Good day, and welcome to the SQM second quarter earning conference call and webcast. [Operator Instructions] I would now like to turn the conference call over to Mr. Gerardo Illanes, Vice President of Finance and Investor Relations at SQM. Mr. Illanes, the floor is your sir.

Thank you. Good morning, everyone, and welcome to SQM second quarter 2015 earnings conference call. For your information, this conference call will be recorded and is being webcast live. You may access the webcast later on at our website www.sqm.com. Joining me today our speakers are Patricio Solminihac, Chief Executive Officer; and Ricardo Ramos, CFO. Before we begin, let me remind you that statements in this conference concerning the company's business outlook, future economic performance, anticipated profitability, revenues, expenses or other financial items, anticipated cost synergies and production or service line growth, together with other statements that are not historical facts, are forward-looking statements as that term is defined under federal securities law. Any forward-looking statements are estimates reflecting the best judgment of SQM based on currently available information and involve a number of risk, uncertainties and other factors that could cause actual results to differ materially from those stated in such statements. Risks, uncertainties and factors that could affect the accuracy of such forward-looking statements are identified in the public filings made with the Securities and Exchange Commission, and forward-looking statements should be considered in light of those factors. I now leave you with our Chief Executive Officer, Patricio Solminihac, for brief comments before we move to Q&A.

Thank you, Gerardo. Good morning and thank you for joining the SQM second quarter ending conference call. On Tuesday, we post our results for the six month ended June 30, 2015. Earnings for this period reached $155 million, higher than the amount seen during the same period in 2014. Revenues for this period totaled just over $872 million, down approximately 17% when compared to the first half of 2014, mainly because of lower sales volumes in the fertilizer segment and lower iodine prices. I would like to highlight the high margins seen during the first six months of the year. Gross margin reached 33.9% compared to 28.4% seen during the same period last year. On the similar note, EBITDA margin was over 44% during the second quarter. Our margins increased as a direct results of lower cost, which were impacted for several reason. Our lower cost reflect the important work that we have done to make improvements in our operating activities across all business lines, by developing new technology, creating value, implementing lean manufacturing and working diligent to be the most cost-effective competitor. Specifically, in the iodine business line, we have further improved our efficiency and cost position. We produced a majority of our iodine at Nueva Victoria, our lowest cost facility. During the first half of the year we had a positive impact on cost of about $60 million compared to the first half of last year. We believe that around 60% of these savings were a result of a weaker Chilean pesos and a lower oil price. Finally, our costs are calculated using an average cost accounting measure. Therefore, during the first half of this year, we recognized important cost savings, which in turn possibly impacted our margin. As production costs continue to decrease, we could see a…

[Operator Instructions] The first question we have comes from Ben Isaacson of Scotiabank.

Just two, three questions from me. Patricio, can you talk a little bit about where the next round of cost reductions will come from, how much you're thinking and over what time period?

We are working in all areas. The area that is giving us a lot of good news has been the lean manufacturing process that we are implementing since already 18 months or more, we are seeing the results. We have not implemented that way of operating in all our plants. We will continue to do so in the rest of the year and next year, so we hope to get some of additional benefit that way. Second, we are reviewing all our plants in order to see how to optimize the production that we need to do. And we can see there also some additional cost benefit. And third, we continue to work even though we are facing the lower energy cost. We continue to work in energy savings and especially also in improving processes to get better deals. Better deals really have also an important effect on our total cost.

My second question is, you realized quite a high potash price this quarter, and I'm guessing some of that was due to selling more SOP. Have you guys thought about doing more in the SOP business and less in MOP? I mean you obviously have a very good distribution network, because of your potassium nitrate and SPN business. Are the margins more attractive or have you thought about that from a strategic point of view?

Yes. We are reviewing and we are doing some upgrade in our SOP plant and we are reviewing exactly how much we can do. This is something, that we have some flexibility to do it. However, you understand that we need to change the way we pump from different areas in the Salar, so that take times. And then go through the brine process and get the salt in one way for the MOP or the SOP. So this is something that we are working on. We don't disclose yet how much we can do it, but of course we are looking today at a much nicer margin in SOP.

And then just my very last question on the arbitration. Has CORFO, I mean you had a negotiation process that wasn't successful for quite a long time. Was CORFO always seeking to terminate its agreements or did they offer conditions to you in which they would agree to settle and that wasn't agreeable with you?

Basically, we have the disagreement with CORFO at different views on how to calculate the rent. And they decided instead of trying to get an agreement on that with us, they decided that was better to go through the arbitration process that was in May 2014. And when they place the arbitration process they indicated that we have this different, up to now it was $9 million difference in the payment of the rent. And also they say that given that they wanted also to terminate the contract, which was indicated in the request for arbitration. Then during the arbitration process, it's not the negotiation, basically is what is called a process of trying to agree through the arbitration a conciliation process. So during the first part of 2015, we tried to conciliate, trying to agree, and CORFO and we were advancing on that and trying to get to an agreement. And we were well-advanced in an agreement, but unfortunately then CORFO decided to not to continue, then we didn't have an agreement. And we continued with the process of a normal arbitration, which we are right now.

Next, we have Ravi Jain of HSBC.

So I have two questions, one on the iodine. As you mentioned in the call that you expect the prices to be under more pressure in going forward, with the weaker Chilean pesos, so now, we would expect the marginal cost of even the competitors too have come down pretty materially. So would you also say that there is a relevant downside to prices before we see a bottom in iodine in the short-term here?

It's difficult to say exactly how the price will be, where we have a clear strategy from our end. We are the largest producer, but not only the largest, in our calculation and estimate we are the lowest cost producers. We have increased our competitiveness as we indicated and our strategy is to recover our historical market share. So we will continue and we are growing our volumes and then we will see what happen to the price.

And my second question is on the arbitration process as a follow-up. So now, as we understand, it's in the third stage of the process, which is the arbitration, the actual arbitration. The question I had is, is increasing the annual royalties on the table, as a part of this arbitration process or is it only going to be a decision whether the lease is terminated or not?

Basically, what CORFO asked in the arbitration process, was one, that they see a difference, so they want us to pay the difference that they believe we owe them. We believe and we are sure in our part that we have paid exactly what the contract says. Second, they ask that we should pay them, let's say, a fee or something additional, because of not paying the amount that they thought we should be paying. Third, they say that we need to repair some of the things in the mining rights. And fourth, they say that they terminate the contract. So the arbitrator will have to answer to the four things that CORFO is asking. And that will be the decision of the arbitrator that we are now, and CORFO as well, given all the arguments to the arbitrator to decide.

And next we have Emilio Acevedo of GBM.

I would like to know regarding the arbitration proceeding, particularly how long time do you think the evidentiary phase will last, according your idea regarding that phase? And how will be the phase, in particular, regarding how many states will be that evidentiary phase?

Basically, the arbitrator is finding exactly what is needed to proof and justify on. And then there is not exact date. Originally, the arbitrator procedure should finish beginning of next year, but the arbitrator by his own decision can extend it for a year.

Well, at this time, we'll go ahead and conclude our question-and-answer session. I would now like turn the conference call back over to management for any closing remarks. Gentlemen? End of Q&A

Thank you all very much for joining us today and we hope to have you with us in the next conference call. Goodbye, everyone.

And we thank you, sir, and the rest of management team for your time also today. The conference call has now concluded. At this time, you may disconnect your lines. Thank you and have a great day everyone.