ZTE hails 'historic' 2015 operating cash flow, but final quarter hints at weakness

ZTE announced that operating cash flow hit historic highs in 2015, as operating revenue grew 23 per cent year-on-year on the back of strong sales of 4G products, smart city and emerging ICT technologies.

The China-based vendor reported that operating cash flow hit CNY7.4 billion (€1 billion/$1.1 billion) in 2015, compared to CNY2.5 billion in 2014, on revenue of CNY100 billion. Total net profit grew 21.6 per cent year-on-year to CNY4.3 billion -- well short of the 43.5 per cent rise the vendor originally predicted -- of which some CNY3.2 billion was attributable to ordinary shareholders.

In its earnings announcement, ZTE said revenues rose on the back of increased sales of 4G and optical access products in domestic and international markets, along with higher sales of optical transmission products in China. The vendor also noted that international sales of high-end routers and handsets increased through 2015.

ZTE added that its smart city projects enjoyed rapid growth during 2015, as did its data centre and ICT businesses -- fields that ZTE stated are key pillars in a converged technology strategy.

While ZTE noted that investment by Chinese operators remained primarily focused on wireless, transmission, access and broadband sectors, it stated that operators in its domestic market also expressed growing interest in cloud computing, Internet of Things, Big Data, smart city and high-end routers. The domestic business generated 53 per cent of ZTE's total 2015 revenue.

The main focus of international customers was on smart cities, the medical market, education, mobile e-commerce, and modernisation of the agricultural industry, the company stated.

ZTE said it shipped at least 56 million smartphones globally during 2015, an increase of 16 per cent year-on-year. The bulk of smartphones sales growth (70 per cent) came from international markets, ZTE said. Perhaps worryingly, the vendor sold 15 million smartphones in the U.S., where authorities have recently moved to ban component shipments to the vendor over concerns it had breached export controls.

A quarterly breakdown in the vendor's performance through 2015 may also cause alarm. While operating revenue grew from CNY22.6 billion in the third quarter of  2015 to CNY31.6 billion in the fourth quarter, net profit attributable to shareholders fell from CNY988.6 million to CNY603.7 million in the final three months of the year.

For more:
- see ZTE's earnings announcement
- view the vendor's full year earnings statement (PDF)

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