Samsung Electronics expects record-high Q2 profits

[SEOUL] Samsung Electronics expects profits to soar 72 per cent in the second quarter to a record high, it said Friday, as it moves on from a recall debacle thanks to rising memory chip prices and increased demand for smartphones.

The South Korean tech giant estimated its operating profit for April-June at 14 trillion won (S$16.75 billion), up from 8.14 trillion won a year earlier.

That would reportedly make it more profitable in the period than US behemoth Apple, where consensus analyst forecasts point to a profit of US$10.6 billion.

"Samsung is believed to have topped the list of global IT companies, surpassing Intel and Apple, in terms of operating profits for the first time in history," said Kim Dong Won of KB Securities.

It would also be Samsung Electronics' highest-ever quarterly operating profit, surpassing the 10.1 trillion won of the third quarter of 2013.

Samsung has benefitted from increased shipments and strong prices for Dram and Nand semiconductor chips, as it put behind it last year's Galaxy Note 7 recall fiasco.

It appears not to have been distracted by the corruption trial of its detained vice-chairman Lee Jae Yong.

Brisk sales of its new flagship Galaxy S8 smartphones, rising demand for flexible OLED products as well as soaring LCD panel prices also drove its earnings, analysts said.

Samsung withholds sector-by-sector business performance until it releases its final earnings report later this month.

But Greg Roh of HMC Investment Securities told AFP: "All the three sectors - semiconductor business, display and smartphone business - are all believed to have performed well".

"This is a better-than-expected performance," he added.

The earnings forecast surpassed a market consensus of around 13.2 trillion won compiled by FnGuide, a financial information service provider.

Sales for the April-June period are expected to surge 17.8 per cent on-year to 60 trillion won.

Analysts expected the firm to continue to post strong earnings this year.

"Samsung will continue to generate quarterly operating profits hovering above 13 trillion won throughout the second half of this year," Kwon Seong Ryul, a researcher at Dongbu Securities said in a report.

He projects annual operating profits of 50 trillion won for 2017, up 70 per cent from last year.

"The chip business is leading the overall performance, the display and smartphone sectors are also performing well," Mr Kwon said.

But Samsung shares closed 0.42 per cent lower Friday in Seoul on profit-taking led by foreign investors.

The world's top maker of smartphones and memory chips said this week it will invest 20.4 trillion won by 2021 to expand and upgrade its chip plants in the South Korean cities of Pyeongtaek and Hwaseong.

The factory in Pyeongtaek, 70 kilometres south of Seoul, is the world's biggest and has recently started production after Samsung Electronics spent 15.6 trillion won over the past two years to build it.

The company also plans to expand its Nand chip plant in the Chinese city of Xian to meet booming demand for the chips used in high-end storage products, it said.

In smartphones, Samsung has been increasingly sandwiched by smaller Chinese rivals in the low and mid-end markets, and by Apple's iPhone in the high-end segment.

But the firm managed to post stellar profits partly thanks to the robust chip business, which supplies not only to its own handset unit but also other electronics giants including Apple.

It suffered a blow to its reputation last year after a humiliating mass recall of its Galaxy Note 7 smartphone over faulty, exploding batteries.

Refurbished devices - featuring batteries with a slightly smaller capacity - went on sale Friday in South Korea.

AFP