Samsung’s profit more than doubles in December quarter

Business Tuesday 24/January/2017 13:13 PM
By: Times News Service
Samsung’s profit more than doubles in December quarter

Seoul: Samsung Electronics Co.’s profit more than doubled in the last three months of 2016 on robust semiconductor sales and a recovery in its mobile business, giving it enough stamina to buy back 9.3 trillion won ($8 billion) of its own shares.
Net income rose to 6.92 trillion won in the December quarter, largely buoyed by rising prices for memory chips and TV screens, the Suwon, South Korea-based company said in a statement on Tuesday. Growth in demand for smartphone displays coupled with a weaker Korean won also lifted its component businesses. The repurchased shares, part of a shareholder return program unveiled in November, will be canceled, the company said.
The company’s reputation, already tarnished by the cessation of its fire-prone Galaxy Note 7 last year, took another hit when prosecutors began a probe into Samsung’s involvement in an influence-peddling scandal that’s led to the impeachment of the Korean president. The special prosecutor is proceeding with an investigation, even after a court rejected a request to arrest for Vice Chairman Jay Y. Lee on alleged bribery and embezzlement charges.
Key points
The fourth-quarter result compares with the 7 trillion-won average projection of six analysts surveyed by Bloomberg. Operating profit in the period was 9.22 trillion won on sales of 53.3 trillion won.
"Earnings are holding up well despite the lingering risks, such as political scandal as well as other issues,” said Song Myung-sup, an analyst at HI Investment & Securities Co.
"It has been proven that Jay Y.’s risk is decoupling from the company business. Earnings is expected to hit another record this year on the back of extremely robust chip and display profits,” he added.
Samsung shares were unchanged at 1,904,000 won in early trading in Seoul. The stock remains up more than 5 per cent this year, after climbing 43 per cent in 2016.
Big picture
Samsung’s business has remained resilient despite the crisis over its fire-prone Note 7 smartphones.
Samsung pulled its most expensive handset from the market before the peak holiday season, slashing more than $6 billion from its mobile business.
Meanwhile, Samsung heir-apparent Lee is mired in the influence-peddling scandal that’s gripped South Korea for months, and remains under investigation over allegations of bribery and embezzlement. The company’s stock price and earnings have largely emerged unscathed.
On Monday, Samsung detailed the results of its probe into the Note 7 battery overheating and eventual recall. The company blamed flaws in battery manufacturing and design for the fiasco and said it is taking full legal responsibility
Operating income at the chip unit, the company’s biggest profit generator, was 4.95 trillion won, compared with 2.8 trillion won a year earlier.
Growing demand for memory chips is outstripping supply, triggering a price rally. Chip inventory levels among semiconductor suppliers remain low, largely thanks to discarded mobile chips following the death of the flawed Note 7 as well as higher orders from Apple Inc. and Chinese mobile phone makers, said SK Securities Co. analyst Kim Young-woo.
The mobile unit posted an operating profit of 2.5 trillion won, rebounding from a record low profit in the third quarter. A persistent supply shortage of organic light emitting diode or OLED screens, mainly used for mobile electronics, is fattening profit at the company’s display unit.
Operating income from the division was 1.34 trillion won, up from 300 billion won. Rising prices of chips and displays are pressuring the company’s end-user products, such as smartphones and TVs.
Earnings at the consumer electronics unit, which encompasses televisions and appliances, fell to 320 billion won from about 820 billion won.