Roundup: Samsung Electronics' Q2 operating profit drops on weak smartphone sales
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E-mail Xinhua, July 31, 2014
Samsung Electronics, the world's biggest manufacturer of smartphones, memory chips and display panels, said Thursday that its second-quarter operating profit dropped due to weak smartphone sales and the local currency's appreciation against the U.S. dollar.
Operating profit was 7.19 trillion won (7 billion U.S. dollars) in the second quarter, down 24.6 percent from a year earlier, the company said in a statement. From three months earlier, the profit declined 15.3 percent.
It was the first time in two years that the tech giant recorded operating profit below 8 trillion won. The earnings missed a market consensus of some 8 trillion won in operating profit.
The company said that the local currency's appreciation to the dollar chipped away around 500 billion won in the second-quarter operating profit.
The earnings were also affected by slow global sales of smartphones and tablets along with escalating marketing expenditure to reduce inventory. Weak demand for mobile devices impacted the company's chip business.
Samsung sold 95 million mobile phones and 8 million tablets in the second quarter, down 14.4 percent and 38.5 percent each from the first quarter of last year.
Revenue fell 8.9 percent from a year earlier to 52.35 trillion won in the second quarter, and net income tumbled 19.6 percent to 6.25 trillion won.
The IT & mobile communications (IM) unit, which makes smartphones, logged an operating profit of 4.42 trillion won on 28. 45 trillion won in sales for the second quarter.
It was the first time the IM division's operating profit fell below 5 trillion won. The profit was down 29.6 percent from a year earlier, and down 31.3 percent from the prior quarter.
The company said demand for IM products was traditionally low in the second quarter, noting that sales for both smartphones and tablets declined due to pre-existing inventories in European markets, which increased marketing expenditure.
Samsung said market growth is expected to improve in the second half with stronger seasonal demand, adding that it will focus on releasing new premium mobile devices and a new flagship model with large screen to meet this rise.
The consumer electronics division, which manufactures home appliances and medical equipments, logged an operating profit of 770 billion won on revenue of 13 trillion won. The profit was up 300 percent from the previous quarter.
Samsung outperformed the market in both sales volume and shipments by introducing strategic products like the new UHD curved TVs. It expected to see continual growth in TV sales compared with last year due to strong seasonal demand for flat panel TVs.
The semiconductor business, which makes memory chips and system LSI, registered an operating profit of 1.86 trillion won on 9.78 trillion won in revenue.
The revenue increased 4 percent from three months earlier on the back of solid demand for memory chips and main applications, but profit margin declined 5 percent due to a slowdown in the system LSI business.
The company said it will keep expanding the 20-nanometer class migration to enhance cost competitiveness and maintain profitability and market leadership. It planned to spend a total of 14.4 trillion won this year on the chip business.
The display panel business posted an operating profit of 220 billion won in the second quarter on revenue of 6.3 trillion won. The unit turned into black after logging a deficit in the prior quarter.
The company said that it will focus on expanding the application of flexible display to the fast-growing wearable device market. Endi
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