Improvement in cash flow and profitability sustained as company focuses on higher margin contracts and maintains cost controls

26 April 2013, Shenzhen, China – ZTE Corporation (“ZTE”) (H share stock code: 0763.HK / A share stock code: 000063.SZ), a publicly-listed global provider of telecommunications equipment, network solutions and mobile devices, reported a 35.9% increase in net profit in the first-quarter, as the company’s operational review continued to deliver improvements in cash flow and profitability.

Net profit attributable to shareholders of the parent company rose to RMB205 million in the first quarter, and basic earnings per share increased to RMB0.06. Operating cash flow in the first quarter significantly improved compared to a year earlier. ZTE’s gross profit margin has expanded for two consecutive quarters, as the company strengthened efforts to control costs. Revenue dropped 2.8% to RMB18.09 billion.

Since the second half of 2012, ZTE has stringently enforced measures to focus resources on key products and markets, target higher-margin contracts, improve cash flow management and reduce costs, under the company’s operational review. This has helped the company achieve a more optimal product and customer mix, and an improved cost structure. The company achieved combined savings of RMB 350 million in selling, administration and research costs in the first quarter compared with a year earlier. The results of the operational review, combined with the disposal gain, allowed the company to overcome the negative effects from currency fluctuation and asset write-downs to record higher net profit.

Looking ahead to the next reporting period, equipment investment by the telecommunications industry is expected to be focused on broadband conversion of wireless and wireline networks and the construction of ancillary facilities. The Group will commit its efforts to product innovation and solution-based operations with a strong focus on mainstream products and improve R&D efficiency. The strategy for populous nations and mainstream carriers will be reinforced, as we seek to concentrate on markets in which we claim strengths while vigorously expanding in the government, enterprise and service segments. The Group will continue to implement the settlement system to facilitate resource management and control, so as to refine cost management and enhance operating efficiency.