Samsung posts disappointing earnings forecast for Q2

July 5, 2013
A woman walks past a Samsung Galaxy sign at a mobile phone shop in Seoul on August 27, 2012/AFP
A woman walks past a Samsung Galaxy sign at a mobile phone shop in Seoul on August 27, 2012/AFP

, SEOUL, July 5 – Samsung Electronics Co. the world’s largest technology firm by revenue, on Friday fuelled concerns about flagging demand for high-end smartphones with a weaker than expected earnings forecast for the second quarter.

The South Korean giant forecast of 9.5 trillion won ($8.3 billion) in operating profit for the April June quarter would be a record. But analysts had expected a figure of more than 10 trillion won, and shares in the firm lost more than three percent in afternoon trade.

“It’s weaker than expected. Slow mobile sales, combined with hefty marketing costs for the flagship Galaxy S4 smartphones, undermined the bottom line,” Jeff Kim, of Hyundai Securities, told AFP.

And Daiwa Securities analyst Jae H. Lee said the firm would likely be hit further by higher advertising costs in the second half as it tries to keep sales volumes up.

Samsung has lost nearly $30 billion in market value since mid March, before it launched the Galaxy S4 smartphone a month later.

Investors are concerned that the company relies too heavily on IT and mobile business, which accounts for more than 70 percent of its operating profit, at a time when the global outlook for this sector is not so bright, Jeff Kim said.

Several brokerages have downgraded Samsung and their earnings forecasts for the company on fears that the S4 is not selling as strongly as hoped.

Kim Young Chan, an analyst at Shinhan Financial Investment said Samsung’s other business lines semiconductor and display units were projected to have produced good results.

Samsung, the world’s top maker of smartphones, memory chips and flat-panel TVs, was giving earnings guidance before official results at the end of July.

The estimate for second quarter operating profit represents a 47 percent increase from the actual figure of 6.46 trillion won a year earlier.

The forecast marks an 8.2 percent rise from the previous quarter, when the tech behemoth posted an operating profit of 8.78 trillion on the back of robust smartphone sales.

The company did not provide a net profit estimate or break down figures for its individual business units.

Sales in the April-June period were expected to reach 57 trillion won, up 19.8 percent from the same period last year.

A poll of seven analysts forecast an average second-quarter operating profit of 10.1 trillion won on sales of 58.6 trillion won, Dow Jones Newswires said.

In afternoon trade on Seoul’s KOSPI stock index, Samsung was down 3.49 percent at 1.27 million won.

The new market jitters about Samsung come after Canada’s troubled BlackBerry, fresh after launching two flagship phones, on Friday posted an unexpected first quarter loss and disappointing sales figures. Its share price tumbled nearly 28 percent on the news.

Shares in US computer giant Apple are well off their historic highs, having taken a beating earlier this year on concerns that demand for the iPhone 5 may be tapering off.

The mobile business, a key profit driver for Samsung, accounted for 74 percent of its total operating profit in the first quarter. Samsung also makes consumer electronics including cameras and laptops, and home appliances.


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