SEOUL (dpa-AFX) - Samsung Electronics Co Ltd (SMSN.L, SSNNF.OB, SSNLF.OB) reported a profit for the first-quarter that increased about 55 percent from last year. Total revenue grew about 20 percent from last year. It expects Mobile earnings for the second-quarter to decrease quarter-over-quarter due to a slowdown in sales of its flagship models and increased marketing expenses to address the situation.
Net income attributable to the shareholders of the parent company for the first quarter of 2018 rose 55.06 percent to 11.61 trillion Korean won from 7.49 trillion won last year.
Quarterly operating profit increased 58.03 percent to 15.64 trillion won from 9.90 trillion won in the previous year. Profitability improved significantly in the quarter thanks to the Semiconductor Business and the early global launch of the Galaxy S9. All in all, the operating margin in the first quarter was 25.8 percent, up 6.2 percentage points year-over-year.
Total revenue for the quarter grew 19.82 percent to 60.56 trillion won from 50.55 trillion won in the prior year. First quarter revenue was primarily led by Samsung's Memory Business and increased sales of its flagship mobile products, including the Galaxy S9.
By business unit, the Semiconductor Business' significant earnings performance was driven by demand for memory chipsets for high value-added servers and graphics products. The System LSI and Foundry businesses also contributed to first quarter earnings, backed by strong demand for chips used for smartphones and crypto-currency mining.
For the Display Panel segment, which manufactures OLED and LCD screens, profits were affected by slow demand for flexible OLED panels and greater competition between rigid OLED and LTPS LCD. An imbalance between supply and demand in the LCD market, brought on by competitors' increased production capacity, also weighed on earnings.
For the IT & Mobile Communications Division, the early launch of the Galaxy S9 and solid sales of the Galaxy S8 smartphones resulted in considerable growth in earnings.
As for the Consumer Electronics Division, earnings by the Visual Display Business slid following an adjustment in its TV lineup where some mid-range to low-end products were removed. As for the Digital Appliances Business, rising raw material prices and other factors impacted profitability.
For the second quarter, Samsung expects the Memory Business to maintain its strong performance, but generating overall earnings growth across the company will be a challenge due to weakness in the Display Panel segment and a decline in profitability in the Mobile Business amid rising competition in the high-end segment.
Demand for server and mobile DRAM is expected to be robust and orders for high-density storage chips will grow as the price of NAND softens in the second quarter. For the System LSI and Foundry businesses, shipments of 10-nanometer APs and crypto-currency mining chips will expand but earnings will be impacted due to sluggish demand for smartphone components.
The Display Panel segment will seek profitability in OLED by cutting costs and improving yield, amid the weak demand for flexible products. As for LCD panels, oversupply is anticipated despite an expected boon in TV sales in time with an upcoming major global soccer event.
In the Mobile Business, profitability is expected to decline quarter-over-quarter due to stagnant sales of flagship models amid weak demand and an increase in marketing expenses. Meanwhile, earnings for the Consumer Electronics Division are projected to improve due to increased shipments of new products such as QLED TVs and strong seasonal demand for air conditioners.
The overall business outlook for the second half regarding components is positive, as the company looks forward to strong demand for DRAM and increased sales of OLED panels.
For set products, Samsung aims to sustain profitability by strengthening its market leadership in the sales of premium products despite challenging global market conditions.
In the mid to long term, Samsung will strengthen its business capabilities by delivering differentiated technology in the component business and solidifying its leadership in cutting-edge technologies such as AI and 5G. The company believes opportunities will widen for the set business, as digital devices become increasingly connected.
Samsung said it has not yet finalized its capex plan for 2018, but the company expects it to decline year-over-year. Capex rose substantially in 2017 due to efforts to respond to market growth and emerging technologies, which included expanding the production capacity for flexible OLED panels.
The Semiconductor businesses posted 11.55 trillion won in operating profit on consolidated revenue of 20.78 trillion won for the quarter.
Overall, the Memory Business achieved strong earnings, despite weak seasonality, thanks to a continuation of favorable market conditions as well as strong server demand.
The IT & Mobile Communications Division posted 28.45 trillion won in consolidated revenue and 3.77 trillion won in operating profit for the quarter.
While overall market demand for smartphones and tablets declined during weak seasonality, Samsung's smartphone shipments increased quarter-over-quarter due to an early release of the Galaxy S9 and S9+ as well as solid sales of the Galaxy S8.
As a result of increased sales, mainly driven by premium models, revenue and profit significantly increased from lastyear. Earnings for the Networks Business also improved due to LTE investments from major overseas partners and an expansion of new solutions for optimization of network operations.
Looking ahead to the second quarter, Samsung expects Mobile earnings to decrease quarter-over-quarter due to a slowdown in sales of its flagship models and increased marketing expenses to address the situation. Samsung will aim to maintain sales momentum of the Galaxy S9 and S9+ by expanding the operation of experiential stores, strengthening the cooperation with partners, and reinforcing promotional programs such as trade-ins.
For the second half, Samsung will seek to strengthen sales in the premium market by launching a new flagship model and maintaining long-tail sales of the Galaxy S9, S9+, and flagship models from the previous year. In the mass segment, Samsung will introduce new models optimized for specific markets and strengthen both offline and online sales channels. Moreover, Samsung will continuously invest in expanding the Bixby 2.0 open ecosystem to provide a seamless multi-device experience for consumers.
For the Networks Business, the company expects increased earnings quarter-over-quarter for the second quarter and will focus on continued growth by expanding its LTE business and leading the world's first commercialization of 5G.
The Consumer Electronics Division posted 9.74 trillion won in consolidated revenue and 0.28 trillion won in operating profit for the quarter.
Overall, the TV market decreased quarter-over-quarter due to slow seasonality following the year-end holiday, but grew year-over-year due to increased demand in emerging markets such as the CIS, the Middle East, and Latin America.
Copyright RTT News/dpa-AFX