Shares in ZTE Corp slumped yesterday after the No. 2 Chinese telecommunications equipment maker issued an earnings warning, citing delays in overseas projects and low-margin contracts amid a global economic slowdown.
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ZTE fell by the maximum allowable 10 percent in Shenzhen and plunged as much as 17 percent before closing 16Â percent lower in Hong Kong.
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The company, which relies on overseas markets for half of its sales, said on Sunday it may post a loss of up to 1.75 billion yuan (US$279 million) in the first nine months of the year, a reversal from a net profit of 1.07 billion yuan in the same period a year earlier.
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That would mean a loss of as much as 2 billion yuan in the third quarter, which would be its first unprofitable quarter. A slowing global economy has weakened demand for telecoms infrastructure and equipment, the firm said.
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ZTE blamed delays in some international projects, a change in the procurement system of domestic carriers, and low profit margins in Europe and Asia for the expected loss. But it said on a conference call it still hopes to break even for the full year.
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Barclays analyst Jones Ku wrote "we believe the worst may not be over yet."