Samsung Electronics

Samsung profit slips on weak smartphone, flat-screen results

Weakness in flat-screen panels and maturing high-end smartphone business weighs on results

PUBLISHED : Tuesday, 29 April, 2014, 11:44am
UPDATED : Wednesday, 30 April, 2014, 1:08am

Samsung Electronics reported its second consecutive fall in quarterly profit yesterday as weakness in flat-screen panels and the maturing high-end smartphone business weighed on the South Korean giant's earnings.

But the company said the soccer World Cup in Brazil starting in June should help boost sales of screens and smartphones this quarter as fans invest in fancy gadgets to watch the action.

Display panels … are expected to increase as new mobile devices are rolled out

The world's biggest smartphone maker is also banking on its flagship Galaxy S5 handset, launched this month, to outsell its predecessor and widen profit margins.

South Korea's largest company by market value said operating profit in the first quarter fell 3.3 per cent from a year earlier to 8.5 trillion won (HK$63.5 billion) versus guidance of 8.4 trillion won.

Profit in the mobile division fell 1.2 per cent to 6.43 trillion won from 6.51 trillion won a year earlier.

"Samsung is expected to see profits rally in the second quarter and beyond, on the back of improved sales of display panels and home appliances," the company said in a statement.

"Orders for display panels that are used for premium smartphones and TVs are expected to increase, as new mobile devices are rolled out into the market and as consumers look forward to the upcoming World Cup in Brazil."

Even so, Samsung could be heading for its first decline in annual profit in three years as margins tighten across the product line, analysts say.

As growth in its core high-end smartphone business eases in wealthy countries, the battle is shifting to cheaper, narrow-margin phones in emerging markets.

Samsung's mobile business is poised for an uncertain year, analysts say. Its broad range of low-end phones is meeting competition from Chinese-made offerings with improving quality, while the large-screen advantage of its top-range phones could be countered by new models from Apple.

Any further decline in profitability could increase pressure from shareholders to produce a new growth engine or increase payouts.

Samsung's flat-screen panels business posted an 80 billion won loss during the quarter, compared with a 770 billion won profit a year earlier, as weaker global sales weighed on prices.

The company also cited higher costs stemming from an increase in production in China as a reason for the earnings slump in the panels business.

In the chip business, profits rose 82 per cent from a year earlier to 1.95 trillion won, thanks to solid demand from PC makers and tight supply.