Samsung warns of tough 2016 after profit sinks

SEOUL, Korea, Republic Of - Samsung Electronics reported Thursday a bigger-than-expected decline in fourth quarter earnings as its mainstay smartphone and semiconductor businesses suffered from weakening global demand for consumer electronics.

See Full Article

The South Korean company also warned a recovery in profit is unlikely during the first half of this year due to a tough business environment.

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

The result fell short of expectations, even after considering the negative impact from foreign currency exchange rates estimated at 400 billion won. A survey of analysts by financial data provider FactSet forecast net profit of 5.1 trillion won.

Sales edged up 1 per cent to 53.3 trillion won for the quarter. Operating income rose 16 per cent to 6.1 trillion won, in line with Samsung's earnings preview earlier this month.

The latest results reflect additional challenges for Samsung as its semiconductor business, which helped offset declining earnings from smartphones since mid-2014, joined the mobile division in a profit slowdown.

Weakening global demand for smartphones and other consumer electronics products 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 per cent 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 per cent 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 rolled out its high-end smartphones sooner than usual, including the Galaxy Edge series with curved displays, they failed to increase premium smartphone shipments as consumers flocked to cheaper smartphones.

Samsung is not the only smartphone maker struggling to increase sales of premium smartphones. Apple, which reported earnings earlier this week, forecast its first year-over-year sales decline in 13 years.

The maker of Galaxy smartphones will likely not see a revival in its profit anytime soon.

"It would be a challenge to maintain the 2015 operating profit level as we expect weak macroeconomic conditions and the IT demand to persist during the first half," Robert Yi, a senior vice-president at Samsung, said on a conference call.

"However, we expect the business conditions to improve in the second half driven by the strong seasonality in set businesses," he said referring to mobile phones, home appliances and TVs.

Apparently aware of growing pressure to seek new revenue sources, Samsung gave out some hints about its future plans. It 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 to increase shareholder returns and announced an additional plan to buy back and cancel shares. But the move did little to shore up its share price. After the earnings release, the company's shares traded 3 per cent lower.



Advertisements

Latest Economic News

  • Last BlackBerry-designed phone with physical keyboard to hit stores in April

    Economic CTV News
    TORONTO -- Fans of BlackBerry's classic physical keyboard will have reason to celebrate when the last product designed in part by the former smartphone leader becomes available in April. The Waterloo, Ont.-based firm played a role in developing the KEYone, named for the return of the QWERTY keyboard that other smartphone designers have mostly long retired. Source
  • Final cleanup begins at Dakota Access pipeline protest camp

    Economic CTV News
    BISMARCK, N.D. -- The U.S. Army Corps of Engineers has moved into the evacuated Dakota Access pipeline protest camp to finish the cleanup started weeks ago by the Standing Rock Sioux Tribe. A Florida-based company has been hired to provide trash removal and environmental cleanup in the main Oceti Sakowin camp on the north side of the Cannonball River and the smaller Rosebud camp on the south side. Source
  • Appealing to millennials, Las Vegas gets e-sports arena

    Economic CTV News
    LAS VEGAS -- The arena has all the features that a professional sports venue needs: stands, warm-up areas for teams, massive screens for spectators and a broadcast platform for commentators. But what distinguishes this new Las Vegas arena is its dozens of video game consoles. Source
  • Warren Buffett says don't waste money on investment fees

    Economic CTV News
    OMAHA, Neb. -- Billionaire Warren Buffett wants investors to be wary of the high fees Wall Street routinely charges because of the damage they do to investment returns, and he emphasized his confident outlook in the U.S. Source
  • 'We always find a way': N.L.'s oil-dependent economy is hurting, but there is hope on the horizon

    Economic CBC News
    Dwight Ball, the affable pharmacist who has been Newfoundland and Labrador's premier for the last 15 months, said something remarkable Wednesday while swinging an axe through several hundred government jobs. "We're human, too. This impacts us," said Ball, who clearly has shown no relish for the more brutal parts of dealing with an oil-dependent economy during a collapse in petroleum prices. Source
  • Deciphering Trump's curious comments on Keystone XL pipeline

    Economic CBC News
    In his nearly hour-long speech at the Conservative Political Action Conference on Friday morning, U.S. President Trump talked about a lot of things — the media, Obamacare, trade and crime. But he also ventured into pipelines. Source
  • Ontario police looking for 'large quantity' of stolen cheese

    Economic CTV News
    SOUTH WEST OXFORD TOWNSHIP, Ont. - Police in southwestern Ontario are looking for thieves who made off with a lot of cheese. Ontario Provincial Police say the Village Cheese Mill in South West Oxford Township, east of London, Ont. Source
  • Stock prices slide lower despite large profits at big banks

    Economic CBC News
    Canada's benchmark stock index is on track for its worst day of the year as oil prices are lower and financial firms are selling off despite record earnings at some of Canada's biggest banks. The S&P/TSX composite index was off by 260 points to 15,520 in the afternoon. Source
  • TSX tumbles 247 points despite big profits at big banks

    Economic CBC News
    Canada's benchmark stock index is on track for its worst day of the year as oil prices are lower and financial firms are selling off despite record earnings at some of Canada's biggest banks. The S&P/TSX composite index was off by 260 points to 15,520 in the afternoon. Source
  • 'Baycott': Why 'Peeved Beavers' are upset by Ivanka Trump's brand at the Bay

    Economic CTV News
    Armed with distinctive blonde wigs, pursed lips and red power ties, a group of Ontario women are planning to dress up as U.S. President Donald Trump to protest the Hudson’s Bay Co. for carrying Ivanka Trump’s fashion line during two demonstrations in the Toronto area planned for Saturday. Source