Samsung Electronics Co yesterday flagged a second quarter drop in operating profit that missed analyst estimates after sales of its newest flagship smartphone failed to meet expectations.
The Galaxy S6 and S6 Edge with a wraparound screen received rave reviews, but company predictions of record sales fell short of expectations, partly due to production and supply constraints.
In an earnings estimate, the giant South Korean smartphone and memorychip maker predicted operating profit of about 6.9 trillion won (US$6.1 billion) for the April-June period, down just over 4 percent from a year earlier.
Photo: Bloomberg
That compared with the 7.2 trillion won average of 33 analyst estimates compiled by Bloomberg News, but still marked a 15 percent increase from the first quarter.
Yesterday’s estimate, which comes ahead of audited results to be released later in the month, did not provide a net income figure.
It also gave no breakdown of divisional earnings.
Samsung has seen profits sag since late 2013 due to heightened competition in an increasingly saturated smartphone market that it had dominated for years.
Overall sales were about 48 trillion won in the second quarter, Samsung said yesterday, compared with the 53 trillion won average of 37 estimates.
The company’s share price, which has fallen 7.2 percent this year, was largely unchanged in early trading following the earnings estimate.
The slump in Samsung’s once stellar growth has coincided with preparations for a once-in-a-generation leadership change, with control of the family-run conglomerate’s main business expected to pass from ailing patriarch Lee Kun-hee to only son Lee Jae-yong.
Faced with what will be a massive inheritance tax bill, Lee and his siblings have been seeking to pare down and simplify the byzantine system of cross-holdings that link the many branches of the Samsung empire.
Meanwhile, a South Korean court yesterday rejected a US hedge fund’s request to block the sale of treasury stocks by construction firm Samsung C&T Corp, clearing the path for the US$8 billion merger of two Samsung affiliates.
The planned merger, which would see Cheil Industries Inc acquire Samsung C&T through an all-stock deal, is the latest in a series of moves by Lee family to boost control over the conglomerate ahead of a generational power transfer.
The US hedge fund, Elliot Associates LP, which holds a 7.12 percent stake in Samsung C&T, has opposed the merger, arguing that it “significantly undervalues” the construction firm’s stock.
The Seoul Central District court had already dismissed an Elliot demand to prevent a July 17 Samsung shareholders’ meeting called to approve the proposed merger.
Yesterday’s ruling rejected a second demand to halt Samsung C&T’s sale of treasury stocks to a “friendly” shareholder, chemicals maker KCC Corp.
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