Samsung vows big acquisition after disappointing results

Samsung Electronics is on the hunt for major takeover targets over the next three years after announcing lower-than-forecast earnings for 2020.

Korea's tech behemoth has landed few such deals in recent years as big tech companies and large chipmakers abroad have scooped up companies.

“It is hard to pinpoint a specific time due to different internal and external uncertainties,” said Choi Yoon-ho, Samsung's president and chief financial officer, during a conference call with analysts and press. “But we have a positive view on the possibility of a meaningful M&A in the upcoming three years.”

Samsung Electronics’ last buyout was an acquisition of American audio and automotive company Harman back in 2017.
That stance contradicts worries that Samsung may be forced into a cautious approach to big deals with its leader Lee Jae-yong jailed for bribery.

Choi also said the company will keep investing heavily in chips.

But he avoided direct comment on reports that Samsung plans to build a new factory in Austin, Texas, saying nothing has been decided.

“[Facility expansion] is something we review on a regular basis because of the characteristic of the foundry business,” Choi said. “We are looking at all regions across the United States as well as Hwaseong and Pyeongtaek [in Gyeonggi].”

On Thursday, Samsung Electronics announced somewhat disappointing earnings for 2020, affected by lower memory chip prices and demand for electronic goods that was suppressed by the pandemic.

The electronics maker announced a 2020 net profit of 26.48 trillion won ($23.78 billion), up 21.48 percent from the previous year but short of a consensus of 35.6 trillion won compiled by market tracker FnGuide.

Operating profit rose 29.62 percent to 35.99 trillion won. Sales rose 2.78 percent to reach 236.81 trillion won.

But 2020 was a good year compared to 2019, when chip prices hit bottom, although earnings fell short of the company’s heydays in 2017 and 2018, when operating profit exceeded 50 trillion won.

The fourth quarter of last year was weak, especially compared to the third. Samsung reported 61.55 trillion won in sales for the fourth quarter, up 2.71 percent on year, and an operating profit of 9.05 trillion won, up 26.4 percent than a year earlier.

“Profit fell 26.7 percent from the third quarter due to weaker memory prices and sluggish consumer products sales, as well as higher marketing costs and a negative impact from the Korean won’s appreciation,” the company said in a statement.

Semiconductors accounted for 3.85 trillion won in operating profit in the fourth quarter, up 11.59 percent over a year ago.
Smartphone operating profit was 2.42 trillion won in the quarter, down 4.13 percent from a year earlier, while operating profit from the consumer electronics division edged up 1.22 percent to 820 billion won on year.

Samsung expects a tough road in the first quarter, especially in the semiconductor business.

“The memory business will likely continue to be affected by the ongoing strength of the won and costs associated with new production lines, despite solid demand from mobile products and data centers,” it said.

A more generous dividend policy was announced Thursday. Samsung raised its regular dividend payout to 9.8 trillion won between 2021 and 2023 from 9.6 trillion won between 2018 and 2020.

LG Electronics’ 2020 earnings also fell short of market expectations, according to a statement released Thursday.

It reported 2.06 trillion won in net profit, up 1,046.9 percent over a year earlier, but 16.08 percent lower than an analyst consensus of 2.46 trillion won.

Operating profit rose 31.1 percent to 3.2 trillion won while sales went up 1.5 percent to 63.26 trillion won compared to the previous year.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]