Samsung Electronics Co, Asia's biggest electronics maker by market value, had a smaller drop in fourth-quarter profit than analysts expected and said it will accelerate investment in plants producing chips, flat screens and mobile phones. The company's stock surged 6.2 percent.
Net income fell 1.9 percent from a year ago to 1.8 trillion won (US$1.74 billion) as lower prices on mobile phones and flat-screen displays led to the first profit decline in six quarters, Suwon, South Korea-based Samsung said today in a regulatory filing. The profit beat the median 1.4 trillion won estimate from 19 analysts surveyed by Bloomberg News.
The decline failed to prevent a record annual profit for Chief Executive Yun Jong Yong, 60, who will raise capital spending by 34 percent this year -- more than double last year's pace. The plan underlines Samsung's strategy of outspending rivals such as Intel Corp by investing in the latest technology to cut costs.
The shares of Samsung, which lags only Intel in semiconductor sales, rose to 471,500 won, the biggest one-day gain in more than three months.
To boost its share price further, Samsung said yesterday that it will buy back at least 2 trillion won of stock this year.
The pricing pressures on semiconductors and flat screens that squeezed earnings in the final three months of last year should ease this quarter, Samsung said, adding handset prices and profit margins will rise "significantly." Demand for liquid-crystal display (LCD) televisions will also rise, the company said.
Samsung expects the mobile phone industry to ship 670 million handsets this year, a forecast that's more optimistic than the 630 million projected by bigger rival Nokia Oyj.
Aided by sales of handsets and semiconductors, Samsung's full-year net income surged 81 percent to a record 10.8 trillion won on sales of 57.6 trillion won, also a record. Operating profit gained 67 percent to 12 trillion won, prompting the company to reward its employees with about 700 billion won in special bonuses.
Sales are expected to rise again this year, edging 2 percent higher to 58.7 trillion won, the electronics maker said.
"The business environment during the fourth quarter was quite challenging" because of high oil prices, an appreciating won and slowing demand for electronics, said Chu Woo Sik, head of investor relations at Samsung in a conference call with analysts yesterday. "Despite these difficulties, I think the company did quite well."
The fourth-quarter result did little to deter the company from investing in more production capacity. Samsung will boost capital expenditures to 10.3 trillion won from 7.7 trillion won last year, when Samsung raised spending by 14 percent.
Spending on chips will rise 9 percent to 6.01 trillion won this year, almost one-tenth more than Intel's projected spending of as much as US$5.3 billion. LCD investments will almost double to 2.9 trillion won; expenditures on telecommunications will rise 41 percent to about 410 billion won, Samsung said.