Sam­sung’s Q3 op­er­at­ing profit jumps nearly 80%


South Korea’s Sam­sung Elec­tron­ics flagged a nearly 80 per­cent jump in quar­terly profit Wed­nes­day, as sales of chips and dis­plays off­set stiff com­pe­ti­tion in smart­phones from Ap­ple and cheaper Chi­nese ri­vals.

The stel­lar earn­ings forecast sent shares soar­ing 8.7 per­cent by the clos­ing bell.

Sam­sung pre­dicted op­er­at­ing profit of around 7.3 tril­lion won (US$6.23 bil­lion) for Ju­lySeptem­ber, up from 4.1 tril­lion a year ear­lier and 6.9 tril­lion won the pre­vi­ous quar­ter.

The firm’s flag­ship smart­phone busi­ness is strug­gling against fierce com­pe­ti­tion, sand­wiched be­tween top-end ri­vals like Ap­ple’s iPhone and lower- end de­vices from fast-grow­ing Chi­nese out­fits in­clud­ing Xiaomi.

Sales of the Gal­axy S6 — the latest edi­tion of its top-of-the-range hand­set, launched in April — failed to gen­er­ate much ex­cite­ment.

But brisk busi­ness in chips and dis­plays has largely com­pen­sated for these dif­fi­cul­ties, an­a­lysts said.

In ad­di­tion to pro­vid­ing the chips for its own hand­sets, Sam­sung’s semi­con­duc­tor unit also makes the pro­ces­sors for a num­ber of other com­pa­nies, in­clud­ing Ap­ple.

The firm’s TV busi­ness — the world’s largest — also helped shore up the bal­ance sheet in the third quar­ter, said Lee Se­ung-woo, an­a­lyst at IBK Se­cu­ri­ties.

A re­cent weak­en­ing of the won — down 12 per­cent year-on-year against the U.S. dol­lar by the end of the third quar­ter — helped boost prof­its since most sales of semi­con­duc­tors and dis­play pan­els to emerg­ing mar­kets are set­tled in U.S. dol­lars, he added.

A weaker won makes South Korean ex­ports more com­pet­i­tive over­seas and boosts earn­ings when repa­tri­ated.

“With slug­gish sales of Gal­axy S6 ... the (semi­con­duc­tor and TV) busi­nesses were a ma­jor fac­tor be­hind the sur­prise earn­ings,” Lee said.

Hwang Min-sung, an an­a­lyst at Sam­sung Se­cu­ri­ties Co., said ship­ments of smart­phones ap­par­ently surged to 83 mil­lion units in the third quar­ter from 72 mil­lion units three months ear­lier.

“But the di­vi­sion’s prof­itabil­ity prob­a­bly wors­ened due to fall­ing prices,” he said.

Sam­sung did


pro­vide break­downs for each di­vi­sion, but Meritz Se­cu­ri­ties es­ti­mated the IT and mo­bile sec­tor in­clud­ing smart­phone busi­nesses reaped a 2.1 tril­lion won op­er­at­ing profit in the third quar­ter, down from the pre­vi­ous quar­ter’s 2.7 tril­lion won.

The third- quar­ter op­er­at­ing profit pre­dic­tion beat the es­ti­mate of 6.7 tril­lion won given by an­a­lysts sur­veyed by Bloomberg News.

Sales for the third quar­ter are ex­pected to reach 51 tril­lion won, up 7.5 per­cent from a year ear­lier, the com­pany said in a state­ment.

Wed­nes­day’s es­ti­mate, which comes ahead of au­dited re­sults later this month, did not give a net in­come fig­ure or a break­down of di­vi­sional earn­ings.

Af­ter peak­ing at 10.1 tril­lion won in the third quar­ter of 2013, Sam­sung’s op­er­at­ing profit fell to 4.6 tril­lion won in the cor­re­spond­ing pe­riod of 2014 be­fore re­cov­er­ing grad­u­ally.

As its re­liance on the chip-mak­ing busi­ness grew, the firm in May be­gan build­ing a new US$14.3 bil­lion chip plant at Pyeong­taek south of Seoul.

The in­vest­ment in the fac­tory, which is to be­gin pro­duc­tion in 2017, is the largest the firm has ever com­mit­ted to a sin­gle plant.

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