Smartphone maker Xiaomi says China sales already close to full recovery

Xiaomi reported on Tuesday a 27% jump in revenue for October-December 2019

SHANGHAI (Reuters) - Chinese smartphone maker Xiaomi Corp is seeing signs of a sales recovery in China, it said on Tuesday, as the country starts to return to normal following the coronavirus lockdown.

“The (Chinese) market has entered a full recovery stage, and... has already recovered to 80 to 90% of the normal level,” Chief Financial Officer Shou Zi Chew said on an earnings call.

He said sales in China fell in the first quarter due to the economic impact of the virus, but did not say by how much. Chew said he expected demand for smartphones to be resilient globally even though the virus was spreading to other countries. The company will take a hit in global sales during March and April, he said, but expects to see signs of recovery in May.

“If we take reference from China’s experience, I think smartphone demand is resilient,” said Chew. “I think it will rebound quickly.”

Xiaomi reported on Tuesday a 27% jump in revenue for October-December 2019, above analysts’ expectations. Sales in the fourth quarter jumped to 56.5 billion yuan ($8 billion) from 44.42 billion yuan a year earlier, beating analysts’ expectations of 55.6 billion yuan, according to Refinitiv data.

The company derives roughly 60% of its revenue from mobile handsets, and also sells online ads and other consumer hardware.

Revenue from smartphones jumped 23% in the period to 30.8 billion yuan. Excluding one-time items, Xiaomi earned 2.34 billion yuan in the fourth quarter, above analysts’ estimates of 1.88 billion.

For the whole year, Xiaomi’s profit attributable to shareholders fell by a quarter to 10.04 billion yuan.

Rival Huawei reported a 5.6% annual profit increase on Tuesday, its smallest rise in three years, hurt by weak overseas sales as the United States campaigned to restrict its global expansion on security grounds.

Overseas growth has been a key strategy for Xiaomi and other Chinese rivals in recent years as the domestic smartphone market has seen a period of contraction.

The coronavirus, which first appeared in Wuhan, China, has killed more than 37,000 globally and forced countries to lock down borders and curb movement. Businesses have been hurt by supply disruptions and factory shutdowns.

Analysts expect first-quarter smartphone shipments to China to decline by roughly 40% from a year earlier.

Apple warned last month it was unlikely to meet its March quarter sales guidance as the ramp-up of Chinese factories that produce iPhones was slower than expected after weeks of closures.

Xiaomi, which unveiled a new flagship 5G smartphone, the Redmi K30 Pro, said on March 19 that 80% of its supply chain had resumed operations. Chinese smartphone makers are hoping the domestic market, which has for years contracted, will see new life with the sale of 5G-enabled phones. Counterpoint Research estimates global smartphone sales fell 14% in February, and expects a steeper decline after that.

Xiaomi is planning an 8 billion yuan bond issue to fund coronavirus prevention efforts, two sources with knowledge of the matter told Reuters last week.