Samsung forecasts record operating profit in Q1

Industry

Published: 06 Apr. 2010, 23:05

Samsung forecasts record operating profit in Q1

Samsung Electronics, the world’s largest electronics company by sales, forecasted yesterday a record quarterly operating profit and a 19 percent rise in revenue in the January-March period from a year ago as the global economy recovers from the recent financial crisis.

In an earnings guidance, the Korean company estimated a consolidated operating profit of 4.3 trillion won ($3.83 billion) in the first quarter. The figure is seven times larger than it reported last year for the same period.

Operating profit represents a company’s earnings before taxes, dividends and other items, and consolidated figures include overseas subsidiaries.

Samsung Electronics also predicted healthy sales - at 34 trillion won in the first quarter, up 18.6 percent from a year earlier.

Although the company did not specify earnings by its businesses nor give reasons for the bullish first quarter figures, analysts attribute them mainly to strong sales and higher prices for memory chips. They estimate that about half of Samsung Electronics’ operating profit for the first quarter came from its semiconductor business.

According to Dramexchange Technology, benchmark prices of dynamic random access memory, or DRAM, chips, which are used mainly in personal computers, rose 16 percent in the first quarter from a year ago.

Samsung Electronics is the world’s largest chipmaker and supplies key memory chips for a range of popular Apple products, including the iPad, the iPhone and the iPod.

Analysts said strong sales of flat-screen televisions contributed to the earnings performance.

This is the first time that the company has issued an earnings estimate using International Financial Reporting Standards (IFRS) in hopes of increasing transparency and providing more information to investors.

Samsung is expected to release its official first-quarter results later this month, with some analysts saying the actual results could be higher than those forecast yesterday.

“Although the current exchange rate is not really favorable for the company, increased global demand in the IT sector could further boost Samsung’s operating profits,” said Lee Seon-tae, an analyst with Meritz Securities.

The earnings guidance came less than two weeks after Lee Kun-hee returned as Samsung Electronics chairman following a presidential pardon for a tax evasion conviction. Lee said his presence at Samsung was needed since the company faced a potential crisis due to increased global competition. Last month, the company forecast double-digit sales growth in 2010 from last year’s revenue of 136.3 trillion won.

By Kim Hyung-eun [hkim@joongang.co.kr]

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