ZTE Corp, the world’s No. 5 telecom equipment and smartphone maker, expects to post a third quarterly net profit for the July-September period.<\/p>\n
The result was thanks to cost-cutting measures and as the company shunned the low-margin contracts that led to it posting losses last year.<\/p>\n
ZTE, which was plagued last year by unprofitable telecom projects in markets like Africa and thinning margins in the highly competitive smartphone sector, is banking on cost cuts – such as a self-imposed 50 percent pay cut by senior executives – and Chinese mobile carriers laying 4G networks for its turnaround this year, analysts said.<\/p>\n
Since late last year, the Shenzhen-based company has also sold stakes in several non-core units to help it turn profitable.<\/p>\n
On Wednesday, ZTE, which competes with Huawei Technologies Co Ltd in the telecom gear and smartphone sectors, flagged a net profit of 500-750 million yuan ($81-$121 million) for the first nine months ending September, in a statement on the Hong Kong stock exchange – a move back into the black from a net loss of some 1.7 billion yuan in the same period last year.<\/p>\n
That meant that its third-quarter net profit would likely amount to 190-440 million yuan, versus a 130 million yuan net loss a year earlier, according to Reuters’ calculations based on company data.<\/p>\n
“The increase is primarily due to the reasons that the group has strengthened its management over contract profitability by strictly controlling the signing of low gross margin contracts,” ZTE said.<\/p>\n
ZTE added that costs for the first nine months were expected to fall significantly due to cuts in administrative, and research and development expenses.<\/p>\n
In a separate statement on Wednesday, ZTE said its first half net profit came in at 310.0 million yuan, higher than a preliminary 302.3 million yuan the company flagged in July.<\/p>\n
Its second quarter net profit therefore amounted to 105.0 million yuan, up 11.7 percent from the same period a year earlier, according to Reuters’ calculation.<\/p>\n
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