August 29, 2018 / 5:37 AM / 21 days ago

New executives at China's ZTE say production back to normal

HONG KONG (Reuters) - Production at China’s ZTE Corp (0763.HK) is back to normal after the lifting of a U.S. ban and its carrier network business will return to a standard growth track in 2019, according to the firm’s newly elected chairman and chief executive.

FILE PHOTO: The company name of ZTE is seen outside the ZTE R&D building in Shenzhen, China April 27, 2016. REUTERS/Bobby Yip/File Photo

China’s No. 2 telecommunications equipment maker (000063.SZ) was crippled in April when the United States banned American firms from selling it parts, saying the company broke an agreement to discipline executives who had conspired to evade U.S. sanctions on Iran and North Korea.

The ban, which became a source of friction in Sino-U.S. trade talks, was lifted in July after ZTE paid $1.4 billion in penalties, allowing the firm to resume business.

“As of today, the main operating business has resumed completely. The production mission for August has resumed to normal and R&D is resuming rapidly,” the Securities Times newspaper quoted Chairman Li Zixue as saying at a shareholder meeting at the company’s headquarters in Shenzhen on Tuesday.

ZTE confirmed the comments to Reuters on Wednesday.

As part of the settlement deal with Washington, ZTE, which relies on U.S. suppliers for core components, also overhauled its management team and appointed a new chief executive and chairman.

“We can definitely say the company is still in the front line in the communications industry,” CEO Xu Ziyang said at the meeting.

“Our orders have been great and are in line with that of July and August last year,” he said, adding that the company hoped to see its network operating business resume a normal growth path in 2019.

ZTE also aimed to beef up research and development, in particular for key components such as chips, and strengthen ties with third-party chip makers in a bid to control risks, he said.

In July, ZTE flagged the impact of the U.S. supplier ban when it said it expected to report a first-half net loss of 7.0-9.0 billion yuan ($1.1 billion-$1.3 billion) versus a profit of 2.3 billion yuan a year earlier.

The company is due to report its earnings on Thursday.

ZTE's Hong Kong-listed shares were up more than 3 percent on Wednesday, outpacing a flat broader market .HSI. The firm lost about $3 billion in market value when trading of its shares resumed in June after a two-month suspension.

Reporting By Anne Marie Roantree, Donny Kwok and Sijia Jiang; Editing by Stephen Coates

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