ZTE is confident there’ll be black ink on its bottom line for 2013, replacing the red of last year – a CNY2.8 billion ($466 million) net loss – thanks to a mixture of cost cutting and a shift towards higher-margin contracts.
For the first nine months, ZTE’s net profit was CNY552 million – a 132 per cent increase from a year earlier.
Chairman Hou Weigui says the increase is down to the firm’s strengthening of management over contract profitability “by strictly controlling the signing of low gross margin contracts”.
Weigui also points to better control over selling, and general and administrative expenses, which has boosted cash flow.
Q3 net profit, at CNY242 million, was at the lower end of ZTE’s guidance. No profit guidance is given for the full year.
The turnaround, however, has little to do with 4G demand in China.
“The board would like to point out that since the issue of 4G licenses in the PRC market has not been confirmed to date and the procurement of 4G equipment from domestic carriers remains uncertain, it has brought some uncertainties to the Group’s sales revenue and profit for the year ending 31 December 2013,” said Weigui in a statement.
Revenue for the first nine months dropped 10 per cent, year on year, to CNY54.66 billion, as ZTE scaled back on lower-margin contracts.