Orsus Xelent Technologies first quarter revenue hit by soft consumer demand in China for cell phones
First quarter results from mobile phone designer and manufacturer Orsus Xelent Technologies (NYSE Amex:ORS) will have done little to excite shareholders this morning. The company designs mobile phones and related digital circuits and also specializes in software development and mobile phone integration technology.
The Asian focused, US listed company reported a 61.5% decline in
first quarter net sales to US$7.59 million (Q1 2009: $19.72 million) and
a near halving in gross margins to 7.85% (Q1 2009: 15.68%). Orsus
Xelent blamed the poor numbers on ‘difficult market conditions’ in China
which compressed its sales and margins. Not surprisingly, the
company’s net income also took a dive, falling to a loss per shares of 2
cents, or $0.454 million, compared to a net profit of 7 cents per
share, or $2.135 million in the first quarter of 2009.
During the first quarter, Orsus Xelent sold 57,000 cell phone
units, down substantially from 266,000 cell phone units in the
corresponding period in 2009. The company said it was hit by smaller
orders from distributors and a higher proportion of its sales coming
from lower margin units to rural customers.
“At the same time, competition in this market has continued to
increase, as China's telecom operators have focused on protecting their
rural market share ahead of the future strengthening they anticipate in
this market, as government policies to improve the living standards of
rural households are applied,” the company further explained.
Accounts receivables for the period rose slightly to $85.37
million, a comparatively large number compared to the company’s total
revenues for the quarter. Orsus Xelent said it was working on reducing
the size of receivables on the balance sheet, and reminded investors
that it had a ‘third party guarantee company’ that guarantees all
accounts receivables that are or may become outstanding from the
company’s largest distributor.
"Other factors affecting the domestic cell phone market at
present include the lingering dampening effect of the global financial
crisis on consumer purchasing, and the reorganization of the domestic
telecom operators which continues to create a lag in market demand for
high-margin products in particular,” Guoji Liu, CEO of the Company,
stated.
Looking ahead, Liu stated that there were opportunities for
growth in the second half of the year if 3G phones generate buying
activity.
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