Samsung Posts Record Q3 Operating Profit

Samsung Electronics Co Ltd (SMSN.L, SSNNF.OB, SSNLF.OB) reported a profit for the third-quarter that increased about 17.46 percent from last year. Quarterly operating profit improved 20.93 percent from the previous year. Operating profit reached a new quarterly high for the company driven mainly by the continued strength of the Memory Business. Sales increased about 5.5 percent from last year, on the back of strong sales of memory products and OLED panels.

Net income attributable to the shareholders of the parent company for the third quarter of 2018 rose 17.46 percent to 12.97 trillion Korean won from 11.04 trillion won last year.

Quarterly operating profit improved 20.93 percent to 17.57 trillion won from 14.53 trillion won in the previous year.

Quarterly sales rose 5.5 percent to 65.46 trillion won from the prior year.

The company said that the Semiconductor Business recorded higher earnings amid strong seasonal demand, particularly for server and mobile memory. While NAND and DRAM demand remained high, the Memory Business improved its earnings by concentrating on sales of premium products, improving yields, and ramping up production of high-density chips at its Pyeongtaek plant.

For the Display Panel Business, despite unfavorable supply-demand conditions in the LCD market, earnings improved on-year thanks to higher sales of flexible OLED panels to major customers.

The IT & Mobile Communications (IM) Division reported a drop in earnings despite solid sales of its flagship smartphones. Overall, its smartphone shipments remained flat due to a decrease in sales of mid- to low-end products. Profit was also down due to increased promotional costs and a negative currency impact.

Looking ahead to the fourth quarter, Samsung expects overall earnings across the company to decline as it enters a period of weak seasonality for the semiconductor market.

For the components businesses, earnings from memory chips are expected to decline on weaker seasonality, but remain strong for OLED panels thanks to continued high demand from major customers.

Among the set businesses, although shipments of smartphones are forecast to rise, increased marketing expenses during the year-end peak season will affect profitability. Meanwhile, the Networks Business will look to cement its position at the forefront of 5G technology as it begins supplying 5G equipment; shipping to customers in North America and Korea in the fourth quarter, the company said.

The CE Division will benefit from strong year-end seasonality in the fourth quarter. It expects earnings to rise on the back of higher consumer demand for QLED TVs and premium home appliances.

Looking further ahead to 2019, earnings are forecast to be weak for the first quarter due to seasonality, but then strengthen as business conditions, particularly in the memory market, improve.

Moreover, Samsung will continue to focus on strengthening its competitiveness in emerging technologies, such as 5G, AI and automotive electronics.

The Semiconductor Business posted consolidated revenue of 24.77 trillion won and operating profit of 13.65 trillion won for the quarter.

The Display Panel segment posted 10.09 trillion won in consolidated revenue and 1.10 trillion won in operating profit for the third quarter.

Looking ahead to the fourth quarter, Samsung expects solid demand to continue in the OLED business and will therefore focus on enhancing technical differentiations in flexible panels and improving productivity of rigid panels.

The IT & Mobile Communications Division posted 24.91 trillion won in consolidated revenue and 2.22 trillion won in operating profit for the quarter.

Looking to the fourth quarter, Samsung expects its smartphone shipments to rise during the year-end peak season, particularly for its enhanced mass product lineup including the new Galaxy A7 and A9. However, earnings are forecast to decrease due to increased marketing expenses.

As for the outlook for 2019, smartphone market demand is expected to slightly grow mainly driven by premium segments. However, competition is likely to intensify across all segments as key features of premium models continue to expand to mid- to low-end models.

Looking to the fourth quarter, the Company projects the TV market to grow slightly year-over-year.

In 2019, overall TV market demand is expected to remain the same as this year.