Huawei 2014 Annual Report Download - page 39

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37Management Discussion and Analysis
Results of Operations
CNY Million 2014 2013 YoY
Revenue 288,197 239,025 20.6%
Gross profit 127,451 98,020 30.0%
– Gross margin 44.2% 41.0% 3.2%
Total operating expenses (93,246) (68,892) 35.4%
– as % of revenue 32.4% 28.8% 3.6%
Operating profit 34,205 29,128 17.4%
– Operating margin 11.9% 12.2% (0.3%)
Net finance expenses (1,455) (3,942) (63.1%)
Income tax expenses (5,187) (4,159) 24.7%
Net profit 27,866 21,003 32.7%
Sales revenue in 2014 totaled CNY288,197 million, representing an increase of 20.6% year-on-year. Net profit
grew by 32.7% year-on-year to CNY27,866 million. This increase is mainly attributable to the rapid growth in
scale, reduction in foreign exchange loss, and improvement in funds utilization, which combined to reduce net
finance expenses. Larger scale, higher efficiency, lower costs, higher brand awareness of the consumer business,
and improved product structure helped increase gross margin by 3.2 percentage points year-on-year.
Total Operating Expenses
CNY Million 2014 2013
Restated YoY
Research and development expenses 40,845 31,563 29.4%
– as % of revenue 14.2% 13.2% 1.0%
Selling and administrative expenses 47,468 38,052 24.7%
– as % of revenue 16.5% 15.9% 0.6%
Other expenses/income, net 4,933 (723) (782.3%)
– as % of revenue 1.7% (0.3%) 2.0%
Total operating expenses 93,246 68,892 35.4%
– as % of revenue 32.4% 28.8% 3.6%
In 2014, Huawei maintained robust operations and increased investments in future technologies, brand marketing,
transformation, and incentives. As a result, the company's total operating expense ratio increased by 3.6 percentage
points. Specifically, the R&D expense ratio rose by 1.0 percentage point, the selling and administrative expense ratio
increased by 0.6 percentage point, and, primarily due to the provision of goodwill impairment, the ratio of other
expenses/income, net was up 2.0 percentage points.