Performance of the two Chinese lithium resource giants declined significantly in the first quarter due to coronavirus

The sudden new coronavirus pandemic has caused many domestic industries to almost shut down in the first quarter of this year. Downstream demand is seriously insufficient, product prices continue to decline, and operating rates are at a low level. Multiple factors are superimposed, and most companies’ earnings in the first quarter are not as expected or even changed drastically, even industry giants are no exception.

Lithium mining process

On April 15, domestic and global lithium mining resource giants Ganfeng Lithium and Tianqi Lithium issued the first quarter 2020 performance forecast on the same day, and the decline in net profit became a “consensus”.

Ganfeng Lithium’s first-quarter performance forecast shows that it is expected that the company will achieve a net profit of 7 million to 10 million yuan in the first quarter of this year, compared with 253 million yuan in the same period last year, which is expected to drop by 96 to 97% year-on-year.

Ganfeng Lithium stated that the price of lithium salt in this reporting period has decreased compared with the same period of the previous year, which has affected the company’s profit growth. At the same time, the outbreak of the coronavirus has affected some of the company’s production capacity, resulting in a slight decline in production and sales in the current period compared with the same period last year. In addition, the decline in the price of financial assets and stocks held by the company resulted in losses in the current period, which in turn affected the company’s profits.

Although Ganfeng Lithium’s performance fell sharply in the first quarter, it is still profitable. Another lithium mining giant, Tianqi Lithium, has seen a “big face change” in its performance.

The first-quarter performance forecast released by Tianqi Lithium Industry Co., Ltd. shows that the company is expected to lose 450 million to 510 million yuan in the first quarter of this year, while the company also made a profit of 111 million yuan in the same period last year.

Tianqi Lithium said that in the first quarter of this year, due to multiple adverse factors such as industry cycle adjustments and sudden COVID-19 epidemic, the price of lithium products fell. Not only that, poor logistics and delayed start of downstream customers also led to a decline in the company’s lithium product sales. The above factors led to a decrease in operating income and gross profit margin over the same period last year, which resulted in a decline in the company ’s net profit attributable to shareholders of listed companies. In addition, during the reporting period, the exchange rate of the Australian dollar against the US dollar dropped significantly, resulting in a substantial increase in the exchange loss of financial expenses in the current period compared with the same period last year.

Tianqi Lithium Industry expects that with the gradual improvement of the domestic epidemic situation, downstream customers have resumed production, and the poor logistics situation has gradually been alleviated.

Author: Nabeel K

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