Samsung Electronics posts worst operating profit in 14 years

[Photo by Yonhap]

Samsung Electronics Co.’s operating profit in the second quarter is estimated to have plunged nearly 96 percent on year to hit the lowest in 14 years due to the sluggish chip industry and weak smartphone demand.

In an earnings guidance released Friday, the South Korean tech giant estimated its operating income at 600 billion won ($458 million) in the April-June period, down 95.7 percent on year and 6.25 percent on quarter.

The figure, however, is higher than the market consensus of 281.8 billion won compiled by local financial data tracker FnGuide Inc.

Analysts note that higher-than-expected earnings were led by stronger DRAM sales in the second quarter and increased demand for high bandwidth memory and DDR5 DRAM.

Revenue is also estimated to have declined 22.3 percent on year and 5.88 percent on quarter to 60 trillion won, which is slightly lower than the brokerage consensus of 61.9 trillion won.

Shares of Samsung Electronics were trading 2.23 percent lower at 70,000 won in the morning.

The second-quarter operating profit is the lowest since 590 billion won in the first quarter of 2009.

The sluggish earnings is believed to come from the up to 4 trillion won in losses from Samsung Electronics’ device solutions (DS) division that is responsible for the chips business.

KB Securities Co. estimated the DS division to have logged an operating loss of 3.3 trillion won while other units generated profit, including mobile eXperience (MX) 2.7 trillion won, consumer electronics (CE) 500 billion won, and electronics device subsidiary Harman International Industries Inc. 300 billion won.

Analysts, in the meantime, expect the memory chip market to have bottomed out and is on its way for recovery. They project that Samsung Electronics’ earnings will improve in the remaining quarters, with its operating loss from chips swinging to a profit as early as the fourth quarter.

Samsung Electronics will release final figures with division details later this month.