Samsung Elec and LG Elec releasing Q3 guidance Friday to be disappointments

Samsung Electronics and LG Electronics would be disappointments when they release earnings guidance for the July-September period on Friday as the Korean household electronics names are widely expected to report a contraction or slowed growth from the previous quarter due to poor demand in IT components and devices.

According to Korean financial data tracker FnGuide on Wednesday, Samsung Electronics is projected to have raised 78.36 trillion won ($55.6 billion) in consolidated sales during the last quarter ended September, up slightly from 77.2 trillion won in the second quarter and 6 percent from a year ago.

The consensus for operating profit came to 11.87 trillion won ($8.4 billion), down 16 percent on quarter and around 25 percent on year.

The deterioration in operating income is largely blamed on softening in memory chip prices that make up more than half of Samsung Electronics’ operating profit.

“The demand for tech products such as smartphones, PCs, TVs, and chips is sinking at a staggering pace,” said Choi Do-yeon, a researcher at Shinhan Investment, projecting the worst-ever inventory pile-up for chip and finished good makers.

By business, Samsung Electronics’ semiconductor sector is expected to record 6.5 trillion won in operating profit during the third quarter, Mobile eXperience (MX) and network 2.9 trillion won, Visual Display (VD) and home appliances 400 billion won.

Samsung’s operating income is expected to continue its downward trend and fall to 8.6 trillion won in the fourth quarter.

LG Electronics is projected to have earned 876.4 billion won in operating income in the third quarter, gaining 10.7 percent on quarter and 62 percent on year. But the on-year comparison is less meaningful as the company had booked 480 billion in loss reserves versus recalls for batteries for General Motors in the third quarter last year.

Sales were estimated at 20.17 trillion won, gaining from 19.47 trillion won in the second quarter, and around 7.3 percent higher from a year-ago period.

LG Electronics’ flagship TV sector has turned sluggish on softened demand on top of soaring raw material and logistics costs. It is estimated to have earned a profit of 30 billion won range in the third quarter, which is only one-fifth of the operating profit of a year ago.

It recorded a deficit in the second quarter for the first time in 28 quarters.

The outlook for the company’s Vehicle Component Solutions (VS) department, however, is more positive as it achieved a profit for the first time in nine years during the second quarter.

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