BEIJING (dpa-AFX) - Lenovo Group (LNVGF.PK, LNVGY.PK) reported that its net income for its first fiscal quarter ended June 30, 2016 increased 64 percent year-over-year to US$173 million. First quarter pre-tax income increased 297 percent year-over-year to US$206 million.
Basic earnings per share for the first fiscal quarter was 1.57 US cents, or 12.19 HK cents. Net debt as of June 30, 2016, totaled US$1.2 billion.
'Although the macro-economy and our industries remain challenging, causing a decline in our revenue, we significantly improved our profit year-on-year through innovative products and strong execution. Our PC business delivered strong profits and our smartphone business stabilized compared to last quarter,' said Yuanqing Yang, Chairman and CEO of Lenovo.
Lenovo's first quarter financial performance occurred during a period when the core markets saw either slow growth or year-over-year industry declines: PCs were down 4.1 percent and tablet shipments fell 11.1 percent, while server industry shipments were essentially flat with smartphone markets growing 0.7 percent. At the same time, the RMB continued its depreciation, capping overall growth potential during the quarter.
Quarterly revenue was US$10.1 billion, a six percent decrease year-over-year, while it was down four percent in constant currency.
In the PC and Smart Device Business Group, or PCSD, which includes PCs and tablets, Lenovo's quarterly sales were US$7 billion, down seven percent year-over-year. Pre-tax income was US$370 million, an increase of 2.4 percent year-over-year. Pre-tax income margin was strong at 5.3 percent, improving 0.5 points year-over-year, aided by good margins in China and increased profitability of the Latin America and Brazil PC businesses.
In the Mobile Business Group, or MBG, which includes products from Motorola and Lenovo-branded mobile phones, Lenovo quarterly sales were US$1.7 billion, down 6 percent year-over-year, but nearly flat in constant currency. MBG's total pre-tax loss was US$206 million, with a pre-tax profit margin of negative 12.1 percent. The transition to higher priced products drove pre-tax profit margin up 2.9 points year-over-year.
In the Data Center Business Group, or DCG, which includes servers, storage, software and services sold under both the Lenovo ThinkServer and the System x brands, sales were US$1.1 billion, up 1 percent. DCG's reported PTI - which included non-cash, M&A-related accounting charges - was negative US$64 million with a pre-tax profit margin of negative 5.9 percent.
In the Asia Pacific region, Lenovo achieved sales of US$1.7 billion, or 16.7 percent of Lenovo's worldwide sales, while pre-tax profit margins were down 1.2 points to 1 percent, mainly due to contraction in the Japan PC market and the impact of currency fluctuation.
In China, consolidated sales in the first fiscal quarter, declined 9.8 percent year-over-year to US$2.9 billion, accounting for 28.4 percent of the Company's worldwide sales.
Lenovo in Europe, Middle East & Africa had consolidated sales in the first quarter of US$2.5 billion, a year-over-year decline of 7.3 percent driven by a mix of operational and macroeconomic challenges.
In the Americas, Lenovo saw consolidated sales decline 6.6 percent year-over-year to approximately US$3 billion in the first quarter, driven by the product transition in the mobile business. This represented 30.4 percent of Lenovo's total worldwide sales.
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