China Fund News reporter Feng Yao
On the evening of April 23, Tianqi Lithium, the "lithium king", disclosed the performance forecast for the first quarter of this year, and the company expects a net loss of 3.6 billion yuan ~ 4.3 billion yuan in the first quarter, turning from profit to loss. In the same period last year, Tianqi Lithium's net profit was 4.875 billion yuan.
In the fourth quarter of last year, Tianqi Lithium has suffered a loss of 801 million yuan, which is also the company's first single-quarter loss since the first quarter of 2021.
Tianqi Lithium suffered a large loss in the first quarter, which attracted regulatory attention. After disclosing the first quarter performance forecast, Tianqi Lithium immediately received a letter of concern from the Shenzhen Stock Exchange. The Shenzhen Stock Exchange requires the company to analyze the reasons for the sequential expansion of losses in the first quarter and explain whether there is a risk of sustained losses.
The performance of the associated company exploded
In the performance forecast, Tianqi Lithium gave two explanations for the sharp decline in performance in the first quarter. First, due to the fluctuation of the lithium product market, the sales price of the company's lithium products decreased sharply compared with the same period last year, and the gross profit of lithium products fell sharply.
The second is that the performance of SQM, a significant associate, is expected to decline significantly year-on-year in the first quarter, so the company's investment income in the associated company recognized in the reporting period decreased significantly compared with the same period last year.
In the earnings forecast, Tianqi Lithium also mentioned that SQM issued an announcement that the court of Santiago, Chile, ruled on its tax litigation for the 2017 and 2018 tax years in April 2024, reversing the conclusion of the tax and customs court's decision on the case on November 7, 2022.
SQM, on the other hand, has reviewed the accounting treatment of all tax dispute amounts based on the latest ruling and expects that it may reduce its net profit by approximately US$1.1 billion in the first quarter of 2024.
Tianqi Lithium said that the company's investment income in the associate recognized in the first quarter will be significantly lower than the same period last year. Therefore, this matter is expected to reduce the company's net profit attributable to the parent company.
According to the data, as early as December 2018, Tianqi Lithium purchased part of the equity of Chilean SQM Company. SQM operates the world's largest lithium salt lake Atacama project, with a resource of approximately 10.8 million tonnes of lithium metal equivalent. As of the end of last year, Tianqi Lithium Hong Kong held 0.26% of the shares, and Tianqi Chile held 21.9%.
In last year's annual report, SQM's performance fell sharply. The reporter checked the data and found that SQM will achieve revenue of 52.449 billion yuan and net profit of 13.136 billion yuan in 2023, a year-on-year decline of nearly half of the year. SQM's net profit in 2022 reached 26.056 billion yuan.
This also led to a year-on-year decline in the investment income recognized by Tianqi Lithium in 2023 for the associate, which affected its net profit.
Regulatory attention is being paid quickly
In fact, in the fourth quarter of last year, Tianqi Lithium has already incurred losses. The company's operating income in the quarter was about 7.1 billion yuan, a year-on-year decrease of 55.04%. The company posted a net loss of 801 million yuan in the fourth quarter of last year, which was also the first time that the lithium salt manufacturer had a single-quarter loss since the first quarter of 2021.
The loss in the fourth quarter of last year also dragged down Tianqi Lithium's full-year performance. In 2023, the company will achieve revenue of 40.503 billion yuan, a year-on-year increase of 0.13%, and a net profit attributable to the parent company of 7.297 billion yuan, a year-on-year decrease of 69.75%.
However, in an institutional survey in early April, Tianqi Lithium also said that "it has recently felt that the downstream procurement sentiment has recovered, and the overall delivery situation of customers is better than earlier expectations, and some new customers have issued procurement offers."
The regulator is also concerned about Tianqi Lithium's losses for two consecutive quarters, and the loss amount has expanded sharply. Just after Tianqi Lithium disclosed the performance forecast of its first quarterly report, the Shenzhen Stock Exchange immediately issued a letter of concern to the company.
In the letter of concern, the Shenzhen Stock Exchange requested Tianqi Lithium to quantitatively analyze the reasons for the significant increase in losses in the first quarter of 2024 compared with the fourth quarter of 2023 in light of the specific changes in factors such as the development of its main business, product production and sales, product prices, raw material purchase prices, costs and expenses, and impairment provisions, and explain whether there is a risk of sustained losses.
At the same time, the Shenzhen Stock Exchange also required the company to explain the specific situation and subsequent progress of the SQM tax dispute ruling, as well as the amount of impact on the net profit in the first quarter and the basis for calculation.
Moreover, the Shenzhen Stock Exchange also asked whether Tianqi Lithium's confirmation of the impact of the tax dispute ruling in the first quarter was in line with the relevant provisions of the accounting standards for business enterprises.
Lithium salt manufacturers collectively lost money
Judging from the fourth quarter of last year, not only Tianqi Lithium, but also many lithium salt manufacturers have fallen into a state of loss, and these lithium salt manufacturers were "unlimited" a year ago.
Among them, Ganfeng Lithium achieved revenue of 7.29 billion yuan in the fourth quarter of last year, a year-on-year decrease of 48.7%, and a net loss of 1.063 billion yuan, a year-on-year decrease of 118.62%, making it the largest single-quarter loss among the lithium companies that have published annual reports.
Also losing money in the fourth quarter of 2023 is Shengxin Lithium Energy.
In 2023, Shengxin Lithium Energy will achieve revenue of 7.951 billion yuan, a year-on-year decrease of 33.96%, and the net profit attributable to the parent company will be 702 million yuan, a year-on-year decrease of 87.35%. In the fourth quarter of last year, Shengxin Lithium Energy's revenue was 1.323 billion yuan, less than half of the first quarter of last year, and its net profit attributable to the parent company was a loss of 393 million yuan.
From the perspective of lithium carbonate spot prices, the price of battery-grade lithium carbonate in 2023 will fall from more than 500,000 yuan/ton at the beginning of the year to around 100,000 yuan/ton at the end of the year, a decline of more than 80%. Moreover, lithium carbonate prices are still hovering at a low level this year.
However, just recently, the production data of lithium carbonate in April stimulated a phased recovery of lithium prices, which once soared to nearly 118,000 yuan/ton, close to the upper edge of the shock range.
However, the spot price of lithium carbonate has fallen back recently. Some institutions speculate that the lower-than-expected production schedule of the downstream of the industrial chain in May drove lithium prices to continue to fall, and the deep-seated reason behind it is still the market's concern about the sustainability of demand in the future.
Looking forward to the second quarter, the industry generally believes that lithium salt production is expected to further increase after the profit recovery and supply disruption in the smelting link weakens. On the demand side, the raw material inventory of downstream materials and battery cell factories is already low, and there is still room for fermentation in the replenishment logic. The key point of the market outlook is mainly in May and June, if the demand exceeds expectations, it may drive lithium prices upward. Conversely, lithium prices will return to weak fundamentals in the medium term.
Editor: Captain
Review: Xu Wen