Xiaomi rebounds with 13.5 billion yuan annual profit, targets greater international expansion
- Beijing-based firm was one of the few companies in the smartphone industry to maintain high growth in 2018
Chinese smartphone giant Xiaomi Corp on Tuesday reported a net profit of 13.5 billion yuan (US$2 billion) for 2018, rebounding from its 43.9 billion yuan loss in 2017.
The Beijing-based company’s total revenue grew 52.6 per cent to 174.9 billion yuan, but slightly missed the 176 billion yuan market average estimate from analysts’ forecasts compiled by Bloomberg.
That was driven by a 41.3 per cent increase in global smartphone sales to 113.8 billion yuan over the previous year, as total shipments rose 29.8 per cent year on year to 118.7 million units.
“We are one of the few companies in the industry that maintained high growth in 2018,” Xiaomi said in its regulatory filing in Hong Kong.
The firm said its smartphone revenue in mainland China continued to grow last year on the back of a rising average selling price (ASP), which was up 17 per cent.
“As we shipped increasingly more smartphones in developed markets, the ASP of our smartphones in international markets also recorded a 9.7 per cent year-on-year growth,” it said.
For the quarter ended December 31, Xiaomi posted a profit of 3.4 billion yuan, climbing from a 12.1 billion yuan loss a year ago. Its revenue for the same period improved 26.5 per cent to 44.4 billion yuan.
While Xiaomi smartphone sales in China shrunk by more than 34 per cent in the fourth quarter, that was offset by its rapid growth in India and Europe, according to data from IDC.
Xiaomi ranked fourth in the European smartphone market, according to estimates by research firm Canalys. The company also unseated Samsung Electronics from the top spot in India’s smartphone market last year, thanks to its budget Redmi series.
In its regulatory filing, the company said it aimed to replicate its success in India in other large markets, such as Indonesia and countries in western Europe.
“Xiaomi is also growing as an investor,” said Shou Zi Chew, the company’s chief financial officer. “Nine of our invested companies went public last year.”
Xiaomi, the world’s fourth largest smartphone supplier, also has big plans for the African market. The company, which entered Egypt two years ago, is also planning forays into Kenya, Nigeria and Morocco, Wang Xiang, Xiaomi’s senior vice-president in charge of international expansion, said in a recent email interview.
Wang, however, said that Xiaomi has “no timetable” to enter the US market through local carriers. The escalation of the US-China trade war last year has forced many Chinese companies to reassess their US expansion plans.
Xiaomi founder, chairman and chief executive Lei Jun said in March last year that the goal was to expand the firm’s smartphone business in the US by the end of 2018 or early this year.
Xiaomi already sells other product lines, including projectors, via Amazon.com and Walmart.
“The US is always an attractive market,” said Wang.
Still, some analysts saw the slowdown in Chinese sales volume as a negative for Xiaomi. JP Morgan analysts downgraded Xiaomi to neutral in January because of “a sharp deterioration in China smartphone demand in [the fourth quarter last year], according to a JP Morgan report published in January.
“With limited prospects for share gains, Xiaomi is likely to see declining units, margin downside risk … in China,” the report said.
In an effort to boost margins, Xiaomi has built its budget line Redmi into an independent brand to allow umbrella brand Xiaomi to grow in the higher-end segment of the smartphone market.
Xiaomi’s Hong Kong-traded shares are down around 30 per cent since they started trading last July at HK$17.
The company’s stock was hit by a wave of selling in January as Xiaomi’s lock-up period – when key investors are banned from selling stock – ended at the beginning of the year.
