The performance of the A-share "lithium king" in the first quarter exploded, turning from profit to loss year-on-year, with a loss of at least more than 3.6 billion yuan, which led to the regulator's rapid questioning.
On the evening of April 23, Tianqi Lithium (002466. SZ) announced that the company expects a net loss of 3.6 billion yuan ~ 4.3 billion yuan in the first quarter of 2024, compared with a profit of 4.875 billion yuan in the same period last year. On a quarter-on-quarter basis, Tianqi Lithium's net loss in the fourth quarter of 2023 was 801 million yuan, and the net loss in the first quarter of this year expanded significantly.
As for the reasons for the explosion of the first quarter results, Tianqi Lithium explained in the announcement that due to the impact of the fluctuation of the lithium product market, the sales price of the company's lithium products fell sharply compared with the same period last year, and the gross profit of lithium products fell sharply;
On the evening of the same day, the Shenzhen Stock Exchange issued a letter of concern to Tianqi Lithium, requiring it to analyze the reasons for the significant increase in losses in the first quarter of 2024 compared with the fourth quarter of 2023 in combination with the development of its main business, product production and sales, product prices, etc., and explain whether there is a risk of continuous losses.
For the sharp decline in the gross profit of lithium products in the first quarter, it should be directly related to the price of lithium carbonate. Since the beginning of this year, the price of lithium carbonate has maintained a low operating state, and the futures price has fluctuated at the level of 100,000 yuan/ton. As of April 23, 2024, the price of lithium salt is about 110,000 yuan/ton, which has fallen by more than 80% from the high point in 2022.
It is not difficult to find that Tianqi Lithium's profitability is closely related to the price of lithium resources and is cyclical. From 2021 to 2023, when lithium carbonate prices are more optimistic, Tianqi Lithium's net profit will be 2.08 billion yuan, 24.12 billion yuan, and 7.297 billion yuan respectively. In 2019 and 2020, Tianqi Lithium lost money for two consecutive years, with a cumulative loss of more than 7.8 billion yuan.
In fact, Tianqi Lithium has already fallen into the red in the fourth quarter of 2023. According to the 2023 annual report, Tianqi Lithium's single-quarter loss in the fourth quarter of 2023 was 801 million yuan, a year-on-year decrease of about 110%. The company's net profit attributable to the parent company in 2023 will be 7.297 billion yuan, a year-on-year decrease of 69.75%.
In addition, Tianqi Lithium's performance is also related to the operation of its shareholding company, SQM. In December 2018, Tianqi Lithium decided to buy a 23.77% stake in Chile's SQM for US$4 billion (about 25.8 billion yuan at the time), becoming its second largest shareholder.
It is reported that SQM operates the Atacama project, the world's largest lithium salt lake, which is listed on the New York Stock Exchange in Santiago, Chile and the New York Stock Exchange in the United States.
As of the end of 2023, Tianqi Lithium holds a total of 22.16% of the equity of SQM through its subsidiaries Tianqi Lithium Hong Kong and Tianqi Chile, and adopts the equity method to account for and recognize investment income on SQM.
Tianqi Lithium said that according to Bloomberg's forecast data, combined with the impact of SQM's tax dispute ruling, SQM's performance in the first quarter of this year is expected to decline significantly year-on-year, so the company's investment income in the associated company recognized in the reporting period decreased significantly compared with the same period last year.
Tianqi Lithium's announcement shows that its associate company SQM announced that the court of Santiago, Chile, ruled on its tax litigation for the 2017 and 2018 tax years in April 2024, revoking the conclusion of the tax and customs court's ruling on the case on November 7, 2022. SQM is reviewing the accounting treatment of all tax dispute amounts based on the latest ruling and expects that it may reduce its net profit for the first quarter of 2024 by approximately US$1.1 billion. Based on Tianqi Lithium's 23.77% stake, the ruling caused a loss of about US$260 million (nearly 1.8 billion yuan) to Tianqi Lithium in the quarter.
In this regard, the Shenzhen Stock Exchange asked Tianqi Lithium to explain the specific situation and subsequent progress of the SQM tax dispute ruling, the amount of impact on the company's net profit in the first quarter and the basis for calculation, and Tianqi Lithium will confirm whether the impact of the relevant tax dispute ruling is in line with the relevant provisions of the accounting standards for business enterprises in the first quarter.
Tianqi Lithium's 2023 annual report shows that the closing balance (book value) of the company's long-term equity investment in SQM is 26.163 billion yuan. Recent media reports have reported that SQM has signed a Memorandum of Understanding (MoU) with Chile's National Copper Company (Codelco). In this regard, the Shenzhen Stock Exchange requires the company to verify and explain the specific situation of the relevant matters, assess the impact on the company, explain the countermeasures to be taken, and fully indicate the relevant risks.
Source: Reading and Entrepreneurship