Samsung’s Earnings Climb on TV Demand
Samsung Electronics Co. said Friday that its first-quarter net income rose 26% from a year earlier amid strong demand for large flat-screen televisions.
South Korea’s largest company earned 1.88 trillion won ($1.95 billion) in the period ended March 31, the company said, also citing equity gains from the performance of overseas subsidiaries.
The result was better than expected. The average estimate of analysts surveyed by Dow Jones Newswires forecast a 17% increase in profit to 1.76 trillion won.
Samsung said sales in its liquid crystal display, or LCD, business soared 41% to 2.68 trillion won from a year earlier because of demand for big flat-screen TVs. Operating profit in the division surged more than fourfold.
Samsung makes its own flat-panel TVs and is a major supplier of the liquid crystal displays used in other manufacturers’ television sets, as well as in laptop computers and cellphones.
Overall operating profit, or sales minus the cost of goods sold, however, slumped 25% amid strength in the South Korean won and falling prices for products including NAND flash memory chips used in digital music players.
Samsung is the world’s largest manufacturer of memory chips, including DRAM, or dynamic random access memory.
Total sales rose 1% to 13.96 trillion won ($14.5 billion).
LCDs have been a bright spot for companies such as Samsung. Global demand for the televisions is soaring as consumers increasingly abandon their bulky cathode ray tube sets for the sleeker, thinner versions.
Samsung and Japan’s Sony Corp. said this week that they planned to invest about $2 billion to expand joint production of LCD panels to meet the surging demand.
Woosik Chu, senior vice president and head of investor relations, said Samsung shifted its LCD production focus to screens for large-sized TVs amid a seasonal slowdown in demand for personal computers.
“We significantly increased the shipment of 40-inch-and-above TV panels by 20% quarter on quarter,” Chu said. “Even with this kind of significant increase in output, we are still not able to meet our customers’ demand for large TV panels.”
Chu, speaking to investors and analysts in a conference call, said South Korea’s currency gained 6% in the first quarter from the fourth quarter last year.
“Such a drastic won appreciation had a negative impact on our revenue and profits,” he said.
Chu said the value of exports at Samsung, which does about 90% of business overseas, declined 7% from the fourth quarter, adding that when those figures were converted into won, the decline was more like 12%.
A stronger won makes South Korean exports more expensive overseas and reduces the value of foreign profit when converted into the home currency.
