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Samsung Posts More Than 5% Operating Profit Despite Weak Galaxy S9 Sales

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'.

IANS

Updated:July 6, 2018, 1:02 PM IST
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Samsung Posts More Than 5% Operating Profit Despite Weak Galaxy S9 Sales
(Photo for representation: Reuters)
Samsung Electronics Co on Friday said its second-quarter operating profit advanced 5.19 per cent 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 ($13 billion), compared to the 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 per cent 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 finalised 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 per cent, 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.

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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.

The display segment is also expected to post weak earnings on falling price of LCD panels.

Even in the first quarter, Samsung's display division posted 410 billion won in operating profits, down from around 1 trillion won posted a year earlier.

"Although the smartphone business did not meet expectations, the chip arm's performance was strong (over the second quarter)," said Park Won-jae, 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. If the outlook falls in line with the final report, it would indicate that chips account for a whopping 80 per cent of Samsung's combined earnings, reflecting the firm's heavy dependence on the sector.

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.

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Hanwha Investment and 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, 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 August 9 in at New York's Barclays Centre, 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. Industry watchers said the guidance report will compel Vice Chairman Lee Jae-yong, who is effectively running the Samsung Group, which includes the key electronics affiliate, to look for future growth engines.

It was the second quarterly report announced by Samsung since Lee's release from prison in February after being embroiled in a political scandal which led to the impeachment of former President Park Geun-hye.

While staying relatively low-key, Lee has been displaying particular interest in artificial-intelligence (AI) technology and automotive industries. Others claim that Lee may resume his full-fledged activities after meeting President Moon Jae-in next week, although it is still unknown whether the two will actually meet.

Moon is scheduled to attend a ceremony marking the construction of Samsung's production facility in India.

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| Edited by: Sarthak Dogra
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