ZTE expects to register losses of up to 2.9 billion yuan for the 2012 financial year due to postponed contracts and decreases in revenue from terminals in the domestic market, among other reasons.
In its preliminary results announcement on Sunday, the Chinese telecoms equipment maker said that it estimated net losses of 2.5 billion to 2.9 billion yuan (US$378.6 million to US$439.2 million) for the financial year ended December 31, 2012. This compared with a profit of 2.06 billion yuan (US$312 million) in the same period in 2011.
ZTE said that operating revenue for the fourth quarter of 2012 had dipped by about 18 percent, compared to the same period in 2011. This was due to various reasons including postponed execution of systems contracts, decrease in revenue from terminals in the domestic market, and delayed progress of international projects.
The gross profit margin in the fourth quarter fell by about 11 percentage points, compared with the same period in 2011. This was mainly due to a larger number of low-margin contracts in Africa, South America, Asia, and its domestic Chinese market.
ZTE said that it expects to return to profit in the first quarter of 2013 after the sale of equity interest in Shenzhen ZNV Technology, which is expected to bring an income of 820 million to 880 million yuan (US$124.2 million to US$133.3 million).
In 2012, ZTE and fellow Chinese network equipment maker Huawei were involved in several probes from various international governments over security concerns, including the United States and the European Union. Both vendors denied any truth in the claims.