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Samsung Electronics says second-quarter operating profit likely 56% down year-on-year

Stock Markets Jul 05, 2019 07:01AM ET
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© Reuters. FILE PHOTO: The logo of Samsung Electronics is seen at its office building in Seoul

By Ju-min Park and Heekyong Yang

SEOUL (Reuters) - Samsung Electronics Co Ltd (KS:005930) forecast a steep plunge in its second-quarter operating profit as the U.S.-China trade war wreaks havoc in global chip and smartphone markets, although one-off gains helped it beat analyst expectations.

The South Korean tech giant is on track to post year-on-year profit declines for a third consecutive quarter as chip prices fell due to a supply glut and U.S. sanctions on Chinese telecom equipment maker Huawei Technologies, a key Samsung client.

Memory chipmakers like Samsung and South Korea's SK Hynix (KS:000660) are hurting as rising tariffs hit global demand for electronics. Seoul cut its annual economic growth target on Wednesday to a seven-year low as exports slump.

South Korea's tech majors are also bearing the brunt of Japanese curbs on exports to South Korea of materials used in memory chips and smartphones, the latest flashpoint in a quarrel over Japan's use of forced wartime labor.

"There's not enough to say positive earnings momentum has come. Intensified U.S.-China war, and Japanese export curbs and signs of trade conflicts widening globally are likely to delay recovery," Lee Kyoung-min, analyst at Daishin Securities said.

April-June operating profit likely fell 56% to 6.5 trillion won ($5.6 billion), Samsung in a regulatory filing ahead of the release of its detailed earnings figures in late July. Revenue likely fell 4.2% from a year earlier to 56 trillion won.

The forecast profit is better than the 6 trillion won indicated by Refinitiv SmartEstimate that gives a greater weighting to top-rated analysts, according to Refinitiv data.

One-off gains in the display division, which supplies display panels to Apple Inc (O:AAPL), were reflected in the operating profit, the company said without elaborating.

Samsung received reimbursement worth about 800 billion won for display panels sold to Apple as the U.S. smartphone maker missed a sales target the parties had agreed on, analysts said.

Shares in Samsung Elec were down about 1% versus the nearly flat wider market's (KS11) as of 0615 GMT.

In a further sign of the difficulties faced by South Korean smartphone makers, LG Electronics Inc (KS:066570) said its second-quarter operating profit likely fell 15.4% percent from the same period a year earlier.

LG estimated profit of 652.2 billion won for the April-June period.

($1 = 1,167.3300 won)

Samsung Electronics says second-quarter operating profit likely 56% down year-on-year
 

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