Samsung profit tops estimates on Galaxy S7 sales, lower marketing costs

A pedestrian (left), stands outside a Samsung authorised dealer shop selling the latest Samsung products in the streets of Nairobi, Kenya on July 25.
A pedestrian (left), stands outside a Samsung authorised dealer shop selling the latest Samsung products in the streets of Nairobi, Kenya on July 25. PHOTO: EPA

SEOUL (BLOOMBERG) - Samsung Electronics reported second- quarter profit that beat analysts' estimates, fueled by stronger sales for Galaxy S7 smartphones and aggressive cost cuts.

Net income, excluding minority interests, was 5.83 trillion won (S$6.99 billion) in the period ended June, the company said in a filing on Thursday (July 28). That compares with the 5.64 trillion-won average of estimates compiled by Bloomberg. The company also announced a 1.79 trillion won share buyback.

Samsung was the biggest beneficiary of sluggish sales of Apple Inc's iPhone 6S models, as US wireless carriers promoted S7 phones, helping to reduce Samsung's own marketing expenses. Price declines of semiconductors and displays also helped sales of the company's other consumer electronics, even amid sluggish economic growth across the globe. The company said it anticipates higher marketing spending in the second half, and an uptick in capital expenditure in plants and equipment.

"The smartphone and TV divisions led the earnings surprise for the quarter," said Mr Greg Roh, an analyst at HMC Investment Securities. "Samsung did well in the first half, but it's the matter of how well it could defend itself from the overall downside risks in the second half."

Samsung shares were little changed in early Seoul trading. The stock has gained more than 20 per cent this year after three straight annual declines.

"Looking ahead to the second half of 2016, the company expects its solid performance to continue compared to the first half, mainly driven by earnings increase in the component business due to sales growth in high value-added products and stable demand and supply conditions," the company said in a statement.

Samsung will unveil its next-generation Note device with larger displays on Aug 2 in New York, Brazil and in London, the company said.

Revenue was 50.9 trillion won in the quarter, slightly higher than the 50 trillion won of its July 7 preliminary earnings announcement.