Samsung beats market expectations
Outlook positive on strong demand for Galaxy S7
By Lee Min-hyung
Samsung Electronics posted 8.1 trillion won ($7.57 billion) in operating profit in the three months to June, up 17.4 percent from a year earlier, driven by robust demand for its flagship handset Galaxy S7.
In its earnings guidance, the company said its sales came in at 50 trillion won, up 3.01 percent from a year ago. The electronics giant will unveil a breakdown of its divisional performances later this month.
Its operating profit is the largest in about two years and beats the market consensus of about 7.3 trillion won by a large margin.
This is the first time that Samsung’s quarterly operating profit topped 8 trillion won since the first quarter of 2014 when it posted 8.49 trillion won.
“The strong popularity of the Galaxy 7 models and brisk sales of flash memory chips were key factors behind the stronger-than-expected second quarter results,” a company official said.
The combined shipment of the Galaxy S7 is estimated at some 16 million in the quarter.
Samsung hopes to continue to maintain the momentum by launching a new Galaxy Note series early next month.
Samsung Electronics’ chip division, led by 3D NAND flash memory chips, also contributed to the strong quarterly growth, analysts said. The chips, mainly used by corporate clients, have drastically improved memory production efficiency, compared to existing ones.
Analysts are upbeat about the outlook for the third quarter on increased shipments of chips and the launch of the Galaxy Note 7.
“We expect its operating profit at 8.4 trillion won in the third quarter and 8.7 trillion won in the fourth on strong demand for NAND chips,” said Hi Investment & Securities in a report.
Analysts are also positive about the company’s stock price. Samsung Electronics closed at 1,450,000 won, up 2.04 percent, lifted by the earnings surprise.
Still, the company’s IT and mobile communications (IM) unit may face tougher threats from Chinese handset makers and Apple in the third quarter, said Mirae Asset Investment analyst Doh Hyun-woo.
“Apple’s iPhone 7 and Chinese rivals may dent Samsung’s mobile division in the third quarter,” he said.
Daishin Securities analyst John Park said slower sales growth reflects slowing growth in the overall smartphone division and a slowdown in television shipments.
Park said a rebound of the won against the dollar in the second quarter also brought down its sales in terms of the local currency.
“The average won-dollar exchange rate in the second quarter was 1,163 won, down from 1,200 won in the January-March period, which we believe is another factor for the narrow sales growth,” he said.