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Samsung Reports 56 Percent Drop in Second Quarter Profits

Samsung Reports 56 Percent Drop in Second Quarter Profits

Posted July. 16, 2005 03:05,   


Samsung Electronics’ operating profit for the second quarter (April to June) of this year was reported as 1.65 trillion won, a 56 percent drop from the same period last year. The figure is also below what securities companies expected: 1.7 trillion won.

With the figure, Samsung Electronics gave away its first place operating profit ranking to POSCO, which posted profits of 1.728 trillion won in the second quarter.

On July 15, the electronics company announced its second-quarter sales at 13.59 trillion won, operating profit at 1.65 trillion won, and net profit of 1.69 trillion won. Sales fell nine percent from last year, while operating profits and net profits nose-dived 56 percent and 46 percent, respectively.

Compared with the first quarter (January to March), sales and operating profits dropped two percent and 23 percent, respectively. Net profits rose 13 percent because evaluation profits occurred on its shares as the Samsung Card became profitable.

Major business divisions, including the company’s LCD and mobile phone divisions, posted slack performance. The business was also affected by unfavorable factors such as the fall in the won-dollar exchange rate (with the won appreciating) and sluggish domestic consumption.

Its semiconductor business saw a nine percent decrease in sales from the previous quarter due to the seasonal factors of the IT market. Sales and operating profits stood at 4.17 trillion won and 1.1 trillion won for this division, respectively.

The average selling price of DRAM dropped 20 percent. The operating profit rate was still high at 27 percent, but that is a 20 percent decline from the second quarter of last year (47 percent).

The company sold 24.4 million mobile phones, which is a similar record to the previous quarter. It is projected that the company will be able to achieve this year’s sales goal of 100 million units as it sold 49 million units within the first half (January to June).

However, price declines are a problem with cell phones. The average price of a phone was 176 dollars abroad and 342,000 won at home, which is lower than the previous quarter (182 dollars, 356,000 won).

Sales of LCDs increased from the previous quarter at 2.12 trillion won, while its operating profits managed to remain a healthy 12.7 billion won.

Samsung’s home appliance division recorded one trillion won in sales and 30 billion won in operating profits thanks to a significant increase in air-conditioner sales. The division was in the black for the first time since the first quarter of last year.

Ju Woo-sik, the investor relations team leader of Samsung Electronics, said, “The company was hit hard by foreign exchange losses in the second quarter, which amounted to 200 billion won compared with the previous quarter and 900 billion won compared with the same period last year,” adding, “Performance will be improved in all divisions in the second half.”

Securities companies seem to regard an improvement in record in the second half to be more important that weak performance in the second half. Samsung Electronics’ Share price fell only by 5,000 won to 542,000 won that day.

The Korea Composite Stock Price Index also dropped just by 2.33 points from the previous day to 1,059.60, showing that the worsening performance of Samsung Electronics did not have much impact on the stock market.

Suk-Min Hong smhong@donga.com