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 January, 2015.

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 o

 

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, January 19, 2015 – Sociedad Química y Minera de Chile S.A. (SQM), reports the translation of the financial statements that were filed with the Chilean Securities and Insurance Commission (Superintendencia de Valores y Seguros de Chile) for the nine months ended September 30, 2014.

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

For the nine months ended

September 30, 2014

 

SOCIEDAD QUIMICA Y MINERA DE CHILE S.A. AND SUBSIDIARIES

In Thousands of United States Dollars

 

 

This document includes:

 

-

Consolidated Classified Statements of Financial Position

 

-

Consolidated Statements of Income by Function

 

-

Consolidated Statements of Comprehensive Income

 

-

Consolidated Statements of Cash Flows

 

-

Statements of Changes in Equity

 

-

Notes to the Consolidated Financial Statements

 

 

Table of Contents – Consolidated Financial Statements

 

Note		Page
	Consolidated Classified Statements of Financial Position	9
	Consolidated Statements of Income by Function	11
	Consolidated Statements of Comprehensive Income	12
	Consolidated Statements of Cash Flows	14
	Statements of Changes in Equity	16
	Notes  to the consolidated financial statements
1	Identification and Activities of the Company and Subsidiaries
	1.1   Historical background	19
	1.2   Main domicile where the Company performs its production activities	19
	1.3   Codes of main activities	19
	1.4   Description of the nature of operations and main activities	19
	1.5   Other background	21
2	Basis of presentation for the consolidated financial statements
	2.1    Accounting period	23
	2.2    Financial statements	24
	2.3    Basis of measurement	24
	2.4    Accounting pronouncements	25
	2.5    Basis of consolidation	31
	2.6   Significant accounting judgments, estimates and assumptions	34
3	Significant accounting policies
	3.1    Classification of balances as current and non-current	35
	3.2    Functional and presentation currency	35
	3.3    Foreign currency translation	35
	3.4    Subsidiaries	38
	3.5    Consolidated statement of cash flows	38
	3.6    Financial assets	38
	3.7    Financial liabilities	39
	3.8    Financial instruments at fair value through profit or loss	39
	3.9    Financial instruments offsetting	39
	3.10  Reclassification of financial instruments	40
	3.11  Financial derivative instruments and hedging	40
	3.12  Derecognition of financial instruments	42
	3.13  Financial derivative instruments ivative	42
	3.14  Fair value measurements	42

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note		Page
	3.15  Leases	42
	3.16  Deferred acquisition costs from insurance contracts	43
	3.17  Trade and other receivables	43
	3.18  Inventory measurement	44
	3.19  Investments in associates and joint ventures	45
	3.20  Transactions with non-controlling interests	46
	3.21  Related party transactions	46
	3.22  Property, plant and equipment	46
	3.23  Depreciation of property, plant and equipment	48
	3.24  Intangible assets	48
	3.25  Intangible assets other than goodwill	49
	3.26  Research and development expenses	50
	3.27  Prospecting expenses	50
	3.28  Impairment of non-financial assets	52
	3.29  Minimum dividend	53
	3.30  Earnings per share	53
	3.31  Trade and other payables	53
	3.32  Interest-bearing borrowings	53
	3.33  Other provisions	54
	3.34  Obligations related to employee termination benefits and pension commitments	55
	3.35  Compensation plans	56
	3.36  Revenue recognition	56
	3.37  Finance income and finance costs	57
	3.38  Income tax and deferred taxes	58
	3.39  Segment reporting	59
	3.40  Environment	59
4	Financial risk management
	4.1   Financial risk management policy	60
	4.2   Risk factors	61
	4.3   Risk measurement	64
5	Changes in estimates and accounting policies (consistent presentation)
	5.1   Changes in accounting estimates	65
	5.2   Changes in accounting policies	65

 

 

Table of Contents – Consolidated Financial Statements (continued)

 

Note		Page
6	Background of companies included in consolidation
	6.1   Parent’s stand-alone assets and liabilities	66
	6.2   Parent entity	66
	6.3   Jointly arrangements of controlling interest	66
	6.4   General information on consolidated subsidiaries	69
	6.5   Information attributable to non-controlling interests	71
	6.6   Information on consolidated subsidiaries	72
	6.7  Detail of transactions between consolidated companies	76
7	Cash and cash equivalents
	7.1  Types of cash and cash equivalents	77
	7.2   Short-term investments, classified as cash equivalents	78
	7.3   Information on cash and cash equivalents by currency	78
	7.4   Amount of significant restricted (unavailable) cash balances	79
	7.5   Short-term deposits, classified as cash equivalents	80
8	Inventories	82
9	Related party: disclosures
	9.1   Related party disclosures	83
	9.2   Relationship between the Parent and the entity	83
	9.3   Detailed identification of the relationship between the Parent and subsidiary	84
	9.4   Detail of related parties and related party transactions	86
	9.5   Trade receivables due from related parties, current	88
	9.6   Trade payables due to related parties, current	89
	9.7   Board of directors and senior management	90
	9.8   Key Management Personnel Compensation	92
10	Financial instruments
	10.1   Types of other financial assets	93
	10.2   Trade and other receivables, current and non-current	93
	10.3   Hedging assets and liabilities	97
	10.4   Financial liabilities	99
	10.5   Trade and other payables	111
	10.6   Financial liabilities at fair value through profit or loss	111
	10.7   Financial asset and liability categories	112
	10.8   Fair value measurement of assets and liabilities	114
	10.9   Financial assets pledged as guarantee	115
	10.10 Estimated fair value of financial instruments and financial derivative instruments	115
	10.11 Nature and scope of risks arising from financial instruments	117

 

 

Table of Contents – Consolidated Financial Statements (continued)
Note		Page
11	Equity-accounted investees
	11.1   Investments in associates recognized according to the equity method of accounting	118
	11.2   Assets, liabilities, revenue and expenses of associates	119
	11.3   Other information	120
12	Joint ventures
	12.1   Policy for the accounting for equity accounted investment in joint ventures	121
	12.2   Disclosures of interest in joint ventures	121
	12.3   Investments in joint ventures accounted for using the equity method of accounting	122
	12.4   Assets, liabilities, revenue and expenses from joint ventures	124
	12.5   Other joint venture disclosures	125
13	Intangible assets and goodwill
	13.1  Balances	126
	13.2  Disclosures on intangible assets and goodwill	126
14	Property, plant and equipment
	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	140
	14.4   Additional information	140
	14.5   Impairment of assets	140
	14.6   Reclassifications	140
15	Employee benefits
	15.1   Provisions for employee benefits	141
	15.2   Policies on defined benefit plans	142
	15.3   Other long-term benefits	143
	15.4   Post-employment benefit obligations	144
	15.5   Staff severance indemnities	144
16	Executive compensation plan	145
17	Disclosures on equity
	17.1   Capital management	148
	17.2   Disclosures on preferred share capital	149
	17.3   Disclosures on reserves in equity	151
	17.4   Dividend policies	152
	17.5   Provisional dividends	153

 

Table of Contents – Consolidated Financial Statements (continued)
Note		Page
18	Provisions and other non-financial liabilities
	18.1   Types of provisions	155
	18.2   Description of other provisions	156
	18.3   Other non-financial liabilities, current	156
	18.4   Changes in provisions	157
	18.5   Detail of main types of provisions	159
19	Contingencies and restrictions
	19.1   Lawsuits or other relevant events	160
	19.2   Restrictions to management or financial limits	164
	19.3   Commitments.	165
	19.4   Restricted or pledged cash	166
	19.5   Securities obtained from third parties  parties	167
	19.6   Indirect guarantees	168
20	Revenue	170
21	Earnings per share	170
22	Borrowing costs	171
23	Effect of fluctuations on foreign currency exchange rates	172
24	Environment
	24.1   Disclosures on disbursements related to the environment	173
	24.2   Detail of information on disbursements related to the environment	174
	24.3   Description of each project indicating whether these are in process or have been finished	183
25	Other current and non-current non-financial assets	186
26	Operating segments
	26.1   Operating segments	187
	26.2   Operating segments disclosures	189
	26.3   Statement of comprehensive income classified by operating segments based on groups of products	191
	26.4   Revenue from transactions with other operating segments of the Company	193

 

 

Table of Contents – Consolidated Financial Statements (continued)
Note		Page
	26.5 Disclosures on geographical areas	194
	26.6 Disclosures on main customers	194
	26.7 Segments by geographical areas	195
	26.8 Property, plant and equipment classified by geographical areas	196
27	Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature
	27.1 Revenue	197
	27.2 Cost of sales	197
	27.3 Other income	198
	27.4 Administrative expenses	198
	27.5 Other expenses by function	199
	27.6 Other income (expenses)	299
	27.7 Summary of expenses by nature	200
	27.8 Finance expenses	200
28	Income tax and deferred taxes
	28.1 Current tax assets	201
	28.2 Current tax liabilities	202
	28.3 Tax earnings	202
	28.4 Income tax and deferred taxes	203
29	Disclosures on the effects of fluctuations in foreign currency exchange rates	214
30	Mineral resource exploration and evaluation expenditure	219
31	Subsequent events
	31.1 Authorization of the financial statements	220
	31.2 Disclosures on events occurring after the reporting	220
	31.3 Detail of dividends declared after the reporting date	220

 

 

CONSOLIDATED CLASSIFIED STATEMENTS OF FINANCIAL POSITION

 

 

ASSETS		Note				As of September 30, 2014 ThUS$				As of December 31, 2013 ThUS$
Current assets
Cash and cash equivalents			7.1				295,255				476,622
Other current financial assets			10.1				535,006				460,173
Other current non-financial assets			25				31,666				44,230
Trade and other receivables, current			10.2				408,153				330,992
Trade receivables due from related parties, current			9.5				109,167				128,026
Current inventories			8				923,321				955,530
Current tax assets			28.1				31,987				59,476
Total current assets							2,334,555				2,455,049
Non-current assets
Other non-current financial assets			10.1				66				95
Other non-current non-financial assets			25				30,573				36,505
Trade receivables, non-current			10.2				2,347				1,282
Investments in associates			11.1				54,736				51,075
Investments in joint ventures			12.3				29,566				25,943
Intangible assets other than goodwill			13.1				104,050				104,363
Goodwill			13.1				38,388				38,388
Property, plant and equipment			14.1				1,929,757				2,054,377
Deferred tax assets			28.4				417				531
Total non-current assets							2,189,900				2,312,559
Total assets							4,524,455				4,767,608

 

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 September 30, 2014 ThUS$				As of December 31, 2013 ThUS$
Liabilities
Current liabilities
Other current financial liabilities			10.4				187,301				401,426
Trade and other payables, current			10.5				165,147				150,960
Trade payables due to related parties, current			9.6				221				-
Other current provisions			18.1				27,318				17,953
Current tax liabilities			28.2				32,553				31,707
Provisions for employee benefits, current			15.1				20,704				25,236
Other current non-financial liabilities			18.3				182,200				95,353
Total current liabilities							615,444				722,635
Non-current liabilities
Other non-current financial liabilities			10.4				1,390,738				1,417,390
Other non-current provisions			18.1				8,824				8,633
Deferred tax liabilities			28.4				214,864				154,295
Provisions for employee benefits, non-current			15.1				30,441				32,414
Total non-current liabilities							1,644,867				1,612,732
Total liabilities							2,260,311				2,335,367
Equity			17
Share capital							477,386				477,386
Retained earnings							1,736,629				1,909,725
Other reserves							(7,116	)			(10,491	)
Equity attributable to owners of the Parent							2,206,899				2,376,620
Non-controlling interests							57,245				55,621
Total equity							2,264,144				2,432,241
Total liabilities and equity							4,524,455				4,767,608

 

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

 

 

CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION

 

 

						January to September								July to September
		Note				2014				2013				2014				2013
						ThUS$				ThUS$				ThUS$				ThUS$
Revenue			20				1,522,798				1,710,930				466,425				521,074
Cost of sales			27.2				(1,080,198	)			(1,135,747	)			(323,996	)			(372,594	)
Gross profit							442,600				575,183				142,429				148,480
Other income			27.3				6,863				95,978				1,593				87,016
Administrative expenses			27.4				(67,841	)			(76,070	)			(23,000	)			(25,392	)
Other expenses by function			27.5				(41,760	)			(32,101	)			(11,865	)			(7,497	)
Other gains (losses)			27.6				363				(12,275	)			(101	)			(12,566	)
Profit (loss) from operating activities							340,225				550,715				109,056				190,041
Finance income							11,655				9,749				4,949				2,355
Finance costs			22				(45,673	)			(44,082	)			(14,816	)			(16,651	)
Share of profit of associates and joint ventures accounted for using the equity method							15,622				14,531				6,780				4,539
Foreign currency translation differences			23				(12,051	)			(11,343	)			(7,741	)			(2,501	)
Profit (loss) before taxes							309,778				519,570				98,228				177,783
Income tax expense, continuing operations			28.4				(87,053	)			(117,068	)			(29,347	)			(36,921	)
Profit (loss) from continuing operations							222,725				402,502				68,881				140,862
Profit for the year							222,725				402,502				68,881				140,862
Profit attributable to
Owners of the Parent							218,416				398,139				66,349				138,907
Non-controlling interests							4,309				4,363				2,532				1,955
Profit for the year							222,725				402,502				68,881				140,862

 

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

 

CONSOLIDATED STATEMENTS OF INCOME BY FUNCTION (continued)

 

 

						January to September								July to September
		Note				2014				2013				2014				2013
						US$				US$				US$				US$
Earnings per share
Common shares
Basic earnings per share (US$ per share)			21				0.8299				1.5127				0.2521				0.5278
Basic earnings per share (US$ per share) from continuing operations							0.8299				1.5127				0.2521				0.5278
Diluted common shares
Diluted earnings per share (US$ per share)			21				0.8299				1.5127				0.2521				0.5278
Diluted earnings per share (US$ per share) from continuing operations							0.8299				1.5127				0.2521				0.5278

 

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

 

 

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

 

 

		January to September								July to September
		2014				2013				2014				2013
Statements of comprehensive income		ThUS$				ThUS$				ThUS$				ThUS$
Profit for the year			222,725				402,502				68,881				140,862
Components of other comprehensive income before taxes and foreign currency translation differences
Gain (loss) from foreign currency translation differences, before taxes			(2,138	)			(2,920	)			(1,651	)			(267	)
Other comprehensive income before taxes and foreign currency translation differences			(2,138	)			(2,920	)			(1,651	)			(267	)
Cash flow hedges
(Gain) loss from cash flow hedges before taxes			6,688				11,018				1,478				(1,965	)
Other comprehensive income before taxes and cash flow hedges			6,688				11,018				1,478				(1,965	)
Other comprehensive income before taxes and actuarial gains (losses) from defined benefit plans			-				-				-				-
Other miscellaneous reserves			-				-				-				-
Other components of other comprehensive income before taxes			4,550				8,098				(173	)			(2,232	)
Income taxes associated with components of other comprehensive income
Income taxes associated with cash flow hedges in other comprehensive income			(1,258	)			(2,084	)			(245	)			306
Income taxes associated with components of other comprehensive income			(1,258	)			(2,084	)			(245	)			306
Other comprehensive income			3,292				6,014				(418	)			(1,926	)
Total comprehensive income			226,017				408,516				68,463				138,936
Comprehensive income attributable to
Owners of the Parent			221,791				404,201				65,955				136,976
Non-controlling interests			4,226				4,315				2,508				1,960
Total comprehensive income			226,017				408,516				68,463				138,936

 

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

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS

 

 

Statements of cash flows		Note		9/30/2014 ThUS$				9/30/2013 ThUS$
Cash flows from (used in) operating activities
Types of receipts from operating activities
Cash receipts from sales of goods and rendering of services					1,453,590				1,775,224
Types of payments
Cash payments to suppliers for the provision of goods and services					(882,681	)			(1,060,512	)
Cash payments to and on behalf of employees					(31,498	)			(52,929	)
Other payments related to operating activities					(4,834	)			-
Dividends received					9,682				-
Interest paid					(43,998	)			(64,309	)
Interest received					11,655				-
Reimbursed (paid) income taxes					(48,591	)			(124,334	)
Other incomes (outflows) of cash					13,485				30,958
Net cash generated from (used in) operating activities					476,810				504,098
Cash flows from (used in) investing activities
Cash receipts from the loss of control of subsidiaries and other businesses					185				(4,034	)
Proceeds from the sale of property, plant and equipment					132				-
Proceeds from sales of intangible assets					2,123				86,006
Acquisition of intangible assets					-				(4,796	)
Acquisition of property, plant and equipment					(83,631	)			(321,927	)
Cash advances and loans granted to third parties					(2,545	)			-
Dividends received					-				14,683
Other incomes (outflows) of cash (*)					(75,683	)			(353,077	)
Net cash generated from (used in) investing activities					(159,419	)			(583,145	)

 

(*) Includes other cash receipts (payments), investments and redemptions of time deposits and other financial instruments, which do not qualify as cash and cash equivalents in accordance with IAS 7.7 as they record a maturity date from their date of origin greater than 90 days.

 

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

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)

 

		Note				9/30/2014 ThUS$				9/30/2013 ThUS$
Cash flows from (used in) financing activities
Proceeds from long-term borrowings							-				300,000
Proceeds from short-term borrowings							80,000				140,000
Total proceeds from borrowings							80,000				440,000
Repayment of borrowings							(110,000	)			(164,023	)
Dividends paid							(266,005	)			(76,784	)
Interest received							-				9,749
Other cash receipts (payments)							(201,757	)			(3,569	)
Net cash generated from (used in) financing activities							(497,762	)			205,373
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate							(180,371	)			126,326
Effects of exchange rate fluctuations on cash held							(996	)			(6,086	)
Net (decrease) increase in cash and cash equivalents							(181,367	)			120,240
Cash and cash equivalents at beginning of period							476,622				324,353
Cash and cash equivalents at end of period							295,255				444,593

 

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

 

 

STATEMENTS OF CHANGES IN EQUITY

 

 

2014		Share capital				Foreign currency translation difference reserves				Cash flow hedge reserves				Actuarial gains (losses) from defined benefit plans				Other miscellaneous reserves				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$
Equity at beginning of the year			477,386				(3,817	)			(3,766	)			(1,231	)			(1,677	)			(10,491	)			1,909,725				2,376,620				55,621				2,432,241
Profit for the year			-				-				-				-				-				-				218,416				218,416				4,309				222,725
Other comprehensive income			-				(2,055	)			5,430				-				-				3,375				-				3,375				(83	)			3,292
Comprehensive income			-				(2,055	)			5,430				-				-				3,375				218,416				221,791				4,226				226,017
Dividends			-				-				-				-				-				-				(339,208	)			(339,208	)			(2,602	)			(341,810	)
Increase (decrease) in transfers and other changes			-				-				-				-				-				-				(52,304	)			(52,304	)			-				(52,304	)
Increase (decrease) in equity			-				(2,055	)			5,430				-				-				3,375				(173,096	)			(169,721	)			1,624				(168,097	)
Equity As of September 30, 2014			477,386				(5,872	)			1,664				(1,231	)			(1,677	)			(7,116	)			1,736,629				2,206,899				57,245				2,264,144

 

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

 

 

STATEMENTS OF CHANGES IN EQUITY

 

 

2013		Share capital				Foreign currency translation difference reserves				Cash flow hedge reserves				Actuarial gains (losses) from defined benefit plans				Other miscellaneous reserves				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$
Equity at beginning of the year			477,386				(330	)			(16,522	)			(2,243	)			(1,677	)			(20,772	)			1,676,169				2,132,783				54,663				2,187,446
Profit for the year			-				-				-				-				-				-				398,139				398,139				4,363				402,502
Other comprehensive income			-				(2,873	)			8,935				-				-				6,062				-				6,062				(48	)			6,014
Comprehensive income			-				(2,873	)			8,935				-				-				6,062				398,139				404,201				4,315				408,516
Dividends			-				-				-				-				-				-				(199,070	)			(199,070	)			(2,200	)			(201,270	)
Increase (decrease) in transfers and other changes			-				-				-				-				-				-				-				-				-				-
Increase (decrease) in equity			-				(2,873	)			8,935				-				-				6,062				199,069				205,131				2,115				207,246
Equity As of September 30, 2013			477,386				(3,203	)			(7,587	)			(2,243	)			(1,677	)			(14,710	)			1,875,238				2,337,914				56,778				2,394,692

 

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

 

 

Notes to the Consolidated Financial
Statements as of September 30, 2014

Sociedad Química y Minera de Chile S.A.

and Subsidiaries

 

 

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, Tax Identification No.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 Securities Registry of the Chilean Superintendence of Securities and Insurance (SVS) under No. 0184 dated March 18. 1983 and is subject to the inspection of the SVS.

 

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; Administración Building w/n - Maria Elena; Administración 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, mining works at Salar de Ascotán Region II of Chile, Minsal Mining Camp s/n CL Plant CL, Potassium– San Pedro de Atacama.

 

1.3

Codes of main activities

 

The codes of the main activities as established by the Chilean Superintendence of Securities and Insurance are 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 caliche ore in northern Chile contains the only known nitrate and iodine deposits in the world and is the world’s largest commercially exploited source of natural nitrates. The brine deposits of the Salar de Atacama, a salt-encrusted depression within the Atacama Desert in northern Chile, contain high concentrations of lithium and potassium as well as significant concentrations of sulfate and boron.

 

 

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, sulfate and boron in order to produce potassium chloride, potassium sulfate, lithium solutions, boric acid 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 market all of these products through an established worldwide distribution network.

 

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 specially potassium nitrate have had a leading role given the contribution they make to develop crops insuring 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 producer of iodine at worldwide level. 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 cell phones, cameras and notebooks. Through the manufacturing of lithium-based products, SQM provides significant materials to face great challenges such as the efficient use of energy and raw materials. Lithium is not only used for rechargeable batteries and in new technologies for vehicles propelled by electricity, but is also used in industrial applications to lower melting temperature and to help saving costs and energy.

 

  

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 during more than 30 years producing sodium nitrate, potassium nitrate, boric acid 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 as Spain and the United States in their search for decreasing CO₂ emissions

 

Potassium: The potassium is a primary essential macro-nutrient, and even though does not form part of the plant’s structure, has a significant role for the developing of its basic functions, validating the quality of a crop, increasing post-crop life, improving the crop flavor, its amount in vitamins and its physical appearance. Within this business line, SQM has also 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 September 30, 2014 and December 31, 2013, staff was detailed as follows:

 

	9/30/2014			12/31/2013
Permanent staff	4,584			4,792

 

 

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

 

1.5

Other background, continued

 

Main shareholders

 

The table below establishes certain information about the beneficial property of Series A and Series B shares of SQM as of September 30, 2014 and December 31, 2013. In respect to each shareholder which has interest of more than 5% of outstanding Series A or B shares. The information below is taken from our records and reports controlled in the Central Securities Depository and reported to the Superintendence of Securities and Insurance (SVS) and the Chilean Stock Exchange, whose main shareholders are as follows:

 

Shareholder as of September 30, 2014		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			-				-				60,913,968				50.60	%			23.14	%
Sociedad de Inversiones Pampa Calichera S.A.(*)			44,803,531				31.37	%			7,007,688				5.82	%			19.69	%
Inversiones El Boldo Limitada			29,330,326				20.54	%			17,963,546				14.92	%			17.97	%
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	%			-				-				5.90	%
Inversiones Global Mining (Chile) Limitada (*)			8,798,539				6.16	%			-				-				3.34	%
Banco Itau on behalf of foreign investors			20,950				0.01	%			5,858,732				4.87	%			2.23	%
Banco de Chile on behalf of non-resident third parties			-				-				5,338,246				4.43	%			2.03	%
Inversiones La Esperanza Limitada			3,693,977				2.59	%			-				-				1.40	%

 

(*) Total Pampa Group 29.94%

 

Shareholder as of December 31, 2013		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			-				-				56,302,367				46.77	%			21.39	%
Sociedad de Inversiones Pampa Calichera S.A.(*)			44,758,830				31.34	%			6,971,799				5.79	%			19.65	%
Inversiones El Boldo Limitada			29,225,196				20.46	%			18,028,676				14.98	%			17.95	%
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	%
BTG Pactual Chile S.A. C de B			15,593,709				10.92	%			797,393				0.66	%			6.23	%
Inversiones Global Mining (Chile) Limitada (*)			8,798,539				6.16	%			-				-				3.34	%
Banco Itau on behalf of investors			20,950				0.01	%			5,428,234				4.51	%			2.07	%
Banco de Chile on behalf of non-resident third parties			-				-				5,234,823				4.35	%			1.99	%
Inversiones La Esperanza Limitada			3,693,977				2.59	%			-				-				1.40	%

 

(*) Total Pampa Group 29.90%

 

On September 30, 2014 the total number of shareholders had risen to 1,269.

 

 

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 for the periods ended September 30, 2014 and December 31, 2013.

 

-

Consolidated Statements of Changes in Equity for the periods ended September 30, 2014 and 2013.

 

-

Consolidated Statements of Comprehensive Income for the periods between January and September 30, 2014 and 2013.

 

-

Statements of Direct-Method Cash Flows for the periods ended September 30, 2014 and 2013.

 

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

 

2.2

Financial statements

 

The consolidated interim financial statements of Sociedad Química y Minera de Chile S.A. and Subsidiaries, have been prepared in accordance with International Financial Reporting Standards (hereinafter “IFRS”) and represent the full, explicit and unreserved application of the aforementioned international standards issued by the International Accounting Oversight Board (IASB). As of September the only instruction issued by the Chilean Superintendence of Securities and Insurance that contravenes IFRS refers to the particular recognition of the effect of deferred taxes.

 

On September 26, 2014, Law No.20.780 was enacted and published on September 29, 2014, which introduces amendments to the tax system in Chile referred to income taxes, among other matters. On October 17, 2014, the Chilean Superintendence of Securities and Insurance issued Circular No. 856 which required that the adjustment of deferred tax assets and liabilities generated as a direct effect of an increase in the corporate income tax rate provided by Law 20.780 (the Tax Reform) will be made against equity and not as required by IAS 12. Notes 3.38 and 28.5 provide a detail of criteria used and impacts related to the recording of the effects resulting from such tax reform and the application of the aforementioned Circular.

 

These consolidated financial statements reflect fairly the Company’s equity and financial position and the results of its operations, changes in the statement of recognized revenue and expenses and cash flows, which have occurred during the periods then ended.

 

IFRS establish certain alternatives for their application. Those applied by the Company and its subsidiaries are included in detail in this Note.

 

The accounting policies used in the preparation of these consolidated annual and interim accounts comply with each IFRS in force at their date of presentation. Certain reclassifications have been made for comparative purposes.

 

2.3

Basis of measurement

 

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

 

-

inventories are recorded at the lower of cost and net realizable value;

-

other current and non-current asset and financial liabilities at amortized cost;

-

financial derivatives at fair value; and

-

staff severance indemnities and pension commitments at actuarial value.

 

 

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 the annual periods beginning on January 1, 2014 and July 1,2014:

 

Standards and interpretations		Mandatory for annual periods beginning on
IFRIC 21 “Levies”- Indicates the accounting treatment for a liability to pay a levy if such levy falls within the scope of IAS 37. It proposes that the liability be recognized when the obligation triggering event occurs and payment cannot be avoided. The obligation triggering event will be established in the related legislation and may occur at a given date or gradually over time.		01/01/2014
Amendments and improvements		Mandatory for annual periods beginning on
Amendment to IAS 32 “Financial Instruments: Presentation”- On the offsetting of financial assets and financial liabilities. It clarifies the requirements for the offsetting of financial assets and financial liabilities in the Statement of financial position.		01/01/2014
Amendment to IAS 27 “Separate Financial Statements”, IFRS 10 “Consolidated Financial Statements” and IFRS 12 “Disclosure of Interests in Other Entities” Issued in October 2012. The amendments include the definition of an investment entity and provide an exception for the consolidation of certain subsidiaries of entities meeting the definition for an “investment entity”. The amendments also introduce new disclosure requirements relative to investment entities in IFRS 12 and IAS 27.		01/01/2014
Amendment to IAS 36 “Impairment of assets”- Issued in May 2013. It amends the disclosure of the recoverable amount of non-financial assets aligning them to the requirements of IFRS 13.		01/01/2014
Amendment of IAS 39 “Financial Instruments: Recognition and Measurement” – on the novation of derivatives and hedge accounting – Published in June 2013. It establishes certain conditions that must be met for the novation of derivatives to allow the continuance of hedge accounting; this in order to avoid novations that are the result of laws and regulations affecting the financial statements.		01/01/2014

 

The adoption of the standards, amendments and interpretations described above have 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)

The new standards,, interpretations and amendments issued not effective for 2014, which the company has not adopted early are as follows:

 

Standards and interpretations		Mandatory for annual periods beginning on
IFRS 9 “Financial Instruments”- Published in July 2014. The IASB has issued the full version of IFRS 9, which supersedes the application guidance in IAS 39. This final version includes requirements on the classification and measurement of financial assets and financial liabilities and an expected credit losses model that replaces the incurred loss impairment model used today. The final hedging part of IFRS 9 was issued in November 2013. Early adoption is permitted		01/01/2018
IFRS 15 “Revenue from Contracts with Customers” – Published in May 2014. This standard establishes the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. For such purposes, 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. The application of this standard will replace IAS 11 Construction Contracts and IAS 18 Revenue, as well as IFRIC 13 Customer Loyalty Programmes, 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. Early application is permitted.		01/01/2017

 

 

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

 

2.4

Accounting pronouncements, (continued)

 

Amendments and improvements		Mandatory for periods beginning on
Amendment of IAS 19 “Employee Benefits” on defined benefit plans. – Issued in November 2013. This amendment applies to employee or third party contributions in defined benefit plans. Amendments are intended to simplify the accounting for contributions that are independent of the number of years of service of employees; e.g., contributions by employees that are calculated in accordance with a fixed percentage of the employee’s salary.		01/01/2018
IFRS 11 “Joint Arrangements” – on the acquisition of interest in a joint operation – Issued in May 2014. This amendment includes guidance relates to the method for accounting for an acquisition of an interest in a joint operation in which the activity constitutes a business, specifying the proper treatment for such acquisitions.		01/01/2016
IAS 16 “Property, Plant and Equipment” and IAS 38 “Intangible Assets” on depreciation and amortization – Issued in May 2014. The amendments clarify that a depreciation method that is based on revenue that is generated by an activity that includes the use of an asset is not appropriate because revenue generated by such an activity in general reflects other factors other than the use of the economic benefits embedded in the asset. Likewise, the amendments clarify that a revenue-based amortization method is inappropriate to measure the use of the economic benefits embedded in the intangible asset.		01/01/2016
IAS 16 “Property, Plant and Equipment” and IAS 41 “Agriculture” on bearer plants. – Issued in June 2014. These amendments modify the financial information for “bearer plants”, such as vineyards, rubber wood tree and oil palm. The amendments define the concept of “bearer plant” and establish that they should be accounted for in the same way as property, plant and equipment because their operation is similar to that of manufacturing. Consequently, the amendments include them within the scope of IAS 16, instead of IAS 41. The produce growing on bearer plants will remain within the scope of IAS 41. Early adoption is permitted		01/01/2016
Amendment of IFRS 10 “Consolidated Financial Statements” and IAS 28 “Investments in Associates and Joint Ventures”. Issued in September 2014. This amendment addresses an inconsistency between the requirements of IFRS 10 and IAS 28 for the treatment of a sale or contribution of assets between an investor and its associate or joint venture. The main consequence of this amendment is the recognition of a full gain or loss when the transaction involves a business (whether or not in a subsidiary) and a partial gain or loss when the transaction involves assets that are not a business, even if such assets are in a subsidiary.		01/01/2016

 

 

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

 

2.4

Accounting pronouncements, (continued)

 

Improvements to Information Financial Reporting Standards (2012) Issued in December 2013.		07/01/2014
IFRS 2 “Share-based Payment” – It clarifies the definition of “vesting conditions and “market conditions” and defines separately “performance conditions” and “service conditions.” Such an amendment should be applied prospectively on share-based payment transactions whose grant date is July 1, 2014 or after.
IFRS 3, "Business Combinations" – The standard is modified to clarify that the obligation to pay a contingent consideration that meets the definition of a financial instrument is classified as a financial liability or equity, on the basis of the definitions in IAS 32, "Financial Instruments: Presentation." The standard was additionally amended to clarify that all non-equity contingent consideration, both financial and non-financial, is measured at its fair value at each reporting date recognizing changes in fair value in profit or loss. Consequently, there are also changes to IFRS 9, IAS 37 and IAS 39. The amendment is applicable prospectively for business combinations the acquisition date of which is July 1, 2014 or after.
IFRS 8 “Operating Segments” – The standard is amended to include the requirement to disclose the judgments made by management in the aggregation of operating segments. The standard was additionally modified to require a reconciliation of assets of the segments to assets of an entity, when assets are reported by segment.
IFRS 13 "Fair Value Measurement” – IASB has modified the basis for conclusions of IFRS 13 to clarify that it did not intend to eliminate the ability to measure short-term receivables and payables at nominal amounts if the effect of not adjusting is not significant.
IAS 16, "Property, Plant and Equipment" and IAS 38, "Intangible Assets" – Both standards are amended to clarify the treatment of the gross carrying amount and accumulated depreciation when an entity uses the revaluation model.
IAS 24, "Related party Disclosures" – The standard is modified to include, as related party, an entity that provides key management personnel services to the reporting entity of the Parent of the reporting entity (“the managing entity”).

 

 

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

 

2.4

Accounting pronouncements, (continued)

 

Improvements to International Financial Reporting Standards (2013) Issued in December 2013		07/01/2014
IFRS 1 “First-time Adoption of International Financial Reporting Standards” – It clarifies that when a new version of a standard is not yet mandatory but is available for early adoption, a first-time adopter of IFRS may opt to apply the older or new version of the standard, provided that the same standard is applied to all periods presented.
IFRS 3 “Business Combinations” – The standard is modified to clarify that IFRS 3 is not applicable to the accounting recognition of the formation of a new joint arrangement under IFRS 11. This amendment also clarifies that only the scope exemption is applied to the financial statements of the joint arrangement.
IFRS 13 “Fair Value Measurement” – It clarifies that the portfolio exception in IFRS 13, that allows an entity to measure the fair value of a group of financial assets and financial liabilities as at their net amount, applies to all contracts (including non-financial contracts) within the scope of IAS 39 or IFRS 9. An entity must apply the amendments prospectively from the start of the first annual period in which IFRS 13 is applied.
IAS 40 “Investment Property” – The standard is modified to clarify that IAS 40 and IFRS 3 are not mutually excluding. In preparing the financial information, the application guide to IFRS 3 has to be considered to determine whether the acquisition of investment property is or is not a business combination. This amendment can be applied to individual acquisitions of investment property prior to such date if and only if the information required to apply the amendment is available.

 

 

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

 

2.4

Accounting pronouncements, (continued)

 

Improvements to International Financial Reporting Standards (2014) Issued in September 2014.		01/01/2016
IFRS 7 "Financial Instruments: Disclosures." This includes two amendments of IFRS 7. (1) Service contracts: If an entity transfers a financial asset to a third party in conditions that allow the transferor to derecognize the asset, IFRS 7 requires the disclosure of any type of continuing involvement that the entity may still have in the transferred assets. IFRS 7 provides guidance on what is understood as continuing involvement within this context. The amendment is prospective and can be applied retrospectively. This also affects IFRS 1 to provide the same option to the first-time adopters of IFRS. (2) Interim financial statements. The amendment clarifies that the additional disclosure required by amendments of IFRS 7 "Offsetting of financial assets and financial liabilities” is not specifically required for all interim periods unless required by IAS 34. Such amendment is retrospective.
IAS 19, "Employee Benefits" – This amendment clarifies that in order to determine the discount rate for post-employment benefit obligations, the important aspect is the currency in which liabilities are denominated, not the country where they generate. The evaluation of whether a deep market exists for high-quality corporate bonds is based on corporate bonds in such currency, not in corporate bonds of a particular country. Likewise, where there is no deep market for high-quality corporate bonuses in such currency, government bonds in the related currency have to be used, Such amendment is retrospective but limited at the beginning of the first period presented.
IAS 34, "Interim Financial Reporting" – This amendment clarifies the meaning of disclosure of information ‘elsewhere in the interim financial report’ and to require the inclusion of a cross-reference from the interim financial statements to the location of the information. This amendment is retrospective.

 

The Company's management estimates that the adoption of standards, amendments and interpretations described above are under evaluation and it is expected that they will not have a significant impact on the Consolidated Financial Statements of the Company.

 

 

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

 

2.5

Basis of consolidation

 

(a)

Subsidiaries

 

Relate to all the entities on which Sociedad Química y Minera de Chile S.A. has control when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those variable returns through its power over the entity. 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, plus costs directly attributable to the acquisition. 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 acquire either at fair value or as proportional share of net identifiable assets of the acquiree.

 

 

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

 

2.5

Basis of consolidation, continued

 

Companies included in consolidation:

 

								Ownership interest
				Country of				9/30/2014												12/31/2013
TAX ID No.		Foreign subsidiaries		origin		Functional currency		Direct				Indirect				Total				Total
Foreign		Nitratos Naturais Do Chile Ltda.		Brazil		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Nitrate Corporation Of Chile Ltd.		United Kingdom		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM North America Corp.		USA		US$			40.0000				60.0000				100.0000				100.0000
Foreign		SQM Europe N.V.		Belgium		US$			0.5800				99.4200				100.0000				100.0000
Foreign		Soquimich S.R.L. Argentina		Argentina		US$			0.0000				100.0000				100.0000				100.0000
Foreign		Soquimich European Holding B.V.		Netherlands		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Corporation N.V.		Dutch Antilles		US$			0.0002				99.9998				100.0000				100.0000
Foreign		SQI Corporation N.V.		Dutch Antilles		US$			0.0159				99.9841				100.0000				100.0000
Foreign		SQM Comercial De México S.A. de C.V.		Mexico		US$			0.0013				99.9987				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.		Dutch Antilles		US$			1.0000				99.0000				100.0000				100.0000
Foreign		SQM Brasil Limitada		Brazil		US$			1.0900				98.9100				98.3000				100.0000
Foreign		SQM France S.A.		France		US$			0.0000				100.0000				100.0000				100.0000
Foreign		SQM Japan Co. Ltd.		Japan		US$			1.0000				99.0000				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 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 Agro India Pvt.Ltd.		India		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

 

 

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

 

2.5

Basis of consolidation, continued

 

Companies included in consolidation:

 

								Ownership interest
				Country of				9/30/2014												12/31/2013
TAX ID No.		Foreign subsidiaries		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 (b)		Chile		US$			100.0000				-				100.0000				100.0000
76.360.575-2		Orcoma SPA (c)		Chile		US$			100.0000				-				100.0000				100.0000

 

(a)

Comercial Agrorama Ltda. was consolidated given that the Company has control through the subsidiary Soquimich Comercial S.A.

 

(b)

On December 31, 2013, the subsidiary Orcoma Estudios SPA was incorporated where Sociedad Quimica y Minera de Chile S.A. made a capital contribution of US$ 1,500.

 

(c)

On December 31, 2013, the subsidiary Orcoma SPA, was incorporated where Sociedad Quimica y Minera de Chile S.A. made a capital contribution of ThUS$ 2,358.

 

 

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 depending companies acquired or disposed of during the year are included in profit or loss accounts consolidated from the effective date of acquisition or up to the effective date of disposal, as applicable.

 

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

 

2.6

Significant accounting judgments, estimates and assumptions

 

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 IFRSs as issued by the International Accounting Standard 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:

 

-

The useful lives of property, plant and equipment and intangible assets and their residual value;

-

Impairment losses of certain assets, including trade receivables;

-

Assumptions used in calculating the actuarial amount of pension-related and severance indemnity payment benefit commitments;

-

Provisions for commitments assumed with third parties and contingent liabilities;

-

Provisions on the basis of technical studies that cover the different variables affecting products in stock (density, moist, among others), and allowance for slow-moving spare-parts in stock;

-

Future cost for closure of mining sites;

-

The determination of the fair value of certain financial assets and derivative instruments;

-

The determination and assignment of fair values in business combinations.

 

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

 

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 remaining recovery (maturity) dates; i.e., those maturing on a date equal to or lower than twelve months are classified as current 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 interim 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 U.S. dollar.

 

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

 

3.3

Foreign currency translation

 

(a)

Domestic entities:

 

Assets and liabilities denominated in Chilean pesos and other currencies other than the functional currency (U.S. dollar) as of September 30, 2014 and December 31, 2013 have been translated to U.S. dollars at the exchange rates prevailing at those dates. The corresponding Chilean pesos were converted at Ch$599.22 per US$1.00 as of September 30, 2014, and Ch$524.61 per US$1.00 as of December 31, 2013.

 

The values of the UF (a Chilean peso-denominated, inflation-indexed monetary unit) used to convert the UF denominated assets and liabilities as of September 30, 2014 amounted to Ch$24,168.02 (US$40.33), and as of December 31, 2013 amounted to Ch$23,309.56 (US$44.43).

 

 

Note 3 - Significant accounting policies (continued)

 

3.3

Foreign currency translation, continued

 

(b)

Foreign entities:

 

The conversion of the financial statements of foreign companies with functional currency other than U.S. dollars is performed as follows:

 

-

Assets and liabilities using the exchange rate prevailing on the closing date of the consolidated financial statements.

-

Statement of income account items using the average exchange rate for the year.

-

Equity accounts are stated at the historical exchange rate prevailing at acquisition date.

 

Foreign currency translation differences which arise from the conversion of financial statements are recorded in the account “Foreign currency translation differences" within equity.

 

The exchange rates used to translate the monetary assets and liabilities expressed in foreign currency at the closing date of each period in respect to the U.S. dollar are detailed as follows:

 

		9/30/2014		12/31/2013
		US$		US$
Brazilian real		2.45		2.34
New Peruvian sol		2.89		2.75
Argentine peso		8.30		6.48
Japanese yen		109.45		105.39
Euro		0.79		0.73
Mexican peso		13.48		13.07
Australian dollar		1.15		1.12
Pound Sterling		0.62		0.61
South African rand		11.35		10.56
Ecuadorian dollar		1.00		1.00
Chilean peso		599.22		524.61
UF		40.33		44.43

 

  

Note 3 - Significant accounting policies (continued)

 

3.3

Foreign currency translation, continued

 

(c)

Transactions and balances

 

Non-monetary transactions in currencies other than the functional currency (U.S. dollar) (foreign currencies) are translated to the respective functional currencies of Group entities at exchange rates at the dates of the transactions. 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 effective hedge for a net investment in a foreign operation. These items are recognized in other comprehensive income on the disposal of the investment; at the time 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 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 in which the fair value is determined.

 

(d)

Group entities

 

The revenue and 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 loss or gain from the sale.

 

 

Note 3 - Significant accounting policies (continued)

 

3.4

Subsidiaries

 

SQM S.A. establishes as basis the control exercised in subsidiaries, to determine their share in the consolidated financial statements. 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 in known amounts of cash and 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

 

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 IFRS 9, 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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.6

Financial assets, continued

 

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 or 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.

 

3.7

Financial liabilities

 

Management determines the classification of its financial liabilities at the time of initial recognition. As established in IFRS 9, 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. For financial liabilities that have been initially recognized at fair value through profit or loss, these 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, if by doing so eliminates or significantly reduces a measurement or recognition inconsistency, that would otherwise arise from the measurement of assets or liabilities or from the recognition of the gains and losses from them on different bases.

 

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 or of realizing the asset and settling the liability simultaneously.

 

 

Note 3 - Significant accounting policies (continued)

 

3.10

Reclassification of financial instruments

 

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

 

For financial liabilities these could not be reclassified.

 

3.11

Derivative and hedging financial instruments

 

Derivatives are recognized initially at fair value as of the date in which the derivatives contract is signed and subsequently they are valued at fair value. The method for recognizing the resulting loss or gain 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 possible foreseen transaction (cash flow hedge);

 

At the beginning of the transaction, the Company documents the relationship existing 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 the end of each period of whether 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 higher than 12 months and as a current asset or liability if the remaining expiration period of the entry is lower than 12 months.

 

Investing derivatives are classified as a current asset or liability, and the change in their fair value is recognized directly in profit or loss.

 

 

Note 3 - Significant accounting policies (continued)

 

3.11

Derivative and hedging financial instruments, continued

 

(a)

Fair value hedge

 

The change in the fair value of a derivative is recognized with a debit or credit to profit or loss, as applicable. The change in the fair value of the hedged entry attributable to hedged risk is recognized as part of the carrying value of the hedged entry and is also recognized with a debit or credit to profit or loss.

 

For fair value hedges related to items recorded at amortized cost, the adjustment of the fair value is amortized against profit or loss during the period through maturity. Any adjustment to the carrying value of a hedged financial instrument for which the effective rate is used is amortized with a debit or credit to profit or loss at its fair value attributable to the risk being covered.

 

If the hedged entry is derecognized, the fair value not amortized is immediately recognized with a debit or credit to profit or loss.

 

(b)

Cash flow hedges

 

The effective portion of gains or losses from the hedge instrument is initially recognized with a debit or credit to other comprehensive income, whereas any ineffective portion is immediately recognized with a debit or credit to profit or loss, as applicable.

 

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.

 

Should the expected firm transaction or commitment no longer be expected to occur, the amounts previously recognized in equity are transferred to profit or loss. If a hedge instrument expires, is sold, finished, and 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

Derecognition of financial instruments

 

In accordance with IFRS 9, 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, paying to the creditor or the main liability contained has been legally extinguished.

 

3.13

Derivative financial instruments

 

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

 

The Company permanently assesses the existence of embedded derivatives both in its contracts and financial instruments. As of September 30, 2014 and 2013, there are no embedded derivatives.

 

3.14

Fair value measurements

 

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

 

3.15

Leases

 

(a)

Lease - Finance lease

 

Leases are classified as finance leases when the Company holds substantially all the risks and rewards derived from the ownership of the asset. Finance leases are capitalized at the beginning of the lease at the lower of the fair value of the leased asset or the present value of minimum lease payments.

 

 

Note 3 - Significant accounting policies (continued)

 

3.15

Lease, continued

 

Each lease payment is distributed between the liability and the interest expenses to obtain ongoing interest on the pending balance of the debt. The respective lease obligations, net of interest expense, are included in other non-current liabilities. The interest element of finance cost is debited in the consolidated statement of income during the lease period so that a regular ongoing interest rate is obtained on the remaining balance of the liability for each year.

 

(b)

Lease – Operating lease

 

Leases in which the lesser maintains a significant part of the risks and rewards derived from the ownership are classified as operating leases. Operating lease payments (net of any incentive received from the lesser) are debited to the statement of income or capitalized (as applicable) on a straight-line basis over the lease period.

 

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.

 

These are expensed considering the proportional period of time they cover, regardless of the related payment dates.

 

3.17

Trade and other receivables

 

Trade and other receivables relate to non-derivative financial assets with fixed and determinable payments and are not quoted in any active market. These arise from sales operations involving the products and/or services which the Company commercializes directly to its customers

 

These assets are initially recognized at their fair value and subsequently at amortized cost according to the effective interest rate method less a provision for impairment loss. An allowance for impairment loss is established for trade receivables when there is objective evidence that the Company will not be able to collect all the amounts which are owed to it according to the original terms of receivables.

 

Implicit interest in installment sales is recognized as interest income when interest is accrued over the term of the operation.

 

 

Note 3 - Significant accounting policies (continued)

 

3.18

Inventory measurement

 

The Company states inventories for the lower of cost and net realizable value. The cost price of finished products and products in progress includes direct costs of materials and; as applicable, labor costs, indirect costs incurred to transform 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 weighted average cost.

 

Commercial discounts, rebates obtained and other similar entries are deducted in the determination of the acquisition price.

 

The net realizable value represents the estimate of the sales price less all finishing estimated costs and costs which will be incurred in commercialization, sales and distribution processes.

 

The Company conducts an evaluation of the net realizable value of inventories at the end of each year recording an estimate with a charge to income when these are overstated. When the circumstances, which previously caused the rebate ceased to exist, or when there is clear evidence of an increase in the net realizable value due to a change in the economic circumstances or prices of main raw materials, the estimate made previously is modified.

 

The valuation of obsolete, impaired or slow-moving products relates to their net estimated net realizable value.

 

Provisions on the Company's inventories have been made based on a technical study which covers the different variables which affect products in stock (density, humidity, among others.)

 

Raw materials, supplies and materials are recorded at the lower of acquisition cost or market value. Acquisition cost is calculated according to the average price method.

 

 

Note 3 - Significant accounting policies (continued)

 

3.19

Investments in associates and joint ventures

 

Interests in companies on which joint control is exercised (joint venture) or where an entity has 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 considering the proportional share in the equity of the associate, using for such purposes, the interest percentage in the ownership of the associate. The associated goodwill acquired is included in the carrying amount of the investee and is not amortized. The debit or credit to profit or loss reflects the proportional share in the profit or loss of the associate.

 

Unrealized gains for transactions with affiliates or associates are eliminated considering the interest percentage the Company has on 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 considering the proportional amounts with a charge or credit to “Other reserves” and classified considering their origin.

 

Reporting dates of the associate and 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 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 at zero value 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 in conformity with the share of equity 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”.

 

 

Note 3 – Significant accounting policies (continued)

 

3.20

Transactions with non-controlling interests

 

Non-controlling interests are recorded in the consolidated statement of financial position within equity 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 in regard to terms and market prices. Also, these transactions have been eliminated in consolidation. Expiration conditions for each case vary by virtue of the originating transaction.

 

3.22

Property, plant and equipment

 

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 which 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.

 

 

Note 3 – Significant accounting policies (continued)

 

3.22

Property, plant and equipment, continued

 

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.

 

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 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.

 

Based on the impairment analysis conducted by the Company’s management it has been considered that the carrying value of assets does not exceed the net recoverable value of such assets.

 

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 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

 

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.

 

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

 

Types of property, plant and equipment		Minimum life or rate				maximum life or rate
Buildings			3				60
Plant and equipment			3				35
Information technology equipment			3				10
Fixtures and fittings			3				35
Motor vehicles			5				10
Other property, plant and equipment			2				30

 

3.24

Intangible assets

 

Intangible assets mainly relate to goodwill acquired, water rights, trademarks, and rights of way related to electric lines, development expenses, and computer software licenses.

 

(a)

Goodwill acquired

 

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 acquisitions of subsidiaries is included in goodwill, which is subject to impairment tests every time consolidated financial statements are issued 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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.24

Intangible assets, continued

 

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

 

3.25

Intangible assets other than goodwill

 

(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)

Right 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 in third party land. These rights are presented under Intangible assets. Amounts paid are capitalized at the date of the agreement and charged to income according to the life of the right of way.

 

(c)

Computer software

 

Licenses for IT programs acquired are capitalized based on costs that have been incurred to acquire them and prepare them to use the specific program. 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 probably will generate economic benefits that are higher than costs during more than a year, are recognized as intangible assets. Direct costs include expenses incurred for employees who develop IT programs and an adequate percentage of general expenses.

 

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

 

 

Note 3 - Significant accounting policies (continued)

 

3.25

Intangible assets other than goodwill, continued

,

 

(d)

Mining property and concession right

 

The Company holds mining property and concession rights from the Chilean Government. Property rights are usually obtained with no initial cost (other than the payment of mining patents and minor recording expenses) and upon obtaining rights on these concessions, these 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.

 

No impairment of intangible assets exists as of September 30, 2014 and December 31, 2013.

 

3.26

Research and development expenses

 

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

 

3.27

Prospecting expenses

 

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

 

 

Note 3 - Significant accounting policies (continued)

 

3.27

Prospecting expenses, continued

 

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 for which it is not probable that economic benefit will flow to the Company in the future (i.e., when the mine site has low ore grade 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 main raw material.

 

Paragraph 17 of IFRS 6 establishes that an asset for exploitation and evaluation should be classified as such when it loses the technical feasibility and trading feasibility for extraction and therefore, must be impaired. For this reason and because our disbursements correspond to proven reserves with a trading feasibility and used as main 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 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 discount rate before taxes which reflects current market evaluation on the time value of money and specific asset risks.

 

An appropriate valuation model is used to determine the fair value less selling costs. These calculations are confirmed by valuation multiples, quoted share prices for subsidiaries quoted publicly or other available fair value indicators.

 

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.

 

As of December 31, 2013, the Company was unaware of any indication of impairment with respect to its assets.

 

For assets other than acquired goodwill, an annual evaluation is conducted of whether there is impairment loss indicators recognized previously that might have already ceased to exist or decreased. The recoverable amount is estimated if such indicators exist. An impairment loss previously recognized is reversed only if there have been changes in estimates used to determine the asset’s recoverable amount from the last time in which 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 would have not been recognized in prior years. This reversal is recognized with a credit to profit or loss unless an asset is recorded at the revalued amount. Should this be the case, the reversal is treated as an increase in revaluation.

 

 

Note 3 - Significant accounting policies (continued)

 

3.29

Minimum dividend

 

As required by the Shareholders’ Corporations Act, unless decided otherwise by the unanimous vote by the shareholders of subscribed and paid shares, a public company must distribute dividends as agreed by the shareholders at the General Shareholders’ Meeting held each year with a minimum of 30% of its profit for the year ended December 31, 2013, except when the Company records unabsorbed losses from prior years.

However, the Company defines as policy the distribution of 50% of its profit for the year ended December 31, 2014.

 

3.30

Earnings per share

 

The net basic earnings per share amounts are calculated by dividing profit for the year attributable to 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 assumes diluted earnings per share other than the basic 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 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. 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 they are accrued following a financial criterion.

 

 

Note 3 - Significant accounting policies (continued)

 

3.33

Other provisions

 

Provisions are recognized when:

 

-

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

 

The Company’s policy is maintaining 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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.34

Obligations related to employee termination benefits and pension commitments

 

Obligations with the Company’s employees are in accordance with that established in the collective bargaining agreements in force formalized through collective employment agreements and individual employment contracts, except for the United States that is regulated in accordance with employment plans in force up to 2002.

 

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. This considering criteria in force contained in IAS 19 revised.

 

Actuarial gains and losses that may be generated by variations in defined pre-established obligations are directly recorded in profit or loss for the year and not within Other comprehensive income considering their insignificant amount.

 

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 6% for the periods ended September 30, 2014 and December 31, 2013.

 

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 6.5% interest rate for 2014 and 2013. The net balance of this obligation is presented under the non-current provisions for employee benefits.

 

 

Note 3 - Significant accounting policies (continued)

 

3.35

Compensation plans

 

Compensation plans implemented through benefits in share-based payments settled in cash, which have been provided, are recognized in the financial statements at their fair value, in accordance with International Financial Reporting Standard 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 No.16).

 

3.36

Revenue recognition

 

Revenue includes the fair value of considerations received or receivable for the sale of goods and services during 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.

 

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

 

(a)

Sale of goods

 

Sales of goods are 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 customers when the related risks of obsolescence and loss have been transferred to the customer and the customer has accepted products in accordance with the conditions established in the sale, the acceptance period has ended or 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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.36

Revenue recognition, continued

 

(b)

Sales 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.

 

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 expense in bank borrowings, 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.

 

Finance costs accrued during the construction period that are directly attributable to the acquisition, construction or production of qualifying assets using the effective interest rate related to the project’s specific financing; if none exists, the average financing rate of the subsidiary that makes the investment.

 

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.

 

 

Note 3 - Significant accounting policies (continued)

 

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 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 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 not more likely than not that future taxable income will allow for recovery of the deferred tax asset.

 

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 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.

 

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.

 

 

Note 3 - Significant accounting policies (continued)

 

3.38

Income tax and deferred taxes, continued

 

In accordance with the instructions issued by the Chilean Superintendence of Securities and Insurance in its Circular No. 856 of October 17, 2014, the effects generated by the change in the income tax rate approved by Law No. 20.780 (the Tax Reform) on income and deferred taxes, which in accordance with IAS 12 should be charged to profit or loss for the period, have been accounted for as Retained earnings. Subsequent amendments will be recognized in profit or loss for the period in accordance with IAS 12.

 

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 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 different from those of other segments that operate 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

 

3.40

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 account risk, and interest rate risk, among others.

 

Potentially, additional known or unknown risks may exist, of which we currently deem not 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)

Country risk: The economic situation of the countries where the Company operates may affect its financial position. For example, sales conducted in emerging markets expose SQM to risks related to economic conditions and trends in those countries. In addition, inventories may also be affected by the economic scenario in such countries and/ or the global economy, among other probable economic impacts.

 

b)

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

 

c)

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 instability in the results.

 

As of to-date, the Company incurs an annual expenditure of approximately US$140 million associated with oil, gas and equivalents and approximately US$54 million related to electrical supply. A change of 10% in the prices of energy required for the Company’s operations may involve costs of approximately US$14 million in short-term movements.

 

As stated in the Company’s annual report, the markets in which the Company operates are unpredictable, exposed to significant fluctuations in supply and demand, and price volatility. Additionally, the supply of certain fertilizers or chemicals, including certain products which the Company trades, vary mainly depending on the production of top producers and their respective 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.

 

 

Note 4 - Financial risk management (continued)

 

4.2.1

Market risk, continued

 

d)

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.

 

4.2.2

Doubtful account risk

 

A contraction of the global economy and the potentially adverse effects in the financial position of our clients 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.

 

4.2.3

Currency risk

 

As a result of its influence on price level determination, 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 US 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 US dollar against the 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 US 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 US dollar would affect the Company’s profit for the period. Approximately US$ 470 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.

 

 

Note 4 - Financial risk management (continued)

 

4.2.3

Currency risk, continued

 

As of December 31, 2013, the Company recorded derivative instruments classified as currency and interest rate hedges associated with all the bonds payable, denominated both in Chilean pesos and UF, with a fair value of US$23.6 million in favor of SQM. As of September 30, 2014, this amounts to US$30.3 million against SQM.

 

As of September 30, 2014, the Chilean peso to US dollar exchange rate was Ch$599.22 per US$1.00 (Ch$ 524.61 per US$ 1.00 as of December 31, 2013).

 

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 short and long-term debts valued at LIBOR plus a spread. The Company is partially exposed to fluctuations of said rate, as SQM currently holds hedging derivative instruments to hedge a portion of its liabilities subject to the LIBOR rate fluctuations.

 

As of September 30, 2014, approximately 17% of the Company’s financial liabilities are measured at LIBOR. Accordingly, any significant increase in this rate may have an impact on the Company’s financial position. A 100 basic point variation in this rate may trigger variations in financial expenses of approximately US$ 0.3 million. However, this effect is significantly counterbalanced by the returns of the Company’s investments that are also strongly related to LIBOR.

 

In addition, as of September 30, 2014, the Company's financial liabilities are mainly concentrated in the long-term and approximately 8% have maturities of less than 12 months, decreasing in the process the exposure to changes in interest rates.

 

 

Note 4 - Financial risk management (continued)

 

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 September 30, 2014, the Company had unused, available revolving credit facilities with banks, for a total of approximately US$546 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.

 

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

 

There are no changes in accounting estimates as of the closing date of the consolidated financial statements.

 

5.2

Changes in accounting policies

 

As of September 30, 2014, the Company’s consolidated financial statements present no changes in accounting policies or estimates compared to the prior period.

 

The consolidated statements of financial position as of September 30, 2014 and December 31, 2013, and statements of the comprehensive income, changes in equity and cash flows for the periods ended September 30, 2014 and 2013, have been prepared in accordance with International Financial Reporting Standards (IFRS) except for that indicated in Note 2.2. and the principles and criteria have been applied consistently.

 

 

Note 6 - Background of companies included in consolidation

 

6.1

Parent’s stand-alone assets and liabilities

 

		9/30/2014				12/31/2013
		ThUS$				ThUS$
Assets			4,369,879				4,269,749
Liabilities			(2,162,980	)			(1,893,129	)
Equity			2,206,899				2,376,620

 

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) Limitada, collectively the Pampa Group, are the owners of a number of shares that are equivalent to 29.94% as of September 30, 2014 of the current total amount of shares issued, subscribed and fully-paid of 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 2.09% 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 Chilean SVS and the relevant stock exchanges in Chile and abroad that they are not and have never been related parties between them. In addition, this is regardless of the fact that both Groups on December 21, 2006 have entered into a Joint Action Agreement (JAA) related to those shares. Consequently, the Pampa Group, by itself, does not concentrate more than 32% of the voting right capital of SQM S.A., and the Kowa Group does not concentrate by itself more than 32% of the voting right capital of SQM S.A.

 

Likewise, the Joint Action Agreement has not transformed the Pampa and Kowa Groups into related parties between them. 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.

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.3

Joint arrangements of controlling interest, continued

 

Detail of effective concentration

 

Tax ID No.		Name		Ownership interest %
96.511.530-7		Sociedad de Inversiones Pampa Calichera S.A.			19.69
96.863.960-9		Inversiones Global Mining (Chile) Limitada			3.34
76.165.311-5		Potasios de Chile S.A.			6.91
Total Pampa Group					29.94
79,798,650-k		Inversiones la Esperanza (Chile)  Ltda.			1.40
59.046.730-8		Kowa Co Ltd.			0.30
96.518.570-4		Kochi S.A.			0.30
59.023.690-k		La Esperanza Delaware Corporation			0.09
Total Kowa Group					2.09

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries

 

As of September 30, 2014 and December 31, 2013 the general information of the companies on which the Company exercises control and significant influence is as follows:

 

						Country of				Ownership interest
Subsidiary		Tax ID		Address		incorporation		Functional 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$			-				60.6382				60.6382
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		Los Militares 4290 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		Ch$			-				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$			100.0000				-				100.0000
Orcoma SPA		76.360.575-2		Apoquindo 3721 Of.131 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		Dutch Antilles		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 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

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries

 

Country of

Ownership interest

Subsidiary

Tax ID

Address

incorporation

Functional currency

Direct

Indirect

Total

SQI Corporation N.V.

Foreign

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

Dutch Antilles

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$

1.0000

99.0000

100.0000

SQM Europe N.V.

Foreign

Sint Pietersvliet 7 bus 8, 2000. Antwerp

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

Calle Industria Eléctrica s/n Lote 30, Manzana A Parque Industrial Bugambilias CP 45645, Trajomulco de Zuñiga, Jalisco

Mexico

US$

0.0013

99.9987

100.0000

SQM Investment Corporation N.V.

Foreign

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

Dutch Antilles

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

Calle Industria Eléctrica s/n Lote 30, Manzana A Parque Industrial Bugambilias CP 45645, Trajomulco de Zuñiga, Jalisco

Mexico

US$

-

100.0000

100.0000

SQM Nitratos México S.A. de C.V.

Foreign

Calle Industria Eléctrica s/n Lote 30, Manzana A Parque Industrial Bugambilias CP 45645, Trajomulco de Zuñiga, Jalisco

Mexico

US$

-

100.0000

100.0000

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.4

General information on consolidated subsidiaries

 

Country of

Ownership interest

Subsidiary

Tax ID

Address

incorporation

Functional currency

Direct

Indirect

Total

Soquimich European Holding B.V.

Foreign

Loacalellikade 1 Parnassustoren 1076 AZ Amsterdan

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  Agro India Pvt. Ltd.

Foreign

C 30 Chiragh Enclave New Dehli, 110048

India

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

 

 

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
						9/30/2014				12/31/2013				9/30/2014				12/31/2013				9/30/2014				12/31/2013
						ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
Proinsa Ltda.			0.1	%			-				-				-				-				-				-
SQM Potasio S.A.			0.0000001	%			-				-				-				-				-				-
Ajay SQM Chile S.A.			49	%			(2,043	)			(3,389	)			9,400				8,806				1,449				4,400
SQM Indonesia S.A.			20	%			-				-				1				16				-				-
Soquimich Comercial S.A.			39.3616784	%			(2,306	)			(4,051	)			47,574				46,448				1,153				2,026
Comercial Agrorama Ltda.			30	%			40				(18	)			270				351				-				-
Agrorama S.A.			0.001	%			-				-				-				-				-				-
SQM (Thailand) Limited			0.004	%			-				-				-				-				-				-
Total							(4,309	)			(7,458	)			57,245				55,621				2,602				6,426

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries

 

9/30/2014
		Assets								Liabilities																Comprehensive
		Current				Non-current				Current				Non-current				Revenue				Profit (loss)				income (loss)
Subsidiary		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.			615,607				116,443				638,629				22,129				104,711				6,129				6,129
Proinsa Ltda.			176				1				-				-				-				1				1
SQMC Internacional Ltda.			233				-				-				-				-				-				-
SQM Potasio S.A.			157,681				1,101,085				5,172				19,457				1,774				125,435				125,791
Serv. Integrales de Tránsito y Transf. S.A.			410,799				85,203				441,994				11,123				38,107				8,126				8,126
Isapre Norte Grande Ltda			656				771				662				186				3,249				27				(11	)
Ajay SQM Chile S.A.			21,243				1,006				2,419				645				48,731				4,170				4,170
Almacenes y Depósitos Ltda.			315				46				1				-				-				(13	)			(54	)
SQM Salar S.A.			608,881				950,357				229,608				267,547				566,369				129,223				129,079
SQM Industrial S.A.			1,402,457				804,020				1,106,998				84,021				537,201				46,680				44,811
Exploraciones Mineras S.A.			490				31,703				5,068				-				-				(124	)			(124	)
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.			444				424				255				500				1,749				3				1
Soquimich Comercial S.A.			189,062				22,527				89,816				911				138,466				5,858				5,676
Comercial Agrorama Ltda.			11,833				1,856				12,684				103				9,189				(135	)			(134	)
Comercial Hydro S.A.			8,499				112				36				101				46				236				236
Agrorama S.A.			14,475				585				15,287				8				7,355				(410	)			(410	)
Orcoma SpA			3				2,356				4				-				-				(3	)			(3	)
Orcoma Estudio SpA			1				554				550				-				-				2				2
SQM North America Corp.			188,973				16,966				180,961				1,781				251,855				(9,450	)			(9,450	)
RS Agro Chemical Trading  Corporation A.V.V.			5,201				-				-				-				-				(3	)			(3	)
Nitratos Naturais do Chile Ltda.			4				248				4,617				-				-				72				72
Nitrate Corporation of Chile Ltd.			5,076				-				-				-				-				-				-
SQM Corporation N.V.			669				108,343				3,722				-				-				15,973				14,405
SQM Peru S.A.			515				1				1,170				-				-				(43	)			(43	)
SQM Ecuador S.A.			8,927				69				8,548				42				11,600				255				255
SQM Brasil Ltda.			767				1				945				-				84				(45	)			(45	)
SQI Corporation N.V.			-				21				89				-				-				3				3
SQMC Holding Corporation L.L.P.			16,966				15,413				1,000				-				-				3,315				3,315
SQM Japan Co. Ltd.			2,500				254				412				476				2,535				384				384

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

9/30/2014
		Assets								Liabilities																Comprehensive
		Current				Non-current				Current				Non-current				Revenue				Profit (loss)				income (loss)
Subsidiary		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Europe N.V.			292,523				1,316				254,024				-				436,174				3,125				3,125
SQM Italia SRL			1,298				-				16				-				-				-				-
SQM Indonesia S.A.			4				-				1				-				-				-				-
North American Trading Company			159				145				39				-				-				-				-
SQM Virginia LLC			14,828				14,374				14,828				-				-				-				-
SQM Comercial de México S.A. de C.V.			92,150				1,321				63,479				-				134,294				1,838				1,838
SQM Investment Corporation N.V.			66,914				270				36,177				852				20				5,030				5,030
Royal Seed Trading Corporation A.V.V.			187,553				216				53,986				150,000				-				(3,822	)			(3,284	)
SQM Lithium Specialties LLP			15,780				3				1,264				-				-				-				-
Soquimich SRL Argentina			399				-				214				-				-				(12	)			(12	)
Comercial Caimán Internacional S.A.			271				-				1,122				-				-				-				-
SQM France S.A.			346				6				114				-				-				-				-
Administración y Servicios Santiago S.A. de C.V.			154				55				751				130				2,600				96				96
SQM Nitratos México S.A. de C.V.			32				4				19				8				187				7				7
Soquimich European Holding B.V.			79,586				106,272				91,087				-				-				14,211				12,618
SQM Iberian S.A			50,718				67				46,648				-				102,830				4,518				4,518
SQM Africa Pty Ltd.			63,903				760				53,948				-				65,881				2,284				2,284
SQM Oceania Pty Ltd.			3,648				-				1,419				-				2,676				(895	)			(895	)
SQM  Agro India Pvt. Ltd.			5				-				2				-				-				(1	)			(1	)
SQM Beijing Commercial Co. Ltd.			1,571				44				6				-				3,695				(553	)			(553	)
SQM Thailand Limited			7,495				37				5,498				-				7,630				(517	)			(517	)
Total			4,551,790				3,385,255				3,375,289				560,020				2,479,008				360,975				356,433

 

 

Note 6 - Background of companies included in consolidation (continued)

 

6.6

Information on consolidated subsidiaries, continued

 

		12/31/2013																12/31/2013
		Assets								Liabilities																Comprehensive
		Current				Non-current				Current				Non-current				Revenue				Profit (loss)				income (loss)
Subsidiary		ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$				ThUS$
SQM Nitratos S.A.			490,084				124,966				525,924				15,545				184,487				18,434				18,434
Proinsa Ltda.			200				1				-				-				-				(2	)			(2	)
SQMC Internacional Ltda.			266				-				-				-				-				(1	)			(1	)
SQM Potasio S.A.			109,408				1,049.628				3.411				15.749				2.052				184.948				185.458
Serv. Integrales de Tránsito y Transf. S.A.			348.685				86.935				389.980				8.423				50.135				6.149				6.149
Isapre Norte Grande Ltda			916				829				924				192				4.192				28				334
Ajay SQM Chile S.A.			22.720				1.232				5.226				755				67.413				6.916				6.916
Almacenes y Depósitos Ltda.			362				50				1				-				-				(11	)			(40	)
SQM Salar S.A.			678.215				1.000.954				453.864				216.110				792.109				206.745				206.679
SQM Industrial S.A.			1.110.303				820.831				872.216				79.021				925.167				64.602				61.547
Exploraciones Mineras S.A.			477				31.537				4.765				-