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Samsung Electronics posts record Q1, says optimistic on Q2

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Samsung Electronics posts record Q1, says optimistic on Q2

Friday, April 30, 2010

Samsung Electronics says net profit has surged in the first quarter of this year amid higher sales.

The company said on Friday that it earned 3.99 trillion won ($3.58 billion) in the three months ended March 31. It had net profit of 580 billion won ($520.26 million) the year before.

Samsung said sales in the first quarter totalled 34.64 trillion won ($31.07 billion). That was 20.8 percent higher than the 28.67 trillion won ($25.72 billion) reported a year earlier.

Samsung is the world’s largest manufacturer of computer memory chips, flat screen televisions and liquid crystal displays. It ranks No.2 in mobile phones behind Finland’s Nokia Corp.

Samsung Electronics said yesterday that it plans to significantly increase its investment in both chips and flat-screens in 2010, giving a bullish outlook for the remainder of this year.

Samsung posted a historic high operating profit of 4.41 trillion won ($3.9 billion) in the first quarter, mainly driven by the stellar performance of its chip business, which reported 1.96 trillion won in operating profits. Its operating profits are slightly higher than its earlier forecast of 4.3 trillion won ($3.88 million). Samsung’s first-quarter sales reached 3.99 trillion won, compared with its guidance of 34 trillion won.

Samsung expected its earnings to further improve in the second quarter, and said it was “cautiously optimistic” about the second half as well, expecting strong demand for memory and LCDs, and a sales increase for handsets and TVs.

Samsung is the world’s top maker of memory chips, LCD panels and LCD TVs, and the No. 2 handset vendor.

“In order to address the increased demand in the market, we are planning to substantially increase the capital expenditure from the initial guidance, which was 5.5 trillion ($4.93 billion) for memory and 3 trillion ($2.69 billion) for LCDs,” Robert Yi, Samsung’s head of investor relations, said at an earnings conference call yesterday.

Media and analysts have speculated that Samsung may expand its chip investment to more than 7.5 trillion won ($6.73 billion) and its LCD spending to 4.5 trillion won ($4.04 billion) this year.

As for the memory market, Samsung expected supply and demand to remain tight for both DRAM and NAND in the current quarter, saying that a supply increase may not be enough to catch up with robust demand.

However, Samsung’s LCD division posted a lower-than-expected operating profit of 490 billion won ($439.53 million), ceding its top position in terms of profitability to its rival LG Display. LG, the world’s No. 2 LCD maker by sales, reported first-quarter operating profit of 789.4 billion won ($708.09 million), which beat market forecasts.

Samsung said the fall was mainly caused by depreciation costs, and expected an improved profit in the current quarter.

Samsung faces an increasing threat from LG Display, which seeks to catch up not only in profit but sales, with aggressive investment plans. To cope with the challenge, Samsung may spend an additional 1.5 trillion won ($1.35 billion) in expanding its eighth-generation LCD line, on top of the already earmarked 3 trillion won ($2.69 billion), market watchers say.

Yi said that a revision of its investment may be announced before the second-quarter earnings results will be announced in July.

Samsung’s mobile operating profit beat expectations, reaching 1.1 trillion won ($986.7 million). Samsung’s telecommunications division, which includes its handset business, posted a 12 percent operating profit margin, which Samsung ascribed to a reduction in marketing costs and strong sales of mid-end and high-end devices, especially touchscreen phones and messaging phones. Samsung expects a double-digit operating margin for its handset business this year, according to Yi.

A Samsung executive also said during the conference call that the company aims to achieve handset sales that would exceed its initial target of 270 million units this year. Samsung also expected that Android phones would account for more than half of its smartphones this year, while models based on its proprietary Bada platform will make up one third of its total smartphone models.
Yi said Samsung was developing a tablet-like PC which would challenge Apple’s iPad, and said the new model would hit the market after the first half of this year.

Samsung’s Digital Media division, which includes its TV business, saw its operating profit increase 11 percent to 520 billion won ($466.44 million) this year. Its TV sales reached a record high of 8.4 million units in the January to March period, up by nearly 50 percent from a year ago, driven by the growth of shipments to both advanced and developing markets, the company said.

Samsung shares jumped 2.9 percent at yesterday’s close, while the broader market rose 0.8 percent.

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