SEOUL • A flourishing components business helped South Korean technology giant Samsung notch up its highest quarterly profit in more than three years, as the company turned down activist investor Paul Elliott Singer's push for corporate restructuring.
Samsung, the world's largest smartphone maker by revenue, said that its net profit rose sharply to 7.68 trillion won (S$9.5 billion) in the first three months of this year, a 46 per cent increase from 5.25 trillion won for the same period a year earlier.
It offered to reward shareholders by paying its first quarterly dividend and cancelling tens of billions of dollars in treasury shares amid a surge in profits, but turned down Mr Singer's push for a holding company, saying it would not help competitiveness and there could be regulatory hurdles.
"We are encouraged that Samsung Electronics has agreed to take the bold step of optimising its balance sheet through a cancellation of its legacy holding of treasury shares," Elliott Management said in an e-mail statement.
"We think there is room for even more progress due to the company's announced commitment to enhance its board."
The shares initially fell on Samsung's announcement that it would not pursue a holding company, but jumped to a record high when the company said separately that it planned to cancel 40 trillion won of treasury shares in two stages.
Samsung has about 12.9 per cent of its own common stock in its treasury holdings. At today's prices, its treasury holdings are valued at about US$35 billion (S$49 billion). The quarterly dividend will be 7,000 won a share.
"The plans announced today to increase returns for shareholders trumped the announcement not to turn into a holding company," said analyst Lee Jae Yun from Yuanta Securities. "Many shareholders, to a degree, had also expected the holding-company bid would not become a reality."
The stock surged as much as 4 per cent to 2.226 million won, the highest on an intra-day basis, before trading to 2.9 per cent higher as of about 2.40pm in Seoul.
Samsung's strong financial performance came despite challenges. Vice-chairman and de facto chief Lee Jae Yong is on trial in an influence-peddling scandal and remains in detention. Samsung has shrugged off his detention this year and the Note7 smartphone recall last year, as it boosts returns to investors and its earnings on demand for high-end screens and chips for cloud servers and mobile devices.
Mr Elliott called on Samsung to restructure in October, releasing a 10-page letter that detailed his push for a holding company, more independent directors, a Nasdaq listing and the payment of 30 trillion won in dividends.