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Samsung Electronics profit guidance misses expectations as won weighs

Reuters  |  SEOUL 

By Joyce Lee

SEOUL (Reuters) - Electronics Co Ltd on Tuesday estimated a record fourth-quarter profit but the guidance fell short of market expectations as a strong won and one-off staff bonuses took the shine off surging DRAM chip prices.

The said its October-December operating profit likely jumped 64 percent year-on-year to 15.1 trillion won ($14.1 billion), shy of a 15.9 trillion won average estimate from 17 analysts surveyed by Revenue was estimated at 66 trillion won, slightly below expectations.

While the guidance put the South Korean on course for a record 2017 profit, shares fell as much as 2 percent amid doubts over the outlook for and The broader market was 0.3 percent higher.

"The currency effect and bonuses appear to be the main reason for missing market forecasts, but shipments are also likely to be lower than expected," said Song Myung-sup, at & Securities.

"Considering Apple and Chinese firms' sales weren't stellar either, overall mobile demand appears to have been sluggish."

The strong won and a end-year bonus for staff in the business are expected to have dented fourth-quarter profit by about 400 billion won and 400-500 billion won respectively, two analysts said.

Based on the guidance, Samsung's 2017 operating profit is likely to come in at 53.6 trillion won, compared to the previous year's 29.2 trillion won.

The rival did not elaborate on its October-December performance and will disclose detailed at the end of January.

The last time a guidance statement disappointed the market was in the wake of the embarrassing withdrawal of its fire-prone Galaxy Note 7 handsets in October 2016.


The continued rise in the price of and demand from data centre servers drove fourth-quarter earnings, offsetting a drop in NAND chip prices and the stronger won, analysts said.

But the outlook for in 2018 is mixed, and shares have fallen 11.4 percent from their all-time high in early November as some investors bet on an end to the memory boom.

NAND chips, used in things like and USB drives, have entered a down-cycle and there is a view among some industry observers that DRAM market conditions also will soften later this year.

Others however expect DRAM supply to remain tight throughout 2018 as Google, and expand data centres used for cloud storage and

The outlook for and other mobile devices, which analysts expect to contribute about 17 percent to Samsung's fourth-quarter earnings, is also uncertain due to competition from Chinese rivals in markets like and

Tom Kang, research director at data provider Counterpoint, said Samsung's mobile division should show "moderate" shipment growth of about 1-2 percent in 2018.

South Korean exporters like will be keeping a close eye on the won in 2018.

The currency traded on Monday at its highest in more than three years.

($1 = 1,067.7000 won)

(Reporting by Joyce Lee; Editing by Stephen Coates)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Tue, January 09 2018. 08:27 IST