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(2nd LD) Samsung's operating profit up 5.19 pct in Q2

All Headlines 09:37 July 06, 2018

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By Kang Yoon-seung

SEOUL, July 6 (Yonhap) -- Samsung Electronics Co. said Friday its second-quarter operating profit advanced 5.19 percent from a year earlier, but it failed to post record-breaking earnings apparently due to weaker-than-expected smartphone sales.

Operating profit for the three-month period came to 14.8 trillion won (US$13.2 billion), compared with 14.07 trillion won reported a year earlier, the company said in its earnings guidance report.

Sales came to 58 trillion won, down 4.92 percent on-year.

The second-quarter operating profit was below the market's estimate of 15.2 trillion won, according to the data compiled by Yonhap Infomax, the financial arm of Yonhap News Agency, on 21 brokerage houses.

Despite the on-year increase, the latest operating-profit estimate fell shy of the record high figure of 15.6 trillion won tallied for the January-March period of this year.

Samsung did not offer performance and net profit estimate reports for each business division. The company will deliver its finalized earnings report later this month.

It marked the first time in seven quarters for the company to post an on-quarter decrease in terms of operating profits.

Accordingly, the operating profit-to-sales ratio stood at 25.5 percent, down 0.3 percentage point from an earlier three-month period.

Analysts said the on-year improvement was mostly attributable to the chip segment, while the weak sales of the Galaxy S9 probably weighed down further growth.

The Galaxy S9 apparently failed to draw in consumers as it did not show significant improvements over its predecessor, they said.

While Samsung has not revealed detailed figures for the Galaxy S9 series, the combined sales of the smartphones are estimated to have reach some 28 million units, a figure hovering far below the Galaxy S8 series' 37.5 million units in 2017 and the Galaxy S7 series' 48.5 million units in 2016.

"Although the smartphone business did not meet expectations, the chip arm's performance was strong (over the second quarter)," said Park Won-jae, a researcher at Mirae Asset Daewoo Research, claiming that foreign-exchange conditions were also advantageous for Samsung.

Mirae Asset Daewoo Research estimated the operating profit for the crucial chip business at 12.6 trillion won, followed by the IT and mobile division at 2.6 trillion won. It also suggested 500 billion won and 100 billion won for the consumer electronics and display arms, respectively.

Samsung Electronics posted an operating profit of 8 trillion won for the semiconductor business in the second quarter of 2017, along with 4 trillion won in the IT and mobile business.

For the third quarter, analysts said Samsung will resume posting record-breaking earnings on chips and see the recovery of its smartphone sales.

Hanwha Investment & Securities Co. said Samsung is expected to post record-breaking earnings on robust chip sales, with the upcoming Galaxy Note 9 also lending support to the recovery.

"The shipment of chips will continue to increase on seasonal demands," said Lee Soon-hak, a researcher at Hanwha. "As for the IT and Mobile division, the next Galaxy Note 9 may be able to recoup sluggish sales of the Galaxy S9 to some extent."

The South Korean tech giant said it will host an "Unpacked" gathering on Aug. 9, 2018, at New York's Barclays Center, to showcase the new Note model.

Considering such factors, Hanwha said it expects the operating profit to reach 16.8 trillion won for the July-September period.

Others, however, said Samsung should also brace for potential side effects from the latest trade dispute between Washington and Beijing, with China also narrowing the gap with South Korea in the semiconductor technology field.

Shares of Samsung Electronics fell 1.31 percent to 45,350 won as of 9:13 a.m. The guidance report was released before the market opened Friday.

Samsung Electronics' production plant in Giheung, south of Seoul (Yonhap)


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