Huawei 2015 earnings see stronger revenue growth, net profits

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Chinese tech powerhouse Huawei reported a 33 percent rise in net profit for 2015 from the previous year, on the back of its growing consumer device business and rising demand for information and communications technologies (ICT) globally.

Net profit rose to 36.9 billion yuan ($5.7 billion), it said in a statement. Huawei, which saw growth in all three of its business units, saw a 37 percent year-on-year increase in global revenues to 395 billion yuan despite economic headwinds.

However, 2015 gross margin fell by 2.5 percentage points to 41.7 percent due to increased investment in Research and Development (R&D), said the Chinese tech firm.

"Huawei owes its long-term growth to the sheer size of the ICT market, which is the driving force of digital economies around the world. However, our growth is also a direct result of strategic focus and heavy investment in our core businesses," said Guo Ping, deputy chairman and rotating CEO at Huawei, in a statement.

Visitors crowd the Huawei stand at the 2016 CeBIT digital technology trade fair on the fair's opening day.
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Huawei's carrier division, which accounted for the largest part of Huawei's 2015 revenues, saw revenues rise by 21 percent on-year to 232.3 billion yuan on the back of increased demand of 4G networks over the year.

The Enterprise business group generated 27.6 billion yuan in annual revenue, 44 percent higher than in 2014.

The Shenzhen-based company made the greatest strides in its consumer device business, which includes smartphones and tablets. It recorded a 73 percent boost in annual revenues from the previous year to 129.1 billion yuan, a testament to "Huawei's growing influence as a consumer brand," the tech firm said.

Huawei's debt to earnings before interest, tax, depreciation and amortization (EBITDA) ratio fell to 0.58 compared with 0.72 in 2014. Huawei's operating expense ratio was also lower by 2.3 percent, as Huawei reported that it has increased efficiency through better management and higher investments.

"We wrapped up 2015 in a robust financial position, with stable cash flow from operating activities, increased cash availability, and effective risk control," said Sabring Meng, chief financial officer at Huawei.

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Huawei's plan to take on Apple and Samsung

But global uncertainties this year could have an impact on Huawei's performance, especially in its carrier business group, an analyst said.

"The ICT industry will feel the impact of slowing global growth and economic uncertainties, so Huawei's carrier division which is still their core business will definitely be affected," said Nicole Peng, Asia-Pacific research director at Canalys.

However, Peng told CNBC there are "growth opportunities for Huawei's smartphones, as it could win over consumers from Samsung and Apple, which have been struggling to create more innovative products."

She said consumers like Huawei's improving quality of flagship handsets while the Chinese tech firm has also made efforts to enhance its brand image by signing on celebrity footballer Lionel Messi as a global brand ambassador.

Huawei is currently the world's third-largest smartphone maker by shipment volume after Samsung and Apple. It had shipped 108 million smartphones in 2015, a 44 percent increase compared to the year before.

That figure was overshadowed by Samsung's estimated 319.7 million smartphone shipments, and Apple's estimated 231.5 million shipped last year, according to data from research firm Strategy Analytics.

Earlier at the World Mobile Congress in February, Richard Yu, chief executive of Huawei's consumer business group, told CNBC that the firm would aim to overtake Apple as the world's second largest smartphone player in three years. Huawei's ambitions won't end there, as it also hopes to surpass Samsung by 2021.

Yu also revealed at the forum that Huawei expects to release VR devices this year. Many of Huawei's competitors, from Samsung to HTC, have already launched VR products.

-- Arjun Kharpal, Alexandra Gibbs contributed to this report

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