Samsung Electronics and LG Electronics, which are facing end of third quarter, are in great difficulties due to slump of their Smartphone businesses. It will be inevitable for Samsung Electronics to avoid loss due to recall of Galaxy Note 7 while LG Electronics could not get out of slump of its Smartphone business. Overall performance in third quarter will be decided depending on how much losses Smartphone businesses are going to bring upon their companies.
According to an electronic industry and a stock industry on the 25th, it is estimated that Samsung Electronics will make around $6.34 billion (7 trillion KRW) in operating profit that fell under $7.25 billion (8 trillion KRW) again in just a quarter.
According to FN Guide, predicted average value (consensus) of Samsung Electronics’ third quarter operating profit is going to be $6.95 billion (7.6735 trillion KRW). This is not a value that applies all of minuses that occurred from recall of Galaxy Note 7. There are some stock industries that haven’t put out corrected values yet.
Predicted value of Samsung Electronics’ third quarter operating profit reached $7.43 billion (8.2 trillion KRW) before recall of Galaxy Note 7 happened. There were many predictions that Samsung Electronics’ performance will continue to increase after its operating profit surpassed $7.25 billion (8 trillion KRW) once again after 9 quarters. However as recall of Galaxy Note 7 had taken place, it was inevitable that Samsung Electronics’ performance will decrease in a single moment. Industries are estimating that Samsung Electronics will face loss between $906 million (1 trillion KRW) and $1.36 billion (1.5 trillion KRW) due to recall.
“Considering the cost of recall of Galaxy Note 7 to be around $906 million (1 trillion KRW), Samsung Electronics’ third quarter operating profit is estimated to be around $6.79 billion (7.5 trillion KRW).” said Park Yoo-ak who is a researcher for Kiwoom Securities Co., Ltd.
Fact that Samsung Electronics’ performance is not too bad even though it had faced recall of Galaxy Note 7 is due to positive performance from its other departments such as household appliances and components. It is predicted that third quarter operating profits of semiconductor, display, and household appliance departments will be higher than their second quarter operating profits.
It is also difficult for LG Electronics to expect its performance to stick out as its Smartphone business has gone through another slump. According to FN Guide, LG Electronics’ third quarter operating profit consensus is $337 million (371.5 billion KRW). This is a value that is 35% less than previous quarter’s operating profit at $530 million (584.6 billion KRW). Its performance can be actually even worse as stock industries tend to lower their estimated values on performance even more recently.
Daishin Securities Co., Ltd. is predicting that amount of loss for MC (Mobile Communication) Business Department will be bigger due to low sales of its premium Smartphone called G5 and its estimated performance value will fall short of previous estimated value. Daishin Securities Co., Ltd. is estimating that LG Electronics’ third quarter operating profit is going to be $219 million (241.6 billion KRW).
However as LG Electronics’ household appliance businesses such as TV and air conditioner are showing positive signs, it is predicted that H&A (Home Appliance & Air Solution), and HE (Home Entertainment) Business Headquarters’ operating profits and operating profit ratios will increase.
Industries are predicting that performance of Samsung Electronics and LG Electronics will be recovered in fourth quarter. Stock industries are predicting that Samsung Electronics’ operating profit will surpass $7.25 billion (8 trillion KRW) again as its performance is going to improve from global sales events and special component businesses in fourth quarter. Positive effect is expected for LG Electronics due to effect of restructuring of MC Business Headquarters, effect of release of V20, and continuous positive trend of household appliance business.
Staff Reporter Kwon, Keonho | firstname.lastname@example.org