Samsung Electronics announces earnings for Q2 in 2013

Q2 consolidated operating profit reaches 9.53 trillion won (R83 864 billion) on revenues of 57.46 trillion won (R505 648 billion)

Samsung Electronics Co., Ltd. today announced revenues of 57.46 trillion won (R505 648 billion) on a consolidated basis for the second quarter ended June 30, 2013, a 9% increase from the previous quarter. Consolidated operating profit for the quarter reached 9.53 trillion won (R83 864 billion), representing a 9% increase on quarter, while consolidated net profit for the same quarter was 7.77 trillion won (R68 376 billion).

In its earnings guidance disclosed on July 5, Samsung estimated second quarter consolidated revenues would reach approximately 57 trillion won (R501 600 billion) with consolidated operating profit of approximately 9.5 trillion won (R83 600 billion).

In contrast to the first half of last year, revenue was up 19% and operating profit increased 51% in the first half of 2013 as profitability in the components business improved. The profit ratio reached 16.6% in the first six months of the year compared with 13.1% recorded in the same period last year. Samsung expects to see solid growth and the components business’ contribution to profits will gradually increase.

Highlighting the quarterly performance, growth remained steady in high-end smartphone and premium television businesses. Most noticeably, a growth spurt in shipments for OLED panels for smartphones and high consumer demand for air conditioners spurred growth.

Led by the much-awaited launch of GALAXY S4, smartphone shipments and revenue increased from the March quarter. The strong growth streak for the smartphone market is expected to continue in the third quarter albeit at a slower pace.

The components business improved both in terms of revenue and operating profits from a quarter earlier due to a higher demand for mobile device-related parts. However, overall sales of logic chips declined due to lower mobile application processor shipments.

Escalated investments in R&D and in distribution channels, as well as expenses on new product launches have dampened wider gains for IT & Mobile Communications (IM) Division, which encompasses the Mobile Communications, Networks, and Digital Imaging businesses.

“Entering into a typically strong season for the IT industry, we expect earnings to continue to increase. However, we cannot overlook delayed economic recovery in Europe and risks from increased competition for smartphone and other set products,” said Robert Yi, Senior Vice President and Head of Investor Relations.

Mr. Yi added, “We expect to improve profit yields in the second half due to high-margin, differentiated components products, as well as gains stemming from increased smartphone and TV shipments.”

The Display Panel segment’s operating profit jumped 46% on quarter to 1.12 trillion won (R9 856 billion) thanks to strong demand for high value-added panels for IT and TV panels sized 60-inch and over. A mid- to low-end TV line-up targeting emerging markets and a range of premium TV offerings were credited for the Visual Display business’ earnings. As for the next quarter, uncertainties over Europe’s economy and Chinese subsidies for electronics goods could possibly hinder growth.

As for this year’s capital expenditure, Samsung Electronics plans to spend a record total of 24 trillion won (R210 216 billion) an increase of over 1 trillion won (R8 800 billion) from the previous year. This amount may increase depending on market conditions in the second half and the outlook for next year.

The Semiconductor business will invest 13 trillion won (R114 400 billion), while the Display Panel segment will inject 6.5 trillion (R57 200 billion) in capex. The increase in spending is aimed at enhancing Samsung’s competitive edge in growth-generating, high value-added DRAM, NAND and System LSI products. In the second quarter, capex amounted to 5.2 trillion won (R45 760 billion), in which the Semiconductor business was responsible for 2.2 trillion (R19 360 billion), and 1.3 trillion won (R11 440 billion), in spending was accredited to the Display Panel segment. All told, a total of 9 trillion won (R79 200 billion), or 38% of the planned capex investment was made in the first half of the year.