Samsung Electronics Co yesterday posted a near 40 percent fall in first-quarter net profit, missing analyst estimates despite a surge in memorychip demand that cushioned a slump in smartphone sales.
Facing increasing competition from archrival Apple Inc and smaller Chinese manufacturers, the world’s top handset maker reported a net profit of 4.6 trillion won (US$4.3 billion) for the January-to-March period, down by 38.9 percent from a year earlier.
It was the fourth straight quarterly decline in net profit and missed the 4.9 trillion won average of 23 analyst estimates compiled by Bloomberg News. Operating profit also fell by 29.6 percent year-on-year to 6 trillion won, largely in line with the firm’s earlier forecast.
However, in a sign that the South Korean electronics giant might be turning a corner, operating profit was up 13.1 percent from the fourth quarter of last year.
The firm’s latest earnings still stood in stark contrast to Apple, which this week reported a 33 percent surge in net profit to US$13.6 billion in the first quarter thanks to blockbuster sales of the iPhone 6, especially in the Chinese market.
In its earnings statement, Samsung said it expected overall earnings to increase in the second quarter as premium smartphone sales enter “into full swing.”
The company shipped 99 million handsets globally in the first quarter — more than 80 percent of them smartphones, Samsung head of investor relations Robert Yi said in a conference call.
Handset shipments in the second quarter are expected to remain at the same level, he added.
Samsung is pinning its hopes on its flagship high-end smartphones, the Galaxy S6 and S6 Edge, launched this month, but the company cautioned competition would intensify in rapidly growing emerging markets.
“In 2015, continued growth is expected due to the growth of emerging smartphone markets such as China and India, as well as the global expansion of the LTE [long-term evolution] business,” the earnings’ statement said.
“However, increased competition in the middle to low-end market ... may present challenges,” it said.
Recent media reports suggested initial sales of the Galaxy S6 and S6 Edge had fallen short of expectations, but Park Jin-young, vice head of communications at Samsung’s mobile unit, said both models were performing well.
“I think the S6 will become the best-selling model among the Galaxy S series,” Park said, adding that Samsung was struggling to meet bigger-than-expected demand for the Edge.
Operating profit of the firm’s key mobile unit dropped more than 57 percent year-on-year to 2.74 trillion won in the January-to-March period, although it was up nearly 40 percent from the previous quarter.
Meanwhile, operating profit at its semiconductor unit soared more than 50 percent year-on-year to 2.93 trillion won — and was up 8.5 percent from the fourth quarter.
The firm yesterday said it had invested 7.2 trillion won to build or expand production infrastructure in the first quarter alone, including 4.4 trillion won on semiconductor plants. The weak euro and emerging market currencies could drag down overall demand this year, Samsung said, adding that currency moves had an 800 billion won impact on the first quarter.
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