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SQM Falls in Chile After Low Prices Lead to Profit Miss

Soc. Quimica y Minera de Chile SA, the country’s largest fertilizer producer, fell to the lowest in five years after the company reported a bigger-than-expected drop in profit as potash prices slumped.

SQM retreated 1.7 percent to 12,765 pesos at the close in Santiago, the lowest since November 2008. The benchmark Chilean IPSA index fell 0.6 percent.

Net income fell 44 percent in the second quarter from a year earlier to $107 million, trailing the $136 million average of six estimates compiled by Bloomberg. Potash prices were falling even before the collapse in July of an agreement between Russian and Belarusan producers that had helped prop up prices, SQM said. The company cut its 2013 investment budget to $400 million from $500 million and said spending next year will be “significantly lower.”

“We find more negatives than positives” in the earnings report, Banchile-Citi analysts Juan Tavarez, Raimundo Perez and Felipe Jiman Koh said today in an e-mailed note.

Second-quarter volumes dropped in the iodine and lithium segments, SQM said. Overall sales contracted 17 percent to $566 million.

SQM’s shares tumbled 22 percent on July 30 and 31 after Russia’s OAO Uralkali, the world’s largest potash producer, announced the end of a trade agreement with its Belarusan counterpart Belaruskali.

Management’s statements on earnings for the rest of the year have become “increasingly cautious given higher competition in lithium and iodine and price pressure in potash,” the Banchile-Citi analysts wrote.

The company is the worst performer on the IPSA this year, falling 54 percent as the index dropped 18 percent.

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