Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday

Samsung profit better than expected, wary of recovery

Samsung profit better than expected, wary of recovery
Comment E-mail Print Share
First Published: Fri, Apr 24 2009. 11 11 AM IST
Updated: Fri, Apr 24 2009. 11 11 AM IST
Seoul: Samsung Electronics, the world’s top maker of memory chips and LCD screens, posted a 72% drop in quarterly profit and said it was too early to call a recovery in demand or prices.
But a rebound in mobile phone margins helped Samsung, the world’s No.2 mobile maker after Nokia, beat market profit forecasts by some distance.
A battered global memory chip sector is showing some signs of emerging from a severe downturn as big production cuts have helped eased a supply glut, but Samsung remained cautious.
“We believe it is still premature to expect a global economy, as well as consumer demand, recovery in the near term,” said Robert Yi, head of Samsung’s investor relations.
He said a sharp recovery in the memory chip or LCD markets was unlikely, but Samsung aimed to outperform in semiconductors and mobiles.
Samsung shares fell 4.9% by 9:52am, in a flat market. Shares in South Korea’s biggest company had risen 39% this year through Thursday, beating the KOSPI’s 22% rise, with expectations that earnings could top forecasts fuelling recent gains.
Smaller rival Hynix Semiconductor Inc, the world’s No.2 memory chip maker, earlier reported a sixth straight quarterly loss, but forecast an upturn as chip prices recover.
Samsung’s semiconductor business posted a bigger-than-expected 17% operating loss margin, following a 14 percent loss margin in the fourth quarter.
The company forecast prices of its mainstay dynamic random access memory (DRAM) chips, mostly used to power personal computers, would rise in the low single digits this quarter, but added that oversupply would stifle big price rises.
“The memory chip market seems to have passed the most difficult stage ... but it’s too early to predict when prices will peak,” said S.R. Kwon, analyst at Hana Daetoo Securities. “It should also be noted that the rise comes from limited supply rather than increasing demand.”
Research firm iSuppli forecast memory chip prices would stabilise over the rest of this year but oversupply would still be acute. In a note dated Thursday, it kept its rating on near-term DRAM market conditions at “negative.”
Samsung’s January-March net profit fell to won619 billion ($458.1 million) from won2.19 trillion a year ago, but was well above an average forecast for won149 billion.
Operating profit was won148 billion, well below last year’s won2.15 trillion, but trumping expectations for a won152 billion loss.
Quarterly sales of won18.6 trillion also beat expectations.
Strong handsets
Samsung said its telecoms margins surged to 12% from 2% in the fourth quarter, and it hoped to continue outperforming a shrinking broader market, focusing on high-end phones and marketing.
Nokia last week reported a 27% drop in quarterly sales and a first-ever pretax loss, and reaffirmed a forecast for a 10 percent decline in global cellphone market volumes this year.
But LG Electronics, Samsung’s home rival and the world’s No.3, said on Tuesday its mobile sales would rise more than 10 percent this quarter from the first.
Samsung’s LCD division reported a loss margin of 8%, unchanged from the previous quarter. Samsung said its LCD lines would run at full capacity this quarter, but cautioned prices may fall again if everyone ramps up output, triggering more oversupply.
Comment E-mail Print Share
First Published: Fri, Apr 24 2009. 11 11 AM IST