Samsung Electric says quarterly profit fall likely milder than forecast

SEOUL: Samsung Electronics Co Ltd said yesterday quarterly operating profit likely fell at a milder pace than analysts forecast, indicating memory chip prices bottomed out and strengthening hope of recovery from an industry downturn.

The announcement sent Samsung’s share price up 2.2% in morning trade, bucking the wider market’s 0.8% fall, with cross-town chip rival SK Hynix Inc up over 5%.

Samsung, the world’s biggest maker of memory chips, has seen earnings drop since late 2018 as a weak global economy curbed spending by data centre customers while rising inventories squeezed prices, ending a two-year industry boom.

But expected easing in the SinoUS trade war is lifting optimism for a return of demand this year from server customers and makers of fifth-generation (5G) network-ready smartphones. Last month, Samsung’s US chip rival Micron Technology Inc forecast the industry to recover in 2020.

“The DRAM chip price has already hit bottom while inventories have been holding at lower levels – a potentially encouraging sign to pull up DRAM prices in the second quarter,” said analyst Park Sung-soon at Cape Investment & Securities.

Samsung said it expected to report later this month a 34% drop in operating profit at 7.1 trillion won (RM24.85 billion) for its fourth quarter ended Dec 31 versus the same period a year earlier. That would beat the forecast 6.5 trillion won operating profit from Refinitiv SmartEstimate, helped by one-off gains, analysts said.

Its revenue fell 0.5% to 59 trillion won, missing the 60.7 trillion won forecast from Refinitiv SmartEstimate.

Annual operating profit likely fell 53% to 27.7 trillion won, the lowest since 2015 and steepest decline in a decade.

Earnings from chips and mobile devices in the fourth quarter were better than analysts expected, whereas the display business lagged, said a person with direct knowledge of the matter, declining to be identified as the information was not public. – Reuters