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

  • Biggest U.S. banks strong enough to withstand recession: Fed

    Economic CTV News
    In this Thursday, Nov. 17, 2016, file photo, Federal Reserve Chair Janet Yellen testifies on Capitol Hill in Washington, before the Joint Economic Committee. (AP Photo/Susan Walsh, File) Source
  • Postmedia selling Infomart division

    Economic CBC News
    Postmedia Network Canada Corp. has signed a deal to sell Infomart, its media monitoring division, to Meltwater News Canada Inc. for $38.25 million. The cash-strapped media company says net proceeds from the sale will be used to repay debt. Source
  • A new platform for Whole Foods? How deal could upend grocery

    Economic CTV News
    NEW YORK -- Seeing Whole Foods products first in Amazon searches? Breezing through the grocer's stores with an app that scans affordable fruits and seafood? Those are among the possible scenarios that unnerved the food industry last week, when Amazon announced a $13.7 billion megadeal to acquire Whole Foods. Source
  • Foreign home buyers surge 37 per cent in Montreal on growth in Chinese purchases

    Economic CTV News
    MONTREAL -- Canada's federal housing agency says the number of foreign buyers in the Montreal area surged by 37 per cent in the first four months of the year. The 236 purchases by foreigners accounted for 1.8 per cent of all real estate transactions from January to April, the Canada Mortgage and Housing Corp. Source
  • Qatar Airways seeks 10% stake in American Airlines

    Economic CBC News
    State-owned Qatar Airways is attempting to buy 10 per cent of American Airlines, a surprising move that would trigger an antitrust review by the U.S. government and carry political and trade-policy implications. American Airlines Group Inc. Source
  • Boeing plays down Bombardier dispute, still hopes to sell fighter jets to Canada

    Economic CTV News
    OTTAWA - A senior Boeing official says the U.S. aerospace giant's trade dispute with Montreal-based rival Bombardier is a "company-to-company issue." And Leanne Caret, the head of Boeing's massive defence, security and space division, still hopes to sell Super Hornet fighter jets to Canada. Source
  • Full list of 59 Sears Canada stores slated to close

    Economic CTV News
    Sears Canada will be closing stores in every province except Prince Edward Island, as the retailer slashes 2,900 jobs amid a major restructuring effort. Sears filed for court protection from creditors on Thursday, before announcing that it will close 20 full-line locations, 15 Sears Home stores, 10 outlet stores and 14 Sears Hometown locations. Source
  • Canadian retail sales top April forecasts

    Economic CBC News
    Canadian consumer spending in April was stronger than expected, which economists say lends weight to the Bank of Canada's recent suggestions that interest rate hikes could be on the way. Statistics Canada reported Thursday that retail sales for April rose by 0.8 per cent on a monthly basis to $48.6 billion. Source
  • Warren Buffett’s company buys into Toronto-based Home Capital

    Economic Toronto Sun
    TORONTO - Home Capital Group Inc. says American investment firm Berkshire Hathaway Inc. has agreed to indirectly acquire $400 million of its common shares in a private placement and provide a new $2 billion line of credit to its subsidiary, Home Trust Company. Source
  • Sears Canada cutting 2,900 jobs, closing 59 locations

    Economic Toronto Sun
    TORONTO — Sears Canada said Thursday it is seeking court protection from its creditors in order to restructure its business. The struggling retailer has piled up losses and seen its stock dive, losing more than 80 per cent of its value in the last year, despite efforts to reinvent itself at a time when more Canadians are shirking bricks-and-mortar in favour of online shopping. Source