On August 22, Beijing time, according to Reuters, ZTE Corporation, the world ’s fifth-largest communications equipment manufacturer, will announce its second-quarter financial report on Wednesday. Due to the slowdown in communications equipment sales and intensified competition in the mobile phone market, the company's profit in the second quarter may fall by 90%, hitting a 8-year low.
At present, the US Federal Bureau of Investigation (FBI) is still investigating ZTE's alleged sale of US computers to Iran. US Congressmen also called on Treasury Secretary Timothy Geithner to initiate an investigation into it, which could cause ZTE to face huge fines and restrictions on operations in the United States. In addition, the EU is also investigating whether ZTE has unfairly accepted Chinese government subsidies.
Since this year, ZTE's share price has fallen by more than half. The company will release its first-half performance report on Wednesday.
Michael Li, an analyst at Everbright Securities in Hong Kong, said: "ZTE's performance this year will be better than last year. Compared with other regions of the world, the growth of Chinese telecom operators' spending is a bright spot, and it will be even more amazing next year. At present, ZTE is the largest The risk is that the U.S. government investigates its alleged case of selling computers to Iran. "
According to the average expectations of seven Reuters analysts, ZTE's net profit for the first six months of this year was 223 million yuan (about 35 million U.S. dollars), a 71% decline from last year's 769 million U.S. dollars. This also means that ZTE's second-quarter net profit was 72.7 million yuan, a year-on-year decrease of 88.7%.
This will be ZTE's worst profit decline since it landed on Hong Kong stocks in 2004. Except for the first quarter of this year, ZTE's net profit has been declining every quarter since the second quarter of last year.
Last month, ZTE has issued a performance warning, and its profits are expected to fall by 60% -80% in the first half of this year. The reason for this situation is due to the narrowing of gross profit margins, foreign exchange losses caused by the European debt crisis, and China Mobile ’s delay in purchasing network equipment.
Due to the impact of telecommunications operators cutting expenditures and the tightening of the economic environment, veteran telecommunications equipment manufacturers such as Ericsson, Huawei and Alter Lucent have issued poor performance reports.
However, analysts pointed out that increased spending on the Chinese telecommunications market will help ZTE's performance in the second half of the year. Municipal research agency BOCI Research said: "According to our channel survey, Chinese telecom operators only used 30% of the annual CAPEX (capital expenditure) in the first half of this year, and they will still complete the full year plan in the second half of the year."
According to Reuters data, ZTE's gross profit margin has fallen below 30%, lower than Aran's 40% and Ericsson's 38%.
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