Caixin
Sep 01, 2020 08:42 PM
BUSINESS & TECH

Spiraling Sales and Prices Drive Lithium Giant to $101 Million Loss

Despite the overall poor financial situation, Tianqi’s second quarter has seen signs of recovery.
Despite the overall poor financial situation, Tianqi’s second quarter has seen signs of recovery.

Tianqi Lithium Corp., one of the world’s biggest lithium producers, recorded a net loss of 697 million yuan ($101.7 million) in the first half due to a steep fall in sales and prices, as well as the dire performance of the Chilean mining company in which it holds a stake.

Tianqi’s revenue dropped 27.44% to 1.88 billion yuan compared to the same period last year due to the Covid-19 fallout, swinging from a 193.4 million yuan profit in the first half of 2019 to a net loss of 696.6 million yuan, said an interim report filed to Shanghai Stock Exchange on Monday.

Tianqi earned just 129 million yuan from its 25.86% holding in Sociedad Quimica y Minera de Chile (SQM) in the first six months.

A major part of Tianqi’s lithium products go to the electric vehicle (EV) industry to produce electric batteries. The company has two subsidiaries that specialize in the research and production of EV power packs for electric cars and bicycles, as well as energy storage power stations.

Despite the overall poor financial situation, Tianqi’s second quarter has seen signs of recovery. Its loss narrowed to 196 million yuan in the April to June period versus a 500 million yuan loss in the first three months, though the period’s revenue was almost on a par with that of the previous quarter.

The improvement came as China in April extended its state subsidies for EVs for another two years to uphold the industry, and sales rose accordingly.

Data from China Association of Automobile Manufacturers (CAAM) showed the country’s EV sales gradually recovered from March after taking a deep dive in February due to the sweeping lockdown imposed on the nation. China sold 279,000 EVs between April and June, more than doubling the first quarter’s sales of 114,000 and taking the total half-year figure to nearly 400,000, according to CAAM.

In its high-profile acquisition of SMQ, the lithium giant borrowed a total of $3.5 billion, of which a syndicated loan from China Citic Bank of some 13.6 billion yuan — equal to one third of its total assets — will mature in November this year. And it has booked a 5.28 billion yuan impairment loss for SQM.

The company’s former CEO Wu Wei, who led the gigantic acquisition deal, resigned on Aug. 14. Tianqi’s Chairman Jiang Weiping is holding the post concurrently.

Tianqi’s biggest shareholder, Sichuan Tianqi Industry Group Co. Ltd., has pledged a total of 66.54% of its stake in the listed firm, according to a company response to the bourse on Wednesday.

As of June 30, Tianqi had a debt-to-asset ratio of 80.6%, with debt piling to 35.88 billion yuan. The company forecast its loss in the third quarter would be in the range of 258 million yuan to 894 million yuan due to decreases in production prices and sales.

Contact reporter Lu Yutong (yutonglu@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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