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 June, 2018.

 

Commission File Number 33-65728

 

CHEMICAL AND MINING COMPANY OF CHILE INC.

(Translation of registrant’s name into English)

 

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

(Address of principal executive office)

 

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

Form 20-F:  x          Form 40-F  ¨

 

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

 

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

 

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

 

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

 

 

 

 

 

 

CONSOLIDATED FINANCIAL STATEMENTS

For the period ended

March 31, 2018

 

Sociedad Química y Minera de Chile S.A. and

Subsidiaries

In Thousands of United States Dollars

 

 

This document includes: 

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

 

SQM S.A.

El Trovador 4285,

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 

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

 

Table of Contents –Consolidated Financial Statements

 

Consolidated Classified Statements of Financial Position 7
Consolidated Statements of Income by Function 9
Consolidated Statements of Comprehensive Income 11
Consolidated Statements of Cash Flows 12
Consolidated Statements of Changes in Equity 14
Note 1 Identification and Activities of the Company and Subsidiaries 16
1.1 Historical background 16
1.2 Main domicile where the Company performs its production activities 16
1.3 Codes of main activities 16
1.4 Description of the nature of operations and main activities 16
1.5 Other background 18
Note 2 Basis of presentation for the consolidated financial statements 20
2.1 Accounting period 20
2.2 Consolidated financial statements 20
2.3 Basis of measurement 20
2.4 Accounting pronouncements 21
2.5 Basis of consolidation 26
Note 3 Significant accounting policies 29
3.1 Classification of balances as current and non-current 29
3.2 Functional and presentation currency 29
3.3 Foreign currency translation 29
3.4 Subsidiaries 31
3.5 Consolidated statement of cash flows 31
3.6 Financial assets 31
3.7 Financial liabilities 32
3.8 Financial instruments at fair value through profit or loss 32
3.9 Financial instrument offsetting 32
3.10 Reclassification of financial instruments 32
3.11 Derivative and hedging financial instruments 32
3.12 Available for sale financial assets 34
3.13 Derecognition of financial instruments 34
3.14 Derivative financial instruments 34
3.15 Fair value initial measurements 34
3.16 Deferred acquisition costs from insurance contracts 35

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 1 
 

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

  

3.17 Trade and other receivables 35
3.18 Inventory measurement 36
3.19 Investments in associates and joint ventures 36
3.20 Transactions with non-controlling interests 37
3.21 Related party transactions 37
3.22 Property, plant and equipment 38
3.23 Depreciation of property, plant and equipment 39
3.24 Goodwill 39
3.25 Intangible assets other than goodwill 40
3.26 Research and development expenses 41
3.27 Prospecting expenses 41
3.28 Impairment of non-financial assets 42
3.29 Minimum dividend 42
3.30 Earnings per share 43
3.31 Trade and other payables 43
3.32 Interest-bearing borrowings 43
3.33 Other provisions 43
3.34 Obligations related to employee termination benefits and pension commitments 44
3.35 Compensation plans 44
3.36 Revenue recognition 45
3.37 Finance income and finance costs 46
3.38 Income tax and deferred taxes 46
3.39 Segment reporting 47
3.40 Responsibility for Information and Estimates Made 49
3.41 Environment 49
Note 4 Financial risk management 49
4.1 Financial risk management policy 49
4.2 Risk factors 50
4.3 Risk measurement 54
Note 5 Changes in accounting estimates and policies (consistent presentation) 55
5.1 Changes in accounting estimates 55
5.2 Changes in accounting policies 55
Note 6 Background of companies included in consolidation 56
6.1 Parent’s stand-alone assets and liabilities 56
6.2 Parent entity 56
6.3 Joint arrangements of controlling interest 56

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 2 
 

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

  

6.4 General information on consolidated subsidiaries 58
6.5 Information attributable to non-controlling interests 61
6.6 Information on consolidated subsidiaries 62
6.7 Detail of transactions between consolidated companies 66
Note 7 Cash and cash equivalents 68
7.1 Types of cash and cash equivalents 68
7.2 Short-term investments, classified as cash equivalents 68
7.3 Information on cash and cash equivalents by currency 69
7.4 Amount restricted (unavailable) cash balances 69
7.5 Short-term deposits, classified as cash equivalents 70
7.6 Other information 72
Note 8 Inventories 73
Note 9 Related party disclosures 74
9.1 Related party disclosures 74
9.2 Relationships between the parent and the entity 74
9.3 Detailed identification of the link between the Parent and subsidiary 76
9.4 Detail of related parties and related party transactions 78
9.5 Trade receivables due from related parties, current: 79
9.6 Trade payables due to related parties, current: 79
9.7 Board of Directors and Senior Management 80
9.8 Key management personnel compensation 83
Note 10 Financial instruments 84
10.1 Types of other financial assets 84
10.2 Trade and other receivables 85
10.3 Hedging assets and liabilities 88
10.4 Financial liabilities 90
10.5 Trade and other payables 101
10.6 Financial liabilities at fair value through profit or loss 102
10.7 Financial asset and liability categories 102
10.8 Fair value measurement of assets and liabilities 104
10.9 Financial assets pledged as a guarantee 106
10.10 Estimated fair value of financial instruments and financial derivatives 107
10.11 Nature and scope of risks arising from financing instruments 108
Note 11 Equity-accounted investees 109
11.1  Investments in associates recognized according to the equity method of accounting 109
11.2 Assets, liabilities, revenue and expenses of associates 111

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 3 
 

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

  

11.3 Other information 112
11.4 Disclosures on interest in associates 112
Note 12 Joint Ventures 113
12.1 Policy for the accounting of equity accounted investment in joint ventures 113
12.2 Disclosures of interest in joint ventures 113
12.3 Investment in joint ventures accounted for under the equity method of accounting 114
12.4 Assets, liabilities, revenue and expenses from joint ventures: 117
12.5 Other Joint Venture disclosures: 118
Note 13 Intangible assets and goodwill 119
13.1 Balances 119
13.2 Disclosures on intangible assets and goodwill 119
Note 14 Property, plant and equipment 125
14.1 Types of property, plant and equipment 125
14.2 Reconciliation of changes in property, plant and equipment by type: 127
14.3 Detail of property, plant and equipment pledged as guarantee 131
14.4 Impairment of assets 131
14.5 Additional information 131
Note 15 Employee benefits 132
15.1 Provisions for employee benefits 132
15.2 Policies on defined benefit plan 133
15.3 Other long-term benefits 134
15.4 Post-employment benefit obligations 135
15.5 Staff severance indemnities 135
Note 16 Executive compensation plan 137
Note 17 Disclosures on equity 138
17.1 Capital management 138
17.2 Disclosures on preferred share capital 139
17.3 Disclosures on reserves in equity 141
17.4 Dividend policies 144
17.5 Interim and provisional dividends 145
Note 18 Provisions and other non-financial liabilities 147
18.1 Types of provisions 147
18.2 Description of other provisions 148
18.3 Other current liabilities 149
18.4 Changes in provisions 150
Note 19 Contingencies and restrictions 151

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 4 
 

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

  

19.1 Lawsuits and other relevant events 151
19.2 Restrictions to management or financial limits 159
19.3 Environmental contingencies 160
19.4 Tax contingency 161
19.5 Restricted or pledged cash 163
19.6 Securities obtained from third parties 164
19.7 Indirect guarantees 165
Note 20 Earnings per share 167
Note 21 Borrowing costs 167
21.1 Costs of capitalized interest, property, plant and equipment 168
Note 22 Effect of fluctuations in foreign currency exchange rates 168
Note 23 Environment 169
23.1 Disclosures of disbursements related to the environment 169
23.2 Detail of information on disbursements related to the environment 171
23.3 Description of each project, indicating whether these are in process or have been finished 176
Note 24 Other current and non-current non-financial assets 180
Note 25 Reportable segments 181
25.1 Reportable segments 181
25.2 Reportable segment disclosures: 183
25.3 Statement of comprehensive income classified by reportable segments based on groups of products 185
25.4 Revenue from transactions with other Company’s operating segments 187
25.5 Disclosures on geographical areas 187
25.6 Disclosures on main customers 187
25.7 Segments by geographical areas as of March 31, 2018 and 2017 188
25.8 Property, plant and equipment classified by geographical areas 189
Note 26 Gains (losses) from operating activities in the statement of income by function of expenses, included according to their nature 190
26.1 Revenue 190
26.2 Cost of sales 190
26.3 Other income 191
26.4 Administrative expenses 191
26.5 Other expenses by function 192
26.6 Other income (expenses) 192
26.7 Summary of expenses by nature 193

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 5 
 

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

  

26.8 Finance expenses 194
Note 27 Income tax and deferred taxes 195
27.1 Current and non-current tax assets 195
27.2 Current tax liabilities 196
27.3 Income tax and deferred taxes 197
Note 28 Disclosures on the effects of fluctuations in foreign currency exchange rates 208
Note 29 Mineral resource exploration and evaluation expenditure 213
Note 30 Lawsuits and complaints 214
Note 31 Sanction proceedings 217
Note 33 Events occurred after the reporting date 218
33.1 Authorization of the financial statements 218
33.2 Disclosures on events occurring after the reporting date 218
32.3 Detail of dividends declared after the reporting date 223

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 6 
 

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

  

Consolidated Classified Statements of Financial Position

 

 

 

Assets

 

 

Note

 

  

As of
March 31,
2018

ThUS$

  

As of
December
31, 2017

ThUS$

 
             
Current assets               
Cash and cash equivalents   7.1    575,089    630,438 
Other current financial assets   10.1    416,040    366,979 
Other current non-financial assets   24    39,074    26,883 
Trade and other receivables, current   10.2    421,520    446,875 
Trade receivables due from related parties, current   9.5    57,889    59,132 
Current inventories   8    923,657    902,074 
Current tax assets   27.1    43,548    32,291 
Current assets other than those classified as held for sale or disposal        2,476,817    2,464,672 
Non-current assets or groups of assets classified as held for sale        1,478    1,589 
Total current assets        2,478,295    2,466,261 
                
Non-current assets               
Other non-current financial assets   10.1    50,557    42,879 
Other non-current non-financial assets   24    15,733    19,262 
Trade receivables, non-current   10.2    1,949    1,912 
Investments classified using the equity method of accounting   11.1-12.3    153,065    146,425 
Intangible assets other than goodwill   13.1    105,403    105,948 
Goodwill   13.1    44,177    44,177 
Property, plant and equipment   14.1    1,442,253    1,437,193 
Tax assets, non-current   27.1    32,179    32,179 
Total non-current assets        1,845,316    1,829,975 
Total assets        4,323,611    4,296,236 

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 7 
 

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

  

Consolidated Classified Statements of Financial Position, (continued)

 

 

 

Liabilities and Equity

 

 

Note

 

  

As of March 31,
2018

ThUS$

  

As of December 31,
2017

ThUS$

 
             
Current liabilities               
Other current financial liabilities   10.4    135,888    220,328 
Trade and other payables, current   10.5    300,612    196,280 
Trade payables due to related parties, current   9.6    2    1,365 
Other current provisions   18.1    42,789    63,445 
Current tax liabilities   27.2    105,617    75,402 
Provisions for employee benefits, current   15.1    8,149    22,421 
Other current liabilities   18.3    176,428    168,804 
Total current liabilities        769,485    748,045 
                
Non-current liabilities               
Other non-current financial liabilities   10.4    1,037,969    1,031,507 
Other non-current provisions   18.1    30,352    30,001 
Deferred tax liabilities   27.3    195,870    205,283 
Provisions for employee benefits, non-current   15.1    36,962    33,932 
Total non-current liabilities        1,301,153    1,300,723 
Total liabilities        2,070,638    2,048,768 
                
Equity   17           
Share capital        477,386    477,386 
Retained earnings        1,717,320    1,724,784 
Other reserves        (1,404)   (14,349)
Equity attributable to owners of the Parent        2,193,302    2,187,821 
Non-controlling interests        59,671    59,647 
Total equity        2,252,973    2,247,468 
Total liabilities and equity        4,323,611    4,296,236 

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 8 
 

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

  

Consolidated Statements of Income by Function

 

 

 

       January to March 
  

Note

 

  

2018

ThUS$

  

2017

ThUS$

 
             
Revenue   26.1    518,724    518,591 
Cost of sales   26.2    (326,047)   (340,648)
Gross profit        192,677    177,943 
                
Other income   26.3    4,560    1,395 
Administrative expenses   26.4    (25,184)   (22,210)
Other expenses by function   26.5    (6,461)   (5,775)
Other gains (losses)   26.6    (278)   (1,077)
Profit (loss) from operating activities        165,314    150,276 
Finance income        4,669    2,372 
Finance costs   21-26.8    (12,717)   (12,638)
Share of profit of associates and joint ventures accounted for using the equity method   11-12    4,422    4,655 
Foreign currency translation differences   22    (514)   1,668 
Profit (loss) before taxes        161,174    146,333 
Income tax expense, continuing operations   27.3    (47,291)   (43,291)
                
Profit for the year        113,883    103,042 
Profit attributable to               
Owners of the Parent        113,825    103,232 
Non-controlling interests        58    (190)
Profit for the year        113,883    103,042 

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 9 
 

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

  

Consolidated Statements of Income by Function, (continued)

 

 

 

       January to March 
   Note   2018   2017 
       US$   US$ 
Earnings per share            
Common shares            
Basic earnings per share (US$ per share)   20    0.3945    0.3922 
                
Diluted common shares               
Diluted earnings per share (US$ per share)   20    0.3945    0.3922 

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 10 
 

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

  

Consolidated Statements of Comprehensive Income

 

 

 

   January to March 
   2018   2017 
Statement of comprehensive income  ThUS$   ThUS$ 
         
Profit (loss) for the year   113,883    103,042 
Other comprehensive income          
Items of other comprehensive income that will not be reclassified to profit for the year, before taxes          
Other comprehensive income, before taxes, gains (losses) from new measurements of defined benefit plans   (425)   (1,274)
Total other comprehensive income that will not be reclassified to profit for the year, before taxes   (425)   (1,274)
Items of other comprehensive income that will be reclassified to profit for the year, before taxes          
Foreign currency exchange difference          
Foreign currency exchange gains I(losses) before taxes   (984)   (1,185)
Other comprehensive income before taxes   (984)   (1,185)
Cash flow hedges on defined benefit plans          
Gains (losses) from cash flow hedges   7,121    4,422 
Other comprehensive income before taxes   7,121    4,422 
           
Financial assets measured at fair value with changes in other comprehensive income          
Gains (losses) in financial assets measured at fair value through other comprehensive income   (1,793)   - 
Other comprehensive income, before taxes, financial assets measured at fair value   (1,793)   - 
Total other comprehensive income that will be reclassified to profit for the year   4,344    3,237 
           
Other items of other comprehensive income before taxes   3,919    1,963 
           
Income taxes related to items of other comprehensive income that will not be reclassified to profit for the year          
Income taxes related to new measurements of defined benefit plans in other comprehensive income   310    246 
Accumulated income taxes related to items of other comprehensive income that will not be reclassified to profit for the year   310    246 
           
Income taxes related to items of other comprehensive income that will be reclassified to profit for the year          
Income taxes related to cash flow hedges in other comprehensive income   457    - 
Accumulated income taxes related to items of other comprehensive income that will be reclassified to profit for the year   457    - 
           
Total other comprehensive income   4,686    2,209 
Total comprehensive income   118,569    105,251 
           
Comprehensive income attributable to          
Owners of the Parent   118,545    105,440 
Non-controlling interests   24    (189)
Total comprehensive income   118,569    105,251 

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 11 
 

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

  

Consolidated Statements of Cash Flows

 

 

 

Consolidated Statements of cash flows

 

 

Note

 

  

3/31/2018

ThUS$

  

3/31/2017

ThUS$

 
             
Cash flows from operating activities               
                
Cash receipts from sales of goods and rendering of services       535,700    484,011 
Cash receipts from premiums and benefits, annuities and other benefits from policies entered        191    - 
                
Cash payments to suppliers for the provision of goods and services (1)        (308,778)   (291,658)
Cash payments to and on behalf of employees        (59,469)   (59,153)
Other payments related to operating activities        (2,322)   (1,438)
Net cash generated from (used in) operating activities        164,427    131,762 
Dividends received        5,589    663 
Interest paid        (11,267)   (9,787)
Interest received        4,669    2,372 
Income taxes paid        (37,469)   (24,330)
Other incomes (outflows) of cash (2)        1,434    18,205 
                
Net cash generated from (used in) operating activities        127,362    118,885 
                
Cash flows from (used in) investing activities               
Payments made to acquire interest in joint ventures        (9,500)   (42)
Proceeds from the sale of property, plant and equipment        352    3,569 
Acquisition of property, plant and equipment        (65,119)   (23,321)
Proceeds from sales of intangible assets        2,929    907 
Purchases of intangible assets        -    - 
Proceeds from the repayment of advances and loans granted to third parties        (511)   46 
Other inflows (outflows) of cash (3)        (50,511)   (59,961)
                
Net cash generated from (used in) investing activities        (122,360)   (78,802)

 

(1) Includes a payment of ThUS$30,000 made to the SEC and the DOJ, which was provisioned in 2016.

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

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 12 
 

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

  

Consolidated Statements of Cash Flows, (continued)

 

 

 

  

Note

 

   3/31/2018
ThUS$
   3/31/2017
ThUS$
 
             
Cash flows used in financing activities               
                
Proceeds from short-term borrowings        -    20,000 
Repayment of borrowings        (63,000)   (60,726)
                
Net cash generated used in financing activities        (63,000)   (40,726)
                
Net increase (decrease) in cash and cash equivalents before the effect of changes in the exchange rate        (57,998)   (643)
                
Effects of exchange rate fluctuations on cash held        2,649    (2,179)
Net (decrease) increase in cash and cash equivalents        (55,349)   (2,822)
                
Cash and cash equivalents at beginning of period        630,438    514,669 
Cash and cash equivalents at end of period        575,089    511,847 

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 13 
 

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

 

Consolidated Statements of Changes in Equity

 

 

 

2018  Share
capital
   Foreign
currency
translation
difference
reserves
   Cash
flow
hedge
reserves
   Reserve for
gains (losses)
from financial
assets
measured at
fair value
through other
comprehensive
income
   Actuarial
gains
(losses)
from
defined
benefit
plans
   Other
miscellaneous
reserves
   Other
reserves
   Retained
earnings
   Equity
attributable
to owners of
the Parent
   Non-controlling
interests
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                             
Equity at beginning of the year   477,386    (24,913)   2,248    2,937    (5,953)   11,332    (14,349)   1,724,784    2,187,821    59,647    2,247,468 
Profit for the year   -    -    -         -    -    -    113,825    113,825    58    113,883 
Other comprehensive income   -    (958)   7,121    (1,336)   (107)   -    4,720    -    4,720    (34)   4,686 
Comprehensive income   -    (958)   7,121    (1,336)   (107)   -    4,720    113,825    118,545    24    118,569 
Dividends   -    -    -    -    -    -    -    (113,825)   (113,825)   -    (113,825)
Increase (decrease) due to transfers and other changes   -    -    -    -    -    8,225    8,225    (7,464)   761    -    761 
Increase (decrease) in equity   -    (958)   7,121    (1,336)   (107)   8,225    12,945    (7,464)   5,481    24    5,505 
                                                        
Equity as of March 31, 2018   477,386    (25,871)   9,369    1,601    (6,060)   19,557    (1,404)   1,717,320    2,193,302    59,671    2,252,973 

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 14 
 

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

  

Consolidated Statements of Changes in Equity

 

 

 

2017  Share
capital
   Foreign
currency
translation
difference
reserves
   Cash
flow
hedge
reserves
   Reserve for
gains (losses)
from financial
assets
measured at
fair value
through other
comprehensive
income
   Actuarial
gains
(losses)
from
defined
benefit
plans
   Other
miscellaneous
reserves
   Other
reserves
   Retained
earnings
   Equity
attributable
to owners of
the Parent
   Non-controlling
interests
   Total 
   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                                             
Equity at beginning of the year   477,386    (19,463)   64    3,513    (4,834)   7,832    (12,888)   1,781,576    2,246,074    61,198    2,307,272 
Profit for the year   -    -    -         -    -    -    103,232    103,232    (190)   103,042 
Other comprehensive income   -    (1,186)   4,422    -    (1,028)   -    2,208    -    2,208    1    2,209 
Comprehensive income   -    (1,186)   4,422    -    (1,028)   -    2,208    103,232    105,440    (189)   105,251 
Dividends   -    -    -    -    -    -    -    (156,524)   (156,524)   -    (156,524)
Increase (decrease) due to transfers and other changes   -    -    -    -    -    5    5    -    5    -    5 
Increase (decrease) in equity   -    (1,186)   4,422    -    (1,028)   5    2,213    (53,292)   (51,079)   (189)   (51,268)
                                                        
Equity as of March 31, 2017   477,386    (20,649)   4,486    3,513    (5,862)   7,837    (10,675)   1,728,284    2,194,995    61,009    2,256,004 

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 15 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

 

Note 1Identification and Activities of the Company and Subsidiaries

 

1.1Historical background

 

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

 

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

 

The Company is registered with the Securities Registry of the Financial Markets Commission (CMF), which was formerly named the Chilean Superintendence of Securities and Insurance (SVS) under No. 0184 dated March 18. 1983 and is subject to the inspection of the SVS.

 

1.2Main domicile where the Company performs its production activities

 

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

 

1.3Codes of main activities

 

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

 

-1700 (Mining)

 

-2200 (Chemical products)

 

-1300 (Investment)

 

1.4Description of the nature of operations and main activities

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 16 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

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

 

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

 

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

 

We sell our products in over 100 countries worldwide through our global distribution network and generate our revenue mainly from abroad.

 

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

 

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

 

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

 

Lithium: The Company’s lithium is mainly used for manufacturing rechargeable batteries for cell phones, cameras and notebooks. By manufacturing lithium-based products, SQM provides significant materials for addressing great challenges, such as the efficient use of energy and raw materials. Lithium is not only used for rechargeable batteries for small electrical appliances such as mobile phones, tablets and laptops, but is also used in industrial applications, such as the manufacturing of glass, ceramics and lubricating greases. Other uses include the pharmaceutical and chemical industries.

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 17 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

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

 

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

 

Industrial chemicals: Industrial chemicals are products used as supplies for a number of production processes. SQM participates in this line of business producing sodium nitrate, potassium nitrate and potassium chloride. Industrial nitrates have increased their importance over the last few years due to their use as storage means for thermal energy at solar energy plants, which are widely used in countries such as Spain and the United States in their quest to decrease CO2 emissions.

 

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

 

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

 

1.5Other background

 

Staff

 

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

 

   3/31/2018   12/31/2017 
Employees  SQM S.A   Other
subsidiaries
   Total   SQM S.A.   Other
subsidiaries
   Total 
Executives   43    75    118    43    77    120 
Professionals   143    970    1,113    143    942    1,085 
Technicians and operators   251    3,158    3,409    248    3,177    3,425 
Foreign employees   19    286    305    19    272    291 
Overall total   456    4,489    4,945    453    4,468    4,921 

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 18 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

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

 

1.5Other 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 March 31, 2018 and December 31, 2017 with respect to each shareholder with an interest in excess of 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 CMF, and the Chilean Stock Exchange, whose main shareholders are as follows:

 

Shareholder as of March 31, 2018  No. of Series A with
ownership
   % of Series A
shares
   No. of Series B with
ownership
   % of Series B
shares
   % of total
shares
 
The Bank of New York Mellon, ADRs   -                         -                        40,706,250                     33.82%                    15.47%
Sociedad de Inversiones Pampa Calichera S.A.(*)   44,894,152    31.43%   5,451,688    4.53%   19.13%
Inversiones El Boldo Limitada   29,330,326    20.54%   16,363,546    13.59%   17.36%
Inversiones RAC Chile Limitada   19,200,242    13.44%   2,202,773    1.83%   8.13%
Potasios de Chile S.A.(*)   18,179,147    12.73%   -    -    6.91%
Inversiones PCS Chile Limitada   15,526,000    10.87%   1,600,000    1.33%   6.51%
Inversiones Global Mining (Chile) Limitada (*)   8,798,539    6.16%   -    -    3.34%
Banco de Chile via non-resident third party accounts   -    -    9,312,522    7.74%   3.54%
Banco Itau via investor accounts   19,125    0.01%   7,482,346    6.22%   2.85%
Banco Santander via foreign investor accounts   -    -    5,486,502    4.56%   2.08%

 

(*) Total Pampa Group 29.97%

 

Shareholder as of December 31, 2017  No. of Series A with
ownership
   % of Series A
shares
   No. of Series B with
ownership
   % of Series B
shares
   % of total
shares
 
The Bank of New York Mellon, ADRs   -    -    54,599,961    45.36%   20.74%
Sociedad de Inversiones Pampa Calichera S.A.(*)   44,894,152    31.43%   7,007,688    5.82%   19.72%
Inversiones El Boldo Limitada   29,330,326    20.54%   16,363,546    13.59%   17.36%
Inversiones RAC Chile Limitada   19,200,242    13.44%   2,202,773    1.83%   8.13%
Potasios de Chile S.A.(*)   18,179,147    12.73%   -    -    6.91%
Inversiones PCS Chile Limitada   15,526,000    10.87%   1,600,000    1.33%   6.51%
Inversiones Global Mining (Chile) Limitada (*)   8,798,539    6.16%   -    -    3.34%
Banco de Chile via non-resident third party accounts   -    -    8,394,289    6.97%   3.19%
Banco Itau via Investor Accounts   19,125    0.01%   7,017,504    5.63%   2.67%
Banco Santander via foreign investor accounts   -    -    4,593,336    3.82%   1.75%

 

(*) Total Pampa Group 29.97%

 

On March 31, 2018 the total number of shareholders had risen to 1,398.

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 19 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 2Basis of presentation for the consolidated financial statements

 

2.1Accounting period

 

These consolidated financial statements cover the following periods:

 

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

 

2.2Consolidated financial statements

 

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

 

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

 

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

 

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

 

For the closing date of these consolidated financial statements certain reclassifications have been made for the captions, other non-current financial assets, equity accounted investees, as of December 31, 2017, for consistent presentation and comparability to the figures as of March 31, 2018.

 

2.3Basis of measurement

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 20 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

 

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

 

2.4Accounting pronouncements

 

New accounting pronouncements

 

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

 

Amendments and improvements   Mandatory for annual
periods beginning on
IFRS 9, “Financial Instruments”- Published in July 2014. The IASB has published a complete new version of IFRS 9, which replaces the guidance in IAS 39. This final version includes requirements regarding the classification and measurement of financial assets and liabilities and a new model for the recognition of expected credit losses that replaces the incurred loss impairment model used today. The part relating to hedge accounting that forms part of this final version of IFRS 9 was published in November 2013.   01/01/2018
     
IFRS 15, “Revenue from Contracts with Customers” – Published in May 2014. This established the principles that an entity must apply for presenting useful information to users of financial statements with regard to the nature, amount, timing and uncertainty of revenue and cash flows from a contract with a customer. The basic principle is that an entity will recognize revenue representing the transfer of goods or services to customers in an amount that reflects the consideration that the entity expects to receive in exchange for such goods or services. This standard replaces the following standards and interpretations: IAS 11 Construction contracts; IAS 18 Revenue; IFRIC 13 Customer Loyalty Programs; IFRIC 15 Agreements for the Construction of Real Estate; IFRIC 18 Transfers of Assets from Customers; and SIC-31 Revenue - Barter Transactions Involving Advertising Services.   01/01/2018
     
IFRIC 22, “Transactions in Foreign Currency and Advance Payments” Published in December 2016. This interpretation applies to a foreign currency transaction (or part of one) if an entity recognizes a non-financial asset or non-financial liability arising from the payment or receipt of an advance consideration prior to the entity recognizing the related asset, expense or income (or the applicable portion thereof). The interpretation provides a guideline for the transaction date to be used for both single payments/receipts and situations when there are multiple payments/receipts. Its objective is to reduce diversity in practice.   01/01/2018

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 21 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

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

 

2.4Accounting pronouncements, continued

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 22 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

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

 

2.4Accounting pronouncements, continued

 

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

 

Standards and interpretations   Mandatory for annual
periods beginning on
IFRS 16 “Leases” – Published in January 2016, it establishes the principle for recognizing, measuring, presenting and disclosing leases. IFRS 16 replaces IAS 17 and introduces a single lessee accounting model, requiring lessees to recognize assets and liabilities for all leases with a lease term of more than 12 months unless the underlying asset has a low value. IFRS 16 applies to annual reporting periods beginning on or after January 1, 2019. Earlier application is permitted for entities that apply IFRS 15 before the initial application date of IFRS 16.   01/01/2019
     
IFRS 17 “Insurance Contracts”. Published in May 2017, this replaces IFRS 4. IFRS 17 will mainly change the accounting for those entities that issue insurance contacts and investment contracts with discretionary participation features. IFRS 17 is effective for annual reporting periods beginning on or after January 1, 2021. Earlier application is permitted if both IFRS 15 “Revenue from Contracts with Customers” and IFRS 9 “Financial Instruments” have also been applied.   01/01/2021
     
IFRIC 23 “Uncertainty over Income Tax Treatments”. Published in June 2016. This interpretation clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments.   01/01/2019

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 23 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

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

 

2.4Accounting pronouncements, continued

 

Amendments and improvements   Mandatory for annual
periods beginning on or 
after
Amendment to IFRS 9 “Financial Instruments”.  Published in October 2017. The amendment permits more assets to be measured at amortized cost than under the previous version of IFRS 9, in particular some prepayable financial assets with negative compensation. The assets affected, which include some loans and debt securities, would otherwise have been measured at fair value through profit and loss (FVTPL). For them to qualify for amortized cost measurement, the negative compensation must be "reasonable compensation for early termination of the contract.”   01/01/2019
     
Amendment to IAS 28 “Investments in Associates and Joint Ventures”. Published in October 2017. This amendment clarifies that companies should apply IFRS 9 to account for long-term interests in an associate or joint venture to which the equity method is not applied. The Board has published an example that illustrates how companies should apply the requirements of IFRS 9 and IAS 28 to long-term interests in an associate or joint venture.   01/01/2019
     
Amendment to IFRS 3 “Business Combinations” Published in December 2017. The amendment clarifies that gaining control of a company that is a joint venture is a business combination that is achieved in stages. The acquiring party must remeasure previously held interests in that business at fair value at the date of acquisition.   01/01/2019
     
Amendment to IFRS 11 “Joint Arrangements”. Published in December 2017. The amendment clarifies that when an entity obtains joint control of a business that is a joint operation, the entity does not remeasure previously held interests in that business.   01/01/2019
     
Amendment to IAS 12 “Income Tax” Published in December 2017. This amendment clarifies that the income tax consequences of dividends on financial instruments classified as equity should be recognized when the past transactions or events that generated distributable profits were originally recognized.   01/01/2019
     
Amendment to IAS 23 “Borrowing Costs”. Published in December 2017. This amendment clarifies that the borrowing costs of specific borrowings that remain outstanding after the related qualifying asset is ready for intended use or for sale will be considered as part of the general borrowing costs of the entity.   01/01/2019
     
Amendment to IAS 19 “Employee Benefits” Published in February 2018. The amendment requires that the entities use updated conjectures to determine the cost of the current service and the net interest for the rest of the period after an amendment, reduction or liquidation of the plan; and recognize in profits or losses as part of the cost of the past service, or a profit or loss in the liquidation, any reduction in a surplus, even if this surplus was not previously recognized because it did not exceed the upper threshold of the asset.   01/01/2019

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 24 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

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

 

2.4Accounting pronouncements, continued

 

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

 

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

 

Management believes the adoption of the standards, interpretations and amendments applicable as of January 1, 2018, will have no significant impact on the Company’s financial statements. For those standards to be applied as of 2019, the corresponding studies and analysis will be carried out during 2018.

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 25 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

 

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

 

2.5Basis of consolidation

 

(a)Subsidiaries

 

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

 

To account for the acquisition, the Company uses the acquisition method. Under this method the acquisition cost is the fair value of assets delivered, equity securities issued, and liabilities incurred or assumed at the date of exchange. Identifiable assets acquired, and liabilities and contingencies assumed in a business combination are measured initially at fair value at the acquisition date. For each business combination, the Company will measure non-controlling interest of the acquiree either at fair value or as proportional share of net identifiable assets of the acquiree. For more information, please see Note 6.4

 

Companies included in consolidation:

 

 

 

            Ownership interest 
            3/31/2018   12/31/2017 
TAX ID
No.
  Foreign subsidiaries  Country of
origin
  Functional currency  Direct   Indirect   Total   Total 
Foreign  Nitratos Naturais Do Chile Ltda.  Brazil  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Nitrate Corporation Of Chile Ltd.  United Kingdom  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM North America Corp.  USA  US$   40.0000    60.0000    100.0000    100.0000 
Foreign  SQM Europe N.V.  Belgium  US$   0.5800    99.4200    100.0000    100.0000 
Foreign  Soquimich S.R.L. Argentina  Argentina  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Soquimich European Holding B.V.  Netherlands  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Corporation N.V.  Netherlands  US$   0.0002    99.9998    100.0000    100.0000 
Foreign  SQI Corporation N.V.  Netherlands  US$   0.0159    99.9841    100.0000    100.0000 
Foreign  SQM Comercial De México S.A. de C.V.  Mexico  US$   0.0100    99.9900    100.0000    100.0000 
Foreign  North American Trading Company  USA  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Administración y Servicios Santiago S.A. de C.V.  Mexico  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Peru S.A.  Peru  US$   0.9800    99.0200    100.0000    100.0000 
Foreign  SQM Ecuador S.A.  Ecuador  US$   0.0040    99.9960    100.0000    100.0000 
Foreign  SQM Nitratos Mexico S.A. de C.V.  Mexico  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQMC Holding Corporation L.L.P.  USA.  US$   0.1000    99.9000    100.0000    100.0000 
Foreign  SQM Investment Corporation N.V.  Netherlands  US$   1.0000    99.0000    100.0000    100.0000 
Foreign  SQM Brasil Limitada  Brazil  US$   1.0900    98.9100    100.0000    100.0000 
Foreign  SQM France S.A.  France  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Japan Co. Ltd.  Japan  US$   0.1597    99.8403    100.0000    100.0000 
Foreign  Royal Seed Trading Corporation A.V.V.  Aruba  US$   1.6700    98.3300    100.0000    100.0000 
Foreign  SQM Oceania Pty Limited  Australia  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Rs Agro-Chemical Trading Corporation A.V.V.  Aruba  US$   98.3333    1.6667    100.0000    100.0000 
Foreign  SQM Colombia SAS  Colombia  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Australia PTY  Australia  Australian dollar   0.0000    100.0000    100.0000    100.0000 
Foreign  SACAL S.A.  Argentina  Argentine peso   0.0000    100.0000    100.0000    100.0000 

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 26 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

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

 

2.5Basis of consolidation, continued

 

 

 

            Ownership interest 
            3/31/2018   12/31/2017 
TAX ID No.  Foreign subsidiaries  Country of
origin
  Functional currency  Direct   Indirect   Total   Total 
Foreign  SQM Indonesia S.A.  Indonesia  US$   0.0000    80.0000    80.0000    80.0000 
Foreign  SQM Virginia L.L.C.  USA  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Italia SRL  Italy  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  Comercial Caimán Internacional S.A.  Panama  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Africa Pty.  South Africa  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Lithium Specialties LLC  USA  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Iberian S.A.  Spain  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Beijing Commercial Co. Ltd.  China  US$   0.0000    100.0000    100.0000    100.0000 
Foreign  SQM Thailand Limited  Thailand  US$   0.0000    99.996    99.996    99.996 
Foreign  SQM Internacional N.V.  Belgium  US$   0.5800    99.4200    100.0000    0.0000 
Foreign  SQM (Shanghai) Chemicals Co. Ltd.  China  US$   0.0000    100.0000    100.0000    0.0000 

 

 

 

            Ownership interest 
            3/31/2018   12/31/2017 
TAX ID No.  Domestic subsidiaries  Country of
origin
  Functional currency  Direct   Indirect   Total   Total 
96.801.610-5  Comercial Hydro  S.A.  CHILE  US$   0.0000    60.6383    60.6383    60.6383 
96.651.060-9  SQM Potasio S.A.  CHILE  US$   99.9999    0.0000    99.9999    99.9999 
96.592.190-7  SQM Nitratos S.A.  CHILE  US$   99.9999    0.0001    100.0000    100.0000 
96.592.180-K  Ajay SQM Chile S.A.  CHILE  US$   51.0000    0.0000    51.0000    51.0000 
86.630.200-6  SQMC Internacional  Ltda.  CHILE  Ch$   0.0000    60.6381    60.6381    60.6381 
79.947.100-0  SQM Industrial S.A.  CHILE  US$   99.0470    0.9530    100.0000    100.0000 
79.906.120-1  Isapre Norte Grande Ltda.  CHILE  Ch$   1.0000    99.0000    100.0000    100.0000 
79.876.080-7  Almacenes y Depósitos Ltda.  CHILE  Ch$   1.0000    99.0000    100.0000    100.0000 
79.770.780-5  Servicios Integrales de Tránsitos y Transferencias S.A.  CHILE  US$   0.0003    99.9997    100.0000    100.0000 
79.768.170-9  Soquimich Comercial S.A.  CHILE  US$   0.0000    60.6383    60.6383    60.6383 
79.626.800-K  SQM Salar S.A.  CHILE  US$   18.1800    81.8200    100.0000    100.0000 
78.053.910-0  Proinsa Ltda.  CHILE  Ch$   0.0000    60.5800    60.5800    60.5800 
76.534.490-5  Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.  CHILE  Ch$   0.0000    100.0000    100.0000    100.0000 
76.425.380-9  Exploraciones Mineras S.A.  CHILE  US$   0.2691    99.7309    100.0000    100.0000 
76.064.419-6  Comercial Agrorama Ltda. (a)  CHILE  Ch$   0.0000    42.4468    42.4468    42.4468 
76.145.229-0  Agrorama S.A.  CHILE  Ch$   0.0000    60.6377    60.6377    60.6377 
76.359.919-1  Orcoma Estudios SPA  CHILE  US$   51.0000    0.0000    51.0000    51.0000 
76.360.575-2  Orcoma SPA  CHILE  US$   100.0000    0.0000    100.0000    100.0000 
76.686.311-9  SQM MaG SpA.  CHILE  US$   0.0000    100.0000    100.0000    100,0000 

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 27 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

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

 

2.5Basis of consolidation, continued

 

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

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 28 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies

 

3.1Classification of balances as current and non-current

 

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

 

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

 

3.2Functional and presentation currency

 

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

 

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

 

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

 

3.3Foreign currency translation

 

(a)Group entities:

 

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

 

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

 

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

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 29 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.3Foreign currency translation, continued

 

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

 

   3/31/2018   12/31/2017 
   US$   US$ 
         
Brazilian real   3.31    3.02 
New Peruvian sol   3.22    3.08 
Argentine peso   20.13    18.40 
Japanese yen   106.24    113.00 
Euro   0.81    0.83 
Mexican peso   18.21    19.65 
Australian dollar   0.77    0.78 
Pound Sterling   0.71    0.74 
South African rand   11.84    12.35 
Ecuadorian dollar   1.00    1.00 
Chilean peso   603.39    614.75 
Chinese yuan   6.27    6.51 
Indian rupee   65.16    63.84 
Thai baht   31.23    32.85 
UF (*)   44.69    43.59 

 

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

 

(b)Transactions and balances

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 30 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.4Subsidiaries

 

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

 

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

 

3.5Consolidated statement of cash flows

 

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

 

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

 

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

 

3.6Financial assets

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 31 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.7Financial liabilities

 

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

 

3.8Financial instruments at fair value through profit or loss

 

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

 

3.9Financial instrument offsetting

 

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

 

3.10Reclassification of financial instruments

 

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

 

Financial liabilities could not be reclassified.

 

3.11Derivative and hedging financial instruments

 

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

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 32 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.11Derivative and hedging financial instruments, continued

 

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

 

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

 

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

 

a)Fair value hedge

 

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

 

b)Cash flow hedges

 

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.

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 33 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.12Available for sale financial assets

 

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

 

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

 

3.13Derecognition of financial instruments

 

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

 

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

 

3.14Derivative financial instruments

 

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

 

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

 

3.15Fair value initial measurements

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 34 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.16Deferred acquisition costs from insurance contracts

 

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

 

(a)Lease - Finance lease

 

Leases are classified as finance leases when the Company 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.

 

Each lease payment is distributed between the liability and the interest expenses to obtain ongoing interest on the pending balance of 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.

 

3.17Trade and other receivables

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 35 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.18Inventory measurement

 

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

 

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

 

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

 

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

 

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

 

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

 

3.19Investments in associates and joint ventures

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 36 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.19Investments in associates and joint ventures, continued

 

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

 

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

 

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

 

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

 

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

 

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

 

3.20Transactions with non-controlling interests

 

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

 

3.21Related party transactions

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 37 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.22Property, plant and equipment

 

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

 

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

 

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

 

2.           The future costs that the Company will have to experience, related to the closure of its facilities at the end of their useful life, are included at the present value of disbursements expected to be required to settle the obligation.

 

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

 

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

 

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

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 38 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.23Depreciation 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.

 

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

 

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

 

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

 

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

 

3.24Goodwill

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 39 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.25Intangible assets other than goodwill

 

Intangible assets mainly relate to water rights, rights issues, electric line easement expenses and software license and development expenses.

 

(a)Water rights

 

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

 

(b)Rights of way for electric lines

 

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

 

(c)Computer software

 

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

 

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

 

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

 

(d)Mining property and concession rights

 

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

 

No impairment of intangible assets exists as of March 31, 2018 and December 31, 2017.

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 40 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.26Research and development expenses

 

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

 

3.27Prospecting expenses

 

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

 

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

 

-Disbursements for geological reconnaissance evaluation

 

-Disbursements for drilling

 

-Disbursements for drilling work and sampling

 

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

 

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

 

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

 

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

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 41 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.28Impairment of non-financial assets

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

3.29Minimum dividend

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 42 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.30Earnings per share

 

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

 

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

 

3.31Trade and other payables

 

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

 

3.32Interest-bearing borrowings

 

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

 

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

 

3.33Other provisions

 

Provisions are recognized when:

 

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

 

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

 

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

 

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

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 43 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.33Other provisions, continued

 

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

 

3.34Obligations related to employee termination benefits and pension commitments

 

Obligations towards the Company’s employees comply with the provisions of the collective bargaining agreements in force, which are formalized through collective employment agreements and individual employment contracts, except for the United States, which is regulated in accordance with employment plans in force up to 2002. (See more details in Note 15.4).

 

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

 

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

 

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

 

The discount rate used by the Company for calculating the obligation was 5.035% and 5.114% for the periods ended March 31, 2018 and December 31, 2017, respectively.

 

The Company’s subsidiary SQM North America has established pension plans for its retired employees that are calculated by measuring the projected obligation using a net salary progressive rate net of adjustments for inflation, mortality and turnover assumptions, deducting the resulting amounts at present value using a 3.75% interest rate for 2018 and 4.50% for 2017. The net balance of this obligation is presented under the non-current provisions for employee benefits (refer to Note 15.4).

 

3.35Compensation plans

 

Compensation plans implemented through benefits provided in share-based payments settled in cash are recognized in the financial statements at their fair value, in accordance with International Financial Reporting Standards No. 2 "Share-based Payments.” Changes in the fair value of options granted are recognized with a charge to payroll on a straight-line basis during the period between the date on which these options are granted and the payment date (see Note 16).

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 44 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.36Revenue recognition

 

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

 

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

 

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

 

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

 

(a)Sale of goods

 

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

 

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

 

(b)Sale of services

 

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

 

(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.

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 45 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.37Finance income and finance costs

 

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

 

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

 

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

 

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

 

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

 

3.38Income tax and deferred taxes

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 46 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

   

Note 3Significant accounting policies (continued)

 

3.38Income tax and deferred taxes, continued

  

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

 

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

 

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

 

3.39Segment reporting

 

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

 

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

 

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

 

The following operating segments have been identified by the Company:

 

-Specialty plant nutrients

 

-Industrial chemicals

 

-Iodine and derivatives

 

-Lithium and derivatives

 

-Potassium

 

-Other products and services

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 47 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.40Responsibility for Information and Estimates Made

 

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

 

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

 

-Estimated useful lives are determined based on current facts and past experience, and take into consideration the anticipated physical life of the asset, the potential for technological obsolescence, and regulations. See Notes 3.22, 13 and 14.

 

-Impairment losses of certain assets - Assets, including property, plant and equipment, exploration assets, goodwill and intangible assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amounts exceed their recoverable amounts. If an impairment assessment is required, the assessment of fair value often requires estimates and assumptions such as discount rates, exchange rates, commodity prices, future capital requirements and future operating performance. Changes in such estimates could impact the recoverable values of these assets. Estimates are reviewed regularly by management. See Notes 13 and 14.

 

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

 

-Contingencies – The amount recognized as a provision, including legal, contractual, constructive and other exposures or obligations, is the best estimate of the consideration required to settle the related liability, including any related interest charges, taking into account the risks and uncertainties surrounding the obligation. In addition, contingencies will only be resolved when one or more future events occur or fail to occur. Therefore, the assessment of contingencies inherently involves the exercise of significant judgment and estimates of the outcome of future events. The Company assesses its liabilities and contingencies based upon the best information available, relevant tax laws and other appropriate requirements. See Notes 18 and 19.

 

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

 

-Obsolescence to ensure that the carrying value of inventory is not in excess of the net realizable Inventory valuation requires judgment to determine obsolescence and estimates of provisions for value. See Note 8.

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 48 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 3Significant accounting policies (continued)

 

3.41Environment

 

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

 

Note 4Financial risk management

 

4.1Financial risk management policy

 

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

 

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

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 49 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 4Financial risk management, continued

 

4.2Risk factors

 

4.2.1Market risk

 

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

 

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

 

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

 

At present, the SQM Group incurs a quarterly expenditure of approximately US$31 million associated with fuel, gas, energy and equivalents, of which US$20 million is related to direct electricity consumption. A change of 10% in the prices of energy required for the Company’s operations may involve costs of approximately US$3 million in short-term movements.

 

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

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 50 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 4Financial risk management, continued

 

4.2.2Credit risk

 

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

 

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

 

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

 

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

 

    Rating Institution  3/31/2018 
Financial institution  Financial assets  Moody’s  S&P  Fitch  ThUS$ 
Banco BBVA Chile  Time deposits  P-2  A-2  -   30,010 
Banco Crédito e Inversiones  Time deposits  P-1  A-1  F1   83,747 
Banco Santander - Santiago  Time deposits  P-1  A-1  F1   6,208 
BBVA Banco Francés  Time deposits  -  -  -   148 
Banco de Chile  Time deposits  P-1  A-1  -   2,300 
JP Morgan US dollar Liquidity Fund Institutional  Investment fund deposits  -  -  -   120,020 
Legg Mason - Western Asset Institutional Cash Reserves  Investment fund deposits  -  -  -   123,525 
Scotiabank Sud Americano  Time deposits            1,101 
Nedbank  Time deposits  -  B  F1   3,076 
ABN Amro Bank  Time deposits  -  -  -   1,478 
Total               371,613 

 

      Rating Institution  3/31/2018 
Financial institution  Financial assets  Moody’s  S&P  Fitch  ThUS$ 
Banco Santander  90 days to 1 year  P-1  A-1  F1   184,897 
Banco Crédito e Inversiones  90 days to 1 year  P-1  A-1  F1   96,162 
Itau-Corpbanca  90 days to 1 year  -  -  -   94,454 
Banco Security  90 days to 1 year  P-1  A-2  -   29,313 
Banco de Chile  90 days to 1 year  P-1  A-1  -   6,626 
Total               411,452 

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 51 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 4Financial risk management, continued

 

4.2.3Currency risk

 

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

 

A significant portion of the Company’s costs, particularly payroll, is denominated in Chilean pesos. Accordingly, an increase or decrease in the exchange rate against the U.S. dollar would affect the Company’s profit for the period. Approximately US$101 million of the Company’s costs are denominated in Chilean pesos. A significant portion of the effect of such obligations on the statement of financial position is hedged by derivative instrument transactions on the balance mismatch in such currency.

 

As of March 31, 2018, the Company recorded derivative instruments classified as currency and interest rate hedges associated with all the bonds payable, denominated in UF, with a fair value of US$42 million against SQM. As of December 31, 2017, this amounts to US$5 million against SQM.

 

As of March 31, 2018, the Chilean peso to U.S. dollar exchange rate was Ch$603.39 per US$1.00 (Ch$ 614.75 per US$ 1.00 as of December 31, 2017).

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 52 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

 

Note 4Financial risk management, continued

 

4.2.4Interest rate risk

 

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

 

The Company has current and non-current debts valued at the LIBOR rate, plus a spread. The Company is partially exposed to fluctuations in this rate, as SQM currently holds hedging derivative instruments to hedge a portion of its liabilities subject to LIBOR rate fluctuations.

 

As of March 31, 2018, the Company has no financial liabilities linked to variations in the LIBOR rate and, therefore, significant increases in that rate would not impact its financial position.

 

In addition, as of March 31, 2018, the Company's financial liabilities are mainly concentrated in the long-term and approximately 9% have maturities of less than 12 months, decreasing in the process the exposure to changes in interest rates.

 

4.2.5Liquidity 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 March 31, 2018, the Company had unused, available revolving credit facilities with banks, for a total of approximately US$309 million.

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 53 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 4Financial risk management, continued

 

4.2.5Liquidity risk, continued

 

   Nature of undiscounted cash flows 
As of March 31, 2018  Carrying
amount
   Less than 1
year
   1 to 5 years   Over 5 years   Total 
(in millions of US$)                    
Other non-derivative financial liabilities                         
Bank borrowings   100.96    101.64    -    -    101.64 
Unsecured obligations   1,061.70    47.73    533.37    737.8    1,318.90 
Subtotal   1,162.66    149.37    533.37    737.8    1,420.54 
Other derivative financial liabilities                         
Hedging liabilities   (25.48)   1.18    (45.84)   -    (44.66)
Derivative financial instruments   (1.6)   (1.6)   -    -    (1.6)
Subtotal   (27.08)   (0.42)   (45.84)   -    (46.26)
Total   1,135.58    148.95    487.53    737.8    1,374.28 

 

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

 

4.3Risk measurement

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 54 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 5Changes in accounting estimates and policies (consistent presentation)

 

5.1Changes in accounting estimates

 

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

 

5.2Changes in accounting policies

 

As of March 31, 2018, the Company’s consolidated financial statements present no changes in accounting policies or estimates compared to the prior period (for further details refer to Note 3.40).

 

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

 

The accounting principles and criteria were applied consistently.

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 55 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 6Background of companies included in consolidation

 

6.1Parent’s stand-alone assets and liabilities

 

   3/31/2018   12/31/2017 
   ThUS$   ThUS$ 
         
Assets   3,795,232    3,658,528 
Liabilities   (1,601,930)   (1,470,707)
Equity   2,193,302    2,187,821 

 

6.2Parent entity

 

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

 

6.3Joint arrangements of controlling interest

 

Sociedad de Inversiones Pampa Calichera S.A., Potasios de Chile S.A., and Inversiones Global Mining (Chile) Ltda., collectively the Pampa Group, are the owners of a number of shares that as of March 31, 2018 are equivalent to 29.38% of the current total amount of issued, subscribed and fully-paid shares in the Company. In addition, Kowa Company Ltd., Inversiones La Esperanza (Chile) Limitada, Kochi S.A. and La Esperanza Delaware Corporation, collectively the Kowa Group, are the owners of a number of shares equivalent to 2.12% of the total amount of issued, subscribed and fully-paid shares of SQM S.A.

 

The Pampa Group and the Kowa Group have informed SQM S.A., the CMF, and the relevant stock exchanges in Chile and abroad that they are not and have never been mutually related parties. This is independent of the fact that on December 21, 2006 the two Groups entered into a Joint Action Agreement (JAA) related to those shares. Consequently, neither the Pampa Group nor the Kowa Group individually owns more than 32% of the voting right capital of SQM S.A.

 

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

 

Detail of effective concentration

 

Tax ID No.  Name  Ownership
interest %
 
96.511.530-7  Sociedad de Inversiones Pampa Calichera S.A.   19.13 
76.165.311-5  Potasios de Chile S.A.   6.91 
96.863.960-9  Inversiones Global Mining (Chile) Limitada   3.34 
Total Pampa Group      29.38 
         
79.798.650-K  Inversiones la Esperanza (Chile)  Ltda.   1.43 
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      2.12 

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 56 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

  

Note 6Background of companies included in consolidation (continued)

 

6.3Joint arrangements of controlling interest, continued

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 57 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

 

Note 6Background of companies included in consolidation (continued)

 

6.4General information on consolidated subsidiaries

 

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

 

         Country of  Functional  Ownership interest 
Subsidiary  Tax ID  Address  incorporation  currency  Direct   Indirect   Total 
                         
SQM Nitratos S.A.  96.592.190-7  El Trovador 4285 Las Condes  CHILE  US$   99.9999    0.0001    100.0000 
Proinsa Ltda.  78.053.910-0  El Trovador 4285 Las Condes  CHILE  Ch$   -    60.5800    60.5800 
SQMC Internacional Ltda.  86.630.200-6  El Trovador 4285 Las Condes  CHILE  Ch$   -    60.6381    60.6381 
SQM Potasio S.A.  96.651.060-9  El Trovador 4285 Las Condes  CHILE  US$   99.9999    -    99.9999 
Serv. Integrales de Tránsito y Transf. S.A.  79.770.780-5  Arturo Prat 1060, Tocopilla  CHILE  US$   0.0003    99.9997    100.0000 
Isapre Norte Grande Ltda.  79.906.120-1  Anibal Pinto 3228, Antofagasta  CHILE  Ch$   1.0000    99.0000    100.0000 
Ajay SQM Chile S.A.  96.592.180-K  Av. Pdte. Eduardo Frei 4900, Santiago  CHILE  US$   51.0000    -    51.0000 
Almacenes y Depósitos Ltda.  79.876.080-7  El Trovador 4285 Las Condes  CHILE  Ch$   1.0000    99.0000    100.0000 
SQM Salar S.A.  79.626.800-K  El Trovador 4285 Las Condes  CHILE  US$   18.1800    81.8200    100.0000 
SQM Industrial S.A.  79.947.100-0  El Trovador 4285 Las Condes  CHILE  US$   99.0470    0.9530    100.0000 
Exploraciones Mineras S.A.  76.425.380-9  El Trovador 4285 Las Condes  CHILE  US$   0.2691    99.7309    100.0000 
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.  76.534.490-5  Anibal Pinto 3228, Antofagasta  CHILE  Ch$   -    100.0000    100.0000 
Soquimich Comercial S.A.  79.768.170-9  El Trovador 4285 Las Condes  CHILE  US$   -    60.6383    60.6383 
Comercial Agrorama Ltda. (*)  76.064.419-6  El Trovador 4285 Las Condes  CHILE  US$   -    42.4468    42.4468 
Comercial Hydro S.A.  96.801.610-5  El Trovador 4285 Las Condes  CHILE  Ch$   -    60.6383    60.6383 
Agrorama S.A.  76.145.229-0  El Trovador 4285 Las Condes  CHILE  Ch$   -    60.6377    60.6377 
Orcoma Estudios SPA  76.359.919-1  Apoquindo 3721 Of.131 Las Condes  CHILE  US$   51.0000    -    51.0000 
Orcoma SPA  76.360.575-2  Apoquindo 3721 Of.131 Las Condes  CHILE  US$   100.0000    -    100.0000 
SQM MaG SpA.  76.686.311-9  Los Militares 4290, Las Condes  CHILE  US$   -    100.0000    100.0000 
SQM North America Corp.  Foreign  2727 Paces Ferry Road, Building Two, Suite 1425, Atlanta, GA  United States  US$   40.0000    60.0000    100.0000 
RS Agro Chemical Trading Corporation A.V.V.  Foreign  Caya Ernesto O. Petronia 17, Orangestad  Aruba  US$   98.3333    1.6667    100.0000 
Nitratos Naturais do Chile Ltda.  Foreign  Al. Tocantis 75, 6° Andar, Conunto 608 Edif. West Gate, Alphaville Barureri, CEP 06455-020, Sao Paulo  Brazil  US$   -    100.0000    100.0000 
Nitrate Corporation of Chile Ltd.  Foreign  1 More London Place London SE1 2AF  United Kingdom  US$   -    100.0000    100.0000 
SQM Corporation N.V.  Foreign  Pietermaai 123, P.O. Box 897, Willemstad, Curacao  Netherlands  US$   0.0002    99.9998    100.0000 
SQM Peru S.A.  Foreign  Avenida Camino Real N° 348 of. 702, San Isidro, Lima  Peru  US$   0.9800    99.0200    100.0000 
SQM Ecuador S.A.  Foreign  Av. José Orrantia y Av. Juan Tanca Marengo Edificio Executive Center Piso 2 Oficina 211  Ecuador  US$   0.0040    99.9960    100.0000 

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 58 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

 

Note 6Background of companies included in consolidation (continued)

 

6.4General information on consolidated subsidiaries, continued

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 59 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

 

Note 6Background of companies included in consolidation (continued)

 

6.4General information on consolidated subsidiaries, continued

 

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

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 60 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

 

Note 6Background of companies included in consolidation (continued)

 

6.5Information 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
 
       3/31/2018   12/31/2017   3/31/2018   12/31/2017   3/31/2018   12/31/2017 
       ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
Proinsa Ltda.   0.1%   -    -    -    -    -    - 
SQM Potasio S.A.   0.0000001%   -    -    -    -    -    - 
Ajay SQM Chile S.A.   49%   366    1,023    8,673    8,306    -    989 
SQM Indonesia S.A.   20%   -    -    -    1    -    - 
Soquimich Comercial S.A.   39.3616784%   (227)   100    48,988    49,247    -    1,264 
Comercial Agrorama Ltda.   30%   (81)   (403)   (267)   (184)   -    - 
Agrorama S.A.   0.001%   -    -    -    -    -    - 
Orcoma Estudios SPA   49%   -    -    2,277    2,277    -    - 
SQM (Thailand) Limited.   0.004%   -    -    -    -    -    - 
Total        58    720    59,671    59,647    -    2,253 

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 61 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

 

Note 6Background of companies included in consolidation (continued)

 

6.6Information on consolidated subsidiaries

 

3/31/2018 
   Assets   Liabilities   Revenue   Profit (loss)   Comprehensive
income
(loss)
 
   Current   Non-current   Current   Non-current             
Subsidiary  ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$   ThUS$ 
                             
SQM Nitratos S.A.   394,736    34,553    361,762    2,330    40,811    2,091    2,086 
Proinsa Ltda.   60    1    -    -    -    -    - 
SQMC Internacional Ltda.   222    -    -    -    -    (1)   (1)
SQM Potasio S.A.   268,866    1,011,056    92,950    22,551    1,030    80,210    80,205 
Serv. Integrales de Tránsito y Transf. S.A.   35,135    36,543    65,353    1,815    7,506    (1,090)   (1,114)
Isapre Norte Grande Ltda.   587    848    607    156    917    5    (30)
Ajay SQM Chile S.A.   17,672    1,271    758    485    8,185    748    748 
Almacenes y Depósitos Ltda.   306    52    1    -    -    (2)   19 
SQM Salar S.A.   786,736    788,528    396,754    200,071    219,265    97,082    97,081 
SQM Industrial S.A.   1,022,577    698,422    678,532    86,651    172,058    17,122    17,111 
Exploraciones Mineras S.A.   538    31,760    6,226    -    -    46    46 
Sociedad Prestadora de Servicios de Salud Cruz del Norte S.A.   366    625    592    318    596    (60)   (88)
Soquimich Comercial S.A.   163,298    14,528    48,120    5,250    20,605    (578)   (600)
Comercial Agrorama Ltda.   8,684    1,836    11,375    36    2,550    (270)   (270)
Comercial Hydro S.A.   4,910    39    2    1    6    34    34 
Agrorama S.A.   8,570    638    12,579    58    1,872    (302)   (306)
Orcoma SpA   -    2,360    14    -    -    -    - 
Orcoma Estudio SpA   306    4,396    55    -    -    -    - 
SQM MaG SpA   23    104    122    -    -    (5)   (5)
SQM North America Corp.   142,892    16,803    132,238    4    65,976    4,116    4,935 
RS Agro Chemical Trading Corporation A.V.V.   5,158    -    25    -    -    (8)   (8)
Nitratos Naturais do Chile Ltda.   1    140    3,459    -    -    (8)   (8)
Nitrate Corporation of Chile Ltd.   5,076    -    -    -    -    -    - 
SQM Corporation N.V.   5,804    148,354    3,579    -    -    17,365    17,439 
SQM Perú S.A.   274    -    1,166    -    -    4    4 
SQM Ecuador S.A.   16,546    117    14,313    80    9,028    210    210 
SQM Brasil Ltda.   185    -    663    2,350    79    (8)   (8)
SQI Corporation N.V.   56    31    65    -    -    (2)   (2)
SQMC Holding Corporation L.L.P.   24,878    15,685    1,611    -    -    1,424    1,424 
SQM Japan Co. Ltd.   45,133    323    42,180    666    36,109    271    271 

 

SQM S.A.

El Trovador 4285

Las Condes, Santiago, Chile

Tel: (56 2) 2425 2000

www.sqm.com

 
 62 
 

Notes to the Consolidated Financial Statements as of March 31, 2018.

 

Note 6Background of companies included in consolidation (continued)

 

6.6Information on consolidated subsidiaries, continued

 

3/31/2018
   Assets   Liabilities    Revenue    Profit (loss)    Comprehensive
income
(loss)
 
   Current   Non-current   Current   Non-current