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Is 2020's Debt Storm Affected the Third Quarter Profits of Tianqui Lithium?

Is 2020's Debt Storm Affected the Third Quarter Profits of Tianqui Lithium?

Is 2020's Debt Storm Affected the Third Quarter Profits of Tianqui Lithium?

  • 18-Oct-2022 6:49 PM
  • Journalist: Patrick Knight

Singapore: China's Lithium giant 'Tianqui Lithium' has not performed well in the third quarter of 2022. In the second week of October, the organization announced that profits have remained below the anticipated range. The overall outlook concludes that the organization's performance was not as good as it seemed.

In the first quarter of 2022, Tianqui Lithium announced about the expected profit in the first three quarters will range between CNY 15 Billion to CNY 16.2 Billion, with year-on-year growth in profit percentages ranging from 2768.96% to 3089.83%. At the same time, net profit alone in Q3 was anticipated to range between CNY 5 Billion–CNY 6.5 Billion, with a year-on-year increment of 1026.1%. The organization benefits from improving the global new energy vehicle boom and accelerating capacity expansion. However, the last week's announcement concluded that the net profits would drop by 7% to 28% on a month-on-month basis. At the same time, the competitor's performances have resulted in a consistent increment in the net profits. Ganfeng Lithium anticipates an increment in net profits ranging from 89%-116% during the third quarter of 2022.

Several analysts concluded that this development is majorly attributed to the debt storm of 2020. Tianqui Lithium is the world's leading new energy material enterprise with Lithium at its core. Besides covering the critical stages of the Lithium industry chain, the company has expanded its lithium resources in Australia, Chile, and China. Greenbush is one of the world's lowest-cost producers of Spodumene, previously owned by Tianqui.

In November 2020, the company faced a severe debt crisis. Therefore to get out of trouble, the company sold a 49% stake in its core subsidiary TLEA to investor IGO for USD 1.4 Billion. At the same time, the TLEA owns a 100% stake in the Greenbush Lithium Mine, the most crucial source of Tianqui Lithium. During the mid-semester of Q3, repaid the debt, Tianqui Lithium diversified its investments in other ventures and government policies, leading to significant segregation of the net profits. That is coupled with the increment in the EVs prices amidst the higher cost support from the upstream value chain depreciating the organization's overall outlook in the Chinese domestic market.

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