China's CATL says gross profit margins to improve after raising prices

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

SHANGHAI, May 5 (Reuters) - Chinese battery maker CATL (300750.SZ)said on Thursday that its gross profit margins are set to improve as it will raise prices in the second quarter, while suppliers of raw materials will ease current tightness by ramping up output.

The world's biggest battery manufacturer, whose clients include Tesla (TSLA.O), Volkswagen (VOWG_p.DE) and BMW (BMWG.DE), made the comments at an investor Q&A on Thursday after it reported a 23.6% drop in first-quarter profit the week before, its first fall in two years. read more

Prices of 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.

The company said on Thursday that it had almost completed negotiations with clients on price changes and would gradually implement such adjustments in the second quarter.

The company has resorted to long-term contracts, investments, self-production and recycling to solve raw material supply shortages, Jiang Li, vice president of CATL said during 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 elaborating on the timeline.

CATL will also further expand overseas markets as demand from foreign clients is strong. The company is exploring possibilities to localise production for overseas automakers in their countries, said Chairman Zeng Yuqun.

The company said China's measures to battle COVID-19 outbreaks is having little impact on production or demand for its batteries.

It said it expected 40% of its deliveries this year would be nickel-cobalt-manganese (NCM) batteries, while the remaining would be lithium phosphate (LFP) batteries.

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

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