Samsung Electronics yesterday estimated its third-quarter operating profit at 4.8 trillion won (US$4.29 billion), lower than expected amid concerns about slowing Western demand.
The South Korean company, the world’s largest maker of memory chips and flat-screen TVs, predicted revenue would rise 11 percent to 40 trillion won in July-September compared with a year earlier. The estimate for operating profit represents a rise of almost 14 percent year-on-year. The “earnings guidance” was issued before official earnings figures due later this month. A Dow Jones Newswires poll of seven analysts had forecast an operating profit of 5.06 trillion won and sales of 41.8 trillion. Twelve analysts polled by South Korea’s Yonhap news agency tipped operating profit of 4.96 trillion.
The estimate was also down on the company’s record operating profit of 5.01 trillion won in April-June. Samsung Electronics did not forecast net profit for the third quarter or give a breakdown among its business divisions.
Analysts said prices of memory chips and flat panels fell sharply in the third quarter, but the company’s brisk sales of chips and smartphones helped compensate for this.
They predicted that the chip-making division would contribute around 70 percent of total profit for the quarter. Lee Sun-tae of Meritz Securities said Samsung’s aggressive cost-cutting and a greater focus on advanced chips helped boost chip revenue.
The successful launch of the Galaxy S smartphone also helped compensate for a weak performance by the television and flat panel businesses.
“Due to the macroeconomic [world] slowdown, some product sales, such as TVs, handsets and personal computers were sluggish, which sharply dragged the prices of chips and liquid crystal display [LCD] panels lower during the third quarter,” Lee said.
Analysts said prices of chips and LCDs were likely to fall further in the fourth quarter amid concerns of a possible supply glut, hitting the company’s bottom line.
“The business momentum will continue to lose steam during the second half of this year, but earnings will improve from the first quarter of 2011 on expected restocking demand for chips and LCDs combined with strong smartphone sales,” said Y.C. Kim, an analyst at Shinhan Investment Corp.
Lee Seung-woo of Shinyoung Securities said Samsung’s earnings probably peaked in the second quarter.
“The company will face headwinds at least for a couple of quarters largely because of a slowdown in the recovery of the global economy, which hurts consumption,” Lee said.
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