ZTE triples H1 profit on demand for 4G

ZTE confirmed a more than tripling in its first-half net profit, to CNY 1.13 billion from CNY 310 million a year earlier. While revenues were only up 0.5 percent to CNY 37.70 billion, the Chinese equipment maker managed to reduce operating costs and improve gross margins, driven by the growing number of 4G network deployments and and a focus on more profitable contracts. 

ZTE expects continued investment in new 4G networks in its home market to drive further growth in the second half. The company forecast net profit will more than triple in the first nine months of 2014 to CNY 1.7-1.9 billion, an increase of 208.2-244.5 percent from a year earlier. Revenue should also grow on an annual basis in the nine-month period, helped by investment in key strategic products such as network routers and chipsets. The company also expects gains from more effective foreign exchange management. 

Revenues for the first six months in China were up 2.7 percent to CNY 19.26 billion, while international revenues fell 1.7 percent to CNY 18.44 billion, driven by declines in Africa and the rest of Asia. The group's gross margin rose by 4.0 percent points year-on-year to 29.5 percent, led by better margins on network equipment and software. ZTE increased research and development spending 13.8 percent to CNY 4.13 billion, equal to 10.9 percent of revenues. The company said it focused development on 4G, 5G, high-end routers and core chips.