China's Huawei 2017 profit jump helped by cost controls, smartphone sales

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

FILE PHOTO: The Huawei logo is seen during the Mobile World Congress in Barcelona, Spain, February 26, 2018. REUTERS/Yves Herman/File Photo

The outlook for Huawei, which trails Samsung Electronics 005930.KS and Apple Inc AAPL.O 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 percent increase in 2016. The rise was partly the result of a 85 percent drop in net financing expenses as the company booked smaller foreign exchange losses.

Revenue grew 15.7 percent 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 percent to 237.2 billion yuan ($37.85 billion) after shipping 153 million smartphones last year. The segment had grown 43.6 percent a year earlier.

The carrier business, accounting for nearly half of the group’s total revenue, grew at a slower pace of 2.5 percent, versus 2016’s 23.6 percent 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 percent to 39 billion yuan.

($1 = 6.2675 Chinese yuan)

($1 = 0.8112 euros)

Reporting by Sijia Jiang and Farah Master; Editing by Sunil Nair and Jacqueline Wong