Korean electronics giant, Samsung Electronics, recorded a lower than expected second quarter sales due to falling demand for television and home appliances in Europe, Samsung’s biggest market. The total revenue for April-June quarter is 47 trillion won ($41.4 billion), slightly lower than consensus estimates of 50 trillion won. However, operating profit for the quarter rose 79 percent from a year earlier to 6.7 trillion won ($5.9 billion).
The company’s stock dropped 2.4 percent, trading at 1,158,000 won on Thursday. Samsung was the single largest contributor to the decline on MSCI Asia-Pacific Index yesterday.
Galaxy the Key Driver to Soaring Profits
Though shortage of components such as chips and cases hampered the production of the company’s Galaxy line-up of smartphones, Samsung sold over 50 million smartphones, with Galaxy S III alone selling over 7 million units.
“Our smartphones are flying off the shelves, with some outlets reporting 40-60 percent sales growth, but that’s distorting the overall trading outlook which is more challenging due to the weak global economy and a weak euro,” a Samsung executive told Reuters.
Profits from the mobile division have almost doubled from a year ago. The mobile business now accounts for over 70 percent of Samsung’s total earnings.
Earnings are likely to stay stronger as sales of the high-end Galaxy S III increase and drive the mobile division’s earnings to above 5 trillion won. Nho Geun-chang, an analyst at HMC Investment Securities in Seoul, predicts that the sales of S III can hit 19 million units in the third quarter. The latest Galaxy model is likely to enjoy a boom until the next iPhone launch.
Semiconductor and TV Sales Decline
Profits from the semiconductor segment declined 29 percent as global computer demand shrank. A weak chip and TV market is the primary reason behind the 15 percent decline in Samsung shares prices in the past two months. Though the launch of the new iPad may hamper sales of Galaxy smartphones, it would definitely boost the semiconductor business, as Samsung is the sole producer of chips used in iPhones and iPads. The company also supplies Apple with mobile memory chips, NAND flash and display screens.
The consumer electronics business, which includes TV operations, is battling with weak TV demand especially from a slowing European economy. TV shipments fell 8 percent in the first quarter, and failed to pick up in the second quarter. However, the operating profit for the consumer electronics division increased to 580 won from 510 billion won a year ago, benefiting from demand for display used in mobile devices.
