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Profit for Samsung Electronics Expected to Drop by About 70% in the Fourth Quarter

On Friday, Samsung Electronics forecast that its operating profit for the fourth quarter would fall by 69 percent compared to the same period a year earlier. This was due to the fact that the company’s primary semiconductor business was facing major headwinds from a decrease in the demand for chips and home appliances as a result of the economic downturn.

The South Korean IT giant provided earnings guidance in which it anticipated that its operating profit for the period of October through December would be 4.3 trillion won ($3.4 billion), representing a decrease from 13.87 trillion won during the same period in the previous year.

The result was less than the 6.93 trillion won that was the consensus of the local experts that FnGuide offered for the market information.

After posting a profit of 4.06 trillion won for the third quarter of 2014, Samsung announced a quarterly operating income of less than 5 trillion won for the first time in eight years, which was also the company’s profit for the third quarter of 2014.

According to executives from Samsung, “under pervasive uncertainty regarding macroeconomics, chip sales plummeted owing to decreased demand from memory chip and smartphone industries.” [C]hip sales dropped because of weaker demand from firms that make smartphones.

“(Chip) prices have continued to fall by a larger margin than was anticipated after the readjustments that worldwide suppliers have made in their inventory. As a result of consumers spending less, there was also a reduction in sales of smartphones and household appliances.”

According to a regulatory filing made by the business, it is anticipated that sales for the period spanning October to December would drop by 8.6 percent on-year to a total of 70 trillion won, down from 76.57 trillion won a year earlier.

The overall operating profit for the preceding year is estimated to have decreased by 16% to 43.37 trillion won from the previous year’s figure of 51.63 trillion won, while revenues are estimated to have increased by 7.9% to 301.77 trillion won from 279.6 trillion won during the stated time.

It was the first time that Samsung anticipated that its annual sales would be more than 300 trillion won, and it happened last year. There was a lack of information on the net profit.

The memory chip and smartphone manufacturer with the most market share in the world projects that its full-year revenues would reach 301.6 trillion won in 2022, representing a 7.93 percent increase from the 280 trillion won recorded the previous year. Despite this, it is less than the consensus of the market, which was 304.8 trillion won.

The dissection of the company’s financial performance is scheduled to be made public on the 31st of January.

In the meanwhile, Samsung shares were trading at 59,000 won as of noon on Friday, which is an increase of 1.37 percent from where they were at the end of the previous session in the wake of the publication of the quarterly results.