ZTE’s H1 net profit at RMB 302 million, up 23.5 percent

ZTE today issued guidance for first-half net profit at RMB 302 million, an increase of 23.5 percent Y-o-Y.

With Q2 performance, the company has achieved two consecutive quarters of positive results. In the first half, ZTE’s revenue was RMB 37.7 billion, a decrease of 11.6 percent, a result of lower demand for GSM and UMTS products in China, and lower sales of GSM handsets and data cards.

ZTE’s gross profit margin gained in the first half, a result of improved cost controls and a focus on efficiency. The company’s sales, administrative and research and development expenses declined significantly, and the company recognized a financial gain from the disposal of a subsidiary.

In the first half of 2013, the Renmenbi appreciated in value against the US dollar, resulting in less favorable foreign exchange comparisons with a year earlier. ZTE was also affected by a depreciation in the Euro, Japanese Yen and some emerging market currencies against the US dollar.

ZTE today also announced details of its stock option incentive scheme for employees whereby 103.2 million ZTE shares, equivalent to 3 percent of the company’s share capital will be distributed to 1,531 holders.

The stock options will have a validity period of five years, comprising of a two-year waiting period, and a three-year exercise period. When conditions for exercising the options are fulfilled.

Option holders can exercise them in three tranches, with each tranche accounting for 30 percent, 30 percent and 40 percent of the options respectively. The exercise price of the options will be RMB 13.69 each, which was the closing price of ZTE’s A-shares on the Shenzhen stock exchange on July 12, 2013.

The beneficiaries of the stock option program will be ZTE directors, senior management, and employees involved in core businesses that directly contribute to the company’s operating results and business development.

A total of 5.35 million stock options will be granted to 18 directors and executives holding senior management roles, while 97.85 million options will be awarded to core business employees.

“The stock option scheme is a mechanism for correlating employee remuneration with the company’s financial performance and long-term strategic objectives,” said Hou Weigui, chairman, ZTE.

“The scheme will help the company foster a culture of value creation, and align the interests of shareholders with senior management and core employees. It will enable the company to effectively deploy our human resources, and optimize our employee compensation structure and competitiveness, laying the foundation for the continuing sustainable development of ZTE in the long term,” added Weigui.

“ZTE will grasp this opportunity to embark on a second wave of entrepreneurial growth, and human resources will be a key part of our journey. The share option incentive scheme will help attract and incentivize our employees to create greater value for the company and shareholders,” added Shi Lirong, president, ZTE.

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