Samsung Electronics Co Ltd (KRX: 005930) have reported a huge drop in their operating profits in their most recent trading update.
In challenging political and economic conditions, the technology giant reported a loss in the three months leading up to September 30th.
Operating profit fell 56% versus the same period one year ago, which has caused tensions in senior management and for shareholders.
It is the fourth consecutive quarter where Samsung’s operating profit fell year-on-year,
However, this was an 18% increase from the second quarter beating company guidance published earlier this month.
There still may be a long road to recovery, as analysts suggest. This is due to low prices and demand memory chips.
Here’s what the company reported versus what it had reported a year ago:
- Operating profit: 7.78 trillion Korean won ($6.7 billion) vs. 17.57 trillion won a year ago
- Net profit: 6.29 trillion Korean won vs. 13.15 trillion won a year ago
- Consolidated sales: 62 trillion Korean won vs. 65.46 trillion won a year ago
- Basic earnings per share was 899 Korean won compared to 1,909 won from a year ago.
For the fourth quarter, Samsung said it expects “demand for components to turn sluggish in general amid weak seasonal effects, while marketing expenses are likely to increase to address year-end smartphone sales.”
The tech giant added it expects memory chip demand to rise “slightly quarter-on-quarter on the back of inventory building by customers in response to global macroeconomic uncertainties.″ Memory components used in smartphones and data centers make up Samsung’s main profit-making business.
This comes at a vital time for Samsung, as competitors such as Apple (NASDAQ: AAPL) announce their new Airpod product line and Huawei (SHE: 002502) reported strong third quarter trading figures.
For 2020, Samsung said it predicted “solid” demand in the memory business but cautioned against lingering uncertainties in the external environment. It also expects growing sales for 5G products and foldable devices next year.
Samsung seem optimistic which gives investors and shareholders something to look forward to.
The development of their phone and mobile technology is becoming more and more popular as they look to encapsulate some of Apple’s customers.
Analysts have said that 5G deployment should help spur the recovery in the semiconductor space starting next year.
Samsung said its mobile earnings for the quarter improved due to “robust shipments of the flagship Galaxy Note 10, a better product mix and higher profitability in the mass-market segment.”
Shares of Samsung are trading at 50,400KRW. 31/10/19 11:47BST.
