On the evening of April 23, the Chinese “Lithium King” – Tianqi Lithium Industry disclosed its performance forecast, expecting a net loss of 3.6 billion to 4.3 billion yuan in the first quarter, turning from profit to loss compared to the same period last year when the company had a net profit of 4.875 billion yuan.
In the performance forecast, Tianqi Lithium Industry provided two explanations for the significant decline in performance in the first quarter. Firstly, due to the fluctuations in the lithium product market, the company’s lithium product sales prices significantly decreased compared to the same period last year, leading to a sharp drop in gross profit margins of lithium products.
Secondly, the company’s important joint venture company SQM (Chilean chemical mining company) is expected to experience a significant year-on-year decline in performance in the first quarter, resulting in a substantial decrease in the investment income from the joint venture company compared to the same period last year.
Currently, SQM has not yet announced its first-quarter performance report. Tianqi Lithium Industry usually calculates its investment income from SQM for the same period based on earnings per share information predicted by Bloomberg.
In April of this year, the Santiago Court in Chile ruled on tax litigation for the 2017 and 2018 fiscal years of SQM, overturning the tax and customs court’s decision on the case made on November 7, 2022. Based on the latest ruling, SQM is reviewing the accounting treatment of all tax dispute amounts and is expected to reduce its net profit in the first quarter of 2024 by approximately 1.1 billion US dollars.
According to the financial data released by SQM, the company had a net profit of 750 million US dollars in the first quarter of last year. If not considering the fluctuations in the main business, the aforementioned tax accounting treatment may lead to SQM facing a loss.
Tianqi Lithium Industry stated that, based on Bloomberg’s predicted data and considering the impact of the SQM tax dispute ruling, SQM’s performance in the first quarter is expected to see a significant year-on-year decline.
In December 2018, Tianqi Lithium Industry acquired a portion of the shares of the Chilean company SQM. SQM operates the world’s largest lithium salt lake Atacama project, with estimated resources of around 10.8 million metric tons of lithium metal equivalent. By the end of last year, Tianqi Lithium Industry held a 0.26% stake in Hong Kong and a 21.9% stake in Chile.
The significant expected loss in the first quarter by Tianqi Lithium Industry has immediately attracted regulatory attention. After disclosing its performance forecast for the first quarter, Tianqi Lithium Industry promptly received a letter of concern from the Shenzhen Stock Exchange.
In the fourth quarter of last year, Tianqi Lithium Industry already incurred losses. The company achieved operating income of approximately 7.1 billion yuan during the quarter, a 55.04% year-on-year decrease, and suffered a loss of 800 million yuan, marking the first quarterly loss since the first quarter of 2021 for the company.
Looking at the performance from the last quarter of last year, not only Tianqi Lithium Industry but also several lithium manufacturers have fallen into a state of loss.
For example, Ganfeng Lithium Industry had a revenue of 7.29 billion yuan in the last quarter of last year, a 48.7% year-on-year decrease. Its net profit attributable to shareholders was a loss of 1.063 billion yuan, down by 118.62% year-on-year, making it the company with the largest loss in a single quarter among the lithium enterprises that have already published their annual reports.
Shengxin Lithium Energy achieved revenue of 7.951 billion yuan for the full year of 2023, down by 33.96% year-on-year. Its net profit attributable to shareholders was 702 million yuan, a significant drop of 87.35%. In the last quarter of last year, Shengxin Lithium Energy had a revenue of 1.323 billion yuan, less than half of the first quarter last year, with a net loss of 393 million yuan.