CATL, the world’s largest electric vehicle battery manufacturer, reported higher third-quarter earnings as revenue continued to grow rapidly, although profit growth lagged sales expansion and net profit declined from the previous quarter.
Net profit attributable to shareholders reached 21.25 billion yuan ($3.16 billion) in the third quarter, up 14.54% year-on-year, according to financial results released on Tuesday. Revenue increased 58.58% from a year earlier to 165.22 billion yuan.
Excluding non-recurring gains and losses, net profit attributable to shareholders rose 14.86% year-on-year to 18.86 billion yuan.
Nine-Month Revenue Climbs 56%
For the first nine months of the year, CATL recorded net profit attributable to shareholders of 64.53 billion yuan, an increase of 31.60% compared with the same period last year. Revenue rose 56.19% to 442.14 billion yuan.
The company attributed revenue growth to business expansion. However, operating costs increased more quickly than sales, with cost of sales climbing 61.61% year-on-year to 341.7 billion yuan.
Based on reported revenue and cost of sales, CATL’s gross margin for the first nine months was approximately 22.72%, down from 25.31% a year earlier, a decline of about 2.59 percentage points.
The figures indicate that while CATL continued to expand its business, the cost of delivering that growth increased faster than revenue.
R&D Spending and Investment Income Increase
CATL continued to increase investment in technology development. Research and development expenses rose 22.89% year-on-year to 18.52 billion yuan during the first nine months.
Investment income also increased, climbing 73.11% to 9.07 billion yuan. The company said the increase mainly reflected its share of net profits from investee companies.
These gains contributed to CATL’s overall earnings performance, although the company’s profit growth remained considerably below its rate of revenue expansion.
Operating Cash Flow Declines
Despite higher revenue and net profit, CATL generated less cash from operating activities during the first nine months. Net cash generated from operations fell 23.60% year-on-year to 61.63 billion yuan.
The company also reported increases in both accounts receivable and inventories as of the end of September.
Accounts receivable reached 112.91 billion yuan, up 47.78% from the end of the previous year, while inventories increased 53.15% to 144.77 billion yuan. CATL attributed both increases to business expansion.
The rising balances point to a greater amount of capital tied up in receivables and inventory as the company scales its operations.
Overall, CATL’s results show continued strong sales growth and higher year-on-year earnings, alongside lower gross margin and operating cash flow. The pace at which costs and working-capital requirements evolve relative to revenue will remain important to assessing the financial impact of its expansion.