Xiaomi reported revenues for the fourth quarter of 2019 up 27.1 percent year-on-year to CNY 56.5 billion. Net profit for the period fell to CNY 2.4 billion from CNY 3.4 billion a year earlier, after a sharp rise in marketing and promotional spend to boost sales outside China.
The main smartphone business grew sales 22.8 percent to CNY 30.8 billion. Xiaomi said it sold 32.6 million smartphones in the quarter, up from 25.0 million a year earlier, while the average selling price fell to CNY 945.1 per unit from CNY 1,004.7 in the fourth quarter of 2018. The gross margin from the smartphones segment increased to 7.8 percent from 6.1 percent, helped by the popularity of new models and more prudent operations during the early transition from 4G to 5G in China, Xiaomi said.
Revenue from other smart devices was up 30.5 percent to CNY 14.9 billion in Q4, led by sales of smart TVs, home appliances and other IoT products such as the Mi Band. Revenue from smart TVs and laptops increased by 20.5 percent to CNY 7.9 billion. Xiaomi also generated CNY 5.7 billion in revenues from online services, up 41.1 percent from a year earlier.
Higher marketing spend
The drop in profit was due to a more than doubling in promotional and advertising expenses in the quarter, to CNY 1.53 billion from CNY 614 million a year ago. Xiaomi said it worked on increasing its brand awareness in overseas markets.
Revenue from outside China increased to 46.8 percent of the total in Q4 2019 and was up 40.7 percent year-on-year to CNY 26.4 billion. Xiaomi said its products are available in more than 90 countries and regions around the world and according to Canalys, its smartphone shipments ranked in the top five in 45 countries in 2019.
FY profit lower, revenues up 18%
Over the full year, the company's net profit fell 25 percent to CNY 10.1 billion, hurt by the increased marketing spend as well as one-time gains in 2018 on its IPO. On an adjusted basis, profit rose 34.8 percent to CNY 11.5 billion.
Annual revenues increased 17.7 percent to CNY 205.8 billion, with much slower growth of 7.3 percent in smartphone revenue to CNY 122.1 billion. Xiaomi said it sold 124.6 million smartphones over the full year, up from 118.7 million in 2018, and increased the average selling price to CNY 979.9 per unit from CNY 959.1 a year earlier.
More focus on premium segment, 5G
Xiaomi said it increased R&D spending by nearly 30 percent last year to CNY 7.5 billion to prepare for future growth, and this is expected to grow further to CNY 10 billion this year. The company took a "prudent approach" to the start of 5G in China to maintain a healthy balance sheet and finished the year with cash resources of CNY 66 billion.
The strong cash position and healthy smartphone inventory level should position the company well to capture 5G opportunities in 2020, Xiaomi said. It plans a further focus on the premium smartphone segment and 5G this year to try to grow its ASP further.
