ZTE Corp (中興), China’s second-biggest maker of telecommunications equipment, warned that its profits might have fallen by as much as 80 percent during the first half of the year as a result of reduced investment income, foreign exchange losses and delayed network contracts.
Net income is estimated to have declined to between 154 million yuan and 308 million yuan (US$24.14 million to US$48.28 million) in the six months to June 30, from 769.3 million yuan a year earlier, the Shenzhen-based company said in a statement yesterday.
ZTE in January said it would double smartphone sales this year as it gained market share in Europe, North America, Brazil and Japan. However, overseas sales resulted in exchange losses, the company said, without providing a figure.
The euro and many other emerging market currencies depreciated significantly during the period as the sovereign debt crisis in the eurozone “lingered on,” ZTE chairman Hou Weigui (侯為貴) said in the statement.
Investment income in the first half of the year declined from a year earlier when the company realized a gain on the disposal of a stake in Nationz Technologies Inc (國民技術有限公司), ZTE said in the statement.
The company also fell short of its targeted growth rate as certain domestic carrier network contracts were not recognized in the first half of this year because of the “postponement of tender activities,” ZTE said.
ZTE shares rose 1.5 percent to HK$12.50 at the close in Hong Kong trading yesterday, before the company announced its profit warning.