(Yicai Global) Aug. 22 – Shares in Xiaomi Group slumped as much as 5.6 percent today after China’s biggest smartphone maker reported a 67.1 percent dive in net profit after adjusted in the second quarter from the same period last year, due to shrinking demand for handsets amid the Covid-19 pandemic and heavy investment in new businesses.

Xiaomi’s share price was trading down 3.4 percent at HKD11.26 (USD1.44) as of 2 p.m. China time today. Earlier in the day it sank to HKD11.

Xiaomi managed adjusted net profit of CNY2 billion (USD300 million) in the three months ended June 30, according to the Beijing-based firm's latest earnings report released on Aug. 19. Revenue slumped 20.1 percent to CNY70.1 billion (USD10.2 billion). The company spent CNY611 million (USD89.5 million) over the period on new innovative businesses.

Performance should improve in the second half if there are no further Covid-19 flare-ups, but there remains great uncertainty, President Wang Xiang said. The pandemic is very troubling for brick-and-mortar businesses and there is no end in sight, he added.

Xiaomi had more than 10,600 outlets as of June 30, 1,000 of which have been shuttered on average due to the outbreaks.

As a result, Xiaomi's smartphone sales plunged 28.5 percent in the second quarter year on year to CNY42.3 billion (USD6.2 billion), and output plummeted 26.2 percent to 39.1 million units.

Global economic turmoil and recurring Covid-19 outbreaks had a major impact on the world's mobile phone market. Quarterly shipments fell 8.9 percent globally and 10.1 percent on the Chinese mainland, according to market research firm Canalys.

"We admit that some of Xiaomi’s products have not been particularly successful. But a long-term outlook as well as long-term research and development and investment are our established policy for high-end products," Wang said.

In the first half, Xiaomi's adjusted net profit tumbled 60.1 percent to CNY4.9 billion (USD717.5 million) and revenue slumped 12.8 percent to CNY143.5 billion (USD21 billion). A forecast for future earnings was not given.

Editor: Kim Taylor