With solid Q1, Samsung gets over the hump

Customers look at Samsung Electronics products that are on display at the company’s promotional booth at its headquarters in Seocho, southern Seoul, yesterday.[NEWS1]

Samsung Electronics, which saw profits fall to the level of earnings shock in the fourth quarter last year, rebounded slightly in the first quarter of 2014.

The world’s No. 1 smartphone maker said yesterday it posted 53 trillion won ($50.6 billion) in sales and 8.4 trillion won in operating profit in the first quarter, up 1.08 percent from the last quarter of 2013.

Sales were 59.28 trillion won and operating profit was 8.31 trillion won in the last quarter. In the first quarter of 2013, sales were 52.87 trillion won and operating profit was 8.78 trillion won.

Although sales declined 10 percent compared to last quarter, operating profit increased as the company reduced marketing and promotional costs.

It is often the off-season for IT companies from January through March.

To counter that, Samsung Electronics embarked on an austerity program early this year to reduce costs in the smartphone, home electronics and management divisions by 20 percent to 40 percent.

“In the last quarter, operating profit fell too short of the expectation and we had to be concerned about earnings in the first quarter,” said a spokesman for Samsung Electronics.

“We got over the barley hump along with the cost-reduction effects and improvement in the semiconductor and TV business creating a synergy.”

As operating profit slightly rebounded, industry observers say there are strong signs of recovery in the second quarter, when the Galaxy S5 will be sold.

Starting Friday, Samsung’s flagship Galaxy S5 smartphone and the Gear 2 and Gear Fit wearable devices will go on sale worldwide.

The electronics giant can also expect healthy demand for TVs, such as ultra high-definition (UHD) TVs, in June when the Brazil World Cup will be held.

“Not only the sales effects of Galaxy S5 but also the peak season for air conditioners and TVs will increase sales and operating profit. It is forecast that Samsung will post 58.3 trillion won in sales and 9.3 trillion won in operating profit in the second quarter,” said Byun Han-joon, a research fellow at KB Investment and Securities.

The preliminary result was estimated based on International Financial Reporting Standards (IFRS) and provided for the convenience of investors, as the first-quarter settlement is not yet completed.

“Since July 2009, Samsung has been providing quarterly estimate figures for the first time as a domestic conglomerate,” said a spokesman for Samsung.

“It began applying IFRS in 2010 to enhance shareholder value so that investors could more accurately forecast the company’s performance and value through the information provided by global standards.”

Samsung’s quarterly operating profit surpassed 10 trillion won for the first time in the third quarter last year.

Despite yesterday’s earnings release, shares fell 0.21 percent to finish at 1.394 million won due to net selling by foreign investors.

Samsung Electronics accounts for 20 percent of the Kospi’s market capitalization.

Meanwhile, Samsung said it will provide Galaxy Gift, a premium content service for Galaxy S5 buyers.

New Galaxy S5 owners will be able to download 16 apps, including Workout Trainer and Lark, a health care app, and content worth 600,000 won for free.

In particular, for domestic customers, it is providing a free music streaming service for 30 days at Samsung Music.

BY KIM JUNG-YOON, KIM YOUNG-MIN [kjy@joongang.co.kr]