Samsung Electronics’ operating profit beats market expectations in Q1

SEOUL (XINHUA) – Samsung Electronics, South Korea’s tech behemoth, saw its first-quarter operating profit beat market expectations, regulatory filing data showed yesterday.

Operating profit amounted to KRW6.4 trillion (USD5.2 billion) in the January-March quarter, up 2.7 per cent from a year earlier. It was down 10.6 per cent from the previous quarter.

Revenue grew 4.9 per cent over the year to KRW55 trillion (USD44.9 billion) in the first quarter, but it declined 8.1 per cent compared with the prior quarter.

The ratio of operating profit to revenue stood at 11.6 per cent in the quarter, marking the lowest in over three years since the third quarter of 2016.

The first-quarter earnings beat market consensus of about KRW6 trillion (USD4.9 billion) for operating profit and KRW54.7 trillion (USD44.7 billion) for revenue.

Market expectations for operating profit was lowered from around KRW6.6 trillion (USD5.4 billion) unveiled in February as the COVID-19 pandemic across the world stoked worries about the global economic slump.

Market watchers estimated that Samsung’s chip-making unit recorded an upbeat profit as no production disruption was found in semiconductor factories despite the COVID-19 outbreak.

Demand increased for memory chips used for servers as the virus spread encouraged people to stay at home and raised demand for “untact” services such as food delivery smartphone apps.

Market consensus for the first-quarter operating profit of Samsung’s chip-making unit was set at KRW3.7 trillion (USD3 billion).

The IT & mobile communications division, which makes smartphones, was estimated to have recorded an operating profit of KRW2.4 trillion (USD2 billion) in the March quarter.

The sale of flagship smartphones such as Galaxy S20 and foldable phones was believed to have declined amid the global economic slowdown, but the smartphone unit’s operating profit was modest as the local currency depreciated versus the United States (US) dollar.

The won/dollar exchange rate averaged 1,193.6 won per dollar in the first quarter, up from 1,175.8 won in the prior quarter. The South Korean currency’s fall to the greenback raised the repatriated earnings from smartphone export.

The number of Galaxy S20 sold in the first quarter was estimated at less than 60 million, but higher product price and lower marketing cost was believed to have contributed to the modest earnings in the smartphone business.

The display panel business was estimated to have posted an operating loss in the first quarter on lower panel price and weak demand.

The consumer electronics division, which manufactures TVs and home appliances, was also believed to have seen a fall in the first-quarter operating profit.

Outlook for Samsung’s second-quarter earnings was bleak on growing concerns that the COVID-19 outbreak across the globe would hit hardest the world economy in the April-June quarter.

Demand for memory chips used for mobile phones was forecast to reduce in the second quarter, offsetting robust demand for chips used for servers.

The sale of smartphones and consumer electronics was expected to slide in the June quarter amid the rising number of factories closed off across the world.