ZTE loses another billion bucks but expects a profit in Q3

ZTE has, for some reason, decided to report earnings for the nine months ending 30 September 2018 and while they’re not good, they could be worse.

The numbers can essentially be broken down into historical ones for the first half of the year and forecasted ones for Q3. ZTE lost 6.8 billion RMB in H1 2018, which is around $1 billion. Meanwhile it expects a profit somewhere between not much and a billion RMB for Q3, which is presumably why it has served up the numbers in this way – to sugar the big loss with the promise of imminent profit.

In terms of actual trading ZTE seems amazingly to have broken even as it blames the loss largely on the billion dollar fine it had to pay as one of the many conditions attached to it being allowed to trade with the US again. For the first six months of 2017 ZTE managed a profit of 2.3 billion RMB, which is around a third of a billion bucks.

Here’s what the ZTE announcement had to say: “The substantial decrease in results for the period from January to September 2018 compared to the same period last year was mainly attributable to: (1) the USD1 billion penalty mentioned in the “INSIDE INFORMATION ANNOUNCEMENT AND RESUMPTION OF TRADING” published by the Company on 12 June 2018; (2) operating losses and provision for losses resulting from the suspension of the major operating activities of the Company as referred in “INSIDE INFORMATION ANNOUNCEMENT” published by the Company on 9 May 2018.”

The second table below shows ZTE’s revenue mix by business unit and geography for the first half of the year. It’s interesting to note that one of the main reasons ZTE has been able to maintain a decent amount of revenue during its struggles seems to be government work within China. While you can’t blame the Chinese state for trying to help ZTE out during its troubles, this sort of thing won’t do much to allay the fears of Western governments concerned about letting Chinese kit vendors into their telecoms networks.

ZTE 1H numbers 1

ZTE 1H numbers 2

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