Battery Giant CATL Beats on Full-Year Profit, But Warns on Costs
(Bloomberg) -- Contemporary Amperex Technology Co. Ltd., the world’s biggest maker of electric-vehicle batteries, reported better-than-expected full-year profit and announced plans to spend 13 billion yuan ($2 billion) on a new factory in China.
Net income for 2021 more than doubled to 15.93 billion yuan, the company said late Thursday, beating analyst estimates of 13.51 billion yuan. Still, the manufacturer scrapped its dividend and reported weaker profitability at its key power battery systems division as it warned of surging raw-materials costs.
CATL, as the company is better known, is contending with a raft of challenges from Covid-19 lockdowns in China that are hurting supply chains to inflated costs stemming from spiraling prices for materials like lithium, nickel and cobalt.
Its production base at Ningde in northeastern Fujian province has moved to a so-called closed-loop operation to shield workers and production from a Covid-induced shutdown. Its Shanghai factory reopened April 18, local media reported. CATL plans to add another facility in the southeastern port city of Xiamen, it said Thursday. The company cited growing demand from the new-energy industry for the investment.
The Chinese battery giant also warned over raw-materials inflation. Prices of lithium, cobalt and nickel have jumped on supply shortages and speculative trading. An index of global lithium prices compiled by Benchmark Mineral Intelligence surged 280% last year and another 127% in the first quarter as supply is squeezed by booming demand for electric cars.
The Chinese firm said lithium inflation has led to “great pressure on costs,” adding that it’s signing long-term supply agreements and striking mining deals to protect supplies.
What Bloomberg Intelligence says:
CATL’s gross margin may see limited upside in 2022 as skyrocketing prices of lithium and other raw materials offset economies of scale stemming from higher EV battery sales. Price increases help deflect some cost pressure onto automakers, yet overdoing it risks losing new orders to rivals, with its 1Q market share in China already falling from 4Q’s peak as BYD and CALB expand their turf.
Steve Man and Joanna Chen
The world’s dominant battery manufacturer is facing growing competition from newly listed and well-funded LG Energy Solution, which ranks No. 2, and other top 10 competitors including fellow Chinese companies BYD Co. and China Aviation Lithium Battery Co., or CALB.
CATL, with a share of about one-third of battery production globally and 50% in China, is a major supplier to Tesla Inc. and also sells its cells to a raft of automakers including Volkswagen AG and Chinese EV upstart Nio Inc.
Its Shenzhen-listed shares closed up 0.5% on Thursday ahead of the results. They’re down 30% this year after a 67% rise in 2021. The company will report first-quarter results on April 27.
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