Beating Forecasts
Samsung Electronics said in its preliminary report that its operating profit of the fourth quarter last year would jump about 50 percent from a year ago. The fourth-quarter operating profit is also estimated to have surged 77 percent from a quarter earlier.
Its last year’s fourth quarter operating profit is estimated at 9.2 trillion won (US$7.72 billion), up 49.84 percent from the same period of 2015, Samsung said in the report. Its sales came in at 53 trillion won (US$45 billion), up 10.8 percent from 47.8 trillion won (US$40.6 billion) in a quarter earlier.
Such performances are far above the market expectations, to which strong sales of chips and displays have contributed by helping more than offset losses from a global recall of the Galaxy Note 7 smartphones.
The market consensus on the quarter’s operating profit was around 8.3 trillion won (US$7.1 billion). It was the first time since the third quarter of 2013 when Samsung's quarterly operating profit surpassed 9 trillion won (US$7.6 billion).
The biggest contributor is memory chip business. The operating profit in memory chip sector is estimated at a record 5 trillion won (US$4.2 billion) in the fourth quarter, breaking the previous record of 3.6 trillion won (US$3.1 billion) in the third quarter of 2015. Rising prices of its main products, DRAM and NAND flash, as well as increases in shipments, led to the record-high operating profit in the chip business. DRAM prices rose 39 percent during the past two months. Prices of NAND flash have also soared by 35 percent since last May.
A weaker won against the dollar also helped the Korean electronics giant. The Korean won, which traded at around 1,100 won per dollar in the third quarter, weakened to 1,200 won around the end of last year. The appreciation of 100 won against dollar increases the quarterly operating profit up to a maximum 800 billion won (US$680 million).
It also expects a 1 trillion won (US$850 billion) operating profit in display business based on rising prices of LCDs and the strong performance of OLEDs. It is also estimated to reap over 1 trillion won (US$850 million) in consumer electronics thanks to the popularity of Samsung's high-end home appliances like SHUD TVs.
Operating profit in the IT mobile (IM) business is estimated at around 2.2 trillion won (US$1,87 billion), which would lead the IM business’s annual operating profit to reach 10.5 trillion won (US$8.92 billion), higher than 1.14 trillion won (US$969 million) of last year. Despite the failure of the Galaxy Note 7, strong sales of the Galaxy S7 and other affordable models like Galaxy A series also enabled Samsung to attain the better-than-expected earnings.
Samsung Electronics is expected to extend its robust earnings streak this year, with first quarter operating profit estimated at 10 trillion won (US$8.5 billion), boosted by its strong memory chip and display businesses. In particular, the additional 30 percent increase of DRAM prices is expected for the first quarter.