Sat, Jul 27, 2013 - Page 15 News List

Samsung posts record Q2 net profit

SLOWER SMARTPHONES:Samsung had a net profit surge of nearly 50% year-on-year for April to June, but higher expectations meant the share price has fallen

AFP, SEOUL

Samsung Electronics, the world’s largest technology firm by revenue, yesterday posted another record quarterly net profit, but weakening earnings momentum has fuelled fears of flagging demand for high-end smartphones.

The South Korean giant said its April-to-June net profit surged 49.7 percent year-on-year to 7.77 trillion won (US$6.96 billion) thanks to robust shipments of its flagship Galaxy S smartphones and higher chip prices.

Second-quarter operating profit surged 47.5 percent on-year to 9.53 trillion won in the same period as sales grew 20.7 percent year on year to 57.46 trillion won.

The figures were in line with the firm’s forecast at the start of the month, although they were well short of expectations, which had been for an operating profit of 10 trillion won.

“Entering a typically strong season for the IT industry, we expect earnings to continue to increase,” senior vice president and head of investor relations Robert Yi said. “We cannot overlook delayed economic recovery in Europe and risks from increased competition for smartphone and other set products.”

SHARE PRICE FALLING

Despite the record earnings, however, Samsung’s share price has been falling — wiping about US$30 billion off the firm’s value — since late April when the flagship Galaxy S4 hit stores, as sales have not been as high as hoped.

That is despite the company spending billions of dollars on a global marketing campaign, squeezing margins, after launching the latest gadget at a lavish New York event in late March.

HIGH EXPECTATIONS

“Expectations had been too high for high-end smartphone sales. Many investors now think the Galaxy S4 has not been selling so well,” said Oh Young-bo of Hanmag Securities.

He added that investors are growing concerned as Samsung relies heavily on sales of smartphones to drive growth.

With an expected drop-off in demand for high-end phones, brokerages began cutting their forecasts for earnings and sales last month.

While Samsung did not reveal smartphone shipments, it is thought to have sold about 75 million in the past quarter, including around 20 million Galaxy S4s.

However, while that helped Samsung maintain its status as the world’s largest handset maker, the figure is only slightly up from the estimated 70 million shifted in the previous three months, suggesting a slowdown in growth momentum.

The IT and mobile sector contributed most of the operating profit, producing 6.28 trillion won, up 52 percent from a year earlier.

However, it was down 3.5 percent from the previous quarter because of higher marketing costs and investment in sales networks and research and development, Samsung said.

Semiconductors brought a 1.76 trillion won operating profit, up 71 percent from a year earlier.

Operating profit from displays surged 58 percent year-on-year to 1.12 trillion won. Other sectors’ contributions including consumer electronics were mediocre.

Oh forecast Samsung’s operating profit would rise to 10.5 trillion won in the third quarter to the end of September, mainly thanks to sales of displays, semiconductors and tablet computers.

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