ZTE 1H profit falls despite sales growth

Michael Carroll
31 Aug 2011

Chinese vendor ZTE is struggling to convert sales growth into hard earnings, resulting in a 12.3% drop in first half net profit.

Profit hit 769 million yuan ($120.4 million) compared to $129.1 million in 1H10 – those results reported in US dollars -, despite revenue growing 21.5% to 37.3 billion yuan on the back of a strong performance in Europe and the US, the firm’s fastest growing markets during the period.

International markets are increasingly important to the firm, generating 55.7% of 1H11 revenues compared to 49.6% in 1H10. The contribution from Europe and the US grew from 18% in 2010 to 24.1% this year, with Asia Pacific generating 18.2% and Africa 13.4%. The regions also proved a lucrative source of LTE contracts, with ZTE picking up 23 during the period.

While the firm’s domestic business remains challenging due to a slowdown in orders, tight cost controls and a focus on market share paid off in the form of a $311 million increase in revenue to $2.5 billion (reported as 16.5 billion yuan in the earnings release.)

ZTE predicts business in China will pick up in the back-half of the year as operators accelerate capex, and that mobile broadband networks and smartphones will provide the greatest fodder internationally.

Related content

No Comments Yet! Be the first to share what you think!