(Yicai Global) April 21 -- Contemporary Amperex Technology’s shares advanced after the Chinese battery maker reported big increase in revenue and net profit in the first quarter of the year thanks to higher demand and lower raw material costs.

CATL [SHE: 300750] closed up 2.3 percent at CNY404.99 (USD58.79) a share today, after earlier gaining by as much as 4.8 percent.

Net profit soared 558 percent to CNY9.8 billion (USD1.4 billion) in the three months ended March 31, versus CNY1.5 billion a year earlier, the Ningde-based company announced late yesterday. Revenue surged 83 percent to CNY89 billion.

The difference between revenue and operating costs, which climbed 68 percent to CNY70.1 billion (USD10.2 billion), brought CATL a pre-tax profit of about CNY6 billion.

The price of key raw materials fell in the first quarter. The average price offered for battery-grade lithium carbonate plunged 70 percent from last November to CNY178,500 (USD25,905) a ton yesterday, according to data from Shanghai Metals Market.

Falling raw material prices can lower battery makers’ procurement costs, but they can also drive up asset impairment provisions.

CATL had asset impairment losses of nearly CNY1.1 billion in the first quarter, a 20-fold increase from a year earlier, the report showed. The firm noted that it was mainly an inventory impairment provision, as the cost of inventory is higher than its realizable net value.

The drop in lithium salt prices has exceeded expectations, with increasing supply the main reason, according to industry insiders.

CATL’s competitor Ganfeng Lithium said in its annual trading report released in March that lithium salt prices fell because of two main factors: downstream industrial changes, especially fierce competition among carmakers, and oversupply that triggered a wait-and-see approach, with firms including energy storage product makers anticipating even lower prices.

Editor: Futura Costaglione