Samsung Sees 60 Percent Quarterly Profit Drop

Samsung has warned it expects a 60 percent fall in quarterly operating profit compared with the same quarter last year, as sales of its Galaxy smartphones slow.

The company, which is the world’s largest maker of mobile phones, televisions and memory chips, said it expects an operating income of 4.1tn won (£2.5bn) for the quarter ending in September. Analysts had projected earnings of 5.2tn won.

Sales slowdown

Quarterly sales are expected to reach 47tn won, compared to analysts’ expectations of 50.3tn won.

The quarter marks the company’s weakest quarterly profit since the second quarter of 2011 and the fourth consecutive quarter of annual earnings declines. For the full year, Samsung is heading for its first annual earnings drop since 2011. Samsung is set to publish full financial results for the quarter later this month.

“Smartphone shipments increased marginally amid intense competition,” the company stated. “However, the operating margin declined due to increased marketing expenditure and lowered average selling price.”

Samsung faces pressure from Apple at the top end of the smartphone market, and has been losing low-end market share to the likes of China’s Lenovo and Xiaomi. The company said it is planning new smartphones “featuring new materials and innovative designs” at the high end, as well as “a series of new mid-to-low end smartphones”.

Smartphones accounted for nearly 70 percent of Samsung’s 2013 operating profit.

The company’s shares rose about 1.6 percent in Seoul in spite of the announcement, which analysts said reflects an expectation that profits have bottomed out and will return to growth in the months ahead.

Samsung said income from its memory business improved sequentially due to seasonal demand. The company on Monday announced plans to invest $14.7bn on a new chip facility near Seoul, its biggest-ever investment in a single plant.

Do you know all about Samsung? Take our quiz!