Samsung 3Q profit at record high but outlook mixed

Samsung 3Q profit at record high but outlook mixed

Seoul: Samsung Electronics Co., the world’s largest manufacturer of computer memory chips, said business conditions are deteriorating due to anemic recoveries in advanced economies even as it reported a 17% jump in third quarter profit to a record high.

Samsung earned 4.46 trillion won ($3.97 billion) in the three months ended 30 September, up from net profit of 3.81 trillion won the year before, it said Friday. The result was Samsung’s third straight record net profit.

Suwon, South Korea-based Samsung is a major force in the global electronics industry. Besides dominating in memory chips and flat screen TVs, the company is also the world’s largest manufacturer of large-sized liquid crystal displays and ranks No. 2 in mobile phones behind Nokia Corp. of Finland.

The company manufactures both DRAM chips, used mostly in personal computers, and NAND flash memory chips, used in products such as digital cameras, music players and smartphones.

Its semiconductor business racked up record sales of 10.66 trillion won during the quarter, while sales in the memory division rose 60% from the year before despite a decline in prices because of an oversupply of chips.

Sales of mobile phone handsets rose 19% from a year earlier to 71.4 million units, helped by the launch of the Galaxy S and Wave smartphones.

Samsung said overall third-quarter sales rose 12% to 40.23 trillion won, also a record and the first time the company’s revenue has surpassed the 40 trillion won mark. Sales the year before were 35.89 trillion won.

Looking ahead, Samsung vice president Robert Yi said the outlook for the rest of the year was mixed.

Strong sales of mobile phones and an increase in year-end demand for televisions would be countered by more oversupply and price declines for memory chips along with a potential further decline in LCD panel prices.

“Combining these with the possible appreciation of (the) won, we expect overall fourth-quarter business conditions to be difficult," he told analysts on a conference call.

The South Korean currency rose 4.7% on average against the dollar during the third quarter, according to the Bank of Korea.

Samsung achieved its third-quarter results due to the “cost competitiveness" of its memory chips and “strong sales of handsets," Yi said. That was despite difficulties due to weakness in developed markets, which caused a slowdown in demand for products including personal computers and televisions, he said.

Flat screen TV shipments rose 17% in the third quarter to 9.07 million units, but Samsung said in its statement that sales of premium LED and 3D-capable TVs declined after soccer’s World Cup “due to weakening consumer confidence amid the slow economic recovery in the United States and Europe."

Another weakness was the LCD business, where Samsung said that shipments increased slightly from the year before and were flat from the previous three months.

On the operating level - seen as a direct indicator of business performance before taxes, dividends, asset sales and other items figured into net profit or loss - Samsung reported a profit of 4.86 trillion won in the third quarter, or 15% higher than the year before.

Shares in Samsung, which released earnings about 25 minutes after the start of trading, extended losses, falling 2.4% to 746,000 won in afternoon trading. The stock price surged 77% in 2009.