ZTE shares dive on profit warning
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E-mail Shanghai Daily, October 16, 2012
Shares in ZTE Corp slumped Monday after the No. 2 Chinese telecommunications equipment maker issued an earnings warning, citing delays in overseas projects and low-margin contracts amid a global economic slowdown.
ZTE fell by the maximum allowable 10 percent in Shenzhen and plunged as much as 17 percent before closing 16 percent lower in Hong Kong.
The company, which relies on overseas markets for half of its sales, said on Sunday it may post a loss of up to 1.75 billion yuan (US$279 million) in the first nine months of the year, a reversal from a net profit of 1.07 billion yuan in the same period a year earlier.
That would mean a loss of as much as 2 billion yuan in the third quarter, which would be its first unprofitable quarter. A slowing global economy has weakened demand for telecoms infrastructure and equipment, the firm said.
ZTE blamed delays in some international projects, a change in the procurement system of domestic carriers, and low profit margins in Europe and Asia for the expected loss. But it said on a conference call it still hopes to break even for the full year.
Barclays analyst Jones Ku wrote "we believe the worst may not be over yet."
