Samsung Sees ‘Adverse’ Business Continuing After Net Falls
April 29, 2011, 4:42 AM EDTBy Jun Yang
(Updates with closing share price in the fifth paragraph.)
April 29 (Bloomberg) -- Samsung Electronics Co., the world’s largest maker of TVs and flat-screen panels, said consumer-electronics sales may stay muted in the second quarter after profit fell for the first time in more than a year.
The company said demand for TVs and liquid-crystal display panels may be damped amid uncertainty about the global economy. The Suwon, South Korea-based manufacturer of Galaxy smartphones and tablets reported a 30 percent drop in first-quarter net income today as competition drove down prices.
Samsung, which this month agreed to sell its hard-disk drive unit, plans to introduce more smartphones and tablet computers to take on Apple Inc. and revive profitability. Already hurt by stagnant TV sales and falling prices, Samsung and other manufacturers are introducing new technology such as 3-D functionality and Internet connectivity to lure consumers into upgrading their older LCD televisions.
“I’m not so sure about the second quarter,” said Im Jeong Jae, a Seoul-based fund manager at Shinhan BNP Paribas Asset Management Co., which oversees about $30 billion. “The key is going to be price and whether sales will revive is up to the strategies of TV manufacturers.”
The shares dropped 0.8 percent to 893,000 won at the 3 p.m. close of trading in Seoul, taking the year-to-date decline to 5.9 percent. The benchmark Kospi index fell 0.7 percent.
Significant Decline
The company expects the “adverse” business environment to continue in the second quarter, Robert Yi, vice president of investor relations, said on a conference call today. Slow demand for TVs is likely to continue while the March 11 earthquake in Japan contributed to a “significant decline” in LCD display sales, said Lee Jung Ryul, vice president at the panel unit.
“Global demand is not 100 percent clear,” Yi said, citing uncertainty about the global economic recovery and a possible impact from the earthquake in Japan.
The average price for flat-screen TVs in the U.S. fell for a third straight month in February as manufacturers tried to clear inventory before rolling out new models, according to research company IHS ISuppli. Samsung sold 8.8 million units of flat-screen televisions in the first quarter, five percent more than a year ago, the company said.
Net income in the three months ended in March fell to 2.78 trillion won ($2.6 billion), Samsung said in a statement. That matched the 2.8 trillion won average of 12 analysts’ estimates compiled by Bloomberg. Sales rose 6.8 percent to 37 trillion won, in line with a preliminary estimate announced on April 7.
Displays, Semiconductors
Operating income, or sales minus the cost of goods sold and administrative expenses, fell 33 percent to 2.95 trillion won, in line with the company’s preliminary estimate. Operating profit at Samsung’s TV-making unit fell 3.3 percent to 100 billion won from a year ago, while sales rose 5 percent to 13.5 trillion won.
Analysts had predicted profit at the division will be 85 billion won, based on the median of seven estimates surveyed by Bloomberg News.
The display division had a loss of 230 billion won, exceeding the 140 billion won loss in the survey. Sales fell 5 percent to 6.5 trillion won, Samsung said.
Profit at the semiconductor division fell 5.9 percent to 1.6 trillion won on sales of 9.18 trillion won, compared with the 1.7 trillion won median of the seven analyst estimates.
Profit at the telecommunications unit rose 1.2 percent to 1.4 trillion won, surpassing the 1.2 trillion won median of the seven analyst estimates. Sales increased 19 percent to 10.64 trillion won.
Samsung aims to sell 60 million units of smartphones this year, J.K. Shin, head of the mobile-phone division said in January, after the company met its target to sell 10 million units of the Galaxy S smartphone last year.
--Editors: Anand Krishnamoorthy, Vipin V. Nair.
To contact the reporter on this story: Jun Yang in Seoul at jyang180@bloomberg.net
To contact the editor responsible for this story: Young-Sam Cho at ycho2@bloomberg.net.
