Huawei 2017 profit jump helped by cost controls, smartphone sales

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Richard Yu, CEO of the Huawei Consumer Business Group, attends the launching the new generation of its smartphone, Huawei P20, in Paris, France March 27, 2018 - REUTERS

Net profit rises due to reduced financing expense
Revenue grows at the slowest rate in 4 years
China revenue up 29%, Americas sales down 11%

HONG KONG (Reuters) China’s Huawei Technologies , the world’s third-largest smartphone maker, posted a 28% rise in 2017 net profit on Friday, driven by cost controls and a solid performance in its home market.

The outlook for Huawei, which trails Samsung Electronics and Apple Inc in smartphones, is clouded by strong competition in the domestic market and declining sales in the United States, as Washington plans higher import tariffs on China’s tech products.

Shenzhen-based Huawei saw net profit rise to 47.5 billion yuan ($7.3 billion) in 2017, sharply up from a 0.4% increase in 2016. The rise was partly the result of a 85% drop in net financing expenses as the company booked smaller foreign exchange losses.

Revenue grew 15.7% to 603.6 billion yuan, in line with the company’s previous guidance and its slowest growth in four years.

Huawei vowed to focus on improving profit after posting the slowest profit growth in five years in 2016 as its slim-margin smartphone business weighed down profit growth.

Huawei’s consumer business, which includes smartphone operations, grew at a slower 31.9% to 237.2 billion yuan ($37.85 billion) after shipping 153 million smartphones last year. The segment had grown 43.6% a year earlier.

The carrier business, accounting for nearly half of the group’s total revenue, grew at a slower pace of 2.5%, versus 2016’s 23.6% expansion, as telecom operators prepare to roll out next-generation 5G wireless networks in the coming years.

“We conducted 5G pre-commercial tests with over 30 leading carriers...and prepare for the upcoming end-to-end commercial deployment of 5G,” it said.

Huawei this week launched its most expensive flagship smartphone to date in Europe - the triple-camera P20 series that sell for 649-899 euros ($800-$1,108) - a fresh attempt to compete head-to-head with Samsung and Apple in the high-end phone market.

Market share gains in Europe have helped Huawei offset the company’s exclusion from the United States, the world’s most profitable market for phone sellers.

Revenue from the Americas dropped 11% to 39 billion yuan.