Samsung second-quarter profit dips on slower demand for Galaxy smartphones

SEOUL: Samsung Electronics on Tuesday reported a 0.1 percent dip in its second quarter net profit from a year earlier, blaming slower global sales of premium smartphones that dented demand for its flagship Galaxy device.
Net profit for the April to June period came in at 11.04 trillion won ($9.9 billion), slightly lower than the 11.05 trillion won in the same period in 2017, the company said in a regulatory filing.
An average of estimates compiled by Bloomberg News had forecast 11.6 trillion won for the period.
Operating profit was 14.87 trillion won, up 5.7 percent and in line with the estimate of 14.8 trillion won suggested in a preliminary guidance report released earlier this month.
But total sales fell 4.1 percent year-on-year to 58.48 trillion won, with the company’s consumer electronics and mobile businesses suffering.
“Second quarter revenue fell due to softer sales of smartphones and display panels,” Samsung said in a statement.
The earnings are sharply down from the 11.69 trillion won net profit registered last quarter, when the company reported a 52 percent jump on year.
The world’s biggest maker of memory chips and the flagship subsidiary of South Korea’s Samsung group, the company has weathered a series of setbacks, including an embarrassing global recall of its Galaxy Note 7 smartphone due to exploding batteries in 2016.
Adding to its troubles, its vice-chairman Lee Jae-yong, scion of Samsung’s founding family, was jailed last year for his part in the sprawling corruption scandal that brought down former president Park Geun-hye.
Lee has since been released after some of his convictions were quashed on appeal, and the company has posted record profits in recent quarters.
The disappointment over the second quarter earnings was reflected in mid-morning trade, with Samsung Electronics shares down 0.7 percent.
Weak sales of its new flagship smartphone, the Galaxy S9, drove down its earnings but robust demand for premium TVs — thanks to soaring interest in the recently concluded 2018 World Cup — and memory chips helped boost the operating profit.
Samsung’s chipmaking unit, which dominates the global market after the firm invested tens of billions of dollars to build and expand factories, provides chips for Samsung devices as well as those manufactured by competitors including Apple.
Although the company’s semiconductor business achieved record high operating profits of 11.6 trillion won, the earnings were lower than expected, with market forecasts averaging 12 trillion won.
“The semiconductor sector fell short of expectations but its outlook for the second half of this year is rather positive as demand for DRAM chips are solid... Therefore, chip prices are expected to remain strong,” a Samsung official said on condition of anonymity.
Analysts said the semiconductor division would continue its upward trajectory and set new records in coming months.
“Operating profit in the semiconductor sector is likely to hit the largest-ever 13.7 trillion won in the next quarter, due to the high DRAM chip prices and increasing shipments of NAND flash memory products,” said Park Yoo-ak, an analyst with Kiwoom Securities.
Samsung said it expected “growing demand for flexible OLED panels to drive earnings higher in the second half” of the year.
But “the mobile market condition will likely remain challenging in the second half amid pricing competition and new product launches,” it said, adding that it would respond by launching its Galaxy Note 9 smartphone earlier than expected.
The company said it would bolster its flagship lineup by marketing the new Note 9 “at a reasonable price” and packing its middle-and-low end products with updated features to fend off competition.
Samsung also said it would pay out dividends of 354 won per share for the second quarter on August 20.