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. September 14, 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 June 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 August 22, 2018.

 

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

For the period ended

June 30, 2018

 

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

In Thousands of United States Dollars

 

 This document includes:

-

Independent Auditor’s Report

-

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	22
2.4	Accounting pronouncements	23
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	36
3.16	Deferred acquisition costs from insurance contracts	37
3.17	Trade and other receivables	37

 

  

 

3.18	Inventory measurement	38
3.19	Investments in associates and joint ventures	38
3.20	Transactions with non-controlling interests	39
3.21	Related party transactions	39
3.22	Property, plant and equipment	40
3.23	Depreciation of property, plant and equipment, continued	41
3.24	Goodwill	41
3.25	Intangible assets other than goodwill	42
3.26	Research and development expenses	44
3.27	Prospecting expenses	44
3.28	Impairment of non-financial assets	45
3.29	Minimum dividend	45
3.30	Earnings per share	46
3.31	Trade and other payables	46
3.32	Interest-bearing borrowings	46
3.33	Other provisions	46
3.34	Obligations related to employee termination benefits and pension commitments	47
3.35	Compensation plans	47
3.36	Revenue recognition	48
3.37	Finance income and finance costs	49
3.38	Income tax and deferred taxes	49
3.39	Segment reporting	50
3.40	Responsibility for Information and Estimates Made	51
3.41	Environment	52
Note 4	Financial risk management	52
4.1	Financial risk management policy	52
4.2	Risk factors	53
4.3	Risk measurement	57
Note 5	Changes in accounting estimates and policies (consistent presentation)	58
5.1	Changes in accounting estimates	58
5.2	Changes in accounting policies	58
Note 6	Background of companies included in consolidation	59
6.1	Parent’s stand-alone assets and liabilities	59
6.2	Parent entity	59
6.3	Joint arrangements of controlling interest	59

 

  

6.4	General information on consolidated subsidiaries	60
6.5	Information attributable to non-controlling interests	63
6.6	Information on consolidated subsidiaries	64
6.7	Detail of transactions between consolidated companies	68
Note 7	Cash and cash equivalents	70
7.1	Types of cash and cash equivalents	70
7.2	Short-term investments, classified as cash equivalents	70
7.3	Information on cash and cash equivalents by currency	71
7.4	Amount restricted (unavailable) cash balances	71
7.5	Short-term deposits, classified as cash equivalents	72
7.6	Other information	74
Note 8	Inventories	75
Note 9	Related party disclosures	76
9.1	Related party disclosures	76
9.2	Relationships between the parent and the entity	76
9.3	Detailed identification of the link between the Parent and subsidiary	77
9.4	Detail of related parties and related party transactions	79
9.5	Trade receivables due from related parties, current:	80
9.6	Trade payables due to related parties, current:	80
9.7	Board of Directors and Senior Management	81
9.8	Key management personnel compensation	84
Note 10	Financial instruments	85
10.1	Types of other financial assets	85
10.2	Trade and other receivables	86
10.3	Hedging assets and liabilities	89
10.4	Financial liabilities	91
10.5	Trade and other payables	104
10.6	Financial liabilities at fair value through profit or loss	105
10.7	Financial asset and liability categories	106
10.8	Fair value measurement of assets and liabilities	108
10.9	Financial assets pledged as a guarantee	110
10.10	Estimated fair value of financial instruments and financial derivatives	111
10.11	Nature and scope of risks arising from financing instruments	112
Note 11	Equity-accounted investees	113
11.1	Investments in associates recognized according to the equity method of accounting	113
11.2	Assets, liabilities, revenue and expenses of associates	115

 

  

11.3	Other information	116
11.4	Disclosures on interest in associates	116
Note 12	Joint Ventures	118
12.1	Policy for the accounting of equity accounted investment in joint ventures	118
12.2	Disclosures of interest in joint ventures	118
12.3	Investment in joint ventures accounted for under the equity method of accounting	120
12.4	Assets, liabilities, revenue and expenses from joint ventures:	124
12.5	Other Joint Venture disclosures:	125
Note 13	Intangible assets and goodwill	126
13.1	Balances	126
13.2	Disclosures on intangible assets and goodwill	126
Note 14	Property, plant and equipment	132
14.1	Types of property, plant and equipment	132
14.2	Reconciliation of changes in property, plant and equipment by type:	134
14.3	Detail of property, plant and equipment pledged as guarantee	138
14.4	Impairment of assets	138
14.5	Additional information	138
Note 15	Employee benefits	139
15.1	Provisions for employee benefits	139
15.2	Policies on defined benefit plan	140
15.3	Other long-term benefits	141
15.4	Post-employment benefit obligations	142
15.5	Staff severance indemnities	142
Note 16	Executive compensation plan	144
Note 17	Disclosures on equity	145
17.1	Capital management	145
17.2	Disclosures on preferred share capital	146
17.3	Disclosures on reserves in equity	148
17.4	Dividend policies	151
17.5	Interim and provisional dividends	153
Note 18	Provisions and other non-financial liabilities	156
18.1	Types of provisions	156
18.2	Description of other provisions	157
18.3	Other current liabilities	158
18.4	Changes in provisions	159
Note 19	Contingencies and restrictions	160

 

  

19.1	Lawsuits and other relevant events	160
19.2	Restrictions to management or financial limits	168
19.3	Environmental contingencies	169
19.4	Tax contingency, continued	171
19.5	Contingencies regarding the Changes to the Contracts with Corfo. Appeal No. 10301-2018, Santiago Court of Appeals:	173
19.6	Restricted or pledged cash	174
19.7	Securities obtained from third parties	175
19.8	Indirect guarantees	176
Note 20	Earnings per share	178
Note 21	Borrowing costs	178
21.1	Costs of capitalized interest, property, plant and equipment	179
Note 22	Effect of fluctuations in foreign currency exchange rates	179
Note 23	Environment	181
23.1	Disclosures of disbursements related to the environment	181
23.2	Detail of information on disbursements related to the environment	182
23.3	Description of each project, indicating whether these are in process or have been finished	189
Note 24	Other current and non-current non-financial assets	193
Note 25	Reportable segments	194
25.1	Reportable segments	194
25.2	Reportable segment disclosures:	196
25.3	Statement of comprehensive income classified by reportable segments based on groups of products	198
25.4	Revenue from transactions with other Company’s operating segments	200
25.5	Disclosures on geographical areas	200
25.6	Disclosures on main customers	200
25.7	Segments by geographical areas as of June 30, 2018 and 2017	201
25.8	Property, plant and equipment classified by geographical areas	202
Note 26	Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature	203
26.1	Revenue	203
26.2	Cost of sales	203
26.3	Other income	204
26.4	Administrative expenses	204
26.5	Other expenses by function	205

 

  

26.6	Other income (expenses)	205
26.7	Summary of expenses by nature	206
26.8	Finance expenses	207
Note 27	Income tax and deferred taxes	208
27.1	Current and non-current tax assets	208
27.2	Current tax liabilities	209
27.3	Income tax and deferred taxes	210
Note 28	Disclosures on the effects of fluctuations in foreign currency exchange rates	221
Note 29	Mineral resource exploration and evaluation expenditure	226
Note 30	Assets held for sale	227
Note 31	Lawsuits and complaints	228
Note 32	Sanction proceedings	231
Note 33	Events occurred after the reporting date	232
33.1	Authorization of the financial statements	232
33.2	Disclosures on events occurring after the reporting date	232
33.3	Details of dividends declared after the reporting date	234

 

 

Consolidated Classified Statements of Financial Position

 

 

Assets		Note				As of June 30, 2018 ThUS$				As of December 31, 2017 ThUS$
						Not audited				Audited
Current assets
Cash and cash equivalents			7.1				528,022				630,438
Other current financial assets			10.1				428,776				366,979
Other current non-financial assets			24				38,250				26,883
Trade and other receivables, current			10.2				442,720				446,875
Trade receivables due from related parties, current			9.5				73,303				59,132
Current inventories			8				905,767				902,074
Current tax assets			27.1				41,267				32,291
Current assets other than those classified as held for sale or disposal							2,458,105				2,464,672
Non-current assets or groups of assets classified as held for sale			30				62,305				1,589
Total current assets							2,520,410				2,466,261
Non-current assets
Other non-current financial assets			10.1				34,930				42,879
Other non-current non-financial assets			24				28,138				19,262
Trade receivables, non-current			10.2				1,706				1,912
Investments classified using the equity method of accounting			11.1-12.3				114,195				146,425
Intangible assets other than goodwill			13.1				129,201				113,787
Goodwill			13.1				34,758				44,177
Property, plant and equipment			14.1				1,405,897				1,429,354
Tax assets, non-current			27.1				32,179				32,179
Total non-current assets							1,781,004				1,829,975
Total assets							4,301,414				4,296,236

 

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

 

 

Consolidated Classified Statements of Financial Position, (continued)

 

 

Liabilities and Equity		Note				As of June 30, 2018 ThUS$				As of December 31, 2017 ThUS$
						Not audited				Audited
Current liabilities
Other current financial liabilities			10.4				155,555				220,328
Trade and other payables, current			10.5				182,654				196,280
Trade payables due to related parties, current			9.6				135				1,365
Other current provisions			18.1				79,889				63,445
Current tax liabilities			27.2				59,046				75,402
Provisions for employee benefits, current			15.1				9,990				22,421
Other current liabilities			18.3				205,251				168,804
Total current liabilities							692,520				748,045
Non-current liabilities
Other non-current financial liabilities			10.4				1,221,920				1,031,507
Other non-current provisions			18.1				28,202				30,001
Deferred tax liabilities			27.3				183,913				205,283
Provisions for employee benefits, non-current			15.1				35,049				33,932
Total non-current liabilities							1,469,084				1,300,723
Total liabilities							2,161,604				2,048,768
Equity			17
Share capital							477,386				477,386
Retained earnings							1,624,784				1,724,784
Other reserves							(13,643	)			(14,349	)
Equity attributable to owners of the Parent							2,088,527				2,187,821
Non-controlling interests							51,283				59,647
Total equity							2,139,810				2,247,468
Total liabilities and equity							4,301,414				4,296,236

 

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

 

 

Consolidated Statements of Income by Function

 

 

						January to June								April to June
		Note				2018 ThUS$				2017 ThUS$				2018 ThUS$				2017 ThUS$
						Not audited
Revenue			26.1				1,157,420				1,023,865				638,697				505,274
Cost of sales			26.2				(740,364	)			(666,015	)			(414,317	)			(325,367	)
Gross profit							417,056				357,850				224,380				179,907
Other income			26.3				9,477				5,862				4,916				4,467
Administrative expenses			26.4				(56,264	)			(46,087	)			(31,080	)			(23,876	)
Other expenses by function			26.5				(17,305	)			(13,396	)			(10,843	)			(7,621	)
Other gains (losses)			26.6				(462	)			(991	)			(184	)			85
Profit (loss) from operating activities							352,502				303,238				187,189				152,962
Finance income							10,693				5,716				6,024				3,345
Finance costs			21-26.8				(28,361	)			(25,546	)			(15,644	)			(12,908	)
Share of profit of associates and joint ventures accounted for using the equity method			11-12				9,491				7,824				5,070				3,169
Foreign currency translation differences			22				(602	)			(4,707	)			(89	)			(6,375	)
Profit (loss) before taxes							343,723				286,525				182,550				140,193
Income tax expense, continuing operations			27.3				(96,155	)			(82,610	)			(48,864	)			(39,319	)
Profit (loss) from continuing operations							247,568				203,915				133,686				100,874
Profit attributable to							247,568				203,915				133,686				100,874
Owners of the Parent							247,697				204,386				133,872				101,154
Non-controlling interests							(129	)			(471	)			(186	)			(280	)
Profit for the year							247,568				203,915				133,686				100,874

 

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

 

 

Consolidated Statements of Income by Function, (continued)

 

 

						January to June								April to June
		Note				2018				2017				2018				2017
						US$				US$				US$				US$
						Not audited
Earnings per share
Common shares
Basic earnings per share (US$ per share)			20				0.9411				0.7766				0.5086				0.3843
Diluted common shares
Diluted earnings per share (US$ per share)			20				0.9411				0.7766				0.5086				0.3843

 

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

 

  

Consolidated Statements of Comprehensive Income

 

 

		January to June
		2018				2017				2018				2017
Statement of comprehensive income		ThUS$				ThUS$				ThUS$				ThUS$
						Not audited
Profit (loss) for the year			247,568				203,915				133,686				100,874
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			59				(606	)			484				668
Total other comprehensive income that will not be reclassified to profit for the year, before taxes			59				(606	)			484				668
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			(5,771	)			(1,498	)			(4,787	)			(313	)
Other comprehensive income before taxes			(5,771	)			(1,498	)			(4,787	)			(313	)
Financial assets held for sale
Gain (loss) from revaluations of financial assets held for sale, net of tax			(3,176	)			(3,865	)			(10,297	)			(3,865	)
Other comprehensive income before taxes			(3,176	)			(3,865	)			(10,297	)			(3,865	)
Financial assets measured at fair value with changes in other comprehensive income
Gain (loss) from cash flow hedges			8,264				2,133				10,057				(2,289	)
Other comprehensive income, net of tax			8,264				2,133				10,057				(2,289	)
Total other comprehensive income that will be reclassified to profit for the year			(683	)			(3,230	)			(5,027	)			(6,467	)
Other items of other comprehensive income before taxes			(624	)			(3,836	)			(4,543	)			(5,799	)
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			182				129				(128	)			(117	)
Accumulated income taxes related to items of other comprehensive income that will not be reclassified to profit for the year			182				129				(128	)			(117	)
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			863				(38	)			406				(38	)
Income taxes related to cash flow hedges in other comprehensive income			-				24				-				24
Accumulated income taxes related to items of other comprehensive income that will be reclassified to profit for the year			863				(14	)			406				(14	)
Total other comprehensive income			421				(3,721	)			(4,265	)			(5,930	)
Total comprehensive income			247,989				200,194				129,421				94,944
Comprehensive income attributable to
Owners of the Parent			248,041				200,662				129,497				95,222
Non-controlling interests			(52	)			(468	)			(76	)			(278	)
Total comprehensive income			247,989				200,194				129,421				94,944

 

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

 

 

Consolidated Statements of Cash Flows

 

  

Consolidated Statements of cash flows		Note				6/30/2018 ThUS$				6/30/2017 ThUS$
Cash flows from operating activities
Cash receipts from sales of goods and rendering of services							1,125,188				1,002,485
Cash receipts from premiums and benefits, annuities and other benefits from policies entered							1,023				-
Cash payments to suppliers for the provision of goods and services (1)							(593,754	)			(529,967	)
Cash payments to and on behalf of employees							(101,418	)			(71,359	)
Other payments related to operating activities							(9,155	)			(6,395	)
Net cash generated from (used in) operating activities							421,884				394,764
Dividends received							8,223				1,481
Interest paid							(27,336	)			(17,605	)
Interest received							9,671				5,716
Income taxes paid							(129,753	)			(33,446	)
Other incomes (outflows) of cash (1)							(22,033	)			(52,071	)
Net cash generated from (used in) operating activities							260,656				298,839
Cash flows from (used in) investing activities
Payments made to acquire interest in joint ventures							(19,536	)			(42	)
Proceeds from the sale of property, plant and equipment							23				3,924
Acquisition of property, plant and equipment							(128,761	)			(48,307	)
Proceeds from sales of intangible assets							6,174				1,291
Purchases of intangible assets							-				-
Proceeds from the repayment of advances and loans granted to third parties							(2,264	)			21
Other inflows (outflows) of cash (2)							(37,844	)			(31,602	)
Net cash generated from (used in) investing activities							(182,208	)			(74,715	)

 

(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,

 

 

Consolidated Statements of Cash Flows, (continued)

 

  

		Note				6/30/2018 ThUS$				6/30/2017 ThUS$
Cash flows used in financing activities
Proceeds from long-term loans							125,115				-
Proceeds from short-term borrowings							120,000				20,000
Repayment of borrowings							(83,000	)			(83,697	)
Dividends paid							(332,653	)			(159,412	)
Net cash generated used in financing activities							(170,538	)			(223,109	)
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate							(92,090	)			1,015
Effects of exchange rate fluctuations on cash held							(10,326	)			1,941
Net (decrease) increase in cash and cash equivalents							(102,416	)			2,956
Cash and cash equivalents at beginning of period							630,438				514,669
Cash and cash equivalents at end of period							528,022				517,625

 

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

 

 

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			-				-				-								-				-				-				247,697				247,697				(129	)			247,568
Other comprehensive income			-				(5,853	)			8,264				(2,313	)			247				-				345				-				345				76				421
Comprehensive income			-				(5,853	)			8,264				(2,313	)			247				-				345				247,697				248,042				(53	)			247,989
Dividends			-				-				-				-				-				-				-				(347,697	)			(347,697	)			(8,311	)			(356,008	)
Increase (decrease) due to transfers and other changes			-				-				-				-				-				361				361				-				361				-				361
Increase (decrease) in equity			-				(5,853	)			8,264				(2,313	)			247				361				706				(100,000	)			(99,294	)			(8,364	)			(107,658	)
Equity as of June 30, 2018 (Not Audited)			477,386				(30,766	)			10,512				624				(5,706	)			11,693				(13,643	)			1,624,784				2,088,527				51,283				2,139,810

 

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

 

 

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			-				-				-								-				-				-				204,386				204,386				(471	)			203,915
Other comprehensive income			-				(1,501	)			2,157				(3,903	)			(477	)			-				(3,724	)			-				(3,724	)			3				(3,721	)
Comprehensive income			-				(1,501	)			2,157				(3,903	)			(477	)			-				(3,724	)			204,386				200,662				(468	)			200,194
Dividends			-				-				-				-				-				-				-				(257,678	)			(257,678	)			(1,699	)			(259,377	)
Increase (decrease) due to transfers and other changes			-				-				-				-				-				3,500				3,500				(3,500	)			-				-				-
Increase (decrease) in equity			-				(1,501	)			2,157				(3,903	)			(477	)			3,500				(224	)			(56,792	)			(57,016	)			(2,167	)			(59,183	)
Equity as of June 30, 2017 (Not Audited)			477,386				(20,964	)			2,221				(390	)			(5,311	)			11,332				(13,112	)			1,724,784				2,189,058				59,031				2,248,089

 

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

 

Note 1

Identification and Activities of the Company and Subsidiaries

 

1.1

Historical 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.

 

1.2

Main 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.

 

1.3

Codes of main activities

 

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

 

-

1700 (Mining)

 

-

2200 (Chemical products)

 

-

1300 (Investment)

 

1.4

Description 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.

 

 

Note 1

Identification and Activities of the Company and Subsidiaries (continued)

 

1.4

Description 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 100 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.

 

 

 

Note 1

Identification and Activities of the Company and Subsidiaries (continued)

 

1.4

Description 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.

 

1.5

Other background

 

Staff

 

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

 

		6/30/2018												12/31/2017
Employees		SQM S,A				Other subsidiaries				Total				SQM S.A.				Other subsidiaries				Total
Executives			43				76				119				43				77				120
Professionals			148				1,003				1,151				143				942				1,085
Technicians and operators			248				3,260				3,508				248				3,177				3,425
Foreign employees			18				302				320				19				272				291
Overall total			457				4,641				5,098				453				4,468				4,921

 

 

Note 1

Identification and Activities of the Company and Subsidiaries (continued)

 

1.5

Other 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 June 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 June 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
The Bank of New York Mellon, ADRs			-				-				38,090,112				31.64	%			14.47	%
Sociedad de Inversiones Pampa Calichera S.A.(*)			44,894,152				31.43	%			4,769,106				3.96	%			18.87	%
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	%
Inversiones Global Mining (Chile) Limitada (*)			8,798,539				6.16	%			-				-				3.34	%
Banco de Chile via non-resident third party accounts			53,139				0.04	%			9,655,535				8.02	%			3.69	%
Banco Itau via investor accounts			19,125				0.01	%			7,959,986				6.61	%			3.03	%
Banco Santander via foreign investor accounts			-				-				6,517,827				5.41	%			2.48	%

 

(*) Total Pampa Group 29,12%

 

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 June 30, 2018 the total number of shareholders had risen to 1,516.

 

 

Note 2

Basis of presentation for the consolidated financial statements

 

2.1

Accounting period

 

These consolidated financial statements cover the following periods:

 

-

Consolidated Statements of Financial Position as of June 30, 2018 and, December 31,2017.

-

Consolidated Statements of Changes in Equity as of June 30, 2018 and 2017

-

Consolidated Statements of Comprehensive Income as of June 30, 2018 and 2017

-

Consolidated Statements of Direct-Method Cash Flows as of June 30, 2018 and 2017.

 

2.2

Consolidated 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.

 

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 other non-current financial assets, investments accounted for using the equity method, intangible assets other than goodwill and property, plant and equipment, for the purpose of comparison with the figures as of June 30, 2018.

 

2.3

Basis 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

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.4

Accounting 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:

 

Amendments and improvements		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
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

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.4

Accounting pronouncements, continued

 

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.

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

  

2.4

Accounting 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
IFRS 17 “Insurance Contracts”. Published in May 2017, this replaces IFRS 4. IFRS 17 will mainly change the accounting for those entities that issue insurance contacts and investment contracts with discretionary participation features. IFRS 17 is effective for annual reporting periods beginning on or after January 1, 2021. Earlier application is permitted if both IFRS 15 “Revenue from Contracts with Customers” and IFRS 9 “Financial Instruments” have also been applied.		01/01/2021
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

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.4

Accounting 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

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.4

Accounting 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.

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.5

Basis 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 6.4.

 

Companies included in consolidation:

 

								Ownership interest
								6/30/2018												12/31/2017
TAX ID No,		Foreign subsidiaries		Country of 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

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.5

Basis of consolidation, continued

 

								Ownership interest
								6/30/2018												12/31/2017
TAX ID No,		Foreign subsidiaries		Country of 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
								6/30/2018												12/31/2017
TAX ID No,		Domestic subsidiaries		Country of origin		Functional 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.

 

 

Note 2

Basis of presentation for the consolidated financial statements (continued)

 

2.5

Basis 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.

 

 

Note 3

Significant accounting policies

 

3.1

Classification 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.

 

3.2

Functional and presentation currency

 

The Company’s consolidated financial statements are presented in United States dollars (“U,S, dollars” or “US$”), 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.

 

3.3

Foreign 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.

 

 

Note 3

Significant accounting policies (continued)

 

3.3

Foreign 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:

 

		6/30/2018				12/31/2017
		US$				US$
Brazilian real			3.86				3.02
New Peruvian sol			3.28				3.08
Argentine peso			28.90				18.40
Japanese yen			110.84				113.00
Euro			0.86				0.83
Mexican peso			19.85				19.65
Australian dollar			0.74				0.78
Pound Sterling			0.76				0.74
South African rand			13.74				12.35
Ecuadorian dollar			1.00				1.00
Chilean peso			651.21				614.75
Chinese yuan			6.64				6.51
Indian rupee			68.48				63.84
Thai baht			33.01				32.85
UF (*)			41.71				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.

 

 

Note 3

Significant accounting policies (continued)

 

3.4

Subsidiaries

 

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.

 

3.5

Consolidated 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.

 

3.6

Financial 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.

 

 

Note 3

Significant accounting policies (continued)

  

3.7

Financial 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.

 

3.8

Financial 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.

 

3.9

Financial 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.

 

3.10

Reclassification 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.

 

3.11

Derivative 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).

 

 

Note 3

Significant accounting policies (continued)

 

3.11

Derivative 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.

 

 

Note 3

Significant accounting policies (continued)

 

3.12

Available 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.

 

3.13

Derecognition 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.

 

3.14

Derivative 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 transact ion 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 June 30, 2018, and December 31, 2017, there were no embedded derivatives.

 

3.15

Fair 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.

 

 

Note 3

Significant accounting policies (continued)

 

3.16

Deferred 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.

 

3.17

Trade 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.

 

Note 3

Significant accounting policies (continued)

 

3.18

Inventory 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.

 

3.19

Investments in associates and joint ventures

 

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.

 

 

Note 3

Significant accounting policies (continued)

 

3.19

Investments in associates and joint ventures, continued

 

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”.

 

3.20

Transactions 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.

 

3.21

Related 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.

 

 

Note 3

Significant accounting policies (continued)

 

3.22

Property, 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.

 

 

Note 3

Significant accounting policies (continued)

 

3.23

Depreciation 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

 

3.24

Goodwill

 

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.

 

 

Note 3

Significant accounting policies (continued)

 

3.25

Intangible 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.

 

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.

 

 

Note 3

Significant accounting policies (continued)

 

3.25

Intangible assets other than goodwill, continued

 

(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.

 

No impairment of intangible assets exists as of June 30, 2018 and December 31, 2017,

 

 

Note 3

Significant accounting policies (continued)

 

3.26

Research and development expenses

 

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

 

3.27

Prospecting 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.

 

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”.

 

 

Note 3

Significant accounting policies (continued)

 

3.28

Impairment 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.

 

3.29

Minimum 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.

 

  

Note 3

Significant accounting policies (continued)

 

3.30

Earnings 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.

 

3.31

Trade 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.

 

3.32

Interest-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.

 

3.33

Other 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.

 

  

Note 3

Significant accounting policies (continued)

 

3.33

Other provisions, continued

 

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.

 

3.34

Obligations 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 15.4).

 

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 5.078% and 5.114% for the periods ended June 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 15.4).

 

3.35

Compensation 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 16).

 

 

Note 3

Significant accounting policies (continued)

 

3.36

Revenue 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.

 

(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.

 

 

Note 3

Significant accounting policies (continued)

 

3.37

Finance 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.

 

3.38

Income 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.

 

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.

 

 

Note 3

Significant accounting policies (continued)

 

3.38

Income tax and deferred taxes, continued

 

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.

 

3.39

Segment 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

 

 

Note 3

Significant accounting policies (continued)

  

3.40

Responsibility 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, 13 and 14.

 

-

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 13 and 14.

 

-

Assumptions used in calculating the actuarial amount of pension-related and severance indemnity payment benefit commitments. See Note 15.

 

-

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 18 and 19.

 

-

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 8.

 

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.

 

 

Note 3

Significant accounting policies (continued)

  

3.41

Environment

 

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.

 

Note 4

Financial risk management

  

4.1

Financial 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.

  

 

Note 4

Financial risk management, continued

 

4.2

Risk factors

 

4.2.1

Market risk

  

Market risk refers to the uncertainty associated with fluctuations in market variables affecting the Company’s assets and liabilities, including:

 

a)

Price risk: The Company’s product prices are affected by the fluctuations in international prices of fertilizers and chemicals, as well as changes in production capacities or market demand, all of which might affect the Company’s business, financial position and results of operations.

 

b)

Commodity price risk: The Company is exposed to changes in commodity prices and energy which may have an impact on its production costs that may cause unstable results.

 

The Group currently incurs a direct quarterly cost of around US$117 million for fuels, gas, energy etc. and, of these, around US$77 million are costs related to the direct consumption of electricity. A 10% variation in the prices of the energy needed for the Company’s activities could in the short-term result in changes in these costs of around US$12 million.

  

The markets in which the Company operates are unpredictable, exposed to significant fluctuations in supply and demand, and high price volatility. Additionally, the supply of certain fertilizers or chemicals, including certain products in which the Company trades vary, mainly depending on the production of top producers and their related business strategies. Accordingly, the Company cannot forecast with certainty changes in demand, responses from competitors or fluctuations in the final price of its products. These factors can lead to significant impacts on the Company’s product sales volumes, financial position and share price.

 

c)

Quality standards: In the markets in which we operate, customers might impose quality standards on our products and/or governments could enact more stringent standards for the distribution and/or use of our products. Consequently, we might not be able to sell our products if we are not able to meet those new standards. In addition, our production costs might increase to meet such new standards. Not being able to sell our products in one or more markets or to key customers might significantly affect our business, financial position or the results of our operations.

 

 

Note 4

Financial risk management, continued

 

4.2.2

Credit 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						6/30/2018
Financial institution		Financial assets		Moody’s		S&P		Fitch		ThUS$
Banco de Chile		Time deposits		P-1		A-1		-			1,802
Banco Itau Corpbanca		Time deposits		P-2		A-2		-			50,683
Banco Santander - Santiago		Time deposits		P-1		A-1		F1			8,703
BBVA Banco Francés		Time deposits		-		-		-			109
Nedbank		Time deposits		P-3		B		-			2,468
ABN Amro Bank		Time deposits		P-1		A-1		-			233
Other banks		Time deposits		-		-		-			69
JP Morgan US dollar Liquidity Fund Institutional		Investment fund deposits		-		-		-			153,561
Legg Mason - Western Asset Institutional Cash Reserves		Investment fund deposits		-		-		-			166,123
Total											383,751

 

Rating Institution

6/30/2018

Financial institution

Financial assets

Moody’s

S&P

Fitch

ThUS$

Banco Scotiabank

90 days to 1 year

-

-

-

57,540

Banco de Crédito e Inversiones

90 days to 1 year

P-1

A-1

-

179,002

Banco Santander

90 days to 1 year

P-1

A-1

-

65,894

Banco Itaú-Corpbanca

90 days to 1 year

P-2

A-2

-

89,675

Banco de Chile

90 days to 1 year

P-1

A-1

-

6,675

Total

398,786

 

  

Note 4

Financial risk management, continued

 

4.2.3

Currency 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$370 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 June 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$17.9 million against SQM. As of December 31, 2017, this amounts to US$5 million against SQM. As of June 30, 2018, this value amounted to US$42 million against the Company and as of December 31, 2017, it totaled US$5 million against the Company.

 

As of June 30, 2018, the Chilean peso to U,S, dollar exchange rate was Ch$651.21 per US$1.00 (Ch$ 614.75 per US$ 1.00 as of December 31, 2017).

 

  

Note 4

Financial risk management, continued

 

4.2.4

Interest 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. The Company is partially exposed to fluctuations in this rate, as SQM currently holds hedging derivative instruments to hedge a portion of its liabilities subject to LIBOR rate fluctuations.

 

As of June 30, 2018, the Company has around 5% 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$0.06 million.

 

In addition, as of June 30, 2018, the Company's financial liabilities are mainly concentrated in the long-term and approximately 10% have maturities of less than 12 months, decreasing in the process the exposure to changes in interest rates.

 

4.2.5

Liquidity 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 June 30, 2018, the Company had unused, available revolving credit facilities with banks, for a total of approximately US$309 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.

 

  

Note 4

Financial risk management, continued

 

4.2.5

Liquidity risk, continued

 

		Nature of undiscounted cash flows
As of June 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			201,52				134,79				81,49				-				216,28
Unsecured obligations			1,171.12				51,01				830,91				567,04				1,448.96
Subtotal			1,372.64				185,80				912,40				567,04				1,665.24
Other derivative financial liabilities
Hedging liabilities			(36,91	)			4,84				(19,73	)			19,92				5,03
Derivative financial instruments			(6,8	)			(6,8	)			-				-				(6,8	)
Subtotal			(43,71	)			(1,96	)			(19,73	)			19,92				(1,77	)
Total			1,328.93				183,84				892,67				586,96				1,663.47

 

		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

 

4.3

Risk 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.

 

  

Note 5

Changes in accounting estimates and policies (consistent presentation)

 

5.1

Changes 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).

 

5.2

Changes in accounting policies

 

As of June 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 June 30, 2018 and December 31, 2017 and the statements of comprehensive income, changes in equity and cash flows for the periods ended June 30, 2018 and 2017, have been prepared in accordance with the IFRS.

 

The accounting principles and criteria were applied consistently.

 

  

Note 6

Background of companies included in consolidation

 

6.1

Parent’s stand-alone assets and liabilities

 

		6/30/2018				12/31/2017
		ThUS$				ThUS$
Assets			3,872,000				3,658,528
Liabilities			(1,783,473	)			(1,470,707	)
Equity			2,088,527				2,187,821

 

6.2

Parent 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.

 

6.3

Joint arrangements of controlling interest

 

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 June 30, 2018 are equivalent to 29,38% 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 La Esperanza Delaware Corporation, collectively 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 SQM S.A.

 

The Pampa Group and the Kowa Group have informed SQM S.A., the CMF, and the relevant stock exchanges in Chile and abroad that they are not and have never been mutually related parties. This is independent of the fact that on December 21, 2006 the two Groups entered into a Joint Action Agreement (JAA) related to those shares

 

This Joint Action Agreement has not transformed the Pampa and Kowa Groups into mutually related parties, The Joint Action Agreement has only transformed the current controller of SQM S.A., composed of the Pampa Group, and the Kowa Group, into related parties of SQM S.A.

 

Through a communication dated April 30, 2018, the Company was informed that the Pampa Group and Kowa Group had put an end to the joint action agreement (JAA), which until its termination meant that Pampa Group and Kowa Group had the character of controllers of the Company.

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries

 

As of June 30, 2018 and December 31, 2017, the general information of the companies on which the Company exercises control and significant influence is as follows:

 

						Country of		Functional		Ownership interest
Subsidiary		Tax ID		Address		incorporation		currency		Direct				Indirect				Total
SQM Nitratos S.A.		96.592.190-7		El Trovador 4285 Las Condes		CHILE		US$			99.9999				0.0001				100.0000
Proinsa Ltda.		78.053.910-0		El Trovador 4285 Las Condes		CHILE		Ch$			-				60.5800				60.5800
SQMC Internacional Ltda.		86.630.200-6		El Trovador 4285 Las Condes		CHILE		Ch$			-				60.6381				60.6381
SQM Potasio S.A.		96.651.060-9		El Trovador 4285 Las Condes		CHILE		US$			99.9999				-				99.9999
Serv. Integrales de Tránsito y Transf. S.A.		79.770.780-5		Arturo Prat 1060, Tocopilla		CHILE		US$			0.0003				99.9997				100.0000
Isapre Norte Grande Ltda.		79.906.120-1		Anibal Pinto 3228, Antofagasta		CHILE		Ch$			1.0000				99.0000				100.0000
Ajay SQM Chile S.A.		96.592.180-K		Av, Pdte, Eduardo Frei 4900, Santiago		CHILE		US$			51.0000				-				51.0000
Almacenes y Depósitos Ltda.		79.876.080-7		El Trovador 4285 Las Condes		CHILE		Ch$			1.0000				99.0000				100.0000
SQM Salar S.A.		79.626.800-K		El Trovador 4285 Las Condes		CHILE		US$			18.1800				81.8200				100.0000
SQM Industrial S.A.		79.947.100-0		El Trovador 4285 Las Condes		CHILE		US$			99.0470				0.9530				100.0000
Exploraciones Mineras S.A.		76.425.380-9		El Trovador 4285 Las Condes		CHILE		US$			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		Ch$			-				100.0000				100.0000
Soquimich Comercial S.A.		79.768.170-9		El Trovador 4285 Las Condes		CHILE		US$			-				60.6383				60.6383
Comercial Agrorama Ltda. (*)		76.064.419-6		El Trovador 4285 Las Condes		CHILE		US$			-				42.4468				42.4468
Comercial Hydro S.A.		96.801.610-5		El Trovador 4285 Las Condes		CHILE		Ch$			-				60.6383				60.6383
Agrorama S.A.		76.145.229-0		El Trovador 4285 Las Condes		CHILE		Ch$			-				60.6377				60.6377
Orcoma Estudios SPA		76.359.919-1		Apoquindo 3721 Of,131 Las Condes		CHILE		US$			51.0000				-				51.0000
Orcoma SPA		76.360.575-2		Apoquindo 3721 Of,131 Las Condes		CHILE		US$			100.0000				-				100.0000
SQM MaG SpA.		76.686.311-9		Los Militares 4290, Las Condes		CHILE		US$			-				100.0000				100.0000
SQM North America Corp.		Foreign		2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA		United States		US$			40.0000				60.0000				100.0000
RS Agro Chemical Trading Corporation A.V.V.		Foreign		Caya Ernesto O, Petronia 17, Orangestad		Aruba		US$			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$			-				100.0000				100.0000
Nitrate Corporation of Chile Ltd.		Foreign		1 More London Place London SE1 2AF		United Kingdom		US$			-				100.0000				100.0000
SQM Corporation N.V.		Foreign		Pietermaai 123, P,O, Box 897, Willemstad, Curacao		Netherlands		US$			0.0002				99.9998				100.0000
SQM Peru S.A.		Foreign		Avenida Camino Real N° 348 of, 702, San Isidro, Lima		Peru		US$			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$			0.0040				99.9960				100.0000

 

(*) SQM is the Parent of Soquimich Comercial and the latter is the Parent of Comercial Agrorama Ltda, SQM controls the management of Comercial Agrorama Ltda,

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries, continued

 

Country of

Functional

Ownership interest

Subsidiary

Tax ID

Address

incorporation

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$

1.0900

98.9100

100.0000

SQI Corporation N.V.

Foreign

Pietermaai 123, P,O, Box 897, Willemstad, Curacao

Netherlands

US$

0.0159

99.9841

100.0000

SQMC Holding Corporation L.L.P.

Foreign

2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta

United States

US$

0.1000

99.9000

100.0000

SQM Japan Co. Ltd.

Foreign

From 1st Bldg 207, 5-3-10 Minami- Aoyama, Minato-ku, Tokyo

Japan

US$

0.1597

99.8403

100.0000

SQM Europe N.V.

Foreign

Houtdok-Noordkaai 25a B-2030 Antwerp, Belgium

Belgium

US$

0.5800

99.4200

100.0000

SQM Italia SRL

Foreign

Via A, Meucci, 5 500 15 Grassina Firenze

Italy

US$

-

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$

-

80.0000

80.0000

North American Trading Company

Foreign

2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA

United States

US$

-

100.0000

100.0000

SQM Virginia LLC

Foreign

2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA

United States

US$

-

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 México

Mexico

US$

0.0100

99.9900

100.0000

SQM Investment Corporation N.V.

Foreign

Pietermaai 123, P,O, Box 897, Willemstad, Curacao

Netherlands

US$

1.0000

99.0000

100.0000

Royal Seed Trading Corporation A.V.V.

Foreign

Caya Ernesto O, Petronia 17, Orangestad

Aruba

US$

1.6700

98.3300

100.0000

SQM Lithium Specialties LLP

Foreign

2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA

United States

US$

-

100.0000

100.0000

Soquimich SRL Argentina

Foreign

Espejo 65 Oficina 6 – 5500 Mendoza

Argentina

US$

-

100.0000

100.0000

Comercial Caimán Internacional S.A.

Foreign

Edificio Plaza Bancomer  Calle 50

Panama

US$

-

100.0000

100.0000

SQM France S.A.

Foreign

ZAC des Pommiers  27930   FAUVILLE

France

US$

-

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 México

Mexico

US$

-

100.0000

100.0000

SQM Nitratos México S.A. de C.V.

Foreign

Av, Moctezuma 144-4  Ciudad del Sol, CP 45050, Zapopan, Jalisco México

Mexico

US$

-

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

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries, continued

 

Country of

Functional

Ownership interest

Subsidiary

Tax ID

Address

incorporation

currency

Direct

Indirect

Total

Soquimich European Holding B.V.

Foreign

Loacalellikade 1 Parnassustoren 1076 AZ Amsterdam

Netherlands

US$

-

100.0000

100.0000

SQM Iberian S.A

Foreign

Provenza 251 Principal 1a CP 08008, Barcelona

Spain

US$

-

100.0000

100.0000

SQM Africa Pty Ltd.

Foreign

Tramore House, 3 Wterford Office Park, Waterford Drive, 2191 Fourways, Johannesburg

South Africa

US$

-

100.0000

100.0000

SQM Oceania Pty Ltd.

Foreign

Level 9, 50 Park Street, Sydney NSW 2000, Sydney

Australia

US$

-

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$

-

100.0000

100.0000

SQM Thailand Limited

Foreign

Unit 2962, Level 29, N° 388, Exchange Tower Sukhumvit Road, Klongtoey Bangkok

Thailand

US$

-

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$

-

100.0000

100.0000

SQM Internacional N.V.

Foreign

Houtdok-Noordkaai 25a B-2030 Amberes

Belgium

US$

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$

-

100.0000

100.0000

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.5

Information attributable to non-controlling interests

 

Subsidiary		% 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
						6/30/2018				12/31/2017				6/30/2018				12/31/2017				6/30/2018				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	%			611				1,023				8,478				8,306				440				989
SQM Indonesia S.A.			20	%			(1	)			-				-				1				-				-
Soquimich Comercial S.A.			39,3616784	%			(592	)			100				40,850				49,247				7,872				1,264
Comercial Agrorama Ltda.			30	%			(147	)			(403	)			(322	)			(184	)			-				-
Agrorama S.A.			0,001	%			-				-				-				-				-				-
Orcoma Estudios SPA			49	%			-				-				2,277				2,277				-				-
SQM (Thailand) Limited.			0,004	%			-				-				-				-				-				-
Total							(129	)			720				51,283				59,647				8,312				2,253

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries

 

6/30/2018
		Assets								Liabilities								Revenue				Profit (loss)				Comprehensive income (loss)
		Current				Non-current				Current				Non-current
Subsidiary		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.			442,333				39,868				406,970				2,067				82,063				13,401				13,447
Proinsa Ltda.			55				-				-				-				-				-				-
SQMC Internacional Ltda.			206				-				-				-				-				(1	)			(1	)
SQM Potasio S.A.			301,980				1,065,197				108,135				23,381				1,771				150,049				150,128
Serv. Integrales de Tránsito y Transf. S.A.			45,510				36,274				74,224				1,733				17,748				199				203
Isapre Norte Grande Ltda.			538				793				552				147				1,803				12				(42	)
Ajay SQM Chile S.A.			17,313				1,258				827				441				16,362				1,247				1,247
Almacenes y Depósitos Ltda.			289				49				1				-				-				(4	)			(44	)
SQM Salar S.A.			879,848				802,306				453,700				198,738				520,729				174,595				174,495
SQM Industrial S.A.			1,105,970				690,383				727,103				83,902				408,296				53,085				53,311
Exploraciones Mineras S.A.			551				31,791				6,362				-				-				(45	)			(45	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			285				607				454				298				1,247				4				(23	)
Soquimich Comercial S.A.			139,932				14,278				44,890				5,540				43,619				(1,504	)			(1,522	)
Comercial Agrorama Ltda.			6,133				1,620				8,793				33				4,465				(492	)			(493	)
Comercial Hydro S.A.			4,970				37				20				1				13				73				73
Agrorama S.A.			6,528				573				10,687				58				3,129				(756	)			(749	)
Orcoma SpA			-				2,360				14				-				-				-				-
Orcoma Estudio SpA			296				4,401				50				-				-				-				-
SQM MaG SpA			20				113				130				-				2				(7	)			(7	)
SQM North America Corp.			136,070				16,732				124,178				4				153,710				5,282				6,101
RS Agro Chemical Trading Corporation A.V.V.			5,155				-				28				-				-				(14	)			(14	)
Nitratos Naturais do Chile Ltda.			32				136				3,343				-				-				136				136
Nitrate Corporation of Chile Ltd.			5,076				-				-				-				-				-				-
SQM Corporation N.V.			7,696				152,396				3,583				-				-				29,166				29,240
SQM Perú S.A.			245				-				1,166				-				-				(26	)			(26	)
SQM Ecuador S.A.			16,897				129				14,554				80				17,247				332				332
SQM Brasil Ltda.			184				-				642				2,248				126				114				114
SQI Corporation N.V.			56				32				69				-				-				(5	)			(5	)
SQMC Holding Corporation L.L.P.			25,628				16,314				1,894				-				-				2,519				2,519
SQM Japan Co. Ltd.			53,061				318				50,787				172				85,095				81				81

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

6/30/2018
		Assets								Liabilities								Revenue				Profit (loss)				Comprehensive income (loss)
		Current				Non-current				Current				Non-current
Subsidiary		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Europe N.V.			413,018				2,006				342,622				-				508,607				24,318				24,318
SQM Italia SRL			1,200				-				15				-				-				-				-
SQM Indonesia S.A.			4				-				1				-				-				-				-
North American Trading Company			157				145				39				-				-				(1	)			(1	)
SQM Virginia LLC			14,808				14,349				14,808				-				-				1				1
SQM Comercial de México S.A. de C.V.			87,494				2,551				56,683				-				104,510				2,417				2,417
SQM Investment Corporation N.V.			52,324				86				13,064				910				-				(467	)			(467	)
Royal Seed Trading Corporation A.V.V.			30,988				-				49,811				-				-				(45	)			(45	)
SQM Lithium Specialties LLP			15,756				3				1,264				-				-				1				1
Soquimich SRL Argentina			112				-				160				-				-				(43	)			(43	)
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.			196				79				557				64				1,356				(8	)			(8	)
SQM Nitratos México S.A. de C.V.			81				9				58				9				329				6				6
Soquimich European Holding B.V.			44,203				168,840				71,404				6				-				32,637				32,711
SQM Iberian S.A.			79,971				1,788				69,214				-				85,352				2,484				2,484
SQM Africa Pty Ltd.			91,643				1,496				80,701				-				66,123				4,599				4,599
SQM Oceanía Pty Ltd.			4,978				-				2,886				-				990				(26	)			(26	)
SQM Beijing Commercial Co. Ltd.			8,488				12				6,458				-				6,995				(271	)			(271	)
SQM Thailand Limited			14,862				4				11,760				-				3,276				117				117
SQM Colombia SAS			2,033				144				1,495				-				670				(317	)			(317	)
SQM Australia Pty			4,814				23,584				4,252				-				-				(323	)			(323	)
Sacal S.A.			3				-				-				-				-				-				-
SQM Internacional			3,883				534				1,092				-				-				(4,707	)			(4,707	)
SQM Shangai Chemicals Co. Ltd.			3,511				30				1,438				-				668				(398	)			(398	)
Total			4,077,990				3,093,631				2,774,174				319,832				2,136,301				487,414				488,503

 

 

Note 6

Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

12/31/2017
		Assets								Liabilities								Revenue				Profit (loss)				Comprehensive income (loss)
		Current				Non-current				Current				Non-current
Subsidiary		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	)

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

12/31/2017
		Assets								Liabilities								Revenue				Profit (loss)				Comprehensive income (loss)
		Current				Non-current				Current				Non-current
Subsidiary		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				-				-				-				-				-				-
Total			3,655,266				2,886,593				2,543,126				321,754				3,781,726				736,478				737,264

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.7

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

 

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.

 

  

Note 6

Background of companies included in consolidation (continued)

 

6.7

Detail of transactions between consolidated companies, continued

 

b)

Transactions conducted in 2017, continued

 

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 June 30, 2018.

 

  

Note 7

Cash and cash equivalents

 

7.1

Types of cash and cash equivalents

 

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

 

a)      Cash		6/30/2018				12/31/20171
		ThUS$				ThUS$
Cash on hand			95				60
Cash in banks			141,423				50,137
Other demand deposits			2,753				1,530
Total cash			144,271				51,727

 

b)      Cash equivalents		6/30/2018				12/31/2017
		ThUS$				ThUS$
Short-term deposits, classified as cash equivalents			64,067				290,914
Short-term investments, classified as cash equivalents			319,684				287,797
Total cash equivalents			383,751				578,711
Total cash and cash equivalents			528,022				630,438

 

7.2

Short-term investments, classified as cash equivalents

 

As of June 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		6/30/2018 ThUS$				12/31/2017 ThUS$
Legg Mason - Western Asset Institutional Cash Reserves			166,123				144,464
JP Morgan US dollar Liquidity Fund Institutional			153,561				143,333
Total			319,684				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.

 

  

Note 7

Cash and cash equivalents (continued)

 

7.3

Information on cash and cash equivalents by currency

 

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

 

		6/30/2018				12/31/2017
Original currency		ThUS$				ThUS$
Chilean Peso (*)			6,285				579
US Dollar			499,403				612,727
Euro			14,802				9,782
Mexican Peso			929				258
South African Rand			2,313				4,074
Japanese Yen			1,642				1,773
Peruvian Sol			7				8
Brazilian Real			3				38
Chinese Yuan			1,656				1,143
Indian Rupee			4				-
Argentine Peso			2				1
Pound Sterling			133				55
Australian dollar			843				-
Total			528,022				630,438

 

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

 

7.4

Amount 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 June 30, 2018 and December 31, 2017, restricted cash balances are presented in Note 10.9.

 

  

Note 7

Cash and cash equivalents (continued)

 

7.5

Short-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 ThUS$				Interest accrued to date ThUS$				31/03/2018 ThUS$
Banco Itau Chile		Fixed term		Ch$			3,50			6/29/2018		7/11//2018			4,453				-				4,453
Banco Itau Chile		Fixed term		Ch$			4,27			6/13/2018		7/13/2018			39,117				-				39,117
Banco de Chile		Fixed term		US$			2,43			6/11/2018		7/23/2018			1,800				2				1,802
Banco Santander - Santiago		Fixed term		US$			2,48			6/27/2018		8/13/2018			1,800				2				1,802
Banco Santander - Santiago		Fixed term		US$			2,35			6/29/2018		7/20/2018			4,800				1				4,801
Banco Santander - Santiago		Fixed term		US$			1,98			6/29/2018		7/17/2018			2,100				-				2,100
Banco Itau Chile		Fixed term		US$			2,54			6/04/2018		7/03/2018			5,600				10				5,610
Banco Itau Chile		Fixed term		US$			2,60			6/06/2018		8/06/2018			1,500				3				1,503
ABN Amro Bank		On demand		US$			-			6/28/2018		7/01/2018			233				-				233
Nedbank		On demand		US$			-			6/30/2018		9/30/2018			2,468				-				2,468
BBVA Banco Francés		On demand		US$			0,26			6/14/2018		7/16/2018			107				2				109
National Australia Bank		On demand		US$			-			6/30/2018		7/01/2018			69				-				69
Total															64,047				20				64,067

 

  

Note 7

Cash and cash equivalents (continued)

 

7.5

Short-term deposits, classified as cash equivalents, continued

 

2017 Receiver of the deposit		Type of deposit		Original Currency		Interest rate				Placement date		Expiration date		Principal ThUS$				Interest accrued to-date ThUS$				12/31/2017 ThUS$
Scotiabank Sud Americano		Fixed term					0,24			11-21-2017		1-2-2018			8,943				30				8,973
Banco Itau Chile		Fixed term		Ch$			0,24			11-28-2017		1-2-2018			15,652				41				15,693
Banco Itau Chile		Fixed term		Ch$			0,24			11-28-2017		1-2-2018			15,652				41				15,693
Banco BBVA Chile		Fixed term		Ch$			0,23			11-28-2017		1-2-2018			15,652				40				15,692
Banco BBVA Chile		Fixed term		Ch$			0,23			11-28-2017		1-2-2018			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		1-4-2018			1,301				-				1,301
Scotiabank Sud Americano		Fixed term		Ch$			0,21			12-29-2017		1-5-2018			976				-				976
Scotiabank Sud Americano		Fixed term		Ch$			0,21			12-29-2017		1-5-2018			569				-				569
Banco Santander - Santiago		Fixed term		US$			2,45			12-6-2017		1-5-2018			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		1-4-2018			2,300				1				2,301
Banco Santander - Santiago		Fixed term		US$			2,88			12-27-2017		1-4-2018			2,300				1				2,301
Banco BBVA Chile		Fixed term		US$			2,80			12-27-2017		1-4-2018			1,400				-				1,400
BBVA Banco Francés		Fixed term		US$			0,19			12-11-2017		1-31-2018			163				-				163
Nedbank		On demand		US$			-			12-1-2017		1-31-2018			3,686				-				3,686
ABN Amro Bank		Fixed term		US$			-			12-31-2017		1-2-2018			1,439				-				1,439
Total															290,397				517				290,914

 

  

Note 7

Cash and cash equivalents (continued)

 

7.6

Other 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		6/30/2018				12/31/2017
		ThUS$				ThUS$
Cash and cash equivalents			528,022				630,438
Other current financial assets			428,776				366,979
Other non-current financial hedge assets			28,848				8,910
Borrowings - repayable within one year (including overdraft)			(155,555	)			(220,328	)
Borrowings - repayable after one year			(1,221,920	)			(1,031,507	)
Net debt			(391,829	)			(245,508	)
Cash and liquid investments			985,646				1,006,327
Gross debt - fixed interest rates			(1,377,475	)			(1,251,835	)
Net debt			(391,829	)			(245,508	)

 

 

Note 8

Inventories

 

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

 

Type of inventory		6/30/2018 ThUS$				12/31/2017 ThUS$
Raw material reserves			10,272				9,364
Supplies for production reserves			25,970				22,257
Products-in-progress reserves			415,127				456,333
Finished product reserves			454,398				414,120
Total			905,767				902,074

 

As of June 30, 2018, the Company has inventory of caliche ore (in piles or undergoing leaching process) available for processing valued at ThUS$72,366 (ThUS$ 62,476 as of December 31, 2017), (included in work in progress).

 

Inventory reserves recognized as of June 30, 2018 amount to ThUS$104,701, 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		6/30/2018 ThUS$				12/31/2017 ThUS$
Raw material reserves			93				93
Products-in-progress reserves			88,275				80,249
Finished product reserves			16,333				15,942
Total			104,701				96,284

 

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

 

 

Note 8

Inventories, continued

 

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

 

Reconciliation		6/30/2018				12/31/2017
		ThUS$				ThUS$
Opening balance			96,284				81,295
Changes
Additional provisions			7,596				15,682
Provision used			(1,328	)			(4,921	)
Increase (decrease) in existing provisions			2,149				4,228
Total changes			8,417				14,989
Final Balance			104,701				96,284

 

Note 9

Related party disclosures

 

9.1

Related 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.

 

9.2

Relationships 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 June 30, 2018 are equivalent to 29.12% 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 La Esperanza Delaware Corporation, collectively 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.

 

The Pampa Group and the Kowa Group have informed the Company, the CMF, and the relevant stock exchanges in Chile and abroad that they are not and have never been mutually related parties. This is independent of the fact that on December 21, 2006 the two Groups entered into a Joint Action Agreement (JAA) related to those shares).

 

On April 30, 2018, Sociedad de Inversiones Pampa Calichera S.A. issued a memo informing the Corporation that Pampa Group and Kowa Group had finalized the JAA. Until its termination, this JAA enabled shareholders of the Company and of Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A., Inversiones Global Mining (Chile) Limitada, Kowa Company Ltd., Inversiones la Esperanza (Chile) Ltda., Kochi S.A. and La Esperanza Delaware Corporation to be controlling shareholders of the Company.

 

  

Note 9

Related party disclosures (continued)

 

9.3

Detailed identification of the link between the Parent and subsidiary

 

As of June 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.		Panamá		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

 

  

Note 9

Related party disclosures (continued)

 

9.3

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

 

As of June 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
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

 

  

Note 9

Related party disclosures (continued)

 

9.4

Detail 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 June 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

6/30/2018 ThUS$

12/31/2017 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

10,665

15,706

Foreign

Ajay Europe S.A.R,L,

Associate

France

Dividends

815

969

Foreign

Ajay North America LLC,

Associate

United States

Sale of products

8,867

13,206

Foreign

Ajay North America LLC,

Associate

United States

Dividends

1,403

1,123

Foreign

Abu Dhabi Fertilizer Industries WWL

Associate

United Arab Emirates

Sale of products

2,859

4,351

Foreign

Abu Dhabi Fertilizer Industries WWL

Associate

United Arab Emirates

Dividends

6,620

-

Foreign

Charlee SQM Thailand Co, Ltd,

Associate

Thailand

Sale of products

3,406

5,102

Foreign

Charlee SQM Thailand Co, Ltd,

Associate

Thailand

Dividends

364

-

77.557.430-5

Sales de Magnesio Ltda,

Associate

CHILE

Sale of products

-

45

Foreign

Kowa Company Ltd,

Other related parties

Japan

Sale of products

85,095

132,495

Foreign

SQM Vitas Brasil Agroindustria

Joint control or significant influence

Brazil

Sale of products

25,350

31,137

Foreign

SQM Vitas Peru S.A.C,

Joint control or significant influence

Peru

Sale of products

5,332

23,058

Foreign

SQM Vitas Fzco,

Joint venture

United Arab Emirates

Sale of products

-

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

3,081

8,011

Foreign

SQM Star Qingdao Corp Nutrition Co,, Ltd,

Joint venture

China

Sale of products

-

200

Foreign

SQM Star Qingdao Corp Nutrition Co,, Ltd,

Joint venture

China

Sale of services

93

-

79.049.778-9

Callegari Agrícola S.A.

Other related parties

CHILE

Sale of products

2

210

Foreign

Minera Exar S.A.

Joint venture

Argentina

Loans

4,500

11,000

Foreign

Minera Exar S.A.

Joint venture

Argentina

Loan interest

1,225

-

Foreign

Terra Tarsa Ukraine LLC

Associate

Turkey

Sale of services

1,436

1,218

Foreign

Terra Tarsa Don LLC

Joint venture

Russian Federation

Sale of products

187

423

Foreing

Plantacote N,V,

Associate

Belgium

Sale of products

3,166

2,108

Total

174,645

268,237

 

  

Note 9

Related party disclosures (continued)

 

9.5

Trade receivables due from related parties, current:

 

Tax ID No.

Company

Nature

Country of origin

Currency

6/30/2018

12/31/2017

ThUS$

ThUS$

Foreign

Charlee SQM Thailand Co, Ltd,

Associate

Thailand

US$

2,657

1,204

Foreign

Ajay Europe S.A.R,L,

Associate

France

Euro

5,997

4,689

Foreign

Ajay North America LLC,

Associate

United States

US$

2,687

2,005

Foreign

Abu Dhabi Fertilizer Industries WWL

Associate

United Arab Emirates

Arab Emirates dirham

1,721

73

Foreign

Kowa Company Ltd,

Jointly controlled entity

Japan

US$

2,737

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$

27,872

17,293

Foreign

SQM Vitas Peru S.A.C,

Joint venture

Peru

US$

6,926

13,766

Foreign

Coromandel SQM India

Joint venture

India

Indian rupee

3,032

3,804

Foreign

Sichuan SQM Migao Chemical Fertilizers Co Ltda,

Joint venture

China

US$

-

-

Foreign

SQM Vitas Fzco,

Joint venture

United Arab Emirates

Arab Emirates dirham

-

-

Foreign

SQM Star Qingdao Corp Nutrition Co,, Ltd,

Joint venture

China

US$

278

50

Foreign

Plantacote N,V,

Associate

Belgium

Euro

1,315

190

Foreign

Terra Tarsa Don LLC

Associate

Russian Federation

Russian ruble

213

44

Foreign

Minera Exar S.A.

Joint venture

Argentina

US$

16,740

11,000

Foreign

SQM Eastmed Turkey

Associate

Turkey

YTL

30

-

Foreign

Terra Tarsa Ukraine LLC

Associate

Ukraine

Ukrainian Grivna

1,092

-

Total

73,303

59,132

 

9.6

Trade payables due to related parties, current:

 

Tax ID No.

Company

Nature

Country of origin

Currency

6/30/2018 ThUS$

12/31/2017 ThUS$

Foreign

Doktor Tarsa Tarim Sanayi AS

Associate

Turkey

YTL

12

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

123

38

Current Total

135

1,365

 

  

Note 9

Related party disclosures (continued)

 

9.7

Board 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 28, 2018.

 

As of June 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 Contess 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.

 

  

Note 9

Related party disclosures (continued)

 

9.7

Board 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 June 30, 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 during 2017 amount to ThUS$273 (ThUS$ 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.

 

  

Note 9

Related party disclosures (continued)

 

9.7

Board 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 June 30, 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 2017 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.

 

6)

No guarantees have been constituted in favor of the directors.

 

7)

Senior management compensation:

 

a)

As of June 30, 2018, the global compensation paid to the 109 main executives amounts to ThUS$13,511,the global compensation paid to the 109 main executives as of June 30, 2017 amounted to ThUS$11,680 and the global compensation paid to the 105 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 16).

 

  

Note 9

Related party disclosures (continued)

 

9.7

Board of Directors and Senior Management, continued

 

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 June 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.

 

9.8

Key management personnel compensation

 

As of June 30, 2018, there are 109 people occupying key management personnel posts (there were 105 as of December 31, 2017).

 

		6/30/2018				12/31/2017
		ThUS$				ThUS$
Key management personnel compensation (1)			18,063				27,367

 

(1)

Corresponds to a number of executives (see Note 9.7 7) a).

 

  

Note 10

Financial instruments

 

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

 

10.1

Types of other financial assets

 

Description of other financial assets		6/30/2018 ThUS$				12/31/2017 ThUS$
Other current financial assets (1)			398,786				360,941
Derivatives (2)			9,773				6,038
Hedging assets			20,217				-
Total other current financial assets			428,776				366,979
Other non-current financial assets (3)			34,930				42,879
Total other non-current financial assets			34,930				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 10.3).

(3)

The detail of other financial assets, non-current is as follows:

 

		6/30/2018 ThUS$				12/31/2017 ThUS$
Non-current investments not accounted for using the equity accounting method, classified as available for sale			6,002				9,179
Hedging assets			28,848				8,910
Contribution for constitution of Joint Venture (1)			-				24,745
Other financial assets, non-current			80				45
Total other financial assets, non-current			34,930				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		6/30/2018 ThUS$				12/31/2017 ThUS$
Banco Santander			65,894				163,269
Banco de Crédito e Inversiones			179,002				71,748
Banco Itaú - Corpbanca			89,675				77,527
Banco Security			-				28,592
Scotiabank Sud Americano			57,540				13,764
Banco Chile			6,675				4,834
Banco BBVA Chile			-				1,207
Total			398,786				360,941

 

  

Note 10

Financial instruments, (continued)

 

10.2

Trade and other receivables

 

		6/30/2018												12/31/2017
		Current				Non-current				Total				Current				Non-current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$$				ThUS$
Trade receivables			398,373				-				398,373				412,321				-				412,321
Prepayments			27,810				-				27,810				16,177				-				16,177
Other receivables			16,537				1,706				18,243				18,377				1,912				20,289
Total trade and other receivables			442,720				1,706				444,426				446,875				1,912				448,787

 

		6/30/2018												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			413,726				(15,353	)			398,373				427,400				(15,079	)			412,321
Trade receivables, current			413,726				(15,353	)			398,373				427,400				(15,079	)			412,321
Prepayments, current			28,510				(700	)			27,810				16,877				(700	)			16,177
Other receivables, current			20,919				(4,382	)			16,537				23,409				(5,032	)			18,377
Current trade and other receivables			49,429				(5,082	)			44,347				40,286				(5,732	)			34,554
Other receivables, non-current			1,706				-				1,706				1,912				-				1,912
Non-current receivables			1,706				-				1,706				1,912				-				1,912
Total trade and other receivables			464,861				(20,435	)			444,426				469,598				(20,811	)			448,787

 

  

Note 10

Financial instruments, (continued)

 

10.2

Trade 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 June 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			713				369,452				20				749
1-30 days			582				22,029				293				607
31-60 days			447				8,159				204				512
61-90 days			363				1,117				202				571
91-120 days			320				710				131				470
121-150 days			70				471				73				215
151-180 days			48				794				45				139
181-210 days			17				380				20				70
211-250 days			20				82				27				62
>250 days			1,725				5,507				262				1,630
Total			4,305				408,701				1,277				5,025

 

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				288,896				23				706
1-30 days			1,598				14,323				376				924
31-60 days			824				8,665				130				272
61-90 days			756				3,287				50				119
91-120 days			548				6,919				22				54
121-150 days			182				2,855				22				56
151-180 days			443				7,484				45				75
181-210 days			365				215				27				45
211-250 days			682				88				29				138
>250 days			1,837				89,648				350				2,631
Total			10,274				422,380				1,074				5,020

 

  

Note 10

Financial instruments, (continued)

 

10.2

Trade and other receivables, continued

 

As of June 30, 2018 and 2016, movements in provisions are as follows:

 

		31/03/2018				12/31/2017
		ThUS$				ThUS$
Provision			18,289				18,225
Non-renegotiated provision			2,146				2,586
Total			20,435				20,811
Impairment			(392	)			(13,434	)
Recoveries			891				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.

 

  

Note 10

Financial instruments (continued)

 

10.3

Hedging 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 June 30, 2018, the notional amount of cash flows in Cross Currency Swap contracts agreed upon in US dollars amounted to ThUS$ 471,297and 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$

June 30, 2018

26,902

(14,494

)

12,408

-

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$

June 30, 2018

10,210

(10,436

)

226

-

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$

June 30, 2018

20,217

22,279

(2,062

)

-

(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

 

  

Note 10

Financial instruments (continued)

 

10.3

Hedging 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 June 30, 2018 and 2017.

 

Derivative contract maturities are detailed as follows:

 

Series		Contract amount ThUS$				Currency		Maturity date
H			155,214			UF		01/05/2023
O			58,748			UF		02/01/2022
P			134,228			UF		15/01/2028

 

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.

 

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%.

 

  

Note 10

Financial instruments (continued)

 

10.3

Hedging assets and liabilities, continued

 

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.

 

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.

 

10.4

Financial liabilities

 

Other current and non-current financial liabilities

 

As of June 30, 2018 and December 31, 2017, the detail is as follows:

  

		6/30/2018												12/31/2017
		Current				Non-current				Total				Current				Non-current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Bank borrowings			131,516				68,882				200,398				163,568				-				163,568
Obligations with the public (bonds)			14,979				1,146,956				1,161,935				13,494				1,031,507				1,045,001
Derivatives			2,987				-				2,987				5,979				-				5,979
Hedging liabilities			6,073				6,082				12,155				37,287				-				37,287
Total			155,555				1,221,920				1,377,475				220,328				1,031,507				1,251,835

 

Current and non-current bank borrowings

 

As of June 30, 2018 and December 31, 2017, the detail is as follows:

 

		6/30/2018				12/31/2017
		ThUS$				ThUS$
Long-term bank borrowings			68,882				-
Short-term bank borrowings			131,293				163,568
Current portion of long-term loans			223				-
Short-term borrowings and current portion of long-term borrowings			131,516				163,568
Total bank borrowings			200,398				163,568

 

  

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

a)

Bank borrowings, current:

 

As of June 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		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		Scotiabank Sud Americano		CHILE		US$		Upon maturity			1,63	%			1,63	%
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		Banco Estado		CHILE		US$		Upon maturity			2,40	%			2,40	%
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			2,84	%			2,84	%
79.947.100-0		SQM Industrial S.A.		CHILE		97.030.000-7		Banco Estado		CHILE		US$		Upon maturity			2,40	%			2,4	%
93.007.000-9		SQM.S.A.		CHILE		0-E		Scotiabank Cayman		USA		US$		Upon maturity			3,59	%			8,29	%

 

				6/30/2018												6/30/2018
Debtor		Creditor		Nominal amounts												Current amounts
Company		Financial institution		Up to 90 days ThUS$				90 days to 1 year ThUS$				Total ThUS$				Up to 90 days ThUS$				90 days to 1 year ThUS$				Subtotal ThUS$				Borrowing costs ThUS$				Total ThUS$
SQM.S.A.		Scotiabank Sud Americano			20.000				-				20.000				20.301				-				20.301				-				20.301
SQM.S.A.		Scotiabank Sud Americano			17.000				-				17.000				17.288				-				17.288				-				17.288
SQM.S.A.		Scotiabank Sud Americano			3.000				-				3.000				3.051				-				3.051				-				3.051
SQM Salar S.A.		Banco Estado			-				20.000				20.000				-				20.263				20.263				-				20.263
SQM Salar S.A.		Banco Estado			15.000				-				15.000				15.032				-				15.032				-				15.032
SQM Salar S.A.		Scotiabank Sud Americano			-				20.000				20.000				-				20.268				20.268				-				20.268
SQM Industrial S.A.		Banco Estado			-				20.000				20.000				-				20.058				20.058				-				20.058
SQM Industrial S.A.		Banco Estado			15.000				-				15.000				15.032				-				15.032				-				15.032
SQM S.A.		Scotiabank Cayman			-				-				-				-				223				223				-				223
Total					70,000				60,000				130,000				70,704				60,812				131,516				-				131,516

 

  

Note 10

Financial instruments (continued)

 

10.4

Financial 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 ThUS$				90 days to 1 year ThUS$				Total ThUS$				Up to 90 days ThUS$				90 days to 1 year ThUS$				Subtotal ThUS$				Borrowing  costs ThUS$				Total 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

 

  

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

b)

Unsecured obligations, current:

 

As of June 30, 2018 and December 31, 2017, the detail of current unsecured interest-bearing obligations is composed of promissory notes and bonds, as follows:

 

Bonds

 

Debtor

Number of registration or ID of the instrument

Series

Maturity date

Currency or adjustment index

Periodicity

Effective rate

Nominal rate

Tax ID No,

Company

Country

Payment of interest

Repayment

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

2,96

%

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

2,04

%

4,90

%

93.007.000-9

SQM S.A.

CHILE

699

O

8/01/2018

UF

Semiannual

Upon maturity

2,70

%

3,80

%

93.007.000-9

SQM S.A.

CHILE

563

P

7/15/2018

UF

Semiannual

Upon maturity

3,26

%

3,25

%

  

						6/30/2018												6/30/2018
						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			-				2,635				2,635				-				2,635				2,635				(386	)			2,249
SQM S.A.		CHILE		ThUS$250,000			4,618				-				4,618				4,618				-				4,618				(433	)			4,185
SQM S.A.		CHILE		ThUS$300,000			-				2,628				2,628				-				2,628				2,628				(615	)			2,013
SQM S.A.		CHILE		H			3,926				-				3,926				3,926				-				3,926				(139	)			3,787
SQM S.A.		CHILE		O			975				-				975				975				-				975				(66	)			909
SQM S.A.		CHILE		P			1,849								1,849				1,849								1,849				(13	)			1,836
Total							11,368				5,263				16,631				11,368				5,263				16,631				(1,652	)			14,979

 

 

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.

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

Debtor

Number of

Currency or

Periodicity

Tax ID No,

Company

Country

registration or ID of the instrument

Series

Maturity date

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.

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial 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 June 30, 2018. As of December 31, there were no loans:

 

Debtor

Creditor

Currency or adjustment

Type of

Effective

Nominal

Chilean Tax ID

Company

Country

Chilean Tax ID

Financial institution

Country

Index

Amortization

rate

rate

93,007,000-9

SQM.S.A.

Chile

0-E

Scotiabank Cayman

USA

USD

Maturity

3.59

%

3.59

%

 

				06/30/2018																				06/30/2018
Creditor		Creditor		Nominal non-current maturities																				Non-current maturities
Company		Financial institution		Between 1 and 2 ThUS$				Between 2 and 3 ThUS$				Between 3 and 4 ThUS$				Total ThUS$				Between 1 and 2 ThUS$				Between 2 and 3 ThUS$				Between 3 and 4 ThUS$				Subtotal ThUS$				Costs of obtaining loans ThUS$				Total ThUS$
SQM S.A.		Scotiabank Cayman							-				70,000				70,000				-				-				70,000				70,000				(1,118	)			68,882
Total					-				-				70,000				70,000				-				-				70,000				70,000				(1,118	)			68,882

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

d)

Non-current unsecured interest-bearing bonds

 

The breakdown of non-current unsecured interest-bearing bonds as of June 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 6/30/2018																										Non-current maturities 6/30/2018
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				(325	)			249,675
MUS$250			-				-				-				-				250,000				250,000				-				-				-				-				250,000				250,000				(2,419	)			247,581
MUS$300			-				-				300,000				-				-				300,000				-				-				300,000				-				-				300,000				(2,312	)			297,688
H			-				-				-				-				166,820				166,820				-				-				-				-				166,820				166,820				(1,462	)			165,358
O			-				-				-				-				62,558				62,558				-				-				-				-				62,558				62,558				(912	)			61,646
P			-				-				-				-				125,115				125,115				-				-				-				-				125,115				125,115				(107	)			125,008
Total			250,000				-				300,000				-				604,493				1,154,493				250,000				-				300,000				-				604,493				1,154,493				(7,537	)			1,146,956

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

d)

Non-current unsecured interest-bearing bonds, continued

 

As of June 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

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial liabilities, continued

 

e)

Additional information

 

Bonds

 

On June 30, 2018 and December 31, 2017, short term bonds of ThUS$14,979 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$1,146,956 on June 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 June 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 June 30, 2018, December 31 and 2016, 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

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial 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 June 30, 2018, December 31 and 2016, the Company has made the following payments with a charge to the Series H bonds:

 

Payments made		6/30/2018 ThUS$				12/31/2017 ThUS$
Payments of interest, Series H bonds			4,297				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 June 30, 2018, December 31 and 2017, the detail of payments charged to the line of single series bonds, second issue is as follows:

 

Payments made		6/30/2018 ThUS$				12/31/2017 ThUS$
Interest payment			6,875				13,750

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial 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 June 30, 2018, December 31, 2017 the Company has made the following payments with a charge to the Series O bonds:

 

Payments made		06/30/2018 ThUS$				12/31/2017 ThUS$
Payment of interest, Series O bonds			1,255				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 June 30, 2018, December 31 and 2016, the following payments have been made with a debit to the line of single-series bonds, third issue:

 

Payments made		6/30/2018 ThUS$				12/31/2017 ThUS$
Payment of interest			5,437				10,875

 

 

Note 10

Financial instruments (continued)

 

10.4

Financial 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 June 30, 2018, December 31 and 2017, the following payments have been made.

 

Payments made		6/30/2018 ThUS$				12/31/2017 ThUS$
Payment of interest			5,469				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.

 

 

Note 10

Financial instruments (continued)

 

10.5

Trade and other payables

 

		6/30/2018												12/31/2017
		Current				Non- current				Total				Current				Non- current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Accounts payable			182,321				-				182.321				195,858				-				195,858
Other accounts payable			333				-				333				422				-				422
Total			182,654				-				182,654				196,280				-				196,280

 

As of June 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 6/30/2018
		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			61,371				4,264				451				1,791				353				147				68,377
Services			12,558				823				147				249				78				39				13,894
Others			65,715				161				739				-				-				-				66,615
Total			139,644				5,248				1,337				2,040				431				186				148,886

 

		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			45,134				-				-				-				-				-				45,134
Total			154,556				-				-				-				-				3				154,559

 

Suppliers past due on payments

 

		Amounts according to payment periods as of 6/30/2018
		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			6,739				155				7				24				204				154				7,283
Services			13,739				175				414				713				336				121				15,498
Others			9,265				817				14				22				282				254				10,654
Total			29,743				1,147				435				759				822				529				33,435

 

		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 June 30, 2018, the Company has purchase orders amounting to ThUS$44,521 (ThUS$41,601 as of December 31, 2017).

 

 

Note 10

Financial instruments (continued)

 

10.6

Financial 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		06/30/2018				Effect on profit or loss as of 06/30/2018				12/31/2017				Effect on profit or loss as of 12/31/2017
		ThUS$				ThUS$				ThUS$				ThUS$
Current
Derivative instruments (IRS)			(1,276	)			-				-				-
Total			(1,276	)			-				-				-

 

 

Note 10

Financial instruments (continued)

 

10.7

Financial asset and liability categories

 

As of June 30, 2018 and December 31, 2017 there are no balances corresponding to derivative instruments measured at their fair value,

 

a)

Financial Assets

 

				6/30/2018												12/31/2017
				Current				Non-current				Total				Current				Non-current				Total
Description of financial assets		Financial instruments		Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$
Cash and cash equivalent					528,022				-				528,022				630,438				-				630,438
Trade receivables due from related parties					73,303				-				73,303				59,132				-				59,132
Financial assets measured at amortized cost		Term deposits			398,786				80				398,866				360,941				45				360,986
Loans and receivables measured at amortized cost		Trade and other receivables			442,720				1,706				444,426				446,875				1,912				448,787
Total financial assets measured at amortized cost					1,442,831				1,786				1,444,617				1,497,386				1,957				1,499,343
Financial assets at fair value with an impact on profit or loss		Derivative instruments			9,773				28,848				38,621				6,038				8,910				14,948
Financial assets classified as available for sale at fair value through equity		Other investments			-				6,002				6,002				-				33,924				33,924
Total financial assets at fair value					9,773				34,850				44,623				6,038				42,834				48,872
Total financial assets					1,452,604				36,636				1,489,240				1,503,424				44,791				1,548,215

 

 

Note 10

Financial instruments (continued)

 

10.7

Financial asset and liability categories (continued)

 

b)

Financial liabilities

 

				6/30/2018												12/31/2017
				Current				Non-current				Total				Current				Non-current				Total
Description of financial liabilities		Financial instruments		Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$				Amount ThUS$
Trade payables due to related parties					135				-				135				1,365				-				1,365
Financial liabilities at fair value through profit or loss		Derivative instruments			9,060				-				9,060				43,266				-				43,266
Financial liabilities at fair value through profit or loss					9,195				-				9,195				44,631				-				44,631
Financial liabilities measured at amortized cost		Bank borrowings			131,516				-				131,516				163,568				-				163,568
Financial liabilities measured at amortized cost		Obligations with the public			14,979				1,146,956				1,161,935				13,494				1,031,507				1,045,001
Financial liabilities measured at amortized cost		Trade and other payables			182,654				-				182,654				196,280				-				196,280
Total financial liabilities measured at amortized cost					329,149				1,146,956				1,476,105				373,342				1,031,507				1,404,849
Total financial liabilities					338,344				1,146,956				1,485,300				417,973				1,031,507				1,449,480

 

 

Note 10

Financial instruments (continued)

 

10.8

Fair 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’).

 

 

Note 10

Financial instruments (continued)

 

10.8

Fair 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
		6/30/2018				Level 1				Level 2				Level 3
		ThUS$				ThUS$				ThUS$				ThUS$
Financial assets
Investment
Shares			5,982				5,982				-				-
Non-hedging derivatives
Forwards			3,091				-				3,091				-
Options			6,682				-				6,682				-
Hedging derivatives
Swaps			49,065				-				49,065				-
Deposits, more than 90 days			398,786				-				398,786				-
Other			100				-				100				-
Financial liabilities
Non-hedging derivatives
Forwards			2,339				-				2,339				-
Options			648				-				648				-
Hedging derivatives
Swaps			12,163				-				12,163				-
Bank loans			201,516				-				201,516				-
Non-guaranteed bonds			1,154,493				-				1,154,493				-
Other			8,269				-				8,269				-

 

   

Note 10

Financial instruments (continued)

 

10.8

Fair 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				-

   

10.9

Financial 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 June 30, 2018 and December 31, 2017, assets pledged as guarantees are as follows:

 

Restricted cash		6/30/2018 ThUS$				12/31/2017 ThUS$
Isapre Norte Grande Ltda,			749				771
Total			749				771

  

  

Note 10

Financial instruments (continued)

 

10.10

Estimated 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.

 

  

Note 10

Financial instruments (continued)

 

10.10

Estimated 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:

 

		6/30/2018								12/31/2017
		Carrying value				Fair value				Carrying value				Fair value
		ThUS$				ThUS$				ThUS$				ThUS$
Cash and cash equivalents			528,022				528,022				630,438				630,438
Current trade and other receivables			442,720				442,720				446,875				446,875
Receivables due from related parties, current			73,184				73,184				59,132				59,132
Other financial assets, current:
- Time deposits			398,786				398,786				360,941				360,941
- Derivative instruments			9,773				9,773				6,038				6,038
- Hedging assets			20,217				20,217				-				-
Total other current financial assets			428,776				428,776				366,979				366,979
Non-Current Trade Receivables			1,706				1,706				1,912				1,912
Other non-current financial assets:			34,930				34,930				42,879				42,879
Total other non-current financial assets:			34,930				34,930				42,879				42,879
Other financial liabilities, current:
- Bank loans			131,516				131,516				163,568				163,568
- Derivative instruments			2,987				2,987				5,979				5,979
- Hedging liabilities			6,073				6,073				37,287				37,287
- Unsecured obligations			14,979				14,979				13,494				13,494
Other financial liabilities, current			155,555				155,555				220,328				220,328
Current and non-current accounts payable			182,654				182,654				196,280				196,280
Payables due to related parties, non-current			17				17				1,365				1,365
Other non-current financial liabilities:
- Bank loans			-				-				-				-
- Unsecured obligations			1,221,920				1,253,622				1,031,507				1,131,639
- Non-current hedging liabilities			-				-				-				-
Other non-current financial liabilities:			1,221,920				1,253,622				1,031,507				1,131,639

 

All the fair value estimates are included in levels 1 and 2.

 

10.11

Nature 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.

 

 

Note 11

Equity-accounted investees

 

11.1

Investments in associates recognized according to the equity method of accounting

 

As of June 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:

 

Associates		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
		6/30/2018				12/31/2017				6/30/2018				12/31/2017				6/30/2018				12/31/2017				6/30/2018				12/31/2017
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Abu Dhabi Fertilizer Industries WWL			10,613				15,936				332				1,483				-				-				332				1,483
Doktor Tarsa Tarim Sanayi AS			23,908				21,788				5,376				6,427				-				-				5,376				6,427
Ajay North America			15,234				14,432				2,524				3,677				-				-				2,524				3,677
Ajay Europe SARL			7,277				8,144				598				1,049				(6	)			26				592				1,075
Charlee SQM Thailand Co, Ltd,			2,046				2,301				179				393				-				-				179				393
SQM Eastmed Turkey,			302				-				372				(25	)			-				-				372				(25	)
Kore Potash Ltd,			23,000				20,000				-				-				-				-				-				-
Total			82,380				82,601				9,381				13,004				(6	)			26				9,375				13,030

 

  

Note 11

Equity-accounted investees (continued)

 

11.1

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

  

								Share of
		Description of the nature of the				Country of		ownership in				Dividends received
Associate		relationship		Domicile		incorporation		associates				6/30/2018				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	%			6,720				-
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	%			1,403				1,123
Ajay Europe SARL		Production and commercialization of iodine derivatives.		Z,I, du Grand Verger BP 227 53602 Evron Cedex		France			50	%			815				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	%			364				-
Kore Potash Ltd,		Prospecting, exploration and mining development.		L 3 88 William St Perth, was 6000		Australia			17,55	%			-				-
Total													9,302				2,091

 

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.

 

		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	%			-				-
Total													-				-

 

  

Note 11

Equity-accounted investees (continued)

 

11.2

Assets, liabilities, revenue and expenses of associates

6/30/2018
																						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			31,870				2,064				5,253				-				15,686				898				-				898
Doktor Tarsa Tarim Sanayi AS			98,738				10,650				58,882				2,695				49,042				10,751				-				10,751
Ajay North America			22,900				12,651				4,463				-				22,017				5,151				-				5,151
Ajay Europe SARL			22,593				1,252				9,292				-				21,121				1,195				(12	)			1,183
Charlee SQM Thailand Co, Ltd,			9,044				717				4,392				254				7,385				447				-				447
SQM Eastmed Turkey			2,563				2,388				2,883				1,464				2,423				743				-				743
Total			187,708				29,722				85,165				4,413				117,674				19,185				(12	)			19,173

 

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				-				4,008
Doktor Tarsa Tarim Sanayi AS			81,057				10,731				36,960				11,251				75,269				12,854				-				12,854
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				52				2,150
Charlee SQM Thailand Co, Ltd,			8,585				712				3,292				255				13,618				981				-				981
SQM Eastmed Turkey			3,981				2,671				4,487				2,260				2,389				(49	)			-				(49	)
Total			181,405				29,910				59,507				13,766				194,902				27,397				52				27,449

  

 

Note 11

Investment in Associates (continued)

 

11.3

Other 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 June 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.

 

11.4

Disclosures 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$1,630.

 

In June 2018 the company Charlee SQM Thailand Co. Ltd. paid dividends of ThUS$909.

 

 

Note 11

Investment in Associates (continued)

 

11.4

Disclosures 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.

 

  

Note 12

Joint Ventures

 

12.1

Policy 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.

 

12.2

Disclosures 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 June 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 30.

 

 

Note 12

Joint Ventures

 

12.2

Disclosures of interest in joint ventures, continued

 

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.

 

 

Note 12

Joint Ventures (continued)

 

12.3

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

 

						Country of		Share of interest				Dividends received
Associate		Description of the nature of the relationship		Domicile		incorporation		in ownership				6/30/2018				12/31/2017
												ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co, Ltda, (2)		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 (1)		Without information		Herikerbergweg 238, 1101 CM Amsterdam Zuidoost		Holland			50	%			-				-
Minera Exar S.A.		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	%			-				-

  

(1)

During May 2016, SQM Vitas Holland B,V, sold its interest in SQM Vitas Spain, to SQM Iberian S.A. resulting in the latter obtaining 100% in this transaction generating a loss of ThUS$ 104.

(2)

June 30, 2018, these joint ventures are classified as Non-current assets or groups of assets classified as held for sale.

 

 

Note 12

Joint Ventures (continued)

 

12.3

Investment 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)

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	%			-				-
SQM Vitas Plantacote B.V,(2)		Production and commercialization of controlled-released fertilizers		Herikerbergweg 238, 1101 CM Amsterdam Zuidoost			Holland				50	%			-				-

 

Note 12

Joint Ventures (continued)

 

12.3

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

 

	Final reporting period
Joint Venture	date	Accounting method
Coromandel SQM India	June 30, 2018	Equity method
SQM Vitas Fzco.	June 30, 2018	Equity method
SQM Star Qingdao Corp Nutrition Co., Ltd.	June 30, 2018	Equity method
SQM Vitas Brazil Agroindustria	June 30, 2018	Equity method
SQM Vitas Perú S.A.C.	June 30, 2018	Equity method
SQM Vitas Holland B.V.	June 30, 2018	Equity method
SQM Vitas Plantacote B.V.	June 30, 2018	Equity method
Pavoni & C. Spa.	June 30, 2018	Equity method

 

 

 

Note 12

Joint Ventures (continued)

 

12.3

Investment 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
		6/30/2018				12/31/2017				6/30/2018				12/31/2017				6/30/2018				12/31/2017				6/30/2018				12/31/2017
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co, Ltd. (1)			-				11,444				(324	)			(535	)			-				-				(324	)			(535	)
Coromandel SQM India			1,663				1,633				78				165				-				-				78				165
SQM Vitas Fzco,			19,005				19,478				318				1,502				-				(5	)			318				1,497
SQM Star Qingdao Corp, Nutrition Co, Ltd,			3,157				2,980				176				361				-				-				176				361
SQM Vitas Holland			1,380				1,429				(8	)			(18	)			-				-				(8	)			(18	)
Minera Exar S.A.			-				26,860				(204	)			(27	)			-				-				(204	)			(27	)
Pavoni & C., Spa			6,610				-				74				-				-				-				74				-
Total			31,815				63,824				110				1,448				-				(5	)			110				1,443

  

(1)

As of June 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 30.

 

 

Note 12

Joint Ventures (continued)

 

12.3

Investment 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 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
		6/30/2018				12/31/2017				6/30/2018				12/31/2017				6/30/2018				12/31/2017				6/30/2018				12/31/2017
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Vitas Brazil Agroindustria(1)			8,958				11,003				(469	)			1,753				(1,315	)			(51	)			(1,784	)			826
SQM Vitas Peru S.A.C (1)			5,530				5,961				(354	)			(216	)			-				-				(354	)			(108	)
SQM Vitas Plantacote B,V, (2)			-				669				-				(1	)			-				-				-				(1	)
Total			14,488				17,633				(823	)			1,536				(1,315	)			(51	)			(2,138	)			717

 

The following companies are subsidiaries of

 

(1)

SQM Vitas Fzco.

(2)

SQM Vitas Holland

 

 

Note 12

Joint Ventures (continued)

 

12.4

Assets, liabilities, revenue and expenses from joint ventures:

 

		6/30/2018
		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, Ltda,			29,115				6,284				13,157				-				12				(645	)			-				(645	)
Coromandel SQM India			4,848				865				2,389				-				4,680				155				-				155
SQM Vitas Fzco,			26,359				14,656				3,008				-				9,477				636				(1	)			635
SQM Star Qingdao Corp, Nutrition Co, Ltd,			7,230				139				1,057				-				6,940				353				-				353
SQM Vitas Brazil Agroindustria			39,942				7,266				38,249				-				30,405				(469	)			(1,315	)			(1,784	)
SQM Vitas Peru S.A.C			16,629				8,205				13,488				5,816				13,854				(354	)			-				(354	)
SQM Vitas Holland B,V			2,765				-				5				-				-				(15	)			-				(15	)
SQM Vitas Plantacote B,V,			-				-				-				-				-				-				-				-
Minera Exar S.A.			11,576				103,286				43,601				-				-				(407	)			-				(407	)
Pavoni & C., Spa			14,101				6,331				12,824				694				4,396				148				-				148
Total			152,565				147,032				127,778				6,510				69,764				(598	)			(1,316	)			(1,914	)

 

		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

  

  

Note 12

Joint Ventures (continued)

 

12.5

Other Joint Venture disclosures:

  

		Cash and cash equivalents								Other current financial liabilities								Other non-current financial liabilities
		6/30/2018				12/31/2017				6/30/2018				12/31/2017				6/30/2018				12/31/2017
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$$
Sichuan SQM Migao Chemical Fertilizers Co, Ltda,			-				6,198				-				-				-				-
Coromandel SQM India			512				1,118				-				-				-				-
SQM Vitas Fzco,			15,800				15,307				-				-				-				-
SQM Star Qingdao Corp, Nutrition Co, Ltd,			3,558				3,675				-				-				-				-
SQM Vitas Brazil Agroindustria			2,153				5,139				11,301				7,342				-				-
SQM Vitas Peru S.A.C,			610				687				3,781				2,215				923				1,372
SQM Vitas Holland B,V			2,765				2,190				-				-				-				-
SQM Vitas Plantacote B,V			-				679				-				-				-				-
Minera Exar S.A.			-				9,189				-				-				-				-
Pavoni &C., Spa			2,048				-				7,060				-				-				-
Total			27,446				44,182				22,142				9,557				923				1,372
		Depreciation and amortization expense								Interest expense								Income tax expense, continuing operations
		6/30/2018				12/31/2017				6/30/2018				12/31/2017				6/30/2018				12/31/2017
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Sichuan SQM Migao Chemical Fertilizers Co, Ltda,			-				(696	)			-				(25	)			-				303
Coromandel SQM India			(44	)			-				(6	)			(16	)			(38	)			(485	)
SQM Vitas Fzco,			(343	)			(553	)			(4	)			(19	)			-				-
SQM Star Qingdao Corp, Nutrition Co, Ltd,			(34	)			(68	)			-				-				(126	)			(174	)
SQM Vitas Brazil Agroindustria			(206	)			(453	)			(435	)			(1,253	)			(54	)			(283	)
SQM Vitas Peru S.A.C,			(179	)			(375	)			(213	)			(432	)			(69	)			(214	)
SQM Vitas Holland B,V			-				-				-				-				-				-
SQM Vitas Plantacote B,V			-				-				-				(1	)			-				-
Minera Exar S.A.			-				(523	)			-				(32	)			-				(620	)
Pavoni & C., Spa			(389	)							(198	)			-				-				-
Total			(1,195	)			(2,668	)			(856	)			(1,778	)			(287	)			(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.

 

 

Note 13

Intangible assets and goodwill

 

13.1

Balances

 

		6/30/2018				12/31/2017
		ThUS$				ThUS$
Intangible assets other than goodwill			129,201				113,787
Goodwill (1)			34,758				44,177
Total			163,959				157,964

 

13.2

Disclosures 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 June 30, 2018 and December 31, 2017 are detailed as follows:

 

				6/30/2018
Intangible assets and goodwill		Useful life		Gross amount ThUS$				Accumulated Amortization ThUS$				Net Value ThUS$
Software		Finite			25,663				(21,436	)			4,227
Intellectual property rights, patents and other industrial property rights, service		Finite			1,252				(1,078	)			174
Mining property, water rights and rights of way.		Indefinite			122,918				-				122,918
Customer-related intangible assets		Indefinite			1,723				-				1,723
Other intangible assets		Indefinite			159				-				159
Intangible assets other than goodwill					151,715				(22,514	)			129,201
Goodwill		Indefinite			34,758				-				34,758
Total intangible assets and goodwill					186,473				(22,514	)			163,959

 

 

Note 13

Intangible assets and goodwill (continued)

 

13.2

Disclosures on intangible assets and goodwill, continued

 

				12/31/2017
Intangible assets and goodwill		Useful life		Gross amount ThUS$				Accumulated Amortization ThUS$				Net Value 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 3-6 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.

 

Expenses prior to obtaining the mining concessions are recognized in profit or loss for the year in which they are incurred.

 

  

Note 13

Intangible assets and goodwill (continued)

 

13.2

Disclosures 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 June 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,

 

 

Note 13

Intangible assets and goodwill (continued)

 

13.2

Disclosures on intangible assets and goodwill, continued

 

e)

Movements in identifiable intangible assets as of June 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			427				2				16,562				-				10				-				17,001
Increases (decreases) for transfers			-				-				-				-				-				-				-
Other increases / decreases for foreign currency exchange rates			(2	)			-				-				-				-				-				(2	)
(-) Impairment losses recognized in profit or loss for the year			-				-				(2	)			(150	)			-				(3,214	)			(3,366	)
Transferred to available for sale			-				-				-				-				-				(6,205	)			(6,205	)
Other increases (decreases)			178				-				-				95				(22	)			-				251
Total increases (decreases)			603				2				16,560				(55	)			(12	)			(9,419	)			7,679
Final balance			25,663				1,252				122,918				1,723				159				34,758				186,473

 

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			2				-				-				-				-				-				2
Amortization			(1,319	)			(17	)			-				-				-				-				(1,336	)
Other increases (decreases)			(350	)			-				-				-				-				-				(350	)
Total increases (decreases)			(1,667	)			(17	)			-				-				-				-				(1,684	)
Final balance			(21,436	)			(1,078	)			-				-				-				-				(22,514	)

  

 

13.2

Disclosures on intangible assets and goodwill, continued

 

f)

Movements in identifiable intangible assets as of June 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			427				2				16,562				-				10				-				17,001
Increases (decreases) for transfers			-				-				-								-				-				-
Amortization			(1,319	)			(17	)			-				-				-				-				(1,336	)
Impairment losses recognized in profit or loss for the year			-				-				(2	)			(150	)			-				(3,214	)			(3,366	)
Other increases / decreases for foreign currency exchange rates			-				-				-				-				-				-				-
Transferred to available for sale			-				-				-				-				-				(6,205	)			(6,205	)
Other increases (decreases)			(172	)			-				-				95				(22	)			-				(99	)
Total increases (decreases)			(1,064	)			(15	)			16,560				(55	)			(12	)			(9,419	)			5,995
Final balance			4,227				174				122,918				1,723				159				34,758				163,959

 

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

 

  

Note 13

Intangible assets and goodwill (continued)

 

13.2

Disclosures on intangible assets and goodwill, continued

 

g)

Movements in identifiable intangible assets as of December 31, 2017:

 

Movements in identifiable intangible assets, accumulated amortization		Trademarks				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$				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		Trademarks				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$				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

 

  

Note 14

Property, plant and equipment

 

As of June 30, 2018 and December 31, 2017, the detail of property, plant and equipment is as follows:

 

14.1

Types of property, plant and equipment

 

		6/30/2018 ThUS$				12/31/2017 ThUS$
Description of types of property, plant and equipment
Property, plant and equipment, net
Land			24,728				24,900
Buildings			217,692				230,319
Other property, plant and equipment			22,610				24,862
Transport equipment			2,877				3,257
Supplies and accessories			2,235				1,872
Office equipment			536				487
Network and communication equipment			792				1,050
Mining assets			14,769				16,237
IT equipment			3,825				3,401
Energy generating assets			7,016				7,861
Constructions in progress			226,805				165,054
Machinery, plant and equipment (1)			882,012				950,054
Total			1,405,897				1,429,354
Property, plant and equipment, gross
Land			24,728				24,900
Buildings			612,422				610,264
Other property, plant and equipment			240,530				244,831
Transport equipment			11,143				11,195
Supplies and accessories			20,807				19,498
Office equipment			11,271				11,105
Network and communication equipment			7,362				7,356
Mining assets			131,853				129,028
IT equipment			27,984				27,038
Energy generating assets			36,870				36,643
Constructions in progress			226,805				165,054
Machinery, plant and equipment			2,956,603				2,938,287
Total			4,308,378				4,225,199
Accumulated depreciation and value impairment of property, plant and equipment, total
Accumulated depreciation and impairment of buildings			(394,730	)			(379,945	)
Accumulated depreciation and impairment of other property, plant and equipment			(217,920	)			(219,969	)
Accumulated depreciation and impairment of transport equipment			(8,266	)			(7,938	)
Accumulated depreciation and impairment of supplies and accessories			(18,572	)			(17,626	)
Accumulated depreciation and impairment of office equipment			(10,735	)			(10,618	)
Accumulated depreciation and impairment of network and communication equipment			(6,570	)			(6,306	)
Accumulated depreciation and impairment of mining assets			(117,084	)			(112,791	)
Accumulated depreciation and impairment of IT equipment			(24,159	)			(23,637	)
Accumulated depreciation and impairment of energy generating assets			(29,854	)			(28,782	)
Accumulated depreciation and impairment of machinery, plant and equipment			(2,074,591	)			(1,988,233	)
Total			(2,902,481	)			(2,795,845	)

 

  

Note 14

Property, plant and equipment, (continued)

 

14.1

Types of property, plant and equipment, continued

 

(1)

The detail of machinery, plant and equipment is as follows:

 

		6/30/2018 ThUS$				12/31/2017 ThUS$
Description of classes of property, plant and equipment
Property, plant and equipment, net
Pumps			27,671				33,614
Conveyor belt			23,144				24,832
Crystallizer			14,574				15,519
Plant equipment			172,760				186,885
Water tanks			10,458				11,296
Filter			17,552				18,572
Facilities/electrical equipment			97,639				105,600
Other machinery, plant and equipment			63,078				72,812
Piping			105,706				113,641
Pond			263,381				275,731
Well			41,807				46,802
Parts			44,242				44,750
Total			882,012				950,054

 

  

Note 14

Property, plant and equipment (continued)

 

14.2

Reconciliation of changes in property, plant and equipment by type:

 

Reconciliation of changes in property, plant and equipment by class as of June 30, 2018 and December 31, 2017:

 

Reconciliation of changes in property, plant and equipment by class as of June 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			-				12				630				-				133				29				-				-				298				212				119,533				7,388				128,235
Disposals			-				(38	)			(6,248	)			(51	)			-				-				-				-				-				-				(15,699	)			(1,001	)			(23,037	)
Increase (decrease) in foreign currency translation difference			(31	)			(65	)			(4	)			(1	)			(9	)			(3	)			-				-				(5	)			-				-				(75	)			(193	)
Reclassifications			-				2,249				1,261				-				1,253				141				6				2,825				500				15				(22,056	)			13,807				1
Other increases (decreases) (*)			-				-				60				-				(68	)			(1	)			-				-				153				-				(20,027	)			(1,803	)			(21,686	)
Decreases for classification as held for sale (1)			(141	)			-				-				-				-				-				-				-				-				-				-				-				(141	)
Total changes			(172	)			2,158				(4,301	)			(52	)			1,309				166				6				2,825				946				227				61,751				18,316				83,179
Closing balance			24,728				612,422				240,530				11,143				20,807				11,271				7,362				131,853				27,984				36,870				226,805				2,956,603				4,308,378

 

Reconciliation of changes in property,  plant and equipment by class as of June 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				6,248				8				-				-				-				-				-				-				-				1,010				7,314
Depreciation expense			-				(15,126	)			(3,444	)			(364	)			(881	)			(140	)			(249	)			(4,294	)			(590	)			(1,079	)			-				(88,838	)			(115,005	)
Impairment			-				-				-				-				-				-				-				-				-				-				-				-				-
Increase (decrease) in foreign currency translation difference			-				19				2				1				6				2				-				-				(2	)			-				-				29				57
Reclassifications			-				246				(458	)			(4	)			(84	)			(15	)			(19	)			1				93				1				-				238				(1	)
Other increases (decreases) (*)			-				28				(299	)			31				13				36				4				-				(23	)			6				-				1,203				999
Decreases for classification as held for sale (1)			-				-				-				-				-				-				-				-				-				-				-				-				-
Total changes			-				(14,785	))			2,049				(328	)			(946	)			(117	)			(264	)			(4,293	)			(522	)			(1,072	)			-				(86,358	)			(106,636	)
Closing balance			-				(394,730	)			(217,920	)			(8,266	)			(18,572	)			(10,735	)			(6,570	)			(117,084	)			(24,159	)			(29,854	)			-				(2,074,591	)			(2,902,481	)

 

  

Note 14

Property, plant and equipment (continued)

 

14.2

Reconciliation of changes in property, plant and equipment by type, continued:

 

Reconciliation of changes in property, plant and equipment by class as of June 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			-				12				630				-				133				29				-				-				298				212				119,533				7,388				128,235
Disposals			-				10				-				(43	)			-				-				-				-				-				-				(15,699	)			9				(15,723	)
Depreciation expense			-				(15,126	)			(3,444	)			(364	)			(881	)			(140	)			(249	)			(4,294	)			(590	)			(1,079	)			-				(88,838	)			(115,005	)
Impairment			-				-				-				-				-				-				-				-				-				-				-				-				-
Increase (decrease) in foreign currency translation difference			(31	)			(46	)			(2	)			-				(3	)			(1	)			-				-				(7	)			-				-				(46	)			(136	)
Reclassifications			-				2,495				803				(4	)			1,169				126				(13	)			2,826				593				16				(22,056	)			14,045				-
Other increases (decreases) (*)			-				28				(239	)			31				(55	)			35				4				-				130				6				(20,027	)			(600	)			(20,687	)
Decreases for classification as held for sale (1)			(141	)			-				-				-				-				-				-				-				-				-				-				-				(141	)
Total changes			(172	)			(12,627	)			(2,252	)			(380	)			363				49				(258	)			(1,468	)			424				(845	)			61,751				(68,042	)			(23,457	)
Closing balance			24,728				217,692				22,610				2,877				2,235				536				792				14,769				3,825				7,016				226,805				882,012				1,405,897

 

(*) 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.

 

 

Note 14

Property, plant and equipment (continued)

 

14.2

Reconciliation 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				158,797				26,067				186,784
Disposals			-				(59	)			(11,623	)			(321	)			-				(23	)			-				(30,082	)			(57	)			-				(16,761	)			(3,374	)			(62,300	)
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				(120,668	)			84,424				(191	)
Other increases (decreases) (*)			(7,436	)			4,669				(5,900	)			-				80				(6,817	)			(301	)			-				5,760				-				(27,025	)			(2,767	)			(39,737	)
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	)			-				(175,770	)			(232,365	)
Impairment			-				-				-				-				-				-				-				-				-				-				-				-				-
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	)

 

  

Note 14

Property, plant and equipment (continued)

 

14.2

Reconciliation 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				158,797				26,067				186,784
Disposals			-				(1	)			(1	)			(9	)			-				(20	)			-				1				(32	)			-				(16,761	)			(164	)			(16,987	)
Depreciation expense			-				(33,306	)			(6,759	)			(730	)			(1,047	)			(357	)			(665	)			(10,638	)			(909	)			(2,184	)			-				(175,770	)			(232,365	)
Impairment			-				-				-				-				-				-				-				-				-				-				-				-				-
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				(120,668	)			84,768				(127	)
Other increases (decreases) (*)			(7,436	)			2,566				(3,629	)			(22	)			97				(2,923	)			(81	)			1,635				3,014				(3	)			(27,025	)			(6,547	)			(40,354	)
Decreases for classification as held for sale (1)			(411	)			(56	)			-				-				-				-				-				-				-				-				-				-				(467	)
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.

 

(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.

 

  

Note 14

Property, plant and equipment (continued)

 

14.3

Detail 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.

 

14.4

Impairment 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 June 30, 2018, there were no impairment adjustments and as of December 31, 2017 there were impairment adjustments associated with the closure of railway facilities for the transportation of products.

 

14.5

Additional information

 

Interest capitalized in construction-in-progress:

 

As of June 30, 2018, capitalized interest totaled ThUS$2,650, while for the period January to December 2017, this item totaled ThUS$4,382.

 

Financing costs are not capitalized for periods which exceed the normal term of acquisition, construction or installation of the asset, such as occur with delays, interruptions or a temporary suspension of the project due to technical, financial or other issues, which prevent the asset from being maintained in good condition for its use.

 

  

Note 15

Employee benefits

 

15.1

Provisions for employee benefits

 

Classes of benefits and expenses by employee		6/30/2018				12/31/2017
		ThUS$				ThUS$
Current
Profit sharing and bonuses			9,990				22,421
Total			9,990				22,421
Non-current
Profit sharing and bonuses			8,429				6,487
Severance indemnity payments			26,620				27,445
Total			35,049				33,932

 

  

Note 15

Employee benefits (continued)

 

15.2

Policies 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 15,4 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.

 

  

Note 15

Employee benefits (continued)

 

15.3

Other 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		6/30/2018				12/31/2017
		ThUS$				ThUS$
Staff severance indemnities, Chile			26,291				25,893
Executive severance plan			8,429				6,487
Severance for foreigners			329				1,552
Total other non-current liabilities			35,049				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.

 

  

Note 15

Employee benefits (continued)

 

15.3

Other 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.

 

15.4

Post-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.

 

15.5

Staff severance indemnities

 

As of June 30, 2018 and 2016, severance indemnities calculated at the actuarial value are as follows:

 

		6/30/2018 ThUS$				12/31/2017 ThUS$
Opening balance			(27,445	)			(22,532	)
Current cost of service			(645	)			(934	)
Interest cost			(885	)			(1,488	)
Actuarial gain/loss			(611	)			(1,144	)
Exchange rate difference			1,728				(2,284	)
Benefits paid during the year			1,238				937
Balance			(26,620	)			(27,445	)

 

  

Note 15

Employee benefits (continued)

 

15.5

Staff severance indemnities, continued

 

a)

Actuarial assumptions

 

The liability recorded for staff severance indemnity is valued at the actuarial value method, using the following actuarial assumptions:

 

		6/30/2018				12/31/2017
Mortality rate			RV - 2014				RV - 2009
Actual annual interest rate			5,078	%			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 June 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 6/30/2018		Effect + 100 basis points ThUS$				Effect - 100 basis points ThUS$
Discount rate			(2,050	)			2,507
Employee turnover rate			(259	)			289

 

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.

 

  

Note 16

Executive 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.

 

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 510,404 shares reflected as a cost of ThUS$1,943 in the results for the period ending June 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.

 

 

Note 17

Disclosures on equity

 

The detail and movements in the funds of equity accounts are shown in the consolidated statement of changes in equity.

 

17.1

Capital 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		6/30/2018				12/31/2017				Description (1)		Calculation (1)
Net Financial Debt ThUS$			391,829				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			3,64				3,29			Current Asset divided by Current Liability		Total Current Assets / Total Current Liabilities
Net Debt / Capitalization			0,15				0,10			Net Financial Debt divided by Total Equity		Net financial debt / ( Net financial debt + Total Equity)
ROE			22,1	%			19,1	%		Income divided by Total Equity		Total Income / Equity (UH 12 months)
EBITDA (THUS$)			936,979				894,588			EBITDA		Gross Profit-Administrative Expenses + Adjustments for depreciation and amortization expenses,
ROA			22,23	%			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			1,01				0,91			Total Liability on Equity		Total Liabilities / Total Equity
										(1) Assumes the absolute value of the accounting records

 

  

Note 17

Disclosures on equity (continued)

 

17.1

Capital 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.

 

17.2

Disclosures 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, where both series are preferred shares.

 

The preferential voting rights for each series are detailed as follows:

 

Series “A”:

 

If the election of the Company’s President results in a tie 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.

 

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 the director elected by Series B shareholders.

 

As of June 30, 2018 and December 31, 2017, the Group does not maintain shares in the parent either directly or through those companies in which it has investments.

 

  

Note 17

Disclosures on equity (continued)

 

17.2

Disclosures on preferred share capital, continued

 

Detail of types of capital in preference shares:

 

Type of capital in preferred shares		6/30/2018								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 June 30, 2018 and December 31, 2017, the Company has not placed any new issuances of shares on the market.

 

  

Note 17

Disclosures on equity (continued)

 

17.3

Disclosures on reserves in equity

 

As of June 30, 2018 and December 31, 2017, this caption comprises the following:

 

		6/30/2018				12/31/2017
		ThUS$				ThUS$
Reserve for currency exchange conversion			(30,766	)			(24,913	)
Reserve for cash flow hedges			10,512				2,248
Reserve for gains and losses from financial assets measured at fair value through other comprehensive income			624				2,937
Reserve for actuarial gains or losses in defined benefit plans			(5,706	)			(5,953	)
Other reserves			11,693				11,332
Total other reserves			(13,643	)			(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.

 

  

Note 17

Disclosures on equity (continued)

 

17.3

Disclosures 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			(5,853	)			8,264				-				84								(3,176	)			-				361				(320	)			-				(320	)
Deferred taxes			-				-				-				-				163				-				863				-				-				1,026				1,026
Reclassification of loss in reserves			-				-				-				-				-				-				-				-				-				-				-
Closing balance as of 6/30/2018			(30,766	)			10,512				-				(6,763	)			1,057				1,611				(987	)			11,693				(13,713	)			70				(13,643	)

 

 

Note 17

Disclosures on equity (continued)

 

17.3

Disclosures 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.

 

		6/30/2018				12/31/2017
Subsidiary - Associate		ThUS$				ThUS$
SQM Iberian S.A. (*)			9,903				9,464
SQM Europe NV			1,815				1,957
Soquimich European holding B,V,			828				828
Abu Dhabi Fertilizer Industries WWL(**)			(351	)			455
Doktor Tarsa Tarim Sanayi AS			803				305
Other companies			372				-
Total			13,370				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			11,693				11,332

 

  

Note 17

Disclosures on equity (continued)

 

17.4

Dividend 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.

 

This dividend will be paid to shareholders, in person or through their duly authorized representatives, starting at 9.00 a.m. on June 15, 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.

 

  

Note 17

Disclosures on equity (continued)

 

17.4

Dividend policies, continued

 

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.

 

 

Note 17

Disclosures on equity (continued)

 

17.5

Interim and provisional dividends

 

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.

 

  

Note 17

Disclosures on equity (continued)

 

17.5

Interim and provisional dividends, continued

 

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.

 

This dividend will be paid to shareholders, in person or through their duly authorized representatives, starting at 9.00 a.m. on December 14, 2017. The shareholders who are registered in the Shareholders’ Registry five business days prior to the date of payment will be entitled to the dividend.

 

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.

 

  

Note 17

Disclosures on equity (continued)

 

17.5

Interim and provisional dividends, continued

 

The dividends presented as deducted from equity are as follows:

 

		6/30/2018 ThUS$				12/31/2017 ThUS$
Dividends attributable to owners of the parent			440				55,501
Provisional dividend			113,825				317,243
Potential dividend			107,871				-
Dividend payable			133,872				110,529
Total			356,008				483,273

 

  

Note 18

Provisions and other non-financial liabilities

 

18.1

Types of provisions

 

		6/30/2018												12/31/2017
		Current				Non- current				Total				Current				Non- current				Total
		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Provision for legal complaints (*)			10,999				3,000				13,999				16,419				3,000				19,419
Provision for dismantling, restoration and rehabilitation cost (**)			-				25,196				25,196				-				26,954				26,954
Other provisions(***)			68,890				6				68,896				47,026				47				47,073
Total			79,889				28,202				108,091				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 18.2

 

  

Note 18

Provisions and other non-financial liabilities (continued)

 

18.2

Description of other provisions

 

Current provisions, other short-term provisions		6/30/2018				12/31/2017
		ThUS$				ThUS$
Provision for tax loss in fiscal litigation			710				739
Rent under Lease contract with Corfo(*)			55,478				32,331
Provision for additional tax related to foreign loans			388				416
End of agreement bonus			2,271				4,522
Directors’ per diem allowance			1,628				2,630
Provision for subsidiary restructuring			6,000				6,000
Foreign mining company property tax provision			2,060				-
Miscellaneous provisions			355				388
Total			68,890				47,026
Other long-term provisions
Investments with negative equity			6				47
Total			6				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 19.1).

 

  

Note 18

Provisions and other non-financial liabilities (continued)

 

18.3

Other current liabilities

 

These amounts are paid on a quarterly basis,

 

Other liabilities non-financial current

 

Description of other liabilities		6/30/2018				12/31/2017
		ThUS$				ThUS$
Tax withholdings			5,977				7,404
VAT payable			5,714				3,344
Guarantees received			2,638				2,638
Accrual for dividend			133,872				110,529
Monthly tax provisional payments			16,600				11,684
Deferred income			10,791				5,301
Withholdings from employees and salaries payable			5,663				6,725
Accrued vacations (*)			18,279				19,042
Other current liabilities			5,717				2,137
Total			205,251				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.

 

  

Note 18

Provisions and other non-financial liabilities (continued)

 

18.4

Changes in provisions

 

Description of items that gave rise to variations as of 6/30/2018		Legal complaints				Provision for dismantling, restoration and rehabilitation cost				Other provisions				Total
		ThUS$				ThUS$				ThUS$				ThUS$
Total provisions, initial balance			19,419				26,954				47,073				93,446
Changes in provisions:
Additional provisions			-				-				61,903				61,903
Provision used			(5,420	)			(1,758	)			(40,051	)			(47,229	)
Increase(decrease) in foreign currency exchange			-				-				-				-
others			-				-				(29	)			(29	)
Total Increase (decreases)			(5,420	)			(1,758	)			21,823				14,645
Total provisions, final balance			13,999				25,196				68,896				108,091

 

Description of items that gave rise to variations as of 12/31/2017		Legal complaints				Provision for dismantling, restoration and rehabilitation cost				Other provisions				Total
		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

 

  

Note 19

Contingencies 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:

 

19.1

Lawsuits 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.
	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.

 

  

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits 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.

 

  

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits 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	:	Evidence stage
	Nominal value	:	ThUS$515.

 

  

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits 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	:	Evidence stage.
	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	:	The discussion stage has finished.
	Nominal value	:	Not determined.

 

  

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits 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 found in favor of SQM Nitratos.
	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	:	Evidence stage.
	Nominal value	:	ThUS$1,940.
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	:	Evidence stage
	Nominal value	:	ThUS$472.

 

  

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

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	:	Preparatory hearing pending.
	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	:	Awaiting court decision.
	Nominal value	:	Undetermined.
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$254,126.

 

  

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits and other relevant events, continued

 

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.
	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	:	Awaiting court decision.
	Nominal value	:	Undetermined.
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	:	Pending the case hearing.
	Nominal value	:	Undetermined.

 

  

Note 19

Contingencies and restrictions (continued)

 

19.1

Lawsuits 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.

 

  

Note 19

Contingencies and restrictions (continued)

 

19.2

Restrictions 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.

 

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.

 

  

Note 19

Contingencies and restrictions (continued)

 

19.3

Environmental 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.

 

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.

 

 

Note 19

Contingencies and restrictions (continued)

 

19.3

Environmental 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. In addition, within the next few weeks, SQM Salar will send a complete analysis to the authorities, and if so determined, will require the relocation of the monitoring points analyzed. During this period, SQM Salar and the authorities must assess and agree on the causes behind the reduction in the level of the points in question and must define any potentially necessary measures.

 

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.

 

 

Note 19

Contingencies and restrictions (continued)

 

19.4

Tax contingency

 

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.

 

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.

 

 

Note 19

Contingencies and restrictions (continued)

 

19.4

Tax contingency, continued

 

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$17,809. 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 June 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 first half of 2018 be issued, the value would be approximately US$46 million (without considering potential interest and fines).

 

 

Note 19

Contingencies and restrictions (continued)

 

19.5

Contingencies regarding the Changes to the Contracts with Corfo. Appeal No. 10301-2018, Santiago Court of Appeals:

 

20

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.

 

21

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.

 

22

The appeal is currently awaiting sentence in the Santiago Court of Appeals. Such sentence could be subject to appeal by the parties. In the opinion of the Companies and the lawyer who represents them, there are facts that show that this appeal should be rejected and that the Changes could not affect the fundamental rights of the appellants.

 

 

Note 19

Contingencies and restrictions (continued)

 

19.5

Contingencies 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.

 

19.6

Restricted 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 June 30, 2018, the guarantee amounts to ThUS$749.

 

 

Note 19

Contingencies and restrictions (continued)

 

19.7

Securities 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$10,002 and ThUS$12,103 on June 30, 2018 and December 31, 2017 respectively; which is detailed as follows:

 

Grantor		Relationship		6/30/2018				12/31/2017
				ThUS$				ThUS$
Ferosor Agrícola S.A.		Unrelated third party			3,839				4,067
Tattersall Agroinsumos S.A.		Unrelated third party			2,000				2,000
Contador Frutos S.A.		Unrelated third party			1,668				1,743
Agrícola Lobert Ltda.		Unrelated third party			-				1,264
Covepa SPA		Unrelated third party			768				813
Johannes Epple Davanzo		Unrelated third party			343				363
Hortofrutícola La Serena		Unrelated third party			309				323
Juan Luis Gaete Chesta		Unrelated third party			208				262
Arena Fertilizantes y Semillas		Unrelated third party			230				244
Vicente Oyarce Castro		Unrelated third party			233				244
Soc. Agrocom. Julio Polanco		Unrelated third party			154				163
Bernardo Guzmán Schmidt		Unrelated third party			132				138
Gilberto Rivas Y Cia. Ltda.		Unrelated third party			-				138
Lemp Martin Julian		Unrelated third party			118				124
Comercial Agrosal Ltda.		Unrelated third party			-				116
Soc.Comercial el Mimbral		Unrelated third party			-				101
Total					10,002				12,103

 

 

Note 19

Contingencies and restrictions (continued)

 

19.8

Indirect 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 June 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

6/30/2018

12/31/2017

ThUS$

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

-

-

 

 

Note 19

Contingencies and restrictions (continued)

 

19.8

Indirect guarantees, continued

 

Debtor

Type of

Pending balances as of the closing date of the financial statements

Creditor of the guarantee

Name

Relationship

Guarantee

6/30/2018

12/31/2017

ThUS$

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

-

-

 

 

Note 20

Earnings 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		6/30/2018 ThUS$				6/30/2017 ThUS$
Earnings (losses) attributable to owners of the parent			247,697				204,386

 

		6/30/2018 Units				12/31/2017 Units
Number of common shares in circulation			263,196,524				263,196,524

 

		6/30/2018				6/30/2017
Basic earnings per share (US$ per share)			0,9411				0,7766

 

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.

 

Note 21

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 June 30, 2018, total interest expenses incurred amount to ThUS$28,361 (ThUS$25,546 as of June 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.

 

 

Note 21

Borrowing costs (continued)

 

21.1

Costs 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:

 

		6/30/2018				6/30/2017
Capitalization rate of costs for capitalized interest, property, plant and equipment			4	%			4	%
Amount of costs for interest capitalized in ThUS$			2,650				2,462

 

Note 22

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:

 

 

		6/30/2018 ThUS$				6/30/2017 ThUS$
Conversion foreign exchange gains (losses) recognized in the result of the year.			(602	)			(4,707	)
Conversion foreign exchange reserves attributable to the owners of the controlling entity.			(5,943	)			(1,501	)
Conversion foreign exchange reserves attributable to the non-controlling entity.			82				3

 

 

Note 22

Effect of fluctuations in foreign currency exchange rates (continued)

 

b)

Reserves for foreign currency exchange differences:

 

As of June 30, 2018 and 2017, foreign currency exchange differences are detailed as follows:

 

Detail		6/30/2018 ThUS$				12/31/2017 ThUS$
Changes in equity generated by conversion of equity value:
Comercial Hydro S.A.			1,004				1,004
SQMC Internacional Ltda.			(9	)			(2	)
Proinsa Ltda,			(9	)			(7	)
Comercial Agrorama Ltda,			(32	)			(44	)
Isapre Norte Grande Ltda.			(111	)			(74	)
Almacenes y Depósitos Ltda,			95				97
Sacal S.A.			14				-
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			(5	)			-
Agrorama S.A.			11				(98	)
Doktor Tarsa			(17,851	)			(14,447	)
SQM Vitas Fzco			(2,605	)			(1,779	)
Ajay Europe			(1,092	)			(831	)
SQM Eastmed Turkey			(84	)			(92	)
Charlee SQM (Thailand) Co. Ltd.			(297	)			(285	)
Coromandel SQM India			(359	)			(234	)
SQM Italia SRL			(195	)			(154	)
SQM Oceania Pty Ltd,			(634	)			(634	)
SQM Indonesia S.A.			(124	)			(124	)
Abu Dhabi Fertilizers Industries WWL.			(436	)			(435	)
SQM Vitas Holland			(142	)			(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.			(1,031	)			154
Total			(30,766	)			(24,913	)

 

 

Note 22

Effect of fluctuations in foreign currency exchange rates (continued)

 

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.

-

The equities of these companies are expressed in local currency (Chilean peso).

 

Note 23

Environment

 

23.1

Disclosures 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.

 

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.

 

 

Note 23

Environment (continued)

 

23.1

Disclosures of disbursements related to the environment, continued

 

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.

 

23.2

Detail of information on disbursements related to the environment

 

The cumulative disbursements which the Company had incurred as of June 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$6,375 and are detailed as follows:

 

 

Note 23

Environment (continued)

 

23.2

Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 6/30/2018

 

Identification of the Parent or subsidiary

Name of the project with which expenditure is associated

Concept for which the expenditure was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of expenditure ThUS$

Actual or estimated date on which expenditure was or will be made

Miscellaneous

Environment - Operating Area

Not classified

Expense

Not classified

3,713

6/30/2018

SQM S.A.

01-I005500 - Standardization of SO2 plants

Environmental processing

Assets

Not classified

18

6/30/2018

SQM S.A.

01-I007300 - Compliance with Iodine Gas Exposure Standard

Environmental processing

Assets

Not classified

52

6/30/2018

SQM S.A.

01-I012200 - Repair or replacement of well

Sustainability: Environment and Risk Prevention

Assets

Not classified

-

6/30/2018

SQM S.A.

01-I013800 - Increase height of Absorber Tower

Sustainability: Environment and Risk Prevention

Assets

Not classified

13

6/30/2018

SQM S.A.

01-I017200 - CEDAM at Puquíos (ponds) at Llamara

Sustainability: Environment and Risk Prevention

Expense

Not classified

6

6/30/2018

SQM S.A.

01-I017400 - Development of Pintados and surrounding area

Sustainability: Environment and Risk Prevention

Expense

Not classified

5

6/30/2018

SQM S.A.

01-I018300 - Cultural Heritage Baseline Environmental Impact Statement (EIS) Mina Oeste N.V.

Environmental processing

Assets

Not classified

116

6/30/2018

SQM S.A.

01-I018700 - Penalization Process for Salar de Llamara

Environmental processing

Assets

Not classified

692

6/30/2018

SQM S.A.

EIA Expansion of TEA and Seawater Impulsion

Environmental processing

Assets

Not classified

538

6/30/2018

SQM Industrial S.A.

04-J007000 - Environmental Impact Statement

Environmental processing

Expense

Not classified

30

6/30/2018

SQM Industrial S.A.

04-P003600 - Opening of NPT IV Project (NK engineering studies)

Sustainability: Environment and Risk Prevention

Assets

Not classified

117

6/30/2018

SQM Industrial S.A.

04-J010200 - NK CS (KNO3-NaNO3 salt production at NPT2 plant)

Sustainability: Environment and Risk Prevention

Assets

Not classified

46

6/30/2018

SQM Industrial S.A.

04-I015600 - Recovery of Reject Water from Osmosis Plant, NV Iodine Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

41

6/30/2018

SQM Industrial S.A.

04-J012200 - Environmental Impact Statement and Regularization of CS Ponds

Environmental processing

Assets

Not classified

44

6/30/2018

SQM Industrial S.A.

04-J013500 -  Handling of Equipment associated with PCBs

Sustainability: Environment and Risk Prevention

Expense

Not classified

-

6/30/2018

SIT S.A.

03-T003400 - 2016 Port maintenance Capex

Sustainability: Environment and Risk Prevention

Assets

Not classified

32

6/30/2018

SIT S.A.

03-T001900 - Storage Warehouse Cover

Sustainability: Environment and Risk Prevention

Assets

Not classified

11

6/30/2018

SIT S.A.

03-T001800 - Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

79

6/30/2018

SIT S.A.

03-T003200 - Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

76

6/30/2018

SIT S.A.

03-T003600 - Improved P bulk storage

Sustainability: Environment and Risk Prevention

Assets

Not classified

33

6/30/2018

SIT S.A.

03-T004200 - Encapsulation and Collectors Yards 8 and 9

Sustainability: Environment and Risk Prevention

Assets

Not classified

171

6/30/2018

SIT S.A.

03-T004500 - Belt 5 Extension and Overhaul

Sustainability: Environment and Risk Prevention

Assets

Not classified

69

6/30/2018

SIT S.A.

03-T005000 - Ground leveling and paving of warehouse

Sustainability: Environment and Risk Prevention

Assets

Not classified

222

6/30/2018

 

 

Note 23

Environment (continued)

 

23.2

Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 6/30/2018

 

Identification of the Parent or subsidiary

Name of the project with which expenditure is associated

Concept for which the expenditure was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of expenditure ThUS$

Actual or estimated date on which expenditure was or will be made

SQM Salar S.A.

19-L012200 - Installation of flow meters per environmental standard

Sustainability: Environment and Risk Prevention

Assets

Not classified

76

6/30/2018

SQM Salar S.A.

19-C002300 - Extension of LIOH 7,000 TPA Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

29

6/30/2018

SQM Salar S.A.

19-L012100 – Regularization of weather station

Sustainability: Environment and Risk Prevention

Assets

Not classified

-

6/30/2018

SQM Salar S.A.

19-L014700 - Industrial Waste Management

Sustainability: Environment and Risk Prevention

Expense

Not classified

122

6/30/2018

SQM Nitratos S.A.

12-I012700 - Mine Site Workshop Water Recovery Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

24

6/30/2018

Total

6,375

 

 

Note 23

Environment (continued)

 

23.2

Detail of information on disbursements related to the environment, continued

 

Future expenses as of 6/30/2018

 

Identification of the Parent or subsidiary

Name of the project with which expenditure is associated

Concept for which the expenditure was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of expenditure ThUS$

Actual or estimated date on which expenditure was or will be made

Miscellaneous

Environment - Operating Area

Not classified

Expense

Not classified

7,238

12/31/2018

SQM S.A.

01-I005500 - Standardization of SO2 plants

Environmental processing

Assets

Not classified

19

12/31/2018

SQM S.A.

01-I012200 - Repair or replacement of well

Sustainability: Environment and Risk Prevention

Assets

Not classified

76

12/31/2018

SQM S.A.

01-I013800 - Increase height of Absorber Tower

Sustainability: Environment and Risk Prevention

Assets

Not classified

98

3/31/2018

SQM S.A.

01-I017200 - CEDAM at Puquíos (ponds) at Llamara

Sustainability: Environment and Risk Prevention

Expense

Not classified

254

5/31/2018

SQM S.A.

01-I017400 - Development of Pintados and surrounding area

Sustainability: Environment and Risk Prevention

Expense

Not classified

119

5/31/2018

SQM S.A.

01-I018300 - Cultural Heritage Baseline Environmental Impact Statement (EIS) Mina Oeste N.V.

Environmental processing

Assets

Not classified

4

3/31/2018

SQM S.A.

01-I018700 - Penalization Process for Salar de Llamara

Environmental processing

Assets

Not classified

1,208

12/31/2018

SQM S.A.

EIA Expansion of TEA and Seawater Impulsion

Environmental processing

Assets

Not classified

1,062

8/30/2018

SQM Industrial S.A.

04-P003600 - Opening of NPT IV Project (NK engineering studies)

Sustainability: Environment and Risk Prevention

Assets

Not classified

-

8/30/2018

SQM Industrial S.A.

04-I015600 - Recovery of Reject Water from Osmosis Plant, NV Iodine Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

89

12/31/2018

SQM Industrial S.A.

04-J012200 - Environmental Impact Statement and Regularization of CS Ponds

Sustainability: Environment and Risk Prevention

Assets

Not classified

376

12/31/2018

SQM Industrial S.A.

04-J013500 -  Handling of Equipment associated with PCBs

Environmental processing

Expense

Not classified

140

12/31/2018

SIT S.A.

03-T001900 - Storage Warehouse Cover

Sustainability: Environment and Risk Prevention

Assets

Not classified

-

12/31/2018

SIT S.A.

03-T001800 - Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

24

12/31/2018

 

 

Note 23

Environment (continued)

 

23.2

Detail of information on disbursements related to the environment, continued

 

Future expenses as of 6/30/2018

 

Identification of the Parent or subsidiary

Name of the project with which expenditure is associated

Concept for which the expenditure was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of expenditure ThUS$

Actual or estimated date on which expenditure was or will be made

SIT S.A.

03-T003200 - Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

178

5/31/2018

SIT S.A.

03-T003600 - Improved P bulk storage

Sustainability: Environment and Risk Prevention

Assets

Not classified

1

3/31/2018

SIT S.A.

03-T004200 - Encapsulation and Collectors Yards 8 and 9

Sustainability: Environment and Risk Prevention

Assets

Not classified

683

8/30/2018

SIT S.A.

03-T004500 - Belt 5 Extension and Overhaul

Sustainability: Environment and Risk Prevention

Assets

Not classified

266

8/30/2018

SIT S.A.

03-T005000 - Ground leveling and paving of warehouse

Sustainability: Environment and Risk Prevention

Assets

Not classified

-

9/30/2018

SQM Salar S.A.

19-L012100 – Regularization of weather station

Sustainability: Environment and Risk Prevention

Assets

Not classified

52

6/01/2018

SQM Salar S.A.

19-C002300 - Extension of LIOH 7,000 TPA Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

-

12/31/2018

SQM Nitratos S.A

12-I012700 - Mine Site Workshop Water Recovery Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

136

12/31/2018

Total.

12,023

 

 

Note 23

Environment (continued)

 

23.2

Detail of information on disbursements related to the environment, continued

 

Accumulated expenses as of 12/31/2017

 

Identification of the Parent or subsidiary

Name of the project with which expenditure is associated

Concept for which the expenditure was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of expenditure ThUS$

Actual or estimated date on which expenditure was or will be made

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

Assets

Not classified

37

4/1/2014

SQM Industrial S.A.

04-PPZU00 - Standardize and Certify Plant Fuel Tanks

Environmental processing

Assets

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

Assets

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

Assets

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

Assets

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

Assets

Not classified

12

12/31/2018

SQM S.A.

01-I005500 - Standardization of SO2 plants

Environmental processing

Assets

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

Assets

Not classified

62

12/31/2018

SQM S.A.

01-I007300 - Compliance with Iodine Gas Exposure Standard

Environmental processing

Assets

Not classified

961

12/31/2017

SQM S.A.

01-I012200 - Repair or replacement of well

Sustainability: Environment and Risk Prevention

Assets

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

Assets

Not classified

240

6/1/2018

SQM Salar S.A.

19-C002300 - Extension of LIOH 7,000 TPA Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

230

12/31/2018

SQM Salar S.A.

19-L012100 – Renovation of equipment which must be certified in order to gain environmental approval (RCA)

Sustainability: Environment and Risk Prevention

Assets

Not classified

13

6/1/2018

SIT S.A.

03-T003400 - 2016 Port maintenance Capex

Sustainability: Environment and Risk Prevention

Assets

Not classified

42

3/31/2018

SIT S.A.

03-T001900 - Storage Warehouse Cover

Sustainability: Environment and Risk Prevention

Assets

Not classified

37

3/31/2018

SIT S.A.

03-T001800 - Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

982

5/31/2018

SIT S.A.

03-T003200 - Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

1,296

5/31/2018

SIT S.A.

03-T004200 - Encapsulation and Collectors Yards 8 and 9

Sustainability: Environment and Risk Prevention

Assets

Not classified

58

8/30/2018

SIT S.A.

03-T004500 - Belt 5 Extension and Overhaul

Environmental processing

Assets

Not classified

180

8/30/2018

Total

14,787

 

 

Note 23

Environment (continued)

 

23.2

Detail of information on disbursements related to the environment, continued

 

Future expenses as of 12/31/2017

 

Identification of the Parent or subsidiary

Name of the project with which expenditure is associated

Concept for which the expenditure was made or will be made

Asset / Expense

Description of the asset or expense Item

Amount of expenditure ThUS$

Actual or estimated date on which expenditure was or will be made

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

Assets

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

Assets

Not classified

130

12/31/2018

SQM S.A.

01-I005500 - Standardization of SO2 plants

Environmental processing

Assets

Not classified

37

12/31/2018

SQM S.A.

01-I012200 - Repair or replacement of well

Sustainability: Environment and Risk Prevention

Assets

Not classified

76

12/31/2018

SQM S.A.

01-I013800 - Increase height of Absorber Tower

Sustainability: Environment and Risk Prevention

Assets

Not classified

111

12/31/2018

SQM S.A.

01-I017200 - CEDAM at Puquíos (ponds) at Llamara

Sustainability: Environment and Risk Prevention

Assets

Not classified

260

12/31/2018

SQM S.A.

01-I017400 - Development of Pintados and surrounding area

Sustainability: Environment and Risk Prevention

Assets

Not classified

124

12/31/2018

SIT S.A.

03-T001900 - Storage Warehouse Cover

Sustainability: Environment and Risk Prevention

Assets

Not classified

10

3/31/2018

SIT S.A.

03-T001800 - Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

103

5/31/2018

SIT S.A.

03-T003200 - Mechanization of Shipment from Ca

Sustainability: Environment and Risk Prevention

Assets

Not classified

254

5/31/2018

SIT S.A.

03-T004200 - Encapsulation and Collectors Yards 8 and 9

Sustainability: Environment and Risk Prevention

Assets

Not classified

854

8/30/2018

SIT S.A.

03-T004500 - Belt 5 Extension and Overhaul

Environmental processing

Assets

Not classified

336

8/30/2018

SIT S.A.

03-T005000 - Ground leveling and paving of warehouse

Sustainability: Environment and Risk Prevention

Assets

Not classified

210

9/30/2018

SQM Salar S.A.

19-L012100 – Renovation of equipment which must be certified in order to gain environmental approval (RCA)

Sustainability: Environment and Risk Prevention

Assets

Not classified

52

6/1/2018

SQM Salar S.A.

19-L012200 - Installation of flow meters per environmental standard

Sustainability: Environment and Risk Prevention

Assets

Not classified

10

6/1/2018

SQM Salar S.A.

19-C002300 - Extension of LIOH 7,000 TPA Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

28

12/31/2018

SQM Nitratos S,A

12-I012700 - Mine Site Workshop Water Recovery Plant

Sustainability: Environment and Risk Prevention

Assets

Not classified

160

12/31/2018

Total

13,345

 

 

Note 23

Environment (continued)

 

23.3

Description 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.

 

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.

 

 

Note 23

Environment (continued)

 

23.3

Description of each project, indicating whether these are in process or have been finished, continued

 

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.

 

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.

 

P0036: The project consists of enabling the reuse of the crystallization plant and all of its facilities associated with the production of nitrate salts.

 

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.

 

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.

 

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).

 

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.

 

 

Note 23

Environment (continued)

 

23.3

Description of each project, indicating whether these are in process or have been finished, continued

 

SIT S.A.

 

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.

 

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.

 

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.

 

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.

 

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.

 

 

Note 23

Environment (continued)

 

23.3

Description of each project, indicating whether these are in process or have been finished, continued

 

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.

 

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.

 

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.

 

 

Note 24

Other current and non-current non-financial assets

 

As of June 30, 2018, and December 31, 2017, the detail of other current and non-current assets is as follows:

 

Other non-financial  assets, current		6/30/2018				12/31/2017
		ThUS$				ThUS$
Domestic Value Added Tax			16,964				7,488
Foreign Value Added Tax			4,366				5,122
Prepaid mining licenses			5,304				1,205
Prepaid insurance			2,022				2,446
Other prepayments			2,008				1,443
Refund of Value Added Tax to exporters			3,937				4,937
Other taxes			3,297				4,027
Other assets			352				215
Total			38,250				26,883

 

Other non-financial  assets, non-current		6/30/2018				12/31/2017
		ThUS$				ThUS$
Stain development expenses and prospecting expenses (1)			26,659				17,721
Guarantee deposits			749				771
Other assets			730				770
Total			28,138				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 June 30, 2018, and December 31, 2017:

 

Reconciliation		6/30/2018				12/31/2017
		ThUS$				ThUS$
Opening balance			17,721				23,008
Changes
Additions, other than business combinations			10,064				-
Increase (decrease) due to transfers and other charges			(1,126	)			(5,287	)
Total changes			8,938				(5,287	)
Total			26,659				17,721

 

As of the presentation date, no reevaluations of assets for exploration and assessment of mineral resources have been conducted.

 

  

Note 25

Reportable segments

 

25.1

Reportable 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.

 

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.

 

 

Note 25

Reportable segments (continued)

 

25.1

Reportable segments, continued

 

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.

 

 

Note 25

Reportable segments (continued)

 

25.2

Reportable segment disclosures:

 

6/30/2018
		Specialty plant nutrients				Iodine and its derivatives				Lithium and its derivatives				Industrial chemicals				Potassium				Other products and services				Reportable segments				Operating segments				Elimination of inter-segments amounts				Unallocated amounts				Total
Operating segment items		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Revenue			412,446				160,241				348,154				75,146				139,853				21,580				1,157,420				1,157,420				-				-				1,157,420
Revenues from transactions with other operating segments of the same entity			260,470				219,160				366,242				32,752				123,131				130,125				1,131,880				1,131,880				(1,131,880	)			-				-
Revenues from external customers and transactions with other operating segments of the same entity			672,916				379,401				714,396				107,898				262,984				151,705				2,289,300				2,289,300				(1,131,880	)			-				1,157,420
Costs of sales			(327,834	)			(107,772	)			(111,605	)			(52,926	)			(121,128	)			(19,099	)			(740,364	)			(740,364	)			-				-				(740,364	)
Administrative expenses			-				-				-				-				-				-				-				-				2,707				(58,971	)			(56,264	)
Interest expense			-				-				-				-				-				-				-				-				26,302				(54,663	)			(28,361	)
Depreciation and amortization expense			(51,136	)			(16,436	)			(17,111	)			(8,394	)			(19,098	)			(2,855	)			(115,030	)			(115,030	)			-				(42	)			(115,072	)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				-				-				(752	)			10,243				9,491
Income tax expense, continuing operations			-				-				-				-				-				-				-				-				(4,397	)			(91,758	)			(96,155	)
Other items other than significant cash
Income (loss) before taxes			84,612				52,469				236,549				22,220				18,725				2,481				417,056				417,056				(491,324	)			417,991				343,723
Net income (loss) from continuing operations			84,612				52,469				236,549				22,220				18,725				2,481				417,056				417,056				(495,721	)			326,233				247,568
Net income (loss) from discontinued operations
Net income (loss)			84,612				52,469				236,549				22,220				18,725				2,481				417,056				417,056				(495,721	)			326,233				247,568
Assets			-				-				-				-				-				-				-				-				(6,749,942	)			11,051,356				4,301,414
Equity-accounted investees			-				-				-				-				-				-				-				-				(3,846,831	)			3,961,026				114,195
Increase of non-current assets			-				-				-				-				-				-				-				-				-				(79,086	)			(79,086	)
Liabilities			-				-				-				-				-				-				-				-				(2,708,550	)			4,870,154				2,161,604
Impairment loss recognized in profit or loss			(4,866	)			(1,693	)			509				(991	)			(3,597	)			12				(10,626	)			(10,626	)			-				2,345				(8,281	)
Reversal of impairment losses recognized in profit or loss for the period			-				-				-				-				-				-				-				-				-				-				-
Cash flows from (used in) operating activities			-				-				-				-				-				-				-				-				-				260,656				260,656
Cash flows from (used in) investing activities			-				-				-				-				-				-				-				-				-				(182,208	)			(182,208	)
Cash flows from (used in) financing activities			-				-				-				-				-				-				-				-				-				(170,538	)			(170,538	)

 

 

Note 25

Reportable segments (continued)

 

25.2

Reportable segment disclosures, continued

 

6/30/2017
		Specialty plant nutrients				Iodine and its derivatives				Lithium and its derivatives				Industrial chemicals				Potassium				Other products and services				Reportable segments				Operating segments				Unallocated amounts				Elimination of inter-segments amounts				Total 6/30/2017
Operating segment items		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Revenue			325,749				129,054				297,445				66,379				187,955				17,283				1,023,865				1,023,865				-				-				1,023,865
Revenues from transactions with other operating segments of the same entity			147,056				146,530				253,918				94,174				133,266				94,684				869,628				869,628				(869,628	)			-				-
Revenues from external customers and transactions with other operating segments of the same entity			472,805				275,584				551,363				160,553				321,221				111,967				1,893,493				1,893,493				(869,628	)			-				1,023,865
Costs of sales			(261,527	)			(104,803	)			(80,770	)			(46,488	)			(157,688	)			(14,739	)			(666,015	)			(666,015	)			-				-				(666,015	)
Administrative expenses			-				-				-				-				-				-				-				-				2,760				(48,847	)			(46,087	)
Interest expense			-				-				-				-				-				-				-				-				39,499				(65,045	)			(25,546	)
Depreciation and amortization expense			(47,029	)			(18,847	)			(14,525	)			(8,360	)			(28,357	)			(2,649	)			(119,767	)			(119,767	)			-				(45	)			(119,812	)
The entity’s interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				-				-				-				7,824				7,824
Income tax expense, continuing operations			-				-				-				-				-				-				-				-				(1,072	)			(81,538	)			(82,610	)
Other items other than significant cash
Income (loss) before taxes			64,222				24,251				216,675				19,891				30,267				2,544				357,850				357,850				(346,175	)			274,850				286,525
Net income (loss) from continuing operations			64,222				24,251				216,675				19,891				30,267				2,544				357,850				357,850				(347,247	)			193,312				203,915
Net income (loss) from discontinued operations
Net income (loss)			64,222				24,251				216,675				19,891				30,267				2,544				357,850				357,850				(347,247	)			193,312				203,915
Assets			-				-				-				-				-				-				-				-				(6,735,063	)			10,862,801				4,127,738
Equity-accounted investees			-				-				-				-				-				-				-				-				(2,962,768	)			3,072,100				109,332
Increase of non-current assets			-				-				-				-				-				-				-				-				-				(75,576	)			(75,576	)
Liabilities			-				-				-				-				-				-				-				-				(3,513,267	)			5,392,916				1,879,649
Impairment loss recognized in profit or loss			(5,576	)			(259	)			(243	)			(2,559	)			(894	)			(59	)			(9,590	)			(9,590	)			-				(2,736	)			(12,326	)
Reversal of impairment losses recognized in profit or loss for the period			-				-				-				-				-				-				-				-				-				-				-
Cash flows from (used in) operating activities			-				-				-				-				-				-				-				-				-				298,839				298,839
Cash flows from (used in) investing activities			-				-				-				-				-				-				-				-				-				(74,715	)			(74,715	)
Cash flows from (used in) financing activities			-				-				-				-				-				-				-				-				-				(223,109	)			(223,109	)

 

 

Note 25

Reportable segments (continued)

 

25.3

Statement of comprehensive income classified by reportable segments based on groups of products

 

	6/30/2018
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			412,446				160,241				348,154				75,146				139,853				21,580				-				1,157,420
Cost of sales			(327,834	)			(107,772	)			(111,605	)			(52,926	)			(121,128	)			(19,099	)			-				(740,364	)
Gross profit			84,612				52,469				236,549				22,220				18,725				2,481				-				417,056
Other incomes by function			-				-				-				-				-				-				9,477				9,477
Administrative expenses			-				-				-				-				-				-				(56,264	)			(56,264	)
Other expenses by function			-				-				-				-				-				-				(17,305	)			(17,305	)
Other gains (losses)			-				-				-				-				-				-				(462	)			(462	)
Financial income			-				-				-				-				-				-				10,693				10,693
Financial costs			-				-				-				-				-				-				(28,361	)			(28,361	)
interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				9,491				9,491
Exchange differences			-				-				-				-				-				-				(602	)			(602	)
Profit (loss) before taxes			84,612				52,469				236,549				22,220				18,725				2,481				(73,333	)			343,723
Income tax expense			-				-				-				-				-				-				(96,155	)			(96,155	)
Profit (loss) from continuing operations			84,612				52,469				236,549				22,220				18,725				2,481				(169,488	)			247,568
Profit (loss) from discontinued operations			-				-				-				-				-				-				-				-
Profit (loss)			84,612				52,469				236,549				22,220				18,725				2,481				(169,488	)			247,568
Profit (loss), attributable to
Profit (loss) attributable to the controller´s owners			-				-				-				-				-				-				-				247,697
Profit (loss) attributable to the non-controllers			-				-				-				-				-				-				-				(129	)
Profit (loss)			-				-				-				-				-				-				-				247,568

 

 

Note 25

Reportable segments (continued)

 

25.3

Statement of comprehensive income classified by reportable segments based on groups of products, continued

 

	6/30/2017
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			325,749				129,054				297,445				66,379				187,955				17,283				-				1,023,865
Cost of sales			(261,527	)			(104,803	)			(80,770	)			(46,488	)			(157,688	)			(14,739	)			-				(666,015	)
Gross profit			64,222				24,251				216,675				19,891				30,267				2,544				-				357,850
Other incomes by function			-				-				-				-				-				-				5,862				5,862
Administrative expenses			-				-				-				-				-				-				(46,087	)			(46,087	)
Other expenses by function			-				-				-				-				-				-				(13,396	)			(13,396	)
Other gains (losses)			-				-				-				-				-				-				(991	)			(991	)
Financial income			-				-				-				-				-				-				5,716				5,716
Financial costs			-				-				-				-				-				-				(25,546	)			(25,546	)
interest in the profit or loss of associates and joint ventures accounted for by the equity method			-				-				-				-				-				-				7,824				7,824
Exchange differences			-				-				-				-				-				-				(4,707	)			(4,707	)
Profit (loss) before taxes			64,222				24,251				216,675				19,891				30,267				2,544				(71,325	)			286,525
Income tax expense			-				-				-				-				-				-				(82,610	)			(82,610	)
Profit (loss) from continuing operations			64,222				24,251				216,675				19,891				30,267				2,544				(153,935	)			203,915
Profit (loss) from discontinued operations			-				-				-				-				-				-				-				-
Profit (loss)			64,222				24,251				216,675				19,891				30,267				2,544				(153,935	)			203,915
Profit (loss), attributable to
Profit (loss) attributable to the controller´s owners			-				-				-				-				-				-				-				204,386
Profit (loss) attributable to the non-controllers			-				-				-				-				-				-				-				(471	)
Profit (loss)			-				-				-				-				-				-				-				203,915

 

 

Note 25

Reportable segments (continued)

 

25.4

Revenue from transactions with other Company’s operating segments

 

6/30/2018
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			412,446				160,241				348,154				75,146				139,853				21,580				1,157,420

 

6/30/2017
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			325,749				129,054				297,445				66,379				187,955				17,283				1,023,865

 

25.5

Disclosures 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.

 

25.6

Disclosures 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.

 

 

Note 25

Reportable segments (continued)

 

25.7

Segments by geographical areas as of June 30, 2018 and 2017

 

		6/30/2018
Items		CHILE ThUS$				Latin America and the Caribbean ThUS$				Europe ThUS$				North America ThUS$				Asia and others ThUS$				Total ThUS$
Revenue			56,629				87,228				263,380				258,779				491,404				1,157,420
Investment accounted for under the equity method			(6,233	)			-				41,894				16,314				62,220				114,195
Intangible assets other than goodwill			112,019				-				453				167				16,562				129,201
Goodwill			22,575				86				11,373				724				-				34,758
Property, plant and equipment, net			1,397,140				345				3,870				2,896				1,646				1,405,897
Investment property			-				-				-				-				-				-
Other non-current assets			22,072				23				-				(891	)			6,934				28,138
Non-current assets that are not financial instruments			1,547,573				454				57,590				19,210				87,362				1,712,189

 

		6/30/2017
Items		CHILE ThUS$				Latin America and the Caribbean ThUS$				Europe ThUS$				North America ThUS$				Asia and others ThUS$				Total ThUS$
Revenue			47,358				109,948				501,900				242,156				122,503				1,023,865
Investment accounted for under the equity method			(6,154	)			16,080				32,483				14,166				52,757				109,332
Intangible assets other than goodwill			108,218				-				515				199				-				108,932
Goodwill			23,731				6,290				11,373				724				2,059				44,177
Property, plant and equipment, net			1,441,051				222				3,550				2,531				1,419				1,448,773
Investment property			-				-				-				-				-				-
Other non-current assets			31,133				28				-				-				-				31,161
Non-current assets that are not financial instruments			1,597,979				22,620				47,921				17,620				56,235				1,742,375

  

 

Note 25

Reportable segments (continued)

 

25.8

Property, 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 June 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

 

 

Note 26

Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature

 

26.1

Revenue

 

		January to June
		2018				2017
Products and Services			ThUS$				ThUS$
Specialty vegetal nutrition			412,446				325,749
Iodine and derivatives			160,241				129,054
Lithium and derivatives			348,154				297,445
Potassium			139,853				187,955
Industrial chemicals			75,146				66,379
Other			21,580				17,283
Total			1,157,420				1,023,865

 

26.2

Cost of sales

 

		6/30/2018				6/30/2017
		ThUS$				ThUS$
Raw materials and consumables used			(126,020	)			(111,076	)
Classes of employee benefit expenses			(95,531	)			(76,001	)
Depreciation expense			(112,559	)			(120,752	)
Amortization expense			(1,359	)			(1,356	)
Ground study amortization expense			(1,111	)			(950	)
Operating leases			(40,113	)			(37,743	)
Investment plan expenses			(7,825	)			(2,297	)
Contractors			(38,495	)			(34,987	)
Mining concessions			(4,044	)			(3,936	)
Operations transport			(31,778	)			(32,093	)
Freight and product transport costs			(29,608	)			(26,727	)
Purchase of products from third parties			(113,950	)			(89,045	)
Insurance			(4,774	)			(6,171	)
CORFO rights			(67,850	)			(21,612	)
Export costs			(47,172	)			(40,699	)
Variation in inventory			3,693				(41,215	)
Other expenses, by nature			(21,868	)			(19,355	)
Total			(740,364	)			(666,015	)

  

 

Note 26

Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

26.3

Other income

 

		6/30/2018				6/30/2017
		ThUS$				ThUS$
Discounts obtained from suppliers			366				157
Fines charged to suppliers			304				41
Amounts recovered from insurance			1,023				154
Overestimate of provisions for third-party obligations			60				493
Sale of materials, spare parts and supplies			566				490
Options on mining claims			3,868				3,289
Easements, pipelines and roads			2,372				211
Reimbursement mining licenses and notary expenses			377				690
Shares obtained in junior mining companies through options			541				337
Total			9,477				5,862

 

26.4

Administrative expenses

 

		6/30/2018				6/30/2017
		ThUS$				ThUS$
Employee benefit expenses by nature
Remuneration and benefits to employees			(33,647	)			(26,997	)
Amortization expenses			(7	)			(4	)
Advisory services			(6,326	)			(5,120	)
Marketing costs			(1,789	)			(881	)
Rent buildings and facilities			(2,451	)			(1,961	)
Contractors			(2,686	)			(2,614	)
Other expenses, by nature			(9,358	)			(8,510	)
Total			(56,264	)			(46,087	)

 

 

Note 26

Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

26.5

Other expenses by function

 

		12/31/2017				6/30/2017
		ThUS$				ThUS$
Classes of Employee Benefit Expenses
Depreciation and amortization expense
Depreciation of assets not in use			(43	)			(45	)
Subtotal			(43	)			(45	)
Impairment losses (reversals of impairment losses) recognized in profit (loss) for the year
Impairment of doubtful accounts			(888	)			(2,697	)
Subtotal			(888	)			(2,697	)
Other expenses, by nature
Legal expenses			(5,573	)			(5,292	)
VAT and other unrecoverable taxes			(583	)			(640	)
Fines paid			(222	)			(810	)
Advisory services			(35	)			(36	)
Investment plan expenses			(6,930	)			(2,093	)
Donations not accepted as tax credit			(2,089	)			(1,039	)
Provision for inventory of materials, spare parts and supplies			-				(39	)
Termination benefits paid			-				(153	)
Other operating expenses			(942	)			(552	)
Subtotal			(16,374	)			(10,654	)
Total			(17,305	)			(13,396	)

 

26.6

Other income (expenses)

 

		6/30/2018				6/30/2017
		ThUS$				ThUS$
Adjust previous year application method of participation			(2,688	)			455
Termination expenses			-				192
Others			2,226				(1,638	)
Total			(462	)			(991	)

 

 

Note 26

Gains (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 26.2, 26.4 and 26.5.

 

26.7

Summary of expenses by nature

 

		January to March								April to June
		2018				2017				2018				2017
		ThUS$				ThUS$				ThUS$				ThUS$
Raw materials and consumables			(126,020	)			(111,076	)			(64,405	)			(56,021	)
Classes of Employee Benefit Expenses
Personnel expenses			(129,178	)			(102,998	)			(65,592	)			(54,936	)
Depreciation and amortization expense
Depreciation expense			(112,602	)			(120,797	)			(57,712	)			(60,129	)
Amortization expense			(1,366	)			(1,360	)			(699	)			(678	)
Ground study amortization expense			(1,111	)			(950	)			609				(481	)
Impairment of uncollectible debts			(888	)			(2,697	)			(1,487	)			(40	)
Operating leases			(42,564	)			(39,704	)			(21,510	)			(21,767	)
Fines paid			(222	)			(810	)			(76	)			(179	)
Investment plan expenses			(14,755	)			(4,390	)			(3,088	)			(378	)
Contractors			(41,181	)			(37,601	)			(21,199	)			(20,329	)
Mining concessions			(4,044	)			(3,936	)			(2,724	)			(2,079	)
Operation transport			(31,778	)			(32,093	)			(17,211	)			(15,665	)
Freight and product transport costs			(29,608	)			(26,727	)			(18,252	)			(12,072	)
Purchase of products from third parties			(113,950	)			(89,045	)			(65,682	)			(53,550	)
Insurance			(4,774	)			(6,171	)			(2,874	)			(3,256	)
CORFO rights			(67,850	)			(21,612	)			(55,446	)			(9,604	)
Export costs			(47,172	)			(40,699	)			(24,751	)			(18,819	)
Advisory services			(6,326	)			(5,120	)			(2,993	)			(2,258	)
Marketing costs			(1,789	)			(881	)			(890	)			(567	)
Variation in inventory			3,693				(41,215	)			(17,890	)			(7,483	)
Other expenses, by nature			(40,448	)			(35,616	)			(12,368	)			(16,575	)
Other expenses by nature			(813,933	)			(725,498	)			(456,240	)			(356,866	)

 

  

Note 26

Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature (continued)

 

26.8

Finance expenses

 

		January to March
		2017				2016
		THUS$				THUS$
Interest expense from bank borrowings and overdrafts			(841	)			(830	)
Interest expense from bonds			(26,770	)			(25,369	)
Interest expense from loans			(1,291	)			(1,206	)
Capitalized interest expenses			2,650				2,462
Other finance costs			(2,109	)			(603	)
Total			(28,361	)			(25,546	)

 

  

Note 27

Income tax and deferred taxes

 

Accounts receivable from taxes as of June 30, 2018 and December 31, 2017, are as follows:

 

27.1

Current and non-current tax assets

 

a)

Current tax assets

 

		6/30/2018				12/31/2017
		ThUS$				ThUS$
Monthly provisional income tax payments, Chilean companies			20,342				17,613
Monthly provisional payment Royalty			697				588
Monthly provisional income tax payments, foreign companies			2,611				1,644
Corporate tax credits (1)			488				944
Taxes in recovery process			17,129				11,502
Total			41,267				32,291

 

b)

Non-current tax assets

 

		6/30/2018				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.

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.1

Current and non-current tax assets, continued

 

27.2

Current tax liabilities

 

Current tax liabilities		6/30/2018				12/31/2017
		ThUS$				ThUS$
1st Category income tax			24,063				45,479
Foreign company income tax			34,586				28,996
Article 21 single tax			397				927
Total			59,046				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 2017		Income tax 2016
Spain		25%		25%
Belgium		33,99%		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.

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income tax and deferred taxes

 

Assets and liabilities recognized in the statement of financial position are offset if and only if:

 

1

The Company has legally recognized before the right of the tax authority to offset the amounts recognized in these entries; and

 

2

Deferred 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.

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income tax and deferred taxes, continued

 

d.1)

Income tax assets and liabilities as of June 30, 2018 are detailed as follows:

 

		Net liability position
Description of deferred tax assets and liabilities		Assets				Liabilities
		ThUS$				ThUS$
Unrealized loss			-				(70,942	)
Property, plant and equipment and capitalized interest			200,658				-
Facility closure provision			-				(5,335	)
Manufacturing expenses			99,382				-
Staff severance indemnities ,unemployment insurance			6,765				-
Vacation accrual			-				(4,732	)
Inventory provision			-				(27,406	)
Materials provision			-				(7,574	)
Forwards			-				(2,855	)
Employee benefits			-				(2,588	)
Research and development expenses			3,266				-
Accounts receivable			-				(3,642	)
Provision for legal complaints and expenses			-				(3,780	)
Loan approval expenses			2,476				-
Junior mining companies (valued based on stock price)			1,616				-
Royalty			4,037				-
Tax loss benefit			-				(1,727	)
Other			-				(2,061	)
Foreign items (other)			-				(1,645	)
Balances to date			318,200				(134,287	)
Net balance			183,913				-

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income 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			211,435				-
Facility closure provision			-				(3,469	)
Manufacturing expenses			102,748				-
Staff severance indemnities ,unemployment			6,792				-
Vacation accrual			-				(4,887	)
Inventory provision			-				(25,098	)
Materials provision			-				(7,107	)
Forwards			-				(624	)
Employee benefits			-				(2,317	)
Research and development expenses			3,501				-
Accounts receivable			-				(4,222	)
Provision for legal complaints and expenses			-				(10,750	)
Loan approval expenses			2,670				-
Junior mining companies (valued based on stock price)			2,474				-
Royalty			4,084				-
Tax loss benefit			-				(1,437	)
Other			544				-
Foreign items (other)			-				(510	)
Balances to date			334,248				(128,965	)
Net balance			205,283				-

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income tax and deferred taxes, continued

 

d.3)

Reconciliation of changes in deferred tax liabilities (assets) as of June 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	)			(2,398	)			-				(2,398	)			(70,942	)
Property, plant and equipment and capitalized interest			211,435				(10,777	)			-				(10,777	)			200,658
Facility closure provision			(3,469	)			(1,866	)			-				(1,866	)			(5,335	)
Manufacturing expenses			102,748				(3,366	)			-				(3,366	)			99,382
Individual savings plans, unemployment insurance			6,792				164				(191	)			(27	)			6,765
Vacation accrual			(4,887	)			155				-				155				(4,732	)
Inventory provision			(25,098	)			(2,308	)			-				(2,308	)			(27,406	)
Materials provision			(7,107	)			(467	)			-				(467	)			(7,574	)
Forwards			(624	)			(2,231	)			-				(2,231	)			(2,855	)
Employee benefits			(2,317	)			(271	)			-				(271	)			(2,588	)
Research and development expenses			3,501				(235	)			-				(235	)			3,266
Accounts receivable			(4,222	)			580				-				580				(3,642	)
Provision for legal complaints and expenses			(10,750	)			6,970				-				6,970				(3,780	)
Loan approval expenses			2,670				(194	)			-				(194	)			2,476
Junior mining companies (valued based on stock price)			2,474				-				(858	)			(858	)			1,616
Royalty			4,084				(51	)			4				(47	)			4,037
Tax loss benefit			(1,437	)			(290	)			-				(290	)			(1,727	)
Other			544				(2,605	)			-				(2,605	)			(2,061	)
Foreign items (other)			(510	)			(1,135	)			-				(1,135	)			(1,645	)
Total temporary differences, unused losses and unused tax credits			205,283				(20,325	)			(1,045	)			(21,370	)			183,913

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income 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				(13,689	)			-				(13,689	)			211,435
Facility closure provision			(1,590	)			(1,879	)			-				(1,879	)			(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			(20,608	)			(4,490	)			-				(4,490	)			(25,098	)
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			(4,273	)			51				-				51				(4,222	)
Provision for legal complaints and expenses			(7,686	)			(3,064	)			-				(3,064	)			(10,750	)
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			79				465				-				465				544
Foreign items (other)			(664	)			154				-				154				(510	)
Total temporary differences, unused losses and unused tax credits			205,455				(440	)			268				(172	)			205,283

 

During the period ended June 30, 2018 and December 31, 2017, the Company calculated and accounted for taxable income considering a rate of 24% and 22,5% 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.

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income 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 June 30, 2018 and December 31, 2017, tax loss carryforwards are detailed as follows:

 

		6/30/2018				12/31/2017
		ThUS$				ThUS$
CHILE			1,727				1,437
Total			1,727				1,437

 

Tax losses as of June 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 June 30, 2018 and December 31, 2017 are as follows:

 

		6/30/2018				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

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income tax and deferred taxes, continued

 

d.7)

Movements in deferred tax assets and liabilities

 

Movements in deferred tax assets and liabilities as of June 30, 2018 and December 31, 2017 are detailed as follows:

 

		6/30/2018				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			(20,325	)			(440	)
Increase (decrease) in deferred taxes in equity			(1,045	)			268
Balances to date			183,913				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:

 

		6/30/2018				6/30/2017
		ThUS$				ThUS$
		Income (expenses)				Income (expenses)
Current income tax expense
Current income tax expense			(114,480	)			(81,126	)
Adjustments to prior year current income tax			(2,000	)			15,707
Current income tax expense, net, total			(116,480	)			(65,419	)
Deferred tax expense
Deferred tax expense (income) relating to the creation and reversal of temporary differences			20,325				(17,191	)
Deferred tax expense, net, total			20,325				(17,191	)
Tax expense (income)			(96,155	)			(82,610	)

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income tax and deferred taxes, continued

 

Tax expenses (income) for foreign and domestic parties are detailed as follows:

 

		6/30/2018				6/30/2017
		ThUS$				ThUS$
		Income (expenses)				Income (expenses)
Current income tax expense by foreign and domestic parties, net
Current income tax expense, foreign parties, net			(16,560	)			(4,096	)
Current income tax expense, domestic, net			(99,920	)			(61,323	)
Current income tax expense, net, total			(116,480	)			(65,419	)
Deferred tax expense by foreign and domestic parties, net
Deferred tax expense, foreign parties, net			1,135				(8	)
Deferred tax expense, domestic, net			19,190				(17,183	)
Deferred tax expense, net, total			20,325				(17,191	)
Income tax expense			(96,155	)			(82,610	)

 

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.

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income 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
		6/30/2018				6/30/2018				6/30/2018
		ThUS$				ThUS$				ThUS$
Gain (loss) from defined benefit plans			65				182				247
Cash flow hedge			8,264				-				8,264
Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income			(3,176	)			863				(2,313	)
Total			5,153				1,045				6,198

 

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
		6/30/2017				6/30/2017				6/30/2017
		ThUS$				ThUS$				ThUS$
Gain (loss) from defined benefit plans			(606	)			129				(477	)
Cash flow hedge			2,133				24				2,157
Reserve for gains (losses) from financial assets measured at fair value through other comprehensive income			(3,865	)			(38	)			(3,903	)
Total			(2,338	)			115				(2,223	)

 

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).

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income 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)
		6/30/2018				6/30/2017
		ThUS$				ThUS$
Consolidated income before taxes			343,723				286,526
Income tax rate in force in Chile			27	%			25,5	%
Tax expense using the legal rate			(92,805	)			(73,064	)
Effect of royalty tax expense and passive income			(3,281	)			(1,637	)
Tax effect of non-taxable revenue			1,837				1,723
Effect of taxable rate of non-deductible expenses for determination of taxable income (loss)			(1,643	)			(2,243	)
Tax effect of tax rates borne abroad			(1,980	)			(4,988	)
Variation in assets and liabilities for unrecognized deferred taxes			1,277				-
Other tax effects from the reconciliation between the accounting income and tax expense			440				(2,401	)
Tax expense using the effective rate			(96,155	)			(82,610	)

 

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.

 

 

Note 27

Income tax and deferred taxes (continued)

 

27.3

Income 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.

 

 

Note 28

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		6/30/2018 ThUS				12/31/2017 ThUS$
Current assets:
Cash and cash equivalents		ARS			2				1
Cash and cash equivalents		BRL			3				38
Cash and cash equivalents		CLP			6,285				579
Cash and cash equivalents		CNY			1,656				1,143
Cash and cash equivalents		EUR			14,802				9,782
Cash and cash equivalents		GBP			133				55
Cash and cash equivalents		AUD			843				-
Cash and cash equivalents		MXN			929				258
Cash and cash equivalents		PEN			7				8
Cash and cash equivalents		YEN			1,642				1,773
Cash and cash equivalents		ZAR			2,313				4,074
Subtotal cash and cash equivalents					28,615				17,711
Other current financial assets		CLF			-				-
Other current financial assets		CLP			11,767				39,126
Subtotal other current financial assets					11,767				39,126
Other current non-financial assets		BRL			1,346				1
Other current non-financial assets		COP			-				30
Other current non-financial assets		CLF			34				46
Other current non-financial assets		CLP			21,407				12,172
Other current non-financial assets		CNY			17				12
Other current non-financial assets		EUR			582				235
Other current non-financial assets		MXN			832				1,429
Other current non-financial assets		THB			2				279
Other current non-financial assets		PEN			-				20
Other current non-financial assets		YEN			27				18
Other current non-financial assets		ZAR			517				2,941
Subtotal other current non-financial assets					24,764				17,183
Trade and other receivables		ARS			-				6
Trade and other receivables		BRL			20				23
Trade and other receivables		CLF			377				427
Trade and other receivables		CLP			49,591				85,837
Trade and other receivables		CNY			10,005				10,426
Trade and other receivables		EUR			50,022				49,627
Trade and other receivables		GBP			826				90
Trade and other receivables		MXN			258				195
Trade and other receivables		AED			2,286				546
Trade and other receivables		THB			1,833				791
Trade and other receivables		YEN			51,078				41,582
Trade and other receivables		ZAR			13,363				23,825
Subtotal trade and other receivables					179,659				213,375
Receivables from related parties		EUR			98				58
Receivables from related parties		THB			-				74
Receivables from related parties		CNY			206				-
Subtotal receivables from related parties					304				132

 

 

Note 28

Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Class of assets		Currency		6/30/2018 ThUS$				12/31/2017 ThUS$
Current tax assets		ARS			2				4
Current tax assets		CLP			1,637				1,413
Current tax assets		EUR			254				183
Current tax assets		ZAR			-				431
Current tax assets		MXN			55				-
Current tax assets		PEN			199				201
Subtotal current tax assets					2,147				2,232
Subtotal current assets					247,256				289,759
Non-current assets
Other non-current financial assets		CLP			20				20
Other non-current financial assets		YEN			77				42
Subtotal other non-current financial assets					97				62
Other non-current non-financial assets		BRL			23				27
Other non-current non-financial assets		CLP			798				822
Subtotal other non-current non-financial assets					821				849
Non-current right receivable		CLF			412				209
Non-current right receivable		COP			41				47
Non-current right receivable		CLP			941				1,256
Subtotal non-current rights receivable					1,394				1,512
Equity-accounted investees		AED			29,622				35,414
Equity-accounted investees		EUR			13,886				8,144
Equity-accounted investees		INR			1,663				1,632
Equity-accounted investees		THB			2,278				2,491
Equity-accounted investees		TRY			24,208				21,741
Subtotal equity-accounted investees					71,657				69,422
Intangible assets other than goodwill		CLP			91				48
Subtotal intangible assets other than goodwill					91				48
Property, plant and equipment		CLP			3,352				3,574
Subtotal property, plant and equipment					3,352				3,574
Total non-current assets					77,412				75,467
Total assets					324,668				365,226

 

 

Note 28

Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

 

Liabilities held in foreign currencies are detailed as follows:

 

				6/30/2018												12/31/2017
Class of liability		Currency		91 days to 1 year ThUS$				91 days to 1 year ThUS$				Total ThUS$				Up to90 days ThUS$				91 days to 1 year ThUS$				Total ThUS$
Current liabilities
Other current financial liabilities		CLF			6,531				-				6,531				4,947				-				4,947
Subtotal other current financial liabilities					6,531				-				6,531				4,947				-				4,947
Trade and other payables		BRL			31				-				31				37				-				37
Trade and other payables		THB			79				-				79				91				-				91
Trade and other payables		CLP			69,437				3,158				72,595				61,310				4,361				65,671
Trade and other payables		EUR			22,179				-				22,179				32,896				-				32,896
Trade and other payables		GBP			19				-				19				11				-				11
Trade and other payables		INR			1				-				1				1				-				1
Trade and other payables		MXN			298				-				298				13				-				13
Trade and other payables		PEN			-				-				-				3				-				3
Trade and other payables		ZAR			1,747				-				1,747				2,541				-				2,541
Subtotal trade and other payables					93,791				3,158				96,949				96,903				4,361				101,264
Other current provisions		ARS			1				-				1				-				12				12
Other current provisions		BRL			710				-				710				739				-				739
Other current provisions		CLP			-				61				61				-				80				80
Other current provisions		EUR			243				-				243				243				-				243
Subtotal other current provisions					954				61				1,015				982				92				1,074
Current tax liabilities		CLP			-				238				238				-				326				326
Current tax liabilities		BRL			-				-				-				-				6				6
Current tax liabilities		CNY			-				-				-				3				-				3
Current tax liabilities		EUR			611				1,208				1,819				-				644				644
Current tax liabilities		ZAR			-				56				56				264				-				264
Current tax liabilities		MXN			-				30				30				3				3,071				3,074
Subtotal current tax liabilities					611				1,532				2,143				270				4,047				4,317

 

 

Note 28

Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

				6/30/2018												12/31/2017
Class of liability		Currency		Up to 90 days ThUS$				over 90 days to 1 year ThUS$				Total ThUS$				Up to 90 days ThUS$				Over 90 days to 1 year ThUS$				Total ThUS$
Other current non-financial liabilities		BRL			2				-				2				15				-				15
Other current non-financial liabilities		CLP			6,742				4,043				10,785				8,708				1,824				10,532
Other current non-financial liabilities		CNY			13				-				13				7				-				7
Other current non-financial liabilities		EUR			116				1,642				1,758				2,955				-				2,955
Other current non-financial liabilities		MXN			98				24				122				346				34				380
Other current non-financial liabilities		YEN			-				14				14				-				-				-
Other current non-financial liabilities		PEN			70				-				70				70				-				70
Other current non-financial liabilities		ZAR			363				-				363				12				-				12
Subtotal other current non-financial liabilities					7,404				5,723				13,127				12,113				1,858				13,971
Total current liabilities					109,291				10,474				119,765				115,215				10,358				125,573

 

 

Note 28

Disclosures on the effects of fluctuations in foreign currency exchange rates (continued)

		6/30/2018
Class of liability		Currency		1 to 2 years ThUS$				2 to 3 years ThUS$				3 to 4 years ThUS$				4 to 5 years ThUS$				Over 5 years ThUS$				Total ThUS$
Non-current liabilities
Other non-current financial liabilities		CLF			-				-				-				-				352,012				352,012
Subtotal other non-current financial liabilities					-				-				-				-				352,012				352,012
Non-current provisions for employee benefits		CLP			-				-				-				-				536				536
Non-current provisions for employee benefits		MXN			-				-				-				-				72				72
Non-current provisions for employee benefits		YEN			-				-				-				-				172				172
Subtotal non-current provisions for employee benefits					-				-				-				-				780				780
Total non-current liabilities					-				-				-				-				352,792				352,792

 

		12/31/2017
Class of liability		Currency		1 to 2 years ThUS$				2 to 3 years ThUS$				3 to 4 years ThUS$				4 to 5 years ThUS$				Over 5 years ThUS$				Total 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

 

 

Note 29

Mineral 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 June 30, 2018 and December 31, 2017, the balance amounted to ThUS$15,790 and ThUS$ 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 June 30, 2018 and December 31, 2017, this totaled ThUS$26,659 and ThUS$ 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 June 30, 2018, the amount is ThUS$87 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 June 30, 2018 and December 31, 2017, the balance amounted to ThUS$535 and ThUS$ 521 respectively.

 

For the amount of capitalized expenditure, the total amount disbursed in exploration and evaluation of mineral resources as of June 30, 2018 was ThUS$3,688, 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.

 

 

Note 30

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		06/30/2018				12/31/2017
		ThUS$				ThUS$
Investment in Minera Exar S.A.			41,835				-
Ongoing construction at Minera Exar S.A.			7,796				-
Subtotal of Assets at Minera Exar S.A.			49,631
Investment in Sichuan SQM Migao Chemical Fertilizers Co Ltd.			11,122				-
Subtotal of Assets at Sichuan SQM Migao Chemical Fertilizers Co Ltd. Ltd.			11,122				-
Terrenos Soquimich Comercial S.A.			1,443				1,480
Facilities and fixtures at Soquimich Comercial S.A.			109				109
Subtotal Soquimich Comercial S.A.			1,552				1,589
Total assets held for sale			62,305				1,589

 

 

Note 31

Lawsuits 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.

 

 

Note 31

Lawsuits 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.”

 

 

Note 31

Lawsuits 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.

 

 

Note 32

Sanction 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.

 

 

Note 33

Events occurred after the reporting date

 

33.1

Authorization 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 June 30, 2018, were approved and authorized for issuance by the Management on August 22, 2018.

 

33.2

Disclosures on events occurring after the reporting date

 

On July 25, 2018, the CMF was informed that the Board of Directors had that day agreed to accept the resignation of the Company's Chief Executive Officer, Mr. Patricio de Solminihac Tampier as of December 31, 2018. The Board also agreed to appoint as Chief Executive Officer as of January 1, 2019, Mr. Ricardo Ramos Rodríguez, who is currently serving as the Company’s Vice President of Corporate Services. Mr Ramos has more than 29 years of experience in different executive roles within the Company.

 

The Board recognizes and is deeply grateful to Mr. de Solminihac for his contribution during more than 30 years within the Company, carrying out the roles of Development Manager, Deputy Chair of the Board, Deputy CEO and finally, in the last 3 years, as CEO.

 

On August 13, 2018, SQM Potasio S.A. (“SQM Potasio”), signed a Transaction Agreement (“the Agreement”) with Argentine company Minera Exar S.A.(“Exar”), GFL International Co. Ltd. (“Ganfeng”) and Lithium Americas Corp (“LAC”). Through this Agreement, (a) SQM Potasio will sell to Ganfeng all of its shares and irrevocable contributions in Exar, the company that owns the Caucharí-Olaroz lithium project (the “Project”); (b) Exar will pay in advance to SQM Potasio all of the loans that it has with that company; and (c) Exar will pay the Company for the services it provided to Exar during the project development stage. Under the Agreement, the Company and SQM Potasio will receive a total of US$87.5 million.

 

The Agreement is subject to the fulfillment of certain conditions that the parties have deemed necessary for letters (a) to (c) above to happen (“Conclusion”), by the scheduled date of October 31, 2018, or by December 31, 2018, at the latest. These conditions imply that by the Conclusion date: (i) the statements and guarantees provided by the parties on the signing of the Agreement are true and certain; (ii) Exar can continue to develop its business in the normal way; (iii) the Project continues to develop within the agreed budget; (iv) it complies with the applicable laws and conditions established in the Project’s permits; (v) the Company supports the Project during the transition period until the Conclusion, to enable activities for which it is responsible to be concluded and will be available to clarify Project information to LAC; (vi) the non-existence of laws, standards, judicial processes, orders by authorities or other things that could impede, prohibit or restrict the Conclusion; and (vii) that the approvals necessary for the Conclusion are obtained, even if the parties state that they do not have them.

 

 

Note 33

Events occurred after the reporting date (continued)

 

33.2

Disclosures on events occurring after the reporting date (continued)

 

Under the Agreement, the Company has made a commitment that some of its personnel can be temporarily hired by Exar until December 31, 2018 to carry out on site supervision work of development and construction activities for the Project. Following the Conclusion, the Company has made a commitment (i) that during the first 6 months, part of its team of professionals in the areas of hydrogeology and engineering who are familiar with the Project (the “Professionals”) will be available to hold technical discussions about the Project on a monthly basis; and (ii) that once this period has finished and for a timeframe of 3 years from the Conclusion, the Professionals will be available to hold technical discussions regarding the Project every two months.

 

The Company also reports that SQM Potasio and a subsidiary of Ganfeng, will sign a Deferred Payment Agreement, through which a deferred payment of US$50 million will be made to SQM Potasio, subject to the fulfillment of certain sales targets.

 

The Agreement stipulates that the Deferred Payment Agreement will be signed by the Parties at the closure and the payment to which SQM Potasio is entitled becomes payable as Exar achieves cumulative sales of (i) 25,000 tons (measured in lithium carbonate equivalent) of the Project’s lithium products, (ii) at a price of at least US$10,000 per ton.

 

As a result, the Company estimates that the financial impact at Closure will be (i) cash revenue of US$87.5 million; and (ii) a post-tax profit of around US$5.5 million. The payment to which SQM Potasio will be entitled through the Deferred Payment Agreement will only be accounted for and recognized in the Company’s financial statements once the payment has actually been received.

 

Management is not aware of any other significant events that occurred between June 30, 2018 and the date of issuance of these consolidated financial statements that may significantly affect them.

 

 

Note 33

Events occurred after the reporting date (continued)

 

33.3

Details of dividends declared after the reporting date

 

Payment of Provisional Dividend

 

On August 22, 2018, the Company’s Board of Directors approved the following:

 

To pay 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.

 

This dividend will be paid to shareholders, in person or through their duly authorized representatives, starting at 9.00 a.m. on September 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.

 

 

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: September 14, 2018	/s/ Ricardo Ramos
	By: Ricardo Ramos
	CFO & Vice President of Corporate Services

 

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