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ZTE revises down Q1 earnings after factoring in US supplier ban

Chinese company see losses extending to first half due to $1.4bn in penalties

ZTE was forced to cease major operations, with business resuming only recently.    © Reuters

HONG KONG (Reuters) -- ZTE Corp revised its first-quarter results to a net loss on Friday, after China's second-biggest telecommunications equipment maker took into account the impact of a crippling U.S. supplier ban that has now been lifted.

ZTE said net loss for the three months through March was 5.4 billion yuan ($790.62 million), compared to a net profit of 1.2 billion yuan a year earlier. Revenue rose 6.9 percent on year to 27.5 billion yuan.

The company will set up an export compliance committee with company Chairman Li Zixue as one of the five members, ZTE said in a filing to the Shenzhen stock exchange.

In April, ZTE posted a 39 percent rise in first-quarter profit, but said at the time it was difficult to assess the impact of the supplier ban, imposed in mid-April in relation to its violation of U.S. export restrictions.

ZTE, which makes smartphones and networking gear, said in its latest statement it expected to record a net loss for the first six months of the year due to the $1.4 billion it paid in penalties to have the ban lifted.

Earlier in July, ZTE estimated a first-half loss of 7.0 billion yuan to 9.0 billion yuan, versus a profit of 2.3 billion yuan a year earlier.

The U.S. government lifted ZTE's supplier ban after the firm deposited $400 million in a U.S. bank escrow account and paid a $1 billion penalty, as part of a settlement agreement.

The ban was imposed for reneging on an earlier settlement reached after ZTE was caught shipping U.S. technology to Iran and North Korea in violation of U.S. sanctions on those countries.

The ban forced ZTE to cease major operations as it relies on U.S. components for both its smartphones and networking gear.

ZTE this week said major business had resumed.

The ban had been a source of friction between the United States and Chinese governments at a time of escalating trade tension involving tit-for-tat tariffs.

Last week, U.S. lawmakers cut measures from a defence bill that would have reinstated sanctions on ZTE.

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