SEOUL • Samsung Electronics reported its biggest operating profit in more than two years, bolstered by brisk demand for its Galaxy S7 smartphones, cost controls and sluggish iPhone sales.
Shares in the world's largest maker of phones and memory chips rose after it reported operating income of 8.1 trillion won (S$9.3 billion) in the latest quarter, exceeding the 7.38 trillion-won average of analysts' estimates compiled by Bloomberg and 6.9 trillion won a year earlier.
The results underscore how the South Korean company is defying a slowdown in the smartphone market - Galaxy S7 models, which were timed to go on sale earlier than usual this year, have capitalised on a lull in new iPhones from Apple.
That, along with a healthy consumer electronics business, is helping to boost profit margins and make up for declining income in Samsung's semiconductor business.
"S7 smartphones turned out to be a greater hit than what the market had thought without competing iPhones," said IBK Securities Co analyst Lee Seung Woo in Seoul. "Samsung's end-user products, such as smartphones and TVs, all performed unbelievably well in the first half and looks like they did a lot of cost reduction."
Samsung shares rose 2 per cent to 1.45 million won in Seoul. The stock has climbed 15 per cent in 2016, putting it on track for its first annual increase in four years.
Revenue was 50 trillion won in the June quarter, the Suwon- based company said, compared with the 50.9 trillion won analysts expected.
Samsung won't provide net income or break out divisional performance until it releases audited results later this month.
Samsung probably sold 15 million units of the S7 in the quarter after shipping 10 million in March when it debuted, said Mr Greg Roh, an analyst at HMC Investment Securities in Seoul.
Operating profit at the mobile unit probably rose 53 per cent to 4.23 trillion won in the second quarter, according to the average estimate of six analysts surveyed by Bloomberg News.
Higher sales of the S7 Edge, with its wraparound screen, compared with the flat version, along with solid demand for cheaper models, helped earnings grow.
Meanwhile, Huawei Technologies has filed another patent lawsuit against Samsung in China, adding to the legal battle between the two Asian electronics giants.
In May, Huawei said it sued Samsung in the United States and China, seeking compensation for what the Chinese firm said was unlicensed use of fourth-generation cellular communications technology, operating systems and user interface software in Samsung phones.
BLOOMBERG
