Samsung Electronics reports strong 2022 on a one-off gain

Samsung Electronics reported a better-than-expected net profit last year on a one-off that balanced weakness in most businesses.

Passersby walk by a Samsung Electronics retail shop in Seoul. [News1]

Samsung Electronics reported a better-than-expected net profit last year on a one-off that balanced weakness in most businesses.

Net profit rose by 39.5 percent on year to 55.7 trillion won in 2022, far exceeding the market consensus of 36.5 trillion won. Operating profit dropped by 16 percent to 43.4 trillion won, falling short of the market consensus of 46.3 trillion won.

Sales hit an all-time high of 302.2 trillion won, up 8.09 percent on year, but coming in below the market expectation of 305.5 trillion won.

The upbeat net is related to a one-time gain from settlement of tax-related debts.

“Following a reform in tax law, we settled deferred tax liabilities for subsidiaries, which resulted in negative expense balances,” explained Ben Suh, executive vice president at Samsung Electronics during a conference call Tuesday.

“But this is a one-off gain in the financial statement and this doesn’t necessarily mean that the company is to receive corporate tax refund of that amount,” he said.

The company's performance in the fourth quarter were a drag on last year's earnings – especially operating profit – as a shortfall in demand for chips worsened in the final quarter of the year.

Quarterly operating profit plunged 69 percent to 4.31 trillion won in the fourth quarter, far below the consensus estimate of 6.9 trillion won. It is the worst quarterly result in eight years.

Fourth quarter sales were 70.5 trillion won, down 8 percent over a year ago, but slightly higher than the market consensus of 70 trillion won.

The operating profit for its semiconductor business was the lowest in a fourth quarter since the fourth quarter in 2008, at 270 billion won. The figure is down 96.9 percent compared to the same quarter a year earlier.

“The business environment deteriorated significantly in the fourth quarter due to weak demand amid a global economic slowdown,” Samsung Electronics said in a statement.

“Earnings at the Memory Business decreased sharply as prices fell and customers continued to adjust inventory,” it said.

Contract-chipmaking posted a new record for quarterly revenue while profit increased year-on-year. The chip business generated 98.5 trillion won in sales last year, and 23.8 trillion won in operating profit.

Faced with a supply glut of chips, market attention has turned towards whether the chipmaker will cut production to follow competitors like Micron and SK hynix.

Samsung Electronics maintains the previous stance, saying that there will be no “artificial” cutback on memory chip production.

Its smartphone and network equipment business reported 1.7 trillion won of operating profit in the fourth quarter, down 36 percent compared to the same quarter in 2021, as market demand for mobile handsets remained weak. Throughout the year, the business brought in 11.4 trillion won of operating profit and 120.8 trillion won in sales.

The only strength was in the display panel business, with annual operating profit up 33.7 percent to 5.6 trillion won with sales up 7.8 percent to 34.4 trillion won.

The consumer electronics business generated 1.35 trillion won in operating profit last year, down 96.3 percent on year, while sales rose 9 percent to 60.6 trillion won.

The tech company spent 53.1 trillion won in facility investment last year, short of its previous guidance of 54 trillion won. Of that, 47.9 trillion won went into expanding capacity and upgrading its chip plants and 2.5 trillion won for panel manufacturing.

BY PARK EUN-JEE, SARAH CHEA [park.eunjee@joongang.co.kr]