Share

Samsung warns of tough 2016 after 4Q profit sinks

Samung warned that its future results might be soft due to slowing economic growth in China and weaker emerging market currencies.

Advertisement

Samsung said 2016 was expected to throw up continued challenges to maintaining earnings “due to a hard business environment and slowing IT demand”.

The semiconductor division was the top earner for the sixth consecutive quarter in the October-December period, lifting its operating profit to 2.80-trillion won from 2.70-trillion won a year earlier.

While operating profit from Samsung’s mobile business rose 14% from the disastrous fourth quarter a year earlier, mobile revenue slipped.

“The smartphone market would remain hard throughout this year, but we still see growth in the lower-end segment, although competition will be tougher”, Samsung mobile communications vice president Lee Kyeong-tae said on the call.

It logged 2.8 trillion won in operating income, about 25 percent lower than the previous quarter but slightly higher than a year earlier.

In the January-March period of this year, Apple’s revenue is expected to be between $50 billion and $53 billion, a decline from $58 billion a year ago and the first predicted year-on-year decline in sales since the second quarter of the 2003 fiscal year.

In the fourth quarter, weak demand across certain markets, including PCs, impacted the Memory business’s overall revenue, but sales of mobile and server DRAM were solid. For instance, in mid-2015 the company cut prices on its flagship Galaxy S6 devices, while promoting its cheaper, well-specified Galaxy A and J series smartphones.

IDC analyst Anthony Scarsella said the stock market reacted negatively this week primarily to Cook’s comment about the current quarter being down and didn’t take note of Apple’s view that smartphone penetration is still low in China and India.

The result is significant as Samsung led the global smartphone market past year by selling 391 million units, far outpacing Apple’s 231 million units, with their respective market shares reaching 22.2 percent and 16.1 percent.

“However, we expect the business conditions to improve in the second half driven by the strong seasonality in set businesses”, he said – referring to mobile phones, home appliances and TVs.

Later on Thursday, the firm said it will sell a 37.5 percent stake in Samsung Card Co Ltd to Samsung Life Insurance Co Ltd for 1.54 trillion won ($1.3 billion), the proceeds from which will be used to fund new businesses.

Sales in Samsung’s key mobile division fell 10 per cent in the quarter to 24 trillion won.

Overall quarterly figures for the final three months of 2015 added to the gloom, showing a 40% slump in net profits versus past year. But the move did little to shore up its share price.

Advertisement

Samsung reiterated its promise previous year to increase shareholder returns, including a plan to buy back and cancel shares.

The Korean smartphone maker’s profits decline 40% YoY due to sluggish PC demand globally