Samsung's Q4 profit surges despite Note 7 crisis

Samsung posted a 50 per cent surge in quarterly operating profit after demand from Chinese smartphone brands pushed up memory chip prices and buoyed the unit that makes organic LED screens.
Samsung posted a 50 per cent surge in quarterly operating profit after demand from Chinese smartphone brands pushed up memory chip prices and buoyed the unit that makes organic LED screens.PHOTO: EUROPEAN PRESSPHOTO AGENCY

SEOUL • Samsung Electronics underscored the resilience of its business when it reported its best operating profit in three years, weathering the death of its fire-prone Galaxy Note 7 with the help of its workmanlike chip and display divisions and cheaper smartphones.

The world's largest maker of mobile devices posted a 50 per cent surge in quarterly operating profit after demand from Chinese smartphone brands pushed up memory chip prices and buoyed the unit that makes organic light-emitting diode screens.

Samsung also touched up an older phone line-up with new colours and features, helping it tide over in the Note 7's absence.

Samsung is emerging from its biggest corporate crisis, which happened when reports of incendiary Note 7s forced the Korean company to kill its most profitable gadget.

It still has not revealed the results of a subsequent investigation into an episode that cost Samsung more than US$6 billion (S$8.6 billion) and assured Apple of the lead in premium devices over the holidays.

It is now counting on its next marquee phone to repair its reputation.

"Despite the Note 7's vacuum, Samsung acquitted itself well on the back of sound S7 sales," said IBK Securities analyst Lee Seung Woo.

"After a softer landing in the first quarter, Samsung is on track for record June quarter profit with the new S8 coming to market."

Operating income rose to 9.2 trillion won (S$11 billion) in the quarter ended December, its biggest profit in three years, the company said in preliminary results yesterday.

That compares with the 8.29 trillion-won average of analysts' estimates compiled by Bloomberg in the past four weeks.

Shares of Samsung rose 1.9 per cent to 1.81 million won as of 1.52pm in Seoul. The stock surged 43 per cent last year, snapping a three-year losing streak.

Samsung, which settles most component sales in US dollars, also got a lift from a weaker Korean won. The US dollar appreciated to 1,157.4 won on average in the fourth quarter compared with 1,121.4 won in the previous three months, according to Bank of Korea data.

Samsung is counting on its flagship Galaxy S line this year to fire up a beleaguered mobile division.

The next iteration of the phone is said to feature a bezel-less display and a voice-enabled digital assistant. But the company has also warned of slowing key markets and growing uncertainty due to trade protectionism and currency fluctuations.

Sales were 53 trillion won in the quarter, the company said, compared with the 52.1 trillion won analysts expected.

It will not provide net income or break out divisional performance until it releases the final results later this month.

While it awaits the next Galaxy S, Samsung should be able to rely on its components divisions to pick up some of the slack.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on January 07, 2017, with the headline 'Samsung's Q4 profit surges despite Note 7 crisis'. Print Edition | Subscribe