Samsung Electronics forecast continued strong growth in smartphone sales
Firm confirmed record operating profit in the second quarter of this year
Warned of a deteriorating market for consumer electronics in developed countries
Samsung Electronics forecast continued strong growth in smartphone sales as it confirmed record operating profit in the second quarter of this year, although it warned of a deteriorating market for consumer electronics in developed countries.
The South Korean technology group, the world’s biggest by sales, had already indicated the headline figures it expected to report: sales rose 21 per cent year-on-year to $47.1bn, while operating profit increased 79 per cent to $5.9bn, both in line with this month’s guidance.
Investors therefore focused on Friday’s divisional breakdown of Samsung’s performance in the period, which had not been disclosed previously. Shares were up more than 4 per cent in morning trading in Seoul.
The earnings release showed a strong performance in the IT and mobile division, largely driven by strong uptake of Samsung’s high-margin premium handsets. Sales in the division increased 60 per cent to $21bn, with operating profit rising 145 per cent to $3.7bn.
Those numbers were lower than analysts had expected, but this was due to weakness in IT and networking rather than in handset sales, said Mark Newman, an analyst at Bernstein.
Samsung said it expected demand for its smartphones to increase in the third quarter due to the release of “new products with diverse price ranges”, building on the success of the newly launched Galaxy SIII.
Higher-margin upmarket products also boosted earnings in the consumer electronics business, in which operating profit rose 66 per cent, although the operating margin remained far lower than in the other businesses at 6.3 per cent.
Samsung said demand from emerging markets for its televisions would drive growth in that business in the third quarter, but warned that “demand growth in developed markets may possibly turn negative due to the European economic slowdown”.
Sales growth of 16 per cent in display panels was higher than analysts had expected, for which the company thanked strong sales of “value-added products” such as 3D and LED television screens.
The weakest performer was the group’s semiconductor business, in which sales fell 6 per cent and operating profit by 38 per cent. Samsung blamed the weakness of the PC market, which had depressed demand for its PC memory chips.
Mr Newman said a further reason for the profit fall was oversupply in the market for NAND chips, used in smartphones and flash drives, but added that he expected this to ease in the second half of the year.