Daily Management Review

ZTE Corp. shares jump 14% up after profit forecast


Shares of the Chinese manufacturer of telecommunications equipment ZTE Corp. jumped 14% after the company predicted a profit of up to 1.2 billion yuan ($ 178.18 million) in the first quarter, Reuters reports.

Kārlis Dambrāns
Kārlis Dambrāns
The company said it expects a net profit of 800 million to 1.2 billion yuan in the first quarter of 2019, compared with a net profit of 276 million yuan in the fourth quarter of 2018.

ZTE, the fourth largest telecommunications equipment manufacturer in the world in terms of market share, had to stop most of its operations from April to July last year due to US sanctions.

In April, the United States banned local firms from selling ZTE components for smartphones, telecommunications equipment and other devices manufactured by a Chinese company for seven years.

The US Department of Commerce explained introduction of sanctions against ZTE by saying that the company, which was fined by the US authorities for violating the sanctions regime against Iran and North Korea, violated the terms of the agreement concluded to settle the case.

In exchange for lifting the ban on purchases from US suppliers, ZTE agreed to deposit $ 400 million and pay a $ 1 billion fine to the US Department of Commerce.

The Chinese corporation also changed its top managers, including the CEO and CFO, and allowed the United States to nominate representatives to monitor the company's compliance with established requirements.

In August, ZTE reported its worst six-month loss of 7.8 billion yuan.

As a result, the loss in 2018 was 7 billion yuan, being within the company's estimated range of 6.2–7.2 billion yuan, but more than the forecast. Analysts on average expected a loss of 6.2 billion yuan, it follows from the Refinitiv Eikon data.

ZTE's revenue in October-December was 26.7 billion yuan. At the same time, annual revenue fell by 21.4% to 85.5 billion yuan, compared with a forecast of 87 billion yuan.

ZTE shares on the Hong Kong stock exchange jumped 14%, later reducing growth to 10%. Shares of the company in Shenzhen added 10%, reaching the limit of daily growth.

source: reuters.com