In the downward cycle of lithium prices, upstream lithium miners have had a difficult time, and the world's largest lithium miner, Yabao, cannot be spared.
Recently, Albemarle released its financial results for the third quarter ended September 30, 2023. The financial report shows that the company's net sales in the third quarter were 2.31 billion US dollars, an increase of 10.5% year-on-year; Net profit of 302.5 million US dollars, a year-on-year decrease of 66.3%; Diluted earnings per share were $2.57, a year-on-year decrease of 66.2%, lower than market expectations.
In addition, due to the expectation that lithium prices will continue to decline this year, Yabao has also lowered its annual revenue and net sales guidelines. The company has lowered its adjusted annual earnings per share forecast from $25.00-29.50 to $21.50-23.50, and adjusted EBITDA (before interest, tax, depreciation, and amortization) from $3.8-4.4 billion to $3.2-3.4 billion. It is expected to remain unchanged from the same period last year and decrease by 5%.
Net sales have decreased from $10.4 billion to $11.5 billion to $9.5-9.8 billion, and it is expected that net sales will increase by approximately 30% to 35% year-on-year in 2023.
This means that Yabao's fourth quarter net sales were $2.24 billion to $2.54 billion, with earnings per share ranging from $1.11 to $3.11, while analysts expect revenue to be $2.65 billion, with earnings per share of $4.58.
After the financial report was released, Yabao fell 5.05% after hours to close at $116.75 per share. As of the time of publication of this article, the company's stock price closed at $122.96 per share.
According to production capacity, Yabao is the world's largest producer of lithium compounds, followed by Chilean Chemical Mining Company and China Ganfeng Lithium Industry.
On the day of financial report release, Kent Masters, CEO of Albemarle, stated that the main reason why Albemarle's net sales increased by 10% in the third quarter was due to the increase in sales of its energy storage business.
According to the financial report, the net sales of Yabao's energy storage business in the third quarter reached $1.697 billion, a year-on-year increase of 20%.
In the third quarter, we established a new strategic partnership and streamlined our existing joint venture with Mineral Resources Limited, MARBL, to better position the company's long-term growth. Our global investment continues to progress, and the Meishan project will be completed early in 2024, "Kent Master said.
According to reports, in the third quarter, Yabao's main business events also included signing an agreement with Caterpillar to provide solutions to support the battery cycle value chain and sustainable mining business; Received $90 million in critical materials funding from the US Department of Defense to support the restart of the Kings Mountain lithium mining project in North Carolina; In Chile, lithium salt flats production projects are reaching production capacity as expected.
According to the revised agreement with Mineral Resources Limited, Albemarle will have full ownership of the Kemerton lithium processing facility and 50% ownership of the Wodgina spodumene mine in Australia, while retaining full ownership of the lithium salt processing facilities in Qinzhou and Meishan, China.
It is understood that Yabao acquired Guangxi Tianyuan Company located near Qinzhou Port in Guangxi, China in 2022, with a designed lithium hydroxide production capacity of 25000 tons/year; The factory will undergo renovation to convert Wodgina spodumene and is expected to start production in early 2024. Yabao's Meishan factory project, which invested 500 million US dollars at the end of 2021, is currently under construction with a designed lithium hydroxide production capacity of 50000 tons per year. It is planned to be put into operation by the end of 2024.
It is worth noting that just last month, a cross-border merger and acquisition by Yabao failed. On October 16th, the company announced that it had officially withdrawn its non binding acquisition offer to Australian lithium developer Liantown Resources (hereinafter referred to as Liantown). Abbott's CEO Kent Masters stated that advancing the acquisition at this time was not in Abbott's best interest.
Liantown currently controls two major lithium deposits in Western Australia, including the Kathleen Valley project, which is scheduled to start production in mid next year. The project is one of the largest and highest grade hard rock lithium deposits in the world.
On September 4th, the board of directors of Liantown announced their agreement to Yabao's A $6.6 billion (approximately RMB 30.8 billion) acquisition offer for the company.
The acquisition was unsuccessful or related to Gina Rinehart, the richest woman in Australia, becoming the largest shareholder of Liantown. According to Bloomberg, Reinhardt's company's shareholding in Liantown has increased from 7.72% in mid September to 18.36% currently, which means it has enough votes to block the acquisition of Yabao. However, Reinhardt has not yet publicly stated whether it supports or opposes Yabao's acquisition of Liantown.
According to public information, Yabao Company, founded in 1887, is a global specialty chemicals company that holds a leading position in the global lithium chemicals, bromine chemicals, and refining catalyst markets, with operations in over 100 countries worldwide. The company's lithium related products include lithium carbonate, lithium hydroxide, lithium metals, organic lithium compounds, special lithium salts, etc.
Yabao Company has extremely high-quality lithium ore and salt lake lithium resources worldwide, such as the Australian Greenbushes mine, Thacker pass mine, and Wodgina mine in lithium ore resources. Among the global salt lake resources, SQM and Yabao jointly developed the world's largest salt lake, Atacama, located in Chile. It is also a significant shareholder of Olaroz Salt Lake in Argentina.
At present, Yabao's lithium product customer base includes global battery leaders such as Ningde Times, LG New Energy, Panasonic Battery, Samsung SDI, and many well-known car companies such as Tesla.
According to TrendForce consulting research, global lithium production in 2022 was approximately 860000 tons of LCE (lithium carbonate equivalent), among which Yabao's lithium products (including spodumene, lithium salts, and foundry) had produced over 180000 tons of lithium carbonate equivalent, accounting for approximately 21%. It is expected that the global lithium production in 2023 will be 1.21 million tons of lithium carbonate equivalent, with Yabao's production accounting for 200000 tons, ranking first with a market share of 17%.
However, Bank of America analyst Matthew DeYoe last month downgraded Yabao's rating from neutral to underperforming and lowered its target stock price from $212 per share to $161 per share. He stated that as the global lithium market shifts towards sufficient supply in 2023 and oversupply in 2024/2025, the entire industry chain is expected to face a period of profit pressure.