ZTE Q3 profits up almost 11% despite battling US trade ban

REUTERS/China Daily/Files

HONG KONG (Reuters) – Chinese telecoms equipment group ZTE Corp, which is still facing the threat of curbs on trade with US firms, reported a 10.5% rise in its third-quarter net profit on Thursday.

Net profit for the three months to Sept. 30 rose to 1.09 billion yuan ($160 million), the firm said in a statement. Revenue rose 5.23% to 23.8 billion yuan from the same period last year. ZTE is still facing the imposition of a trade ban on US component makers and software firms supplying ZTE, essentially cutting off much of the supply chain for the network equipment and smartphones ZTE makes.

The US Commerce Department ordered the trade ban earlier this year over allegations that it violated rules restricting the exports of US technology to Iran, but then lifted the ban while it seeks to reach a settlement.

Presenting a threat to ZTE’s global operations, as well as its brand image, the export restrictions have weighed heavily on ZTE’s share price this year, with the shares down 35% in Hong Kong.

“The Company will continue to maintain cooperation with relevant US government authorities and actively liaise with them to reach a final solution, and will strictly comply with US laws and regulations relating to export restrictions,” ZTE Chairman Zhao Xianming said in a statement on Thursday.

Analysts said the issue adds uncertainty to ZTE’s business outlook as demand for 4G telecom infrastructure is expected to slow in China as major carriers complete their network coverage.

“ZTE’s handset business is also facing strong competition that makes it difficult for it to improve its market share that is small at the moment,” said Ricky Lai, a Hong Kong-based analyst with Guotai Junan Securities.

Project investment fund

ZTE said in a separate filing to the stock exchange on Thursday that it will set up a 5-billion-yuan investment fund with a unit of GF Securities that would focus on smart cities, underground pipe networks and data center projects related to its business.

Guangfa Hexin, an investment company controlled by GF Securities, and ZTE subsidiary ZTE Xingyun will be general partners of the new Guangxing Yunhe Industrial Equity Investment Fund.

(Reporting by Sijia Jiang; Editing by Kenneth Maxwell, Greg Mahlich)

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