With all its products witnessing robust demand, Sociedad Quimica y Minera
High prices = fatter bottom line
Rising demand for fertilizers, lithium, and iodine boosted SQM's revenues to $574.7 million, a 25% improvement from last year. While sales volumes went up, higher nutrient prices played a significant role in adding to the top line. If you notice, this has been the general industry trend lately.
Higher nutrient prices drove up PotashCorp's
Backed by strong top-line growth, SQM's net profit surged to $143.2 million from $94.8 million a year ago.
High crop prices are giving the entire fertilizer space a boost. Flush with high prices, farmers are growing more, which directly boosts demand for nutrients. To top that, prices of crops such as corn, which requires a lot of nutrients, have peaked, adding further excitement.
Growing population, especially in the emerging markets, is bound to add pressure on the food supply. The busier the farmers, the better it is for fertilizer players. And with countries like China gobbling up corn and India making big purchases of chemicals, the markets should remain strong.
SQM is expanding its fertilizer capacity and is also upgrading its granular potash facility. Such moves, along with the above factors, should work in SQM's favor.
SQM has a bigger advantage in terms of being the world's largest lithium producer. Its lithium volumes rose 25% in the third quarter, and lithium revenues were 24.5% higher than last year. High lithium volumes and prices had also driven Rockwood Holdings'
Being a lightweight metal, lithium can store huge amounts of energy and therefore has great potential. Lithium-ion batteries can be found everywhere -- from handheld devices to electric cars. The future looks even brighter with more Chevy Volts and Nissan Leafs rolling out and automakers like Tesla Motors
Along with demand, supply of lithium is also tight. This has encouraged lithium players to hike prices, adding more to their top lines. SQM undoubtedly stands to make the most of it because of its strong hold in the market.
The Foolish bottom line
SQM's diverse product line makes it a lucrative bet. Apart from the strong fertilizer and lithium market, iodine (which is used in fields such as health care) is also witnessing tighter supply and rising demand. Such a diverse portfolio with encouraging market conditions for support is a strong reason to be bullish on SQM.
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