Samsung earnings guidance estimate 60 percent profit fall

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Samsung has released its earnings guidance for the first quarter of 2019 with its estimated quarterly operating profit falling 60 per cent to its lowest level in more than two years.

The company’s guidance was below analyst estimates, although Samsung issued a profit warning last week that blamed slow demand for memory chips and an expansion of panel capacity among Chinese competitors.

Operating profit was estimated at Won6.2tn ($5.5bn) for the first three months of this year, compared with Won15.64tn from a year earlier. Sales fell 14 per cent to Won52tn.

The downbeat guidance is the latest sign of woes hitting global electronics manufacturers as chipmakers have been hit by falling demand and rising stock inventories following a slump in smartphone sales.

Declining cryptocurrency mining coupled with a broader economic slowdown and worries over the US-China trade dispute have added to the sector’s woes.

Samsung earnings guidance estimate 60 percent profit fall

Analysts estimate operating profit from the semiconductor division, which accounts for nearly 60 per cent of Samsung’s earnings, at Won3.6tn, down 54 per cent from Won7.8tn a year earlier.

Prices for dynamic random-access memory chips used for personal computers, servers and other devices, have slumped nearly 30 per cent in the first quarter, the biggest decline since 2011, according to research group TrendForce.

The DRAM market is expected to fall another 20 per cent in the second quarter and 10 per cent in the second half.

Analysts say Samsung’s display business was likely to have posted a Won600bn operating loss, due to falling demand for organic light-emitting diode panels from Apple amid slow iPhone sales.

The mobile division fared relatively well, with analysts estimating its operating profit at Won2.7tn, compared with Won1.5tn a year earlier, helped by strong sales of the company’s Galaxy S10 range of smartphones.

Samsung will unveil detailed first-quarter earnings later this month.

2018 4Q and 2018 1Q consolidated figures based on K-IFRS are as follows

(in trillion won) 2018.4Q 2018.1Q
Sales 59.27 60.56
Operating profit 10.80 15.64

Samsung is pinning high hopes on 5G networks and its new foldable phones to drive growth, although analysts remain sceptical over their near-term contribution to earnings. South Korea’s telecom operators launched full-fledged 5G services on Friday, becoming one of the first nations to offer the fast communications.

In February, Samsung unveiled its pricey foldable device — Samsung Galaxy Fold — but the high price tag put the product out of the reach of most consumers.  Despite broad optimism about Samsung’s earnings turnaround in the second half, some analysts remain wary over how strong the potential rebound will be.

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