Samsung CES 2019

Samsungs net profit drops 53% during Q2

Samsungs net profit dropped 53% during its second quarter as the Company posted KRW 56.13 trillion in consolidated quarterly revenue and KRW 6.6 trillion in quarterly operating profit.

The Mobile Business posted stronger shipments on new mass market models but was overall weighed down by slower sales of flagship models and increased marketing expenses. The Network Business posted solid results on the commercialisation of 5G service in South Korea.

Samsung said it notched a second-quarter net profit of 5.18 trillion South Korean won ($4.4 billion), a decline from 11.04 trillion won a year earlier. Revenue slid to 56.13 trillion won from 58.5 trillion won a year earlier.

Samsung’s results topped analysts’ estimates that had anticipated net profit of 5.1 trillion won and revenue of 52.4 trillion won for the quarter ended June 30, according to S&P Global Market Intelligence.

Samsung could receive a modest boost in the coming months from the planned releases of two high-end smartphones. The Galaxy Note 10 will be unveiled next week at a New York event, while the company’s much-anticipated foldable-screen device, the Galaxy Fold, will be released by September.

During the first three months of 2019, Samsung’s smartphone shipments fell 8%, a bigger drop than the industry’s 6.6% decline, according to International Data Corp., a market researcher.

Samsung’s mobile unit saw revenue increase, though operating profit declined by 42% from the prior year, a sign the South Korean company has needed aggressive promotions to gin up sales. Meanwhile, the company’s semiconductor division reported a 71% slide in operating profit.

Just several years ago, Samsung reaped most of its operating profit from smartphones. But consumers have slowed their upgrades of new devices, as updates have left buyers unimpressed and more likely to keep their current phone. Now Samsung derives roughly three-quarters of its operating profit from chip sales.

Following a series of record profits in 2017 and 2018, Samsung saw its winning streak end late last year when demand from smartphone makers and data-server companies fell, leading to lower memory-chip sales. To diversify beyond memory chips, Samsung said in April it would invest $116 billion by 2030 in other semiconductor areas, seeking to tap into new growth drivers.

Samsung said its display business received a one-time gain in mobile displays. Analysts have expected the company would receive compensation fees from Apple, which uses some of Samsung’s flexible displays in some of its iPhones. On Tuesday, Apple reported iPhone sales had declined 12% for the three months ended June 29.

Tokyo’s recent moves to slow shipments of certain chemicals to South Korea took effect July 4, so the financial impact won’t be felt until Samsung reports results for the current quarter. But Japan’s trade policy could have far-reaching implications for Samsung’s business and the global tech supply chain, industry experts say.

Samsung is “facing challenges from uncertainties not only in business areas but also from changes in the global macroeconomic environment,” the company said.

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