​Samsung expects 10 percent jump in profit for Q1

Samsung is expect to beat market forecast for its first quarter profits thanks to stronger-than-expected sales of the Galaxy S7 and S7 Edge and solid performances from its semiconductor division as it estimates a profit jump of 10 percent in its earnings guidance.
Written by Cho Mu-Hyun, Contributing Writer

Samsung expects an operating profit of 6.6 trillion won and revenue of 49 trillion won for the first quarter of the year, it said in its preliminary earnings guidance Thursday, beating market expectations.

The positive figure is likely due to the higher-than-expected sales of the Galaxy S7 and S7 Edge, and a solid performance from its semiconductor business despite falling chip prices.

Several brokerages have upgraded their sales expectation for the flagship phones late last month.

Korean analysts initially showed lukewarm reception for the new phones but since then have upgraded their estimate.

Samsung's profitability has been hampered in recent years by the rise of cost-effective Chinese rivals in the low- to mid-end and strong performance of rival Apple in the premium sector. It posted its lowest net profit in four years in the previous quarter.

In China, its second most important market after the US, it lost out to local rivals but mobile boss DJ Koh said it was expecting a return to form this year.

Profit is set to jump 10.4 percent from 5.98 trillion won and revenue 4 percent from 47.12 trillion won it posted a year ago.

Operating profit is set for a boost of around 7.5 percent from the 6.1 trillion won it posted for the fourth quarter of 2015. In revenue, it expects a drop of 8.1 percent, from 53.3 trillion.

In semiconductors, prices of DRAM and NAND flash are dropping due to oversupply and saturation, but Samsung seemed to have successfully defended its margins by increasing profitability.

"Samsung's DRAM shipment probably shipped slightly lower than our previous forecast but [the solid profits from semiconductors] must have come from them focusing on expanding profitability rather than increasing shipment," said Daishin Securities analysts Kim Kyung-min.

The South Korean tech giant has begun mass production of 10-nanometer class DRAMs in February, the fastest among rivals, which will allow it to set a premium price for clients.

Net profits and the precise contribution of each businesses will be announced at the end of the month in its official filing.

Editorial standards