Samsung Electronics Set to Record Its Biggest Quarterly and Yearly Performance This Year

Jul 10, 2017

Samsung Electronics recorded an earning surprise of $52 billion (60 trillion KRW) and $12.1 billion (14 trillion KRW) in sales and operating profit respectively in this second quarter. Not only this is its company history’s biggest performance but it is likely that this operating profit will be the highest out of all global businesses. It is likely that Samsung Electronics, which is estimated to make about $20.8 billion (24 trillion KRW) in operating profit just from first half of this year, will have its best year ever by making more than $43.3 billion (50 trillion KRW) in operating profit this year. LG Electronics, which also announced its performance on same day, put out satisfactory performance for two quarters in a row.
After totaling tentative performance of second quarter, Samsung Electronics recorded $52 billion (60 trillion KRW) and $12.1 billion (14 trillion KRW) in sales and operating profit respectively based on performance from all of its subsidiaries.
Its sales and operating profit of second quarter increased by 18.69% and 41.41% respectively compared to first quarter. Compared to second quarter of last year, its sales and operating profit increased by 17.79% and 71.99% respectively. Its operating profit ratio of 23.3% is its highest quarterly operating profit ratio ever.
Samsung Electronics’ performance in second quarter is likely to be the best out of all global businesses as its second quarter operating profit is almost certain to be the best out of all global businesses. Not only its second quarter operating profit is going to be higher than that of Apple and Intel but it seems that it will also be higher than $11.15 billion, which is the total of operating profits from FANG (Facebook, Amazon, Netflix, Google) that leads increase in stocks of IT companies in the U.S.
Booming of semiconductor markets, high competitive edge, strong demands for displays, and revival of Smartphone business through Galaxy S8 are some of the reasons why it is set to make its best performance ever in company history.
It seems that Samsung Electronics made about $6.93 billion (8 trillion KRW) just from its semiconductor business due to strong memory price. It is also estimated that it recorded its biggest quarterly sales. It is likely that its sales exceeded Intel’s second quarter sales (estimated to be about $14 billion (16.2 trillion KRW)) which will propel Samsung Electronics to rise to the top in semiconductor industries for the first time ever.
Operating profit of its display field is about $1.3 billion (1.5 trillion KRW) and it increased by about 15% compared to first quarter. Sales and operating profit from its display business increased as LCD business has stabilized based on large panels and as small and medium flexible OLED business is continuing to rise high. Samsung Electronics is also increasing output of displays bi operating extension of its A3 plant which was invested last year.
It is estimated that operating profit from its IM (IT and Mobile) business is about $3.21 billion (3.7 trillion KRW). Compared to operating profit in first quarter which was $1.79 billion (2.07 trillion KRW), second quarter operating profit increased by more than $867 million (1 trillion KRW). After discontinuing Galaxy Note 7, its operating profit is back to $2.6 billion (3 trillion KRW) in just 3 quarters due to positive sales of Galaxy S8 and Galaxy S8 Plus.
It is estimated that Samsung Electronics made about $433 million (500 billion KRW) in operating profit from its CE (Consumer Electronics) business. Compared to its operating profit in first quarter which was $329 million (380 billion KRW), it increased by about 31.5%. It is estimated its operating profit from its CE business will be around $693 million (800 billion KRW) if operating profit from Harman‘s electric equipment business (between $173 million and 260 million), which is included to Samsung Electronics’ performance starting from second quarter, is added. Fact that sales of air conditioners increased rapidly due to peak season and that it increased its profitability through premium products such as QLED TV were effective for increase in operating profit.
It is likely that Samsung Electronics’ performance will continue to rise during second half of this year. It is likely that its semiconductor and display businesses will continue to boom due to continuous demands for semiconductors and displays. It is also likely that strong memory price will continue as well. Its IM business will continue to show positive performance due to effects of Galaxy S8 and added effects from Galaxy Note 8, which is likely to be released in September. It seems that Galaxy Note 8 will have huge impact on its performance depending on initial sales volume of Galaxy Note 8. It is also likely that its CE business will continue its positive performance due to variety of sales events, added effects of peak season, and continuous enhancement of premium strategies.
“Considering Samsung Electronics’ technical skills and bargaining power as a supplier for semiconductor markets, its profit from its semiconductor business will play a role of Fort Knox that protects profits from its entire businesses.” said Kim Kyung-min who is a researcher for Daishin Securities Co., Ltd. “Samsung Electronics will be an icebreaker while the U.S. is adjusting stocks based on technicism.”
However some are pointing out that Samsung Electronics needs to prepare for the future although current market situations are very positive because they are limited in making active investments and M&A due to absence of its leader even though it needs to find new profits in order to assure continuous growth.
Performance of LG Electronics, which announced its performance on the same day as Samsung Electronics, somewhat fell short of estimations. Its sales and operating profit of second quarter were $12.6 billion (14.5552 trillion KRW) and $576 million (664.1 billion KRW) respectively based on performance from all of its subsidiaries. Compared to second quarter of last year, its second quarter and operating profit increased by 3.9% and 13.6% respectively. Compared to first quarter, they decreased by 0.7% and 27.9% respectively.
Its home appliance business has carried positive performance due to positive sales of air conditioners and premium home appliances; its TV business’ performance was also satisfactory due to sales of premium products such as OLED TV and UHD TV. However it can be analyzed that its loss has widened greatly due to increase in marketing cost for Smartphone business and low sales volume of G6.
Staff Reporter Kwon, Keonho | wingh1@etnews.com, Staff Reporter Kwon, Dongjoon | djkwon@etnews.com, Staff Reporter Bae, Okjin | withok@etnews.com, Staff Reporter Choi, Jaepil | jpchoi@etnews.com, & Staff Reporter Han, Juyeop | powerusr@etnews.com

■Samsung Electronics' quarterly performance
▲Sales ∆2nd quarter of 2016: $44.2 billion (50.94 trillion KRW) ∆3rd quarter of 2016: $41.5 billion (47.82 trillion KRW) ∆4th quarter of 2016: $46.2 billion (53.33 trillion KRW) ∆1st quarter of 2017: $43.8 billion (50.55 trillion KRW) ∆2nd quarter of 2017 (estimate): $52 billion (60 trillion KRW)
▲Operating profit ∆2nd quarter of 2016: $7.06 billion (8.14 trillion KRW) ∆3rd quarter of 2016: $4.51 billion (5.20 trillion KRW) ∆4th quarter of 2016: $7.99 billion (9.22 trillion KRW) ∆1st quarter of 2017: $8.58 billion (9.90 trillion KRW) ∆2nd quarter of 2017 (estimate): $12.1 billion (14 trillion KRW) 
Reference: Samsung Electronics <■Samsung Electronics' quarterly performance ▲Sales ∆2nd quarter of 2016: $44.2 billion (50.94 trillion KRW) ∆3rd quarter of 2016: $41.5 billion (47.82 trillion KRW) ∆4th quarter of 2016: $46.2 billion (53.33 trillion KRW) ∆1st quarter of 2017: $43.8 billion (50.55 trillion KRW) ∆2nd quarter of 2017 (estimate): $52 billion (60 trillion KRW) ▲Operating profit ∆2nd quarter of 2016: $7.06 billion (8.14 trillion KRW) ∆3rd quarter of 2016: $4.51 billion (5.20 trillion KRW) ∆4th quarter of 2016: $7.99 billion (9.22 trillion KRW) ∆1st quarter of 2017: $8.58 billion (9.90 trillion KRW) ∆2nd quarter of 2017 (estimate): $12.1 billion (14 trillion KRW) Reference: Samsung Electronics>
■LG Electronics' quarterly performance 
▲Sales &#8710;2nd quarter of 2016: $12.1 billion (14.0029 trillion KRW) &#8710;3rd quarter of 2016: $11.5 billion (13.2243 trillion KRW) &#8710;4th quarter of 2016: $12.8 billion (14.7777 trillion KRW) &#8710;1st quarter of 2017: $12.7 billion (14.6572 trillion KRW) &#8710;2nd quarter of 2017 (estimate): $12.6 billion (14.5552 trillion KRW)
▲Operating profit &#8710;2nd quarter of 2016: $507 million (584.6 billion KRW) &#8710;3rd quarter of 2016: $245 million (283.2 billion KRW) &#8710;4th quarter of 2016: $-30.5 million (-35.2 billion KRW) &#8710;1st quarter of 2017: $799 million (921.5 billion KRW) &#8710;2nd quarter of 2017: $576 million (664.1 billion KRW) 
Reference: LG Electronics <■LG Electronics' quarterly performance ▲Sales ∆2nd quarter of 2016: $12.1 billion (14.0029 trillion KRW) ∆3rd quarter of 2016: $11.5 billion (13.2243 trillion KRW) ∆4th quarter of 2016: $12.8 billion (14.7777 trillion KRW) ∆1st quarter of 2017: $12.7 billion (14.6572 trillion KRW) ∆2nd quarter of 2017 (estimate): $12.6 billion (14.5552 trillion KRW) ▲Operating profit ∆2nd quarter of 2016: $507 million (584.6 billion KRW) ∆3rd quarter of 2016: $245 million (283.2 billion KRW) ∆4th quarter of 2016: $-30.5 million (-35.2 billion KRW) ∆1st quarter of 2017: $799 million (921.5 billion KRW) ∆2nd quarter of 2017: $576 million (664.1 billion KRW) Reference: LG Electronics >

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