China’s CATL says gross profit margins will improve after price hike

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People walk past the R&D center of Contemporary Amperex Technology Ltd (CATL) in Ningde, Fujian province, China December 16, 2016. REUTERS/Jake Spring

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SHANGHAI, May 5 (Reuters) – Chinese battery maker CATL (300750.SZ) said on Thursday its gross profit margins should improve as it raises prices in the second quarter as raw material suppliers ease tensions currents by accelerating up the output.

The world’s largest battery maker, whose customers include Tesla (TSLA.O), Volkswagen (VOWG_p.DE) and BMW (BMWG.DE), made the comments during a Q&A with investors. Thursday after announcing a 23.6% drop in the first quarter. profit the previous week, its first fall in two years. Read more

Prices for key metals such as lithium nearly doubled in the first three months, weighing on CATL’s profit margins and prompting it to raise battery prices in March.

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The company said Thursday that it has nearly completed negotiations with its customers on price changes and will gradually implement those adjustments in the second quarter.

The company has resorted to long-term contracts, investment, self-production and recycling to solve raw material supply shortages, said Jiang Li, vice president of CATL at the online conference. .

As upstream suppliers ramp up production, raw material prices will gradually fall to “reasonable” levels and the company will see its gross profit margin recover, Jiang added, without giving details of the timing.

CATL will also expand its overseas markets as demand from overseas customers is strong. The company is exploring possibilities of locating the production of foreign automakers in their countries, chairman Zeng Yuqun said.

The company said China’s measures to combat COVID-19 outbreaks had little impact on production or demand for its batteries.

It said it expects 40% of its shipments this year to be nickel-cobalt-manganese (NCM) batteries, while the rest will be lithium phosphate (LFP) batteries.

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Reporting by Zhang Yan and Brenda Goh; edited by Jason Neely and Kim Coghill

Our standards: The Thomson Reuters Trust Principles.

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