Solid smartphone sales drive Samsung Q2 profit

LG posts 19% increase in Q2

SEOUL, July 28, (AFP): Solid sales of its flagship smartphone and an aggressive cost-cutting drive saw Samsung Electronics on Thursday post a better-thanexpected gain in net profit for the second quarter.

The giant South Korean conglomerate said its key mobile division enjoyed “substantial earnings improvement” in the April-June period led by expanded sales of its high-end Galaxy S7 and S7 Edge phones.

Industry trackers estimate that the world’s largest smartphone maker has sold about 26 million units of the S7 since it hit stores in March ahead of launches by competitors, including arch-rival Apple.

The mobile division accounts for the lion’s share of Samsung’s business, but it has been increasingly squeezed by competition both from Apple’s iPhone and by lower-end devices from Chinese rivals such as Huawei.

Samsung’s overall net profit for the second quarter stood at 5.85 trillion won ($5.2 billion), up 1.7 percent from the previous year and slightly above analyst estimates.

Operating profit was up nearly 18 percent at 8.1 trillion won, Samsung said in an earnings statement, reflecting a sizeable cut in mobile marketing costs — partly due to the underwhelming performance of the iPhone.

The Samsung earnings came two days after Apple announced a 27 percent second quarter profit slump on a sharp drop in sales of its iconic handset.

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Television and component sales were also strong in the April-June period, Samsung said, with increased profits among premium product ranges.

“Looking ahead to the second half of 2016, the company expects its solid performance to continue ... mainly driven by earnings increase in the component business due to sales growth in high value-added products,” the statement said.

It also flagged a likely rise in mobile division marketing costs with the launch of its latest outsized Galaxy Note smartphone next week.

The Note series has never had as much of a sales impact as the S-series smartphone, and there will be increased competition with a new iPhone set for release later in the year.

Greg Roh, an analyst at HMC Investment, said a steady strengthening of the South Korean currency could also eat into profit margins.

“It will be harder for Samsung in the third quarter because of the stronger won and an increase in marketing costs,” Roh said.

“The key point will be whether components — like semiconductors — will be able to make up for the loss in profits from finished products,” he added.

Sustained profit gains from the company’s cheaper smartphones, such as the J series, also helped to boost Samsung’s mobile earnings in the second quarter.

Operating profit at the mobile unit rose to 4.32 trillion won from 2.76 trillion won a year ago.

Operating income at the semiconductor unit was 2.64 trillion won, compared with 3.40 trillion won a year earlier, as weaker demand pressured component prices.

The chip unit had helped buttress Samsung’s profit margins when the mobile business went into a protracted slump from late 2014. The world’s number-two chipmaker has dominated production of faster, larger-capacity chips using a technology called 3D NAND.

Samsung was the first to mass produce chips using the technology and is producing the high-margin chips — used in mobile gadgets and hard drives for servers — at its factories at home and in China.

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SEOUL: Sales of popular home appliances and televisions offset slumping smartphone sales at

South Korea’s LG Electronics, which reported a sharp increase in second-quarter net profits on Thursday.

Net income for April to June amounted to 268.5 billion won ($238.5 million), up 18.6 percent from a year earlier and 36 percent from the previous quarter, the Seoulbased company said in a statement.

The company produces a range of products from mobile phones to televisions and home appliances including air conditioners, washers and refrigerators.

Operating profit also rose 140 percent on-year to 584.6 billion won, while sales inched up 0.6 percent to 14 trillion won.

The company attributed the growth to robust sales of high-end TVs and home appliances, especially for corporate clients worldwide as well as consumers in European and Asian markets.

Operating profits at the home appliance division grew by 50 percent on-year, while the TV unit showed a dramatic turnaround from a loss of 82.7 billion won a year ago to operating profit of 356.7 billion won.

Both units also reported operating margins of about nine percent in contrast to its chronically lossmaking handset unit.

The handset unit has spent lavishly to promote its latest flagship smartphone called G5 since its launch in April, but racked up an operating loss of 150 billion won as sales sagged.

The company warned of “more competitions ahead” in the third quarter as rivals like Samsung and Apple are expected to roll out new smartphones.

LG has struggled for years to increase its smartphone sales after a late entry into the market and has since found itself hemmed in by emerging Chinese rivals such as Huawei and Lenovo.