Samsung forecasts record quarter, despite scandals

Samsung yesterday forecast its best quarterly profit in three years, for the three months to the end of March, beating expectations. That has put it on track for record annual earnings, on the back of a memory chip super-cycle.

The company has rapidly recovered from the costly failure last year of its fire-prone Galaxy Note 7 device, despite a political scandal involving vice chairman, Jay Y. Lee, who appeared in a Seoul court yesterday. He was facing charges that included bribing ousted president, Park Geun-hye.

The global memory chip leader said first-quarter operating profit was likely 9.9 trillion won (€8.2bn), compared with an average forecast of 9.4tn won from a Reuters survey of analysts. Revenue rose 0.4%, to 50tn won, just ahead of forecasts.

“The semi-conductor business was likely the main driver for earnings,” said Heungkuk Securities analyst, Lee Min-hee, adding that sales of mid-to-low tier smartphones also helped the mobile business remain profitable.

Samsung shares touched a record high of 2.134m won in late March, on expectations of record annual profit in 2017, as the South Korean tech giant bounced back from the embarrassing withdrawal of its Note 7 devices, due to combustible batteries.

Investors and analysts expect Samsung to report its best-ever quarterly profit in the current quarter, with the Galaxy S8 smartphone hitting the market on April 21 in Samsung’s first premium device launch since the Note 7’s withdrawal, in October.

Some researchers are forecasting that the S8, which sports the largest screens for Samsung high-end smartphones to date, will set a new first-year sales record.

All this is amid management upheaval at South Korea’s biggest family-run conglomerate, with Lee, a third-generation leader, embroiled in a scandal that has already led to Park’s removal from office for allegedly receiving bribes.

While Samsung will not provide detailed earnings results until the end of April, analysts tipped its chip division to earn a record 5.8tn won in the first quarter and propel the firm to its best overall operating profit since the third quarter of 2013.

Favourable memory market conditions will likely persist throughout 2017, due to diminishing production gains on investments and careful capacity management among chipmakers. Growing demand for more firepower, from devices such as smartphones and servers, has also pushed up margins for Samsung, and its rivals, in recent quarters.

Samsung’s share price was marginally down by 0.5% yesterday.

• Reuters