Profit Rate Competition
The gap between Samsung Electronics’s and Apple's second quarter operating profit (OP) to sales ratios narrowed to an all time low of 0.65 percentage points. The market forecasts that in terms of OP ratios, Samsung Electronics will overtake Apple by recording its best-ever performances in the third quarter.
On August 2, Apple reported an OP ratio of 23.71% in the second quarter (the third quarter of Apple’s fiscal year). The ratio was a drop of 2.94 percentage points from than the previous quarter.
Earlier, Samsung Electronics posted an operating margin of 23.06% in the second quarter. The OP ratio gap between the two companies dropped to an all-time low of 0.65 percentage points. This was attributed to Samsung Electronics' record high earnings and Apple's sluggish earnings. Apple's OP ratio has gone downhill since it hit 31.86% in the fourth quarter of 2015.
Observing past gaps between the two companies' OP ratios, it was 20.35 percentage points in the fourth quarter of 2015, but slid to 7.07 percentage points in the first quarter of this year. While Samsung Electronics and Apple have been ranked number one and two in the global smartphone market, Apple dwarfed Samsung Electronics in terms of OP ratios.
This is because Apple focused on high-margin premium smartphones, simplifying its lineup, and earning a lot of operating profit despite lagging behind its market share. Apple was the only manufacturer with an OP ratio of over 20%.
Market experts believe that Samsung Electronics will renew its best-ever performances in the third quarter so the company will beat Apple in terms of OP ratios, which is an indicator of profitability.
Of the top 30 listed companies in Korea which announced their business performances in financial statements on consolidated bases, SK Hynix snatched the number-one spot with an OP ratio of 45.59%. SK Hynix was followed by KT&G with 33.27%, Naver with 25.25%, Samsung Electronics with 23.06%, the Shinhan Financial Group with 19.39% and Lotte Chemical with 16.41%.