ZTE reported a net loss of CNY 7.8 billion for the first half of 2018, in line with its earlier warning over the impact of the US ban on imports from the company. The Chinese company said it expects to return to a small profit in the third quarter, of up to CNY 1.0 billion versus CNY 1.6 billion a year ago.
The first-half result compares to a net profit of CNY 2.3 billion in the same period of 2017. ZTE already reported a net loss of CNY 5.4 billion for the first quarter, and the halt to its operations was not ended until mid-July.
Revenues in the first six months of 2018 totaled CNY 39.4 billion, down 27 percent year-on-year. Revenues in China increased to over 65 percent of the total, but were still down 20 percent year-on-year to CNY 25.7 billion. The biggest drop was in the rest of Asia, where revenues fell 47 percent to CNY 4.3 billion.
Across the company's divisions, carrier networks remained the biggest, at CNY 23.5 billion in revenue, down 27 percent from a year earlier. The consumer business fell by 35.8 percent to CNY 11.5 billion in sales, while government and enterprise products increased by 17.7 percent to CNY 4.4 billion.
While ZTE largely succeeded in reducing operating costs largely in line with with the fall in revenues, profits were still hit by the USD 1 billion penalty levied by the US in the settlement of the company's sanctions violations. Cash flow remained negative, and ZTE's cash position shrunk to CNY 15.8 billion at the end of June from CNY 25.9 billion a year earlier. The company said it would be applying for a number of new credit lines in the second half of the year from multiple Chinese banks.
The company was optimistic on the outlook for the rest of the year, saying it plans to relaunch innovation and sales efforts to capitalise on the acceleration of 5G development around the world. ZTE issued a preliminary forecast for third-quarter results, estimating a return to a net profit between CNY 24 million and CNY 1.02 billion, compared to a profit of CNY 1.61 billion in the year-earlier period.
