China’s ZTE posts record first-quarter profit, but US sales ban dims outlook

HONG KONG — China’s ZTE Corp., the target of US sanctions imposed last week, posted a 39% rise in first-quarter net profit on Friday due to improved sales in its telecom equipment and consumer businesses.

The results, showing ZTE’s highest first-quarter net profit on record, are the company’s first since the US banned American companies from selling components to the Chinese firm for seven years.

The US government said ZTE had broken an agreement to punish employees after the company shipped US goods to Iran in violation of US sanctions. ZTE said the ban was unacceptable and threatened its survival.

ZTE said on Friday that it was difficult to assess the impact of the US sales ban on its latest financial result.

“The board of directors and the directors of the company are unable to ensure the truthfulness, accuracy and completeness of the contents of the 2018 first-quarterly report,” ZTE said without giving details.

January- March profit reached 1.69 billion yuan ($267 million) from 1.2 billion yuan in the same period a year earlier, ZTE said in a statement to the Shenzhen stock exchange.

ZTE, China’s secondbiggest telecom equipment maker after Huawei Technologies Co. Ltd., postponed its earnings release from last week as it studied the impact of the US ban.

The ban also led to a suspension in trading of ZTE’s mainland- and Hong Konglisted shares, which remains in effect.

Chinese mutual fund managers have since cut the value of ZTE stock in their portfolios by 20% to 30%. US firms are estimated to provide 25% to 30% of components used in ZTE products such as smartphones and telecommunication network equipment.

Within days of the ban, sources told Reuters that New York prosecutors have been investigating whether Huawei had violated US sanctions on Iran.

The US action is likely to further exacerbate tensions with China over trade at a time when the pair have threatened each other with tens of billions of dollars in tariffs, fanning concern of a trade war that may impact global market. —