Huawei 2015 Annual Report Download - page 49

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47
Results of Operations
Financial Performance
CNY Million 2015 2014 YoY
Revenue 395,009 288,197 37.1%
Gross profit 164,697
127,451 29.2%
– Gross margin 41.7%
44.2% (2.5%)
Total operating expenses (118,911)
(93,246) 27.5%
– as % of revenue 30.1%
32.4% (2.3%)
Operating profit 45,786
34,205 33.9%
– Operating margin 11.6%
11.9% (0.3%)
Net finance expenses (3,715)
(1,455) 155.3%
Income tax expenses (5,077)
(5,187) (2.1%)
Net profit 36,910 27,866 32.5%
Revenue in 2015 totaled CNY395,009 million, representing an increase of 37.1% year-on-year. Net profit grew by
32.5% year-on-year to CNY36,910 million. Profit rose due to increasing revenue and higher efficiency.
■ As the consumer business grew rapidly and contributed a larger share to total revenue, the company's gross
margin dropped by 2.5 percentage points since 2014.
■ In 2015, Huawei continued to increase its efficiency through management transformation while increasing its
future-oriented investment. As a result, the operating expense ratio decreased by 2.3 percentage points from
2014 to 2015.
■ Huawei's net finance expenses rose sharply due to foreign exchange losses.
■ As Huawei enjoyed more tax deductions due to increased R&D investment and recognized more deferred tax
assets because certain subsidiaries became profitable income tax expenses declined by 2.1 percentage points
year-on-year.
Total Operating Expenses
CNY Million 2015 2014 YoY
Research and development expenses 59,607 40,845 45.9%
– as % of revenue 15.1%
14.2% 0.9%
Selling and administrative expenses 62,281
47,468 31.2%
– as % of revenue 15.8%
16.5% (0.7%)
Other (income)/expenses, net (2,977)
4,933 (160.3%)
– as % of revenue (0.8%)
1.7% (2.5%)
Total operating expenses 118,911
93,246 27.5%
– as % of revenue 30.1% 32.4% (2.3%
)
In 2015, Huawei increased investment in future technologies, brand marketing, and management transformation.
Due to ongoing transformation efforts, the company achieved higher efficiency and increased revenue. As a result,
the company's operating expense ratio dropped by 2.3 percentage points. As the company increased investment
in future technologies, research and innovation, and R&D platform and capability improvements, the R&D expense
ratio rose by 0.9 percentage points. Despite the increasing investment in brand marketing and management
transformation, the company benefited from higher efficiency and increased revenue. As a result, the selling and
administrative expense ratio decreased by 0.7 percentage points.