ - 50.00 50.00 266 150
81767200-0 Asoc. Garantizadora Chile - - 3.31 3.31 704 664
Pensiones
O-E Rui Xin Packaging China US$ - 25.00 25.00 482 480
Materials Sanhe Co.Ltd
O-E Impronta SRL Italia Euros - 50.00 50.00 1,131 48
Total
------------------------------------------------------------------------------------------------------------------------------
Tax Book value Net income Equity participation
Registration of investment (loss) in net income (loss)
----------------- -------------------- ---------------------
Number Company 2003 2002 2003 2002 2003 2002
ThUS$ ThUS$ ThUS$ ThUS$ ThUS$ ThUS$
------------------------------------------------------------------------------------------------------------------------------
93390000-2 Empresas Melon S.A.. 42,478 34,751 21,893 16,902 3,076 2,375
0-E SQM Lithium Specialties 26,392 25,558 (1,564) - - -
Limited*
0-E Ajay North America LLC 5,594 6,879 924 308 453 151
77093830-9 SCM Antucoya* - 6,650 - - - -
0-E Abu Dhabi Fertilizer 1,175 1,360 174 - 64 -
Industries WL
0-E Fertilizantes Olmeca y - 859 382 - 191
SQM S.A. de C.V -
0-E Nutrisi Holding N.V. 1,648 371 1,511 (220) 756 (110)
0-E Doktor Tarsa 794 236 123 - 61 -
0-E Mineag SQM Africa Limited - 320 (309) - - -
0-E Ajay Europe S.A.R.L. 1,675 317 - - - -
77557430-5 Sales de Magnesio Ltda. 133 75 72 52 36 26
81767200-0 Asoc. Garantizadora 23 22 - - - -
Pensiones
O-E Rui Xin Packaging 121 120 - - - -
Materials Sanhe Co.Ltd
O-E Impronta SRL 566 24 696 - 348 -
--------------------
Total 80,599 77,542
====================
o In development stage
28
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 10 - Goodwill and Negative Goodwill
Goodwill and negative goodwill and the related amortization is summarized as
follows:
a) Goodwill
September 30, 2003 September 30, 2002
Tax Registration Amount amortized Goodwill Amount amortized Goodwill
Number Company during the balance during the period balance
period
ThUS$ ThUS$ ThUS$ ThUS$
0-E PTM - SQM Iberica S.A. - 88 15 85
0-E Doktor Tarsa 62 90 16 377
79768170-9 Soquimich Comercial S.A. 113 310 113 460
78208790-8 SCM SQM Boratos - - 65 -
93390000-2 Empresas Melon S.A. 363 7,759 381 7,333
79626800-K SQM Salar S.A. 32 93 32 137
0-E SQM Mexico S.A. de C.V. 42 1,017 42 1,072
96864750-4 SQM Potassium S.A. 108 1,916 108 2,060
0-E SQM Venezuela S.A. - - 124 41
0-E Comercial Caiman Int. 17 205 - -
S.A.
0-E Fertilizantes Olmeca 42 237 - -
96801610-5 Norsk Hydro Chile S.A. 65 1,229 - -
O-E Impronta Italy S.R.L. - 141 - -
----------------- ----------------- ------------------- --------------
Total 844 13,085 896 11,565
================= ================= =================== ==============
b) Negative Goodwill
September 30, 2003 September 30, 2002
Tax Negative Negative
Registration Amount amortized Goodwill Amount amortized Goodwill
Number Company during the period Balance during the period Balance
ThUS$ ThUS$ ThUS$ ThUS$
79626800-K SQM Salar S.A. 157 18 158 228
96575300-1 Minera Mapocho S.A. 153 525 152 728
O-E Mineag SQM Africa Limited 110 - - -
----------------- ----------------- ------------------- --------------
Total 420 543 310 956
================= ================= =================== ==============
29
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 11 - Other Long-term Assets
Other long-term assets are summarized as follows:
2003 2002
---- ----
ThUS$ ThUS$
Engine and equipment spare-parts, net 24,445 25,507
Nitrate deposit development costs 7,257 4,061
Mineral development costs 12,056 10,821
Pension plan 1,137 1,911
Construction of Salar-Baquedano road 1,800 1,920
Deferred loan issuance costs 2,669 3,871
Other 797 1,066
--------------- ---------------
Total 50,161 49,157
=============== ===============
Note 12 - Bank Debt
a) Short-term bank debt is detailed as follows:
2003 2002
Bank or financial institution ThUS$ ThUS$
Other banks 1,274 996
--------------- ---------------
Total 1,274 996
=============== ===============
Annual average interest rate 3.04% 4.25%
30
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 12 - Bank Debt (continued)
b) Long-term bank debt is detailed as follows:
2003 2002
---- ----
Bank or financial institution ThUS$ ThUS$
Union Bank of Switzerland (1) 200,642 200,642
ING Bank (3) 60,318 60,133
Bank of America N.A. N.Y. (2) 80,723 80,893
---------------- -------------------
Total 341,683 341,668
---------------- -------------------
Less: Current portion (33,683) (61,668)
---------------- -------------------
Long-term portion 308,000 280,000
================ ===================
(1) U.S. dollar-denominated loan without guarantee, interest rate of 7.7%
per annum, paid semi-annually. The principal is due on September 15,
2006.
(2) U.S. dollar-denominated loan without guarantee, interest rate of 2.582%
per annum, paid semi-annually. The principal is divided into five equal
semi-annual partial installments, beginning in November 2003 with the
final installment ending in November 2005.
(3) U.S. dollar-denominated loan without guarantee, interest rate of 1.99%
per annum, paid semi-annually. The principal is divided into two equal
partial installments, in December 2005 and in December 2006.
c) The maturity of long-term debt is as follows:
2003 2002
---- ----
ThUS$ ThUS$
Years to maturity
Current portion 33,683 61,668
1 to 2 years 32,000 32,000
2 to 3 years 216,000 32,000
4 to 5 years 60,000 216,000
--------------- ----------------
Total 341,683 341,668
=============== ================
31
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 13 - Accrued Liabilities
As of September 30, 2003 and 2002, accrued liabilities are summarized as
follows:
2003 2002
---- ----
ThUS$ ThUS$
Provision for royalties 1,494 932
Quarterly bonus 372 540
Commissions on consignment goods 897 629
Taxes and monthly income tax installment payments 1,028 786
Vacation accrual 5,492 4,620
Accrued employee benefits 1,248 223
Legal expenses 1,100 -
Other accruals 3,498 3,175
Marketing expenses 2,100 1,180
------------------ -----------------
Total current liabilities 17,229 12,085
================== =================
Note 14 - Income and Deferred Taxes
a) At September 30, 2003 and 2002 the Company has the following consolidated
balances for retained tax earnings, income not subject to taxes, tax loss
carry-forwards and credit for shareholders:
2003 2002
---- ----
ThUS$ ThUS$
Accumulated tax basis retained earnings
with tax credit 23,997 25,096
Accumulated tax basis retained earnings
with no tax credit - 10
Tax loss carry-forwards (1) 92,099 116,410
Credit for shareholders 4,539 4,639
(1) Income tax losses in Chile can be carried forward indefinitely
32
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 14 - Income and Deferred Taxes (continued)
b) The deferred taxes as of September 30, 2003 and 2002 represented a net
liability of ThUS$ 23,965 and ThUS$ 12,348, respectively, and consisted of:
2003 Deferred tax asset Deferred tax liability
Short-term Long-term Short-term Long-term
---------- --------- ---------- ---------
ThUS$ ThUS$ ThUS$ ThUS$
Temporary differences
Allowance for doubtful accounts 901 308 - -
Vacation accrual 338 - - -
Diferred income 204 - - -
Accrued loss in exchange rate insurance 45 - - 73
Unrealized gain on sale of products 5,065 - - -
Provision for obsolescence - 1,988 - -
Production expenses - - 11,317 -
Accelerated depreciation - - - 60,049
Exploration expenses - - - 4,321
Capitalized interest - - - 6,260
Staff severance indemnities - - - 1,077
Capitalized expenses - - - 665
Tax loss carry-forwards - 15,634 - -
Unaccrued interest 111 - - -
Provision for sinister expenses - - - 425
Other 286 - 28 130
------------------------------------------------------------------------------------------------------------
Total complementary accounts - (701) (2,530) (33,671)
--------------------------------------------------------------------------------------------------------------
Total deferred taxes 6,950 17,229 8,815 39,329
--------------------------------------------------------------------------------------------------------------
33
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 14 - Income and Deferred Taxes (continued)
2002 Deferred tax asset Deferred tax liability
Short-term Long-term Short-term Long-term
---------- --------- ---------- ---------
ThUS$ ThUS$ ThUS$ ThUS$
Temporary differences
Allowance for doubtful accounts 281 832 - -
Vacation accrual 747 - - -
Unrealized gain on sale of products 6,068 - 123 -
Provision for obsolescence - 1,184 - -
Production expenses - - 11,016 -
Accelerated depreciation - - - 58,372
Exploration expenses - - - 4,114
Capitalized interest - - - 6,538
Staff severance indemnities - - - 2,457
Losses from derivative transactions - 591 - -
Capitalized expenses - - - 819
Tax loss carry-forwards - 21,624 - -
Other 369 - 102 648
-----------------------------------------------------------------------------------------------------------------------
Total gross deferred taxes 7,465 24,231 11,241 72,948
Total complementary accounts (12) (1,618) (3,342) (38,433)
-----------------------------------------------------------------------------------------------------------------------
Total deferred taxes 7,453 22,613 7,899 34,515
-----------------------------------------------------------------------------------------------------------------------
c) Income tax expense is summarized as follows:
2003 2002
---- ----
ThUS$ ThUS$
Provision for current income tax (2,978) (3,552)
Effect of deferred tax assets and liabilities (5,011) (6,092)
Effect of amortization of complementary accounts (4,066) 1,138
Other tax charges and credits (249) 420
------------------- ---------------
Total income tax expense (12,304) (8,086)
=================== ===============
34
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 15 - Staff Severance Indemnities
Staff severance indemnities are summarized as follows:
2003 2002
---- ----
ThUS$ ThUS$
Opening balance 9,143 8,326
Increases in obligation 2,411 1,530
Payments (2,355) (805)
Exchange difference 679 (1,094)
------------------- ------------------
Balance as of September 30 9,878 7,957
=================== ==================
Note 16 - Minority Interest
Minority interest is summarized as follows:
Equity Net Income/(Loss)
2003 2002 2003 2002
---- ---- ---- ----
ThUS$ ThUS$ ThUS$ ThUS$
Soquimich Comercial S.A. 22,433 18,363 (2,154) (1,420)
Ajay SQM Chile S.A. 3,084 3,159 (144) (279)
Cape Fear Bulk LLC 109 116 (54) (112)
SQM Indonesia (11) 3 11 7
SQM Italia S.R.L 12 17 7 4
Fenasa 409 261 (119) (55)
------------- ---------- ------------- ------------
Total 26,036 21,919 (2,453) (1,855)
============= ========== ============= ============
35
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 17 - Shareholders' Equity
a) Changes to shareholders' equity consisted of:
Accumulated
deficit
of
subsidiaries
in
Paid-in Other development
Number capital reserves stage
of shares ThUS$ ThUS$ ThUS$
------------------------------------------------------------------------------------------------------------------------------------
Balance January 1, 2002 263,196,524 477,386 131,066 (2,223)
Transfer 2000 net income to retained earnings - - - -
Definitive dividends - - - -
Accumulated deficit from subsidiaries in development stage (1) - - - (874)
Other comprehensive income (2) - - (8,642) -
Net income for the year - - - -
------------------------------------------------------------------------------------------------------------------------------------
Balance September 30, 2002 263,196,524 477,386 122,424 (3,097)
------------------------------------------------------------------------------------------------------------------------------------
Balance January 1, 2003 263,196,524 477,386 125,111 (3,661)
Transfer 2002 net income to retained earnings - - - -
Definitive dividends - - - -
Accumulated deficit from subsidiaries in development stage (1) - - - (1,564)
Other comprehensive income (2) - - 7,025 -
Net income for the year - - - -
------------------------------------------------------------------------------------------------------------------------------------
Balance September 30, 2003 263,196,524 477,386 132,136 (5,225)
------------------------------------------------------------------------------------------------------------------------------------
Retained Net
earnings income Total
ThUS$ ThUS$ ThUS$
----------------------------------------------------------------------------------------------------------------------
Balance January 1, 2002 195,366 30,102 831,697
Transfer 2000 net income to retained earnings 30,102 (30,102) -
Definitive dividends (14,844) - (14,844)
Accumulated deficit from subsidiaries in development stage (1) - - 874
Other comprehensive income (2) - - (8,642)
Net income for the year - 30,383 30,383
----------------------------------------------------------------------------------------------------------------------
Balance September 30, 2002 210,624 30,383 837,720
----------------------------------------------------------------------------------------------------------------------
Balance January 1, 2003 210,624 40,202 849,662
Transfer 2002 net income to retained earnings 40,202 (40,202) -
Definitive dividends (19,894) - (19,894)
Accumulated deficit from subsidiaries in development stage (1) - - 1,564
Other comprehensive income (2) - - 7,025
Net income for the year - 36,107 36,107
----------------------------------------------------------------------------------------------------------------------
Balance September 30, 2003 230,932 36,107 871,336
----------------------------------------------------------------------------------------------------------------------
(1) The subsidiaries in development stage are SQM Lithium Specialties
Limited in 2003 and SQM Lithium Specialties Limited and SCM Antucoya in
2002.
(2) Other comprehensive income includes translation adjustments, and in 2003
other comprehensive income also includes the effect of the recognition of
an additional liability for the Company's under-funded pension as of
September 30, 2003.
36
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 17 - Shareholders' Equity (continued)
b) The composition of other comprehensive income as of September 30, 2003 is as
follows:
For the period
ended As of
September 30, September 30,
2003 2003
---- ----
Detail ThUS$ ThUS$
Technical appraisal - 151,345
Changes to other comprehensive income from equity
method investments:
Soquimich Comercial S.A. (1) 2,923 (5,993)
Isapre Norte Grande Ltda. (1) 14 (84)
Inversiones Augusta S.A. (1) - (761)
SQM Ecuador S.A. (1) - (270)
Almacenes y Depositos Ltda. (1) 31 (59)
Asociacion Garantizadora de Pensiones (1) - (18)
Empresas Melon S.A. (1) 4,198 (11,437)
Sales de Magnesio Ltda. (1) - (17)
SQM North America Corp. (2) (141) (1,288)
Other Companies (1) - 718
---------------------- -------------------------
Total other comprehensive income 7,025 132,136
====================== =========================
(1) Corresponds to translation adjustment and monetary correction
(2) Corresponds to the effect of the recognition of an additional liability
for the Company's under-funded pension as of September 30, 2003.
c) Capital consists of 263,196,524 fully authorized, subscribed and paid shares
with no par value, divided into 142,819,552 Series A shares and 120,376,972
Series B shares.
The preferential voting rights of each series are as follows:
Series A: If the election of the president of the Company
results in a tied vote, the Company's directors may
vote once again, without the vote of the director
elected by the Series B shareholders.
Series B: 1) A general or extraordinary shareholders' meeting may be
called at the request of shareholders representing 5% of
the Company's Series B shares.
37
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 17 - Shareholders' Equity (continued)
2) An extraordinary meeting of the Board of Directors
may be called with or without the agreement of the
Company's president, at the request of a director
elected by Series B shareholders.
Note 18 - Derivative Instruments
Derivative instruments are recorded at their fair value at period. Changes in
fair value are recognized in income with the liability recorded in other current
liabilities. Losses from options relate to fees paid by the Company to enter
into such contracts. As of September 30, 2003 the Company's derivative
instruments are as follows:
Notional Accounts affected
or Description of the
Type of Covered Expiration contract Position Liability / Asset Income
derivative Amount Type purchase/sale amount (loss)
recorded
Put option 21,390 4th quarter of 2003 Exchange rate P - (40)
Put option 10,486 4th quarter of 2003 Exchange rate P - (20)
Forwards 486 4th quarter of 2003 Exchange rate P 27 -
Forwards 3,348 4th quarter of 2003 Exchange rate P 115 -
Forwards 2,961 4th quarter of 2003 Exchange rate P 48 -
Forwards 998 4th quarter of 2003 Exchange rate P 51 -
Forwards 2,983 4th quarter of 2003 Exchange rate P 175 -
Forwards 431 4th quarter of 2003 Exchange rate P 11 -
Forwards 2,989 4th quarter of 2003 Exchange rate P 56 -
----------- ----------------- -------------
46,072 483 (60)
=========== ================= =============
38
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 19 - Non-Operating Income and Expenses
Amounts included in non-operating income and expenses are summarized as follows:
a) Non-operating income
2003 2002
---- ----
ThUS$ ThUS$
Interest income 3,246
2,450
Reversal of allowance for doubtful accounts 426 347
Insurance recoveries 1,038
154
Net foreign exchange 2,845 -
Sales of materials and services 429
833
Equity participation in net income of unconsolidated
subsidiaries
4,794 2,742
Other income 1,244
1,319
-------------- --------------
Total 12,821 9,046
============== ==============
b) Non-operating expenses
2003 2002
---- ----
ThUS$ ThUS$
Write-off of property, plant, and equipment 6,014 1,150
Interest expense 16,392 22,536
Amortization of goodwill 844 896
Legal expenses 1,375 -
Project relating to commercial effectiveness - 1,406
Net foreign exchange - 733
Equity participation in net loss of unconsolidated subsidiaries - 138
Work disruption expenses 1,476 -
Other expenses 3,425 2,840
-------------- -----------
Total 29,526 29,699
============== ===========
39
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 20 - Assets and Liabilities Denominated in Foreign Currency
2003 2002
---- ----
Assets ThUS$ ThUS$
Total assets
Chilean pesos 161,269 114,855
US dollars 1,099,608 1,100,774
Euro 7,481 7,253
UF 60,584 55,562
Other currencies 33,121 18,350
Current liabilities
Chilean pesos 55,865 28,664
US dollars 48,289 85,677
Euro 10,814 13,225
UF 235 4,039
Other currencies 6,632 2,038
Long-term liabilities
Chilean pesos 5,189 6,127
US dollars 334,520 294,544
UF 3,075 2,760
Other currencies 72 80
40
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 21 - Commitments and Contingencies
I. Contingencies:
(a) The Company did not record the potential insurance reimbursement
for damages incurred in the potassium sulfate ponds in the Atacama
salt deposit.
(b) Material lawsuits or other legal actions of which the Company is
party to:
1. Plaintiff : SQM Salar S.A.
Defendants : ACE Seguros S.A. (formerly - Cigna Compania de
Seguros (Chile) S.A.) and Chubb de Chile
Compania de Seguros Generales S.A.
Date of lawsuit : April 2002
Matter : Arbitration
Status : Collection of compensation for insured claim
Instance : Evidence verification
Nominative value: ThUS$ 36,316
2. Plaintiffs : Du Guano de Poisson Angibaud S.A. and Generale
de Nutrition Vegetale SAS
Defendants : Soquimich European Holdings B.V., NU3
N.V. and SQM France S.A.
Date of lawsuit : March 2003
Court : Court of Arbitration in France
Matter : Termination of the company relationship and
liquidation of the company Generale de Nutrition
Vegetale SAS
Status : The lawsuit is being contested
Nominative value: ThEuro$ 30,295
41
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 21 - Commitments and Contingencies (continued)
I. Contingencies (continued):
(c) Models for the Production of the Maria Elena site
The Company is currently reviewing the "Models for the Production
of the Maria Elena site" which may be implemented as a result of
the Decontamination Plan (see note 24). The different alternatives
for production and technology development for the Maria Elena
site, which are a part of the above-mentioned "Production Models"
do not proactively generate significant changes in the present ore
reserves or forecasted sales volumes. These options include
possibilities to use new production methods and are related to the
"leaching piles" and implementing a mixed system, which would be
comprised with the use of the aforementioned technology and the
current production methods. Advantages and disadvantages of the
different options relate to the extension of the transition
periods of new technology, the investments that will be required,
production costs, changes in technologies and in productive
processes and the effects on certain of the Company's assets and
their value. The possible effects on the valuation of assets are
not yet determinable.
(d) Other
The Company and its subsidiaries are involved in litigation in the
ordinary course of business. Based on the advice of counsel,
management believes the litigation will not have a material effect
on the consolidated financial statements.
II. Commitments:
(a) The subsidiary SQM Salar S.A. maintains an agreement with a
government agency, whereby the Company must make annual payments
until 2030 based on the Company's annual sales. This amount, which
has been paid since the beginning of the agreement in 1996,
amounted to ThUS$ 3,419 in 2003 (ThUS$ 2,546 in 2002).
(b) The Company has certain indirect guarantees, which relate to
agreements with no remaining payments pending. These guarantees
are still in effect and approved by the Company's Board of
Directors; however, they have not been used by the subsidiaries.
42
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 22 - Third Party Guarantees
As of September 30, 2003 and 2002 the Company has the following indirect
guarantees outstanding:
Debtor Balances outstanding
----------------------------------------------------- ---------------------------
Beneficiary Name Relationship 06/30/2003 06/30/2002
ThUS$ ThUS$
Phelps Dodge Corporation SQM Potasio S.A. Subsidiary 2,784 3,600
Bank of America N.A. RS Agro-Chemical Trading A.V.V. Subsidiary 80,723 80,893
Note 23 - Sanctions
During 2003 and 2002, the SVS did not apply sanctions to the Company, its
directors or managers.
Note 24 - Environmental Projects
Disbursements incurred by the Company as of September 30, 2003 relating to its
investments in production processes and compliance with regulations related to
industrial processes and facilities are as follows:
Future
2003 Disbursements
---- -------------
ThUS$ ThUS$
Project
Environmental protection department 291 85
Dressing-room, Tocopilla 276 1
Renewal of water network against fire 4 35
Technology change in Maria Elena 1,260 2,117
Tocopilla dust collection 484 112
Environmental impact evaluations 69 -
Plant for the treatment of wastewater, Ministry of Public Works 300 -
Extension of carbonate plant 434 116
Borate plant emission control 21 79
Dry plants aspiration system 91 9
Environmental evaluation, Guggenheim camp 27 -
Transfer of Steamblock boilers (environmental authorization) 73 -
Modification of fire network 40 45
----------------- --------------------
Total 3,370 2,599
================= ====================
43
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 24 - Environmental Projects (continued)
Protecting the environment is a constant concern for SQM, regarding both the
Company's productive processes and the manufactured goods.
SQM is currently implementing an Environmental Management System, which is based
on the ISO 14000 standard, with which, the Company's environmental performance
will be improved through the effective application of the Environmental Policy
of SQM. The implementation program stipulates that late in 2004, all the
operations maintained by the Company in Regions I and II of Chile, will have a
fully implemented Environmental Management System.
As part of the conversion project to natural gas, the supplier will in turn make
an investment of US$ 5,500 million to be paid by the Company on a monthly basis
for the duration of the contract (10 years).
Technological processes are intended to be environmentally friendly in order to
reduce residual materials and improve technical conditions to ensure an
effective protection to the environment. A good example of this is ongoing
conversion of oil to natural gas used in the Company's plants.
Processes where sodium nitrate is used as a raw material are carried out in
geographical areas such as the desert with favorable weather conditions for the
drying of solid materials and the evaporation of liquids used in solar energy.
The extraction of minerals in open pit mines, given their low waste-to-mineral
ratio, gives rise to sites that have little impact on the environment. The
extraction process and ore crushing produce particles that are consistent with
the industry of operation.
On August 10, 1993, the Ministry of Health published a resolution under the
Sanitary Code that established that the levels of breathable particles present
at Maria Elena Plant exceeded the level allowed for the quality of air and,
which affected the nearby city of Maria Elena. Particles mainly come from dust
that results from processing the sodium nitrate, particularly at the crushing
process prior to leaching. The decontamination plan presented by the Company to
reduce the level of particles was approved with certain modifications by means
of Decree No. 164. As a result of the investments and processes implemented
according to the approved plan, the Company has substantially reduced the levels
of particles in the air. Resolution No. 384, made public on May 16, 2003,
authorized the review and a new draw up of the decontamination plan for the city
of Maria Elena. The Supreme Decree containing the final decontamination plan
should be published in the Offcicial Gazette during the following months.
44
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Notes to the Consolidated Financial Statements
(A translation of the original in Spanish- see note 2 (a))
Note 24 - Environmental Projects (continued)
It is not possible to assure that within such period the Company will be free
from warnings, fines or even eventual temporary closing of the crushing plant in
Maria Elena. The Company is continuously researching techniques, processes and
systems relating to the processing of sodium nitrate that could even further
reduce the level of particles in the city of Maria Elena.
Ore treatment operations, as they are controlled processes, produce solid
residual materials that are non-soluble by-products and a certain degree of
moisture.
Productive operations based on brine, are carried out at the Atacama Salt Mine
and almost 95% of the energy used is solar energy and the remaining 5% comes
from natural gas, electricity and fossil fuels. Residual brine left after the
production processes are again injected to the Atacama Salt Mine in order to
minimize the possible environmental impact.
SQM entered into a contract with the National Forestry Corporation (CONAF) aimed
at researching the activities of flamingo groups that live in the Atacama Salt
Mine lagoons. Such research includes a population count of the birds and
wildlife, breeding research, additional behavior research and the climate
phenomena of the area.
Consistent with the Company's ongoing commitment with the environmental
authorities, the Company actively participates in the Joint Monitoring Research
project for the Atacama Salt Mine watershed along with other mining companies
that make use of the water resources that supply the Atacama Salt Mine
watershed.
Note 25 - Subsequent Events
Dated October 24, 2003 the Company's Board of Directors agreed to authorize SQM
S.A.'s management to suscribe the agreements required to acquire all the shares
of the Chilean Company PCS Yumbes S.C.M., a subsidiary of Potash Corporation of
Saskatchewan Inc.
Management, except for that mentioned above, is not aware of any significant
events occurred between September 30 and the date of issuance of these financial
statements (November 5, 2003), which may affect them.
45
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.
SOCIEDAD QUIMICA Y MINERA DE CHILE S.A.
Conf: /s/ Ricardo Ramos
------------------
Ricardo Ramos
Chief Financial Officer
Date: December 9, 2003.