Samsung predicts 24.5 percent fall in operating profit for Q2

South Korean electronics giant Samsung could be looking at another quarter of profit decline, with the company today revealing an estimated 24.5 percent drop in operating profit from the same period last year.
Written by Leon Spencer, Contributor on

Samsung has revealed its profit guidance for the second quarter of 2014, with the world's largest mobile handset manufacturer revealing that it expects to see an estimated 24.5 percent drop in operating profit for the quarter compared to the same period last year.

The company today confirmed its guidance had not shifted from the figures it released in April, estimating that its consolidated sales for the second quarter this year would be 52 trillion won (US$51.4b), with an operating profit of approximately 7.2 trillion won (US$7.1 billion) — based on estimate ranges.

This represents a fall of 2.33 trillion won (US$1.4b) from the operating profit of 9.53 trillion won (US$8.5b) it recorded for the second quarter of 2013, and a fall of 5.46 trillion won (US$5.4b) from the 57.5 trillion won (US$51b) in revenue it saw in the same period last year.

In its initial earnings guidance for the second quarter of 2014, Samsung suggested that the weaker predicted results were due to a combination of a strong Korean won — which has risen to a six-year high against the US dollar — and a decline in smartphone and tablet shipments.

As early as April, Samsung told shareholders that the expected quarterly decline in profit and revenue was due to weak demand for IM products, increased marketing expenses to "reduce inventories".

Today, Samsung laid the blame for its profit contraction at the feet of growing competition in low-end mobile product channels from Chinese and European manufacturers and, of course, a decline in mobile device shipments — partly due to slow growth in the market.

Samsung's comments are backed up by the latest smartphone sales data by Kantar Worldpanel ComTech, which shows that Samsung's flagship mobile product, the Galaxy S5, was the third best selling smartphone in the UK during May, already lagging behind its older iPhone 5S and 5C rivals only a month after its European release.

Meanwhile, in the United States, the Galaxy S5 was the second highest selling smartphone in May, just behind the iPhone 5S, according to Kantar's sales data.

However, Kantar also found that, at a total brand level, Samsung claimed the top spot in the US, with 36.8 percent of sales, compared to Apple's 32.5 percent over the past three months.

At the time of writing, Samsung's shares stood at 1.3 million won (US$1,285), down from a high of 1.5 million won (US$1,482) in November last year, but up from the six-month low of 1.24 million won (US$1,226) it hit in February this year.

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