Lenovo's Q4 profit surges threefold on PC sales

HONG KONG • Tech giant Lenovo Group yesterday reported a market-beating, threefold surge in quarterly profit, helped by strong personal computer (PC) sales.

Its production plans had not been affected by the ongoing Sino-US trade war, the company said.

Still, investors, worried that the conflict was morphing into a technology Cold War, dumped shares of Asian tech companies, with Lenovo's stock price falling as much as 6.3 per cent to its lowest in nearly four months.

Dual-headquartered in China and the United States, the world's largest PC maker said it is "well poised to navigate the turbulence in the geopolitical and macro-economic environment".

The US has sought to address what it believes is imbalanced trade with China, unleashing waves of tit-for-tat import tariffs on billions of dollars worth of goods.

Lenovo said it was less exposed to the US market than its competitors, and that most of its products are not subject to the new tariffs.

Chairman and chief executive Yang Yuanqing said Lenovo has contingency plans to shift production to its centres outside China - in India, Mexico, Hungary, Brazil and the US - but has yet to make such adjustments.

Lenovo's net profit in its fourth quarter ending March rose more than threefold to US$118 million (S$163 million) from a year prior when it suffered a write-down.

The results compared with the US$91.4 million average of seven analyst estimates compiled by Refinitiv.

"The growth strategy of PC and Smart Device (PCSD) focusing on commercial, high-growth and premium segments has paid off in delivering record revenue for the fiscal year," Mr Yang said.

PCSD revenue rose 10 per cent, with PC shipments growing 9 per cent. Overall revenue rose 10 per cent to US$11.7 billion, in line with estimates.

Global PC shipments declined 4.6 per cent during the first three months, according to data from consultancy Gartner.

For the full year, Lenovo swung to a profit of US$597 million, from a loss of US$189 million a year earlier, when it had written down US$400 million due to US tax reforms.

Annual revenue rose to a record US$51 billion, which Lenovo attributed mainly to record sales at its PCSD business, which accounts for three-quarters of the total.

Lenovo's mobile business, which it has been trying to turn around, continued to lose money on an annual basis. Its nascent data centre division also booked a loss, but revenue grew 37 per cent.

REUTERS

A version of this article appeared in the print edition of The Straits Times on May 24, 2019, with the headline 'Lenovo's Q4 profit surges threefold on PC sales'. Print Edition | Subscribe