SEOUL: Samsung estimated yesterday that its operating profit would plunge nearly 25 percent on year in the second quarter of 2014, as cheap Chinese devices and a strong won hammered down its share of the global smartphone market.
Operating profit was estimated at 7.2 trillion won ($7.1bn) for the April-June period, compared to 9.53 trillion won a year ago — the South Korean electronic giant’s third straight quarter of year-on-year decline. The Q2 operating profit was down 15.2 percent from the 8.49 trillion won posted in the previous quarter.
The profit drop had been widely expected, but the forecast still missed collated analyst estimates.
Samsung did not provide net income or details of division earnings ahead of the official earnings report to be filed later this month. In an unusual move, the forecast was accompanied by an explanatory note that the company said was to “address market and investor concerns” prior to the audited earnings release. “The company witnessed a slowdown in the overall smartphone market growth and saw increased competition in the Chinese and some European markets,” the note said.
“This led to higher inventories for the medium- and low-end smartphones,” it said, adding that earnings had also been hit by the appreciation of the Korean won against the dollar, euro and most emerging market currencies.
The surging won is currently running at six-year highs against the dollar, impacting South Korea’s export-driven economy.
Sales in April-June stood at 52 trillion won, down 9.5 percent from a year earlier, and 3.1 percent from the first quarter.
Samsung said it “cautiously expects” a more positive outlook in the third quarter with the release of its new smartphone lineup, and a much lower marketing spend compared to the second quarter. However, the next quarter will also see the competition heat up with the expected launch of the iPhone 6 by chief high-end rival Apple.
The company acknowledged that “price competition” in China had boosted inventory in a crucial smartphone market — a situation exacerbated by weaker demand in Europe.
Samsung does not disclose smartphone shipments, but analysts say it moved around 78 million units in the quarter ended June 30 — short of the 90 million units many in the market had anticipated. AFP