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

  • Donald Trump on jobs of the future LIVE

    Economic CBC News
    Rohingya Muslims fleeing Myanmar describe military's violence and killings 2:50 Rohingya Muslims fleeing Myanmar describe how they faced violence and killings by the Burmese military, prompting thousands of them to flee to neighboring Bangladesh. Source
  • Ontario has lost 1,000 planned rental units since new housing rules introduced:report

    Economic CTV News
    TORONTO -- A group representing Ontario's rental-housing providers says at least 1,000 planned rental units have been cancelled or converted to condominiums since the provincial government introduced new rent control rules in the spring. A new report commissioned by the Federation of Rental-Housing Providers of Ontario says the Liberal government's Fair Housing Plan has negatively impacted the province's rental housing supply. Source
  • Cenovus sells Suffield for $416M to International Petroleum

    Economic CBC News
    Canada's Cenovus Energy Inc has reached an agreement to sell its Suffield oil and gas assets for $512 million to International Petroleum Corp, striking its second deal this month as it pushes ahead with its debt reduction plan. Source
  • Ikea readies its first East Coast store, touted as Canada's most sustainable

    Economic CTV News
    HALIFAX - Ikea is getting ready to officially open its first Atlantic Canadian store this week as thousands from across the region are expected to descend upon the popular Swedish furniture chain's new Halifax-area location. Source
  • Striking GM CAMI workers awaiting response to weekend contract proposal

    Economic CTV News
    TORONTO -- The union representing 2,500 striking workers at GM Canada's CAMI assembly plant in Ingersoll, Ont., says the company has yet to respond to a comprehensive proposal put forward on the weekend. Unifor spokesman Mike Van Boekel says he expects it will take General Motors of Canada, which owns the plant, about a day to analyze the costs of the proposal. Source
  • Trudeau urges Canadian companies to seek fortune in China's $5 trillion market

    Economic CTV News
    TORONTO -- Prime Minister Justin Trudeau is urging Canadian small- and medium-sized businesses to look beyond Canada's borders and explore the US$5 trillion retail opportunity in China. Trudeau is speaking at a Toronto conference today hosted by Chinese e-Commerce giant Alibaba, with politicians from all three levels of government in attendance. Source
  • American business group says loss of free trade with U.S. would be a big concern

    Economic CTV News
    OTTAWA - A new report says potential changes to NAFTA and a loss of free trade with the United States represent the biggest concerns for a number of big American firms operating in this country. Source
  • French truck drivers block roads to protest labour changes

    Economic CTV News
    PARIS -- French truck drivers staged road blockages near fuel depots across the country Monday to protest against President Emmanuel Macron's changes to labour laws. Two major unions, CGT and FO, called a nationwide protest action because they fear the new rules Macron formally signed last week will lead to a deterioration in working conditions and ease the firing of workers. Source
  • Alibaba launching payment processing service AliPay in Canada

    Economic CBC News
    E-commerce giant Alibaba.com is launching its mobile payment service AliPay in Canada. The service allows Alibaba customers to use AliPay to easily pay Canadian merchants who sign up for the program. Alibaba is by far the most popular online sales website in China, and AliPay allows Chinese customers to buy products from abroad without any difficulties with currency conversion. Source
  • Alibaba expands payment processing service Alipay in Canada

    Economic CBC News
    E-commerce giant Alibaba.com is launching its mobile payment service AliPay in Canada. The service allows Alibaba customers to use AliPay to easily pay Canadian merchants who sign up for the program. Alibaba is by far the most popular online sales website in China, and AliPay allows Chinese customers to buy products from abroad without any difficulties with currency conversion. Source