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Samsung Electronics’ 4Q profit sinks 40 percent

/ 09:44 AM January 28, 2016

SEOUL, South Korea—Samsung Electronics reported Thursday a wider-than-expected decline in its earnings for the final quarter of 2015 as its two core businesses face a slowdown amid weakening global demand for consumer electronics products.

The company also hinted at a profit decline for the first half of this year, citing difficult business environments.

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Samsung’s net profit for the October-December period plunged 40 percent from a year earlier to 3.2 trillion won ($2.7 billion).

BACKSTORY: Samsung 3Q operating profit surges, shares jump 9 percent

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The result fell short of expectations, even after considering the negative impact from foreign currency exchange rates estimated at 400 billion won. Analysts expected 5.1 trillion won in net income, according to FactSet, a financial data provider.

Sales edged up 1 percent to 53.3 trillion won for the quarter, while operating income rose 16 percent to 6.1 trillion won, in line with its earnings preview earlier this month.

The latest results reflect new challenges for Samsung as two core businesses, smartphones and semiconductors, face a slowdown. Weakening global demand for smartphones is taking a toll on Samsung’s sales of mobile components to companies such as Apple, as well as sales of Samsung’s own mobile devices.

The company is the world’s largest maker of memory chips that are used in PCs and mobile devices. It is also the world’s largest maker of smartphones and television sets.

For the full year, it earned 19.1 trillion won ($15.8 billion), down 19 percent from the previous year and the lowest level in four years. It was the second year in a row with a decline in annual net income after the company’s earnings peaked at 30.5 trillion won in 2013.

During the final quarter of 2015, the semiconductor business reported its first quarter-over-quarter profit decline in more than one year. 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 addition to the softer global demand for mobile devices and PCs, an oversupply of memory chips that pushed down prices also drove the weaker-than-expected profit growth.

The mobile phone business posted its second straight quarterly profit decline with 2.2 trillion won in operating income. Even though Samsung expanded sales of its high-end smartphones, including the Galaxy Edge series with curved displays, consumers flocked to cheaper smartphones, driving down its overall profit.

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Apparently aware of growing pressure to seek new revenue sources, Samsung gave out some hints about its future plans. Samsung pointed to transparent, mirror, automotive and flexible displays as future display business areas. And it singled out home and health as areas it will initially focus on with Internet-connected gadgets and home appliances.

Samsung reiterated its promise last year to increase shareholder returns, including a plan to buy back and cancel shares. The move did little to shore up its share price. After the earnings release, the company’s shares traded 2 percent lower when the Seoul bourse opened.

TOPICS: electronic device, profit, profit decline, Samsung, smartphones, technology
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