ZTE sees $343m loss after $1bn US settlement
Chinese vendor ZTE, just hours after announcing a near $1 billion settlement with the US government, issued its guidance for 2016, with a projected net loss of CNY2.36 billion ($343 million) compared with a net profit of CNY3.2 billion in 2015.
The loss reflects the financial provision the company made against the $892 million penalty payable as part of the settlement of the US case. Without the provision, ZTE said it would have reported a net profit of CNY3.83 billion in 2016, which would have been a 19 per cent year-on-year increase from 2015.
Its revenue last year was expected to increase by 1 per cent to CNY101.2 billion.
The settlement was struck with the US Justice, Commerce and Treasury departments, and is now pending approval from a US district court. The US slapped trade sanctions on the Chinese equipment maker in March 2016 following allegations it breached the country’s export rules covering Iran. The government said it would ban US exports to ZTE, but suspended the ban several times.
ZTE warned nearly a month ago US trade sanctions were likely to hit its financial results, and a settlement could result in a fine.
For the first quarter of 2017, ZTE expects its net profit to be between CNY1.15 billion and CNY1.25 billion, an increase of between 21 per cent and 31.7 per cent from a year earlier. Revenue is forecast to increase between 10 per cent and 20 per cent from a year earlier, driven by higher revenue in its carrier networks and consumer businesses, the company said in a statement.
CEO Zhao Xianming said that coupled with recent efforts to streamline operations and its leadership around 5G, “ZTE will be well-positioned for positive overall performance. The company anticipates continued growth and business expansion over the next several years as we continue to work with our partners around the world.”