Samsung enjoys record operating profits in Q3
By Baek Byung-yeul
Samsung Electronics had a record operating profit in the third quarter of the year on the back of solid sales powered by robust demand for DRAM chips, the company said Friday.
The Korean tech giant reported in a preliminary notification that its operating profit in the third quarter reached an all-time high of 17.5 trillion won ($15.47 billion), up 20.4 percent from a year ago.
Its sales jumped 4.7 percent to reach 65 trillion won over the cited period.
Samsung's previous record operating profit was 15.6 billion won achieved in the first quarter of this year.
The firm saw its operating profit decrease in the second quarter for the first time in seven quarters due to sluggish sales of its Galaxy S9 premium smartphones, but the firm has managed to turn the situation around in just one quarter.
While Samsung is set to announce its finalized report Oct. 31, industry watchers presume the semiconductor sector helped steer the firm toward its earnings surprise.
Samsung didn't announce the performance of respective divisions but its chip business is expected to post more than 13 trillion won for the first time, according to analysts.
The firm's estimated operating profit from the IT and mobile division is around 2.3 trillion won, down from 3.29 trillion won year-on-year because of the sluggish smartphone sales, the analysts said.
Its consumer electronics division is estimated to post an operating profit of about 600 billion won.
“The average selling price (ASP) of memory chips had tumbled during the third quarter but it is presumed that DRAM supply increased more than 10 percent to boost the performance,” said Meritz Securities analyst Kim Sun-woo.
Though there had been concerns over a weaker outlook for the global chip industry, an analyst said Samsung could continue to be profitable in the fourth quarter as there is still strong demand for memory chips in the market.
“The company has very strong financial metrics, with a large net cash position and very low leverage. We expected adjusted debt to EBITDA to remain low in the 0.2 to 0.4 times range in the next 12 to 18 months,” said Gloria Tsuen, vice president and senior analyst at Moody's.
The EBITDA figure shows how much earnings the company made before interest, tax, depreciation and amortization are subtracted. It is used as an indicator of the overall profitability of a business and a lower debt to EBITDA ratio is a positive indicator that the firm has sufficient funds to meet its financial obligations.
“I think it's still the semiconductor business that's driving the strong performance,” Tsuen added.