Financial News

  • 26 January 2014, 16:55

Samsung Sees First Profit Fall For Two Years

Samsung, the world's biggest maker of smartphones, has reported its first quarterly fall in profit for two years.

The South Korean firm said the drop was due to a one-off employee bonus, a stronger currency and slowing sales of high-tech phones.

Operating profit for the last three months of 2013 was 4.68bn, down 18% on the July-September period.

It was a 6% decline from the previous year's figures.

Net profit rose 3.7% year-on-year but slowed significantly from the third quarter's 25.6% rise.

It said increased returns from its chip manufacturing unit failed to offset the reduced profitability of the Galaxy series of smartphones.

"Amid macroeconomic uncertainties such as a strong Korean won and increased concerns over possible quantitative easing tapering in the US, our earnings were lower than what the market expected," Samsung's Robert Yi said.

The quarterly profit drop was hit by a "negative currency impact" of 390m and the 440m employee bonus to mark the 20th anniversary of a marketing strategy.

Chairman Lee Kun-Hee laid the groundwork for the company becoming the world's biggest electronic firm. It has amassed large cash reserves in recent years.

And unlike key rivals such as Apple, Samsung owns its own manufacturing facilities.

But the company also warned of potentially lacklustre results continuing this year.

"For the first quarter it will be challenging for Samsung to improve its earnings as the weak seasonality of the IT industry will put pressure on demand for components and TV products," a company statement said.

The latest earnings result ended the company's long run of record quarterly profits on the back of surging sales of its Galaxy products.

The mobile division posted a quarterly operating profit of 3bn, down 2.8% from the third quarter.

"While the number of people buying smartphones is still increasing, it's getting harder for Samsung to tap new demand for its high-end handsets," HMC Investment Securities analyst Nho Gen-Chang said.

"So Samsung will have to lower prices to sell them, which will in turn decrease its profit margins," Mr Nho said.

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