Author: Tronserve admin
Thursday 29th July 2021 11:20 PM
Xiaomi Sees Short-Term Sales Hit from Coronavirus, But Expects Smartphone Demand to Pick Up
Xiaomi Corp, the world’s fourth largest smartphone vendor, warned of a short-term decline in sales during the first quarter because of disruptions caused by the coronavirus pandemic, but remained “cautiously optimistic” as the global health crisis subsides.
“While the entire world is still under the dark shadows of Covid-19, we have maintained our keen focus on efficiency to tide over this economic ‘black swan’ with everyone,” said Lei Jun, founder and chief executive of Xiaomi, in a statement on Tuesday.
The Hong Kong-listed company, which reported better-than-expected earnings in the December quarter and the whole of last year, indicated that 80 to 90 per cent of its production capacity in China has returned, after the government lifted its sweeping travel restrictions and lockdown of communities to curb the spread of the virus, according to senior executives in a conference call with analysts on Tuesday after the market closed.
“Production was affected, but the pace of recovery has exceeded expectations,” said Xiaomi president Wang Xiang. Without elaborating, Wang said the pandemic’s impact on the company has been less compared with the effect on its rivals in major smartphone markets such as India, Europe and the US.
That show of confidence comes after the company reopened more than 1,800 retail stores in China last week, when it announced that more than 80 per cent of its suppliers had resumed operations amid zero new domestic coronavirus cases in the country since the coronavirus outbreak began.
Xiaomi and its main Android handset rivals, including Chinese market leader Huawei Technologies, Oppo and Vivo, had been hoping to boost sales this year with the release of more 5G smartphones, as next-generation mobile networks continue to be rolled out worldwide.
The coronavirus outbreak, however, forced the temporary closure of smartphone factories across China, as the government implemented strict measures to contain the spread of the disease known as Covid-19.
Xiaomi was among several smartphone makers in India to suspend production there after the government implemented a 21-day nationwide lockdown from Tuesday last week.
Research firms Strategy Analytics and Canalys both expected China’s smartphone shipments to drop by 50 per cent in the first quarter, compared with the same quarter last year. IDC estimated a 30 per cent drop.
Canalys estimated a “worst-case” 4.2 per cent decline in smartphone shipments in India this year.
While the disruptions will affect near-term demand for Xiaomi’s smartphones and its other products, company chief financial officer Chew Shou Zi said “there are still many users making use of other channels to buy our products”.
He described demand for smartphones as very resilient, especially during this pandemic, when phones are a vital communication tool. He also estimated the Indian market to rebound as the health crisis eases up, following the company’s experience in China.
Xiaomi posted a net profit of 2.4 billion yuan (US$338 million) in the fourth quarter, down from 3.4 billion yuan a year ago. Still, that was above the 1.9 billion yuan average from analysts’ estimates compiled by Bloomberg.
Revenue during the period rose 27.1 per cent to 56.5 billion yuan, up from 44.4 billion yuan a year earlier, as smartphone sales accounted for 54.5 per cent of total sales. That beat analysts’ estimate of 54.8 billion yuan.
For 2019, Xiaomi’s annual net profit declined to 10.1 billion yuan, down from 13.5 billion yuan in 2018. Total annual revenue increased 17.7 per cent to 205.8 billion yuan, up from 174.9 billion yuan last year.
Still, shares of the Beijing-based company have dropped 37 per cent since its initial public offering in Hong Kong in July 2018. The firm’s share price closed up 3.78 per cent to HK$10.44 on Tuesday before its latest financial results were announced.