Chile’s SQM Slumps as Banchile-Citi Says Sell on Iodine Glut

Soc. Quimica y Minera de Chile SA, Chile’s largest fertilizer company, fell the most in six months after Banchile-Citi recommended selling the stock on predictions that oversupply in the iodine market will cut profit.

SQM dropped 5 percent to 15,999 pesos at the close in Santiago, the biggest decline since Nov. 20. The IPSA index gained 0.2 percent.

Banchile-Citi, the joint research department of Banco de Chile and Citigroup Inc., reduced its recommendation for SQM to sell from the equivalent of hold. The analysts wrote that a 21 percent drop in iodine prices this year may lead to a 39 percent slump in earnings of that segment, which accounted for 36 percent of gross profit in 2013.

“Iodine challenges continue,” analysts Juan Tavarez and Andrew McCarthy said in an e-mailed note. SQM’s market share “may remain under pressure as new supply continues to ramp up,” resulting in a prolonged period of lower prices. The price of potash, which accounted for 23 percent of gross profit, will also be constrained by a “well-supplied market,” Banchile-Citi said.

SQM’s shares have increased 20 percent in 2014, leading gains among members of the IPSA index. The stock is trading at 19.1 estimated profit for the current calendar year, 21 percent below its average of the last four years.

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editors responsible for this story: Brendan Walsh at bwalsh8@bloomberg.net Bradley Keoun, Rita Nazareth

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.