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By Kang Yoon-seung
SEOUL, April 7 (Yonhap) -- South Korean tech giant Samsung Electronics Co. said Thursday its first-quarter operating profit is estimated to have hovered far above the previous forecast, apparently on the back of early sales of its flagship smartphone, the Galaxy S7.
Samsung said it is believed to have posted an operating profit of 6.6 trillion won (US$5.6 billion) in the January-March period, up 10.37 percent from the same period last year. From the previous quarter, the Q1 estimate marks a 7.49 percent rise.
The first-quarter sales came to 49 trillion won, up 3.99 percent from 47.12 trillion won a year earlier, according to the company's earnings guidance. The regulatory filing did not reveal net profits.
The estimated earnings hovered far above the market consensus of 5.6 trillion won by 22 South Korean brokerage houses, according to data compiled by Yonhap Infomax, the financial arm of Yonhap News Agency. The securities firms had forecast sales to reach 49.1 trillion won in the first quarter.
Analysts said the company's first-quarter mobile business is believed to have enjoyed a favorable performance apparently on the back of the Galaxy S7, which went on sales earlier in March.
The predecessor, the Galaxy S6, went on sales in April, having only a limited impact on the company's first-quarter performance in 2015.
The Galaxy S7 and Galaxy S7 Edge smartphones, first showcased at a trade fair in Spain in February, come with improved batteries and are water and dust resistant. The company also brought back the micro SD card slot that had disappeared in the Galaxy S6 series.
"Sales of the Galaxy S7 series are estimated to have hovered above 10 million units in the first quarter, above the expectation of 7 million," said Shin Hyun-joon, an analyst at LIG Investment & Securities Co.
Hwang Joon-ho, an analyst at KDB Daewoo Securities Co., echoed the view, adding new features adopted by the Galaxy S7 series added to the strong sales, with the combined shipment estimated to reach 45 million for 2016.
While Samsung did not provide performances for respective business divisions, KDB Daewoo Securities estimated the mobile arm to boast an operating profit of 3.3 trillion won, up 19 percent from a year earlier.
Samsung's efforts to reorganize its budget handsets also helped the firm improve profitability, analysts added.
The South Korean tech giant had been suffering a slump in its mobile business mainly because Chinese rivals rolled out price-competitive models that ate into Samsung's market share.
Industry watchers added Samsung is expected to enjoy foreign-exchange benefits, especially in the semiconductor and display segments.
Analysts said Samsung's operating profit can rise up to 800 billion won for every 100-won-level depreciation of the local currency against the greenback. The South Korean won closed at 1,172.5 won against the U.S. dollar at end-2015, but the figure reached 1,241 won as of end-February.
It rebounded back to 1,140.5 won at end-March, indicating Samsung enjoyed favorable foreign-exchange conditions for the first two months of 2016.
KDB Daewoo Securities estimated the semiconductor business to have posted an operating profit of 2.5 trillion won, down 17 percent on-year.
IBK Securities Co. echoed the view, casting an estimate of 2.54 trillion won in operating profit for semiconductors and 3.24 trillion won for the mobile business.
If the actual earnings report, set to be delivered later this month, is in line with the estimate, it would stand as a signal for the revival of the mobile division, analysts said.
While the segment stood as the mainstay business for Samsung, a slump in smartphone sales paved the way for the chip division to stand as the main source of profit in 2015.
The semiconductor business posted an operating profit of 12.7 trillion won in 2015, hovering above 10.1 trillion won posted by the mobile arm. In 2013, Samsung made 24.9 trillion won from its mobile business and only 6.88 trillion won from chip sales.
Analysts added that Samsung's display segment is believed to have posted an operating loss in the first quarter, due mainly to the falling demand for panels around the globe.
The consumer electronics arm is believed to have posted an operating profit of 400 billion won in the January-March period, marking a turnaround from the operating loss of 140 billion won posted last year.
Analysts attributed the improvement to the robust sales of premium TVs and home appliances, despite the overall decline in its TV shipments.
For the second quarter, analysts said Samsung Electronics will continue its recovery phase, with the improved performance of the chip segment offsetting the increased marketing expenditures from the mobile division.
Samsung Electronics also said Tuesday it has commenced the mass production of the industry's first 10-nanometer level dynamic random access memory (DRAM) chips, adding to the brighter outlook of the chip segment.
The stabilized global prices of panels will also help the display sector to return to making a profit, analysts added.
Shares of Samsung Electronics Co. shed 1.25 percent to 1,269,000 won on Thursday, while the market added 0.13 percent. The earnings guidance was released before the stock market opened Thursday.
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