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Samsung Reports 72 Percent Drop In Profit

Posted on: Friday, 24 April 2009, 10:35 CDT

The world’s leading computer memory chipmaker, South Korea’s Samsung Electronics, reported its first-quarter net profit as having fallen 72 percent in response to the economic downturn, curbing demand and forcing the lowering of prices.

The company disclosed the net profit for January through March as having gone from $1.6 billion the year earlier to $462.6 million.

Due to the discrepancy in pricing from the previous year, sales actually rose by 8.5 percent to 13.9 billion dollars over the period while profit fell from 1.9 billion to 110.5 million. 

Analysts had expected worse from this quarterly result, which compares with the company’s first-ever quarterly loss of $14.9 million in the last quarter of 2008.

The firm commented, "Despite the extremely challenging market environment, Samsung made a strong recovery from the fourth quarter of 2008, supported by stabilizing semiconductor prices, increased profit margin for mobile phones and careful control of marketing and other expenditure."

"Lingering uncertainty means it is difficult to predict a sharp improvement in demand or the business environment in the near term," claimed vice-president Robert Yi.

Yi explained that the forerunner of the country’s largest business group, Samsung Electronics, intends to make technological improvement, high-end products and the strengthening of its global supply chain management its prime focal point.

The chip divisions recorded a quarterly operating loss of $500.5 million on weak demand, but Samsung says they expect the second quarter to yield an improved demand, though oversupply will likely hinder any significant change in prices.

Though Samsung claims to have outperformed in the LCD (liquid crystal display) division among the broader market due to increased sales of large panels, they still recorded an operating loss of $231.6 million. 

The company says it will aggressively promote sales of higher-end products to China, where the market has been comparatively strong.

The first quarter was recorded by the telecommunications division as having recovered an operating profit of  $836.6 million on a consolidated basis. Samsung claims that unit sales remained stabilized regardless of a reduction in the market as a whole.

The overall demand is expected to remain relatively weak in the second quarter but there should be a slight improvement in the market for smart phones, touch-screen mobiles and 3G devices.

As sales of premium products increased and marketing costs were controlled, the company experienced an improved operating profit in the digital media divisions of $283.9 million in the first quarter.

According to Samsung, its new variety of large-screen LED (liquid electronic display) televisions debuted in the first quarter was received well.

Koo Ja-Woo with Kyobo Securities told Dow Jones Newswires, "Samsung will likely post profits even in its semiconductor and LCD panel operations from the second quarter.”

"This is likely to help Samsung expand overall profits in the second quarter."

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On the Net:

• Samsung Electronics

Source: redOrbit Staff & Wire Reports

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