Samsung flags Q3 profit jump to record high

Competition from cheaper Chinese made phones as well as higher marketing costs have also meant that an imminent rebound for Samsung’s mobile unit is unlikely. (AFP)
Updated 05 October 2018
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Samsung flags Q3 profit jump to record high

  • The firm did not elaborate on its performance and will disclose detailed earnings in late October
  • It is working on bringing phones with bendable screens to market but they are not expected to become a huge profit driver

SEOUL: Samsung Electronics estimated third-quarter operating profit jumped by a fifth to a record high, with its semiconductor unit bolstered by robust demand from data centers and gains in production yields.
But sharp price slides for some types of chips have brought an end to a two-year super cycle of tight supply and soaring demand, and analysts expect the July-September quarter will mark a peak in earnings for the South Korean tech giant.
Competition from cheaper Chinese made phones as well as higher marketing costs have also meant that an imminent rebound for Samsung’s mobile unit is unlikely.
“Falling chip prices will pressure profits while its smartphone shipments are not satisfactory and will continue to crimp margins,” said Song Myung-sup, a senior analyst at HI Investment & Securities.
Third-quarter results for the world’s top maker of memory chips and smartphones were, however, impressive. Preliminary operating profit climbed 20.4 percent to 17.5 trillion won ($15.5 billion) on a 4.8 percent gain in revenue, in line with market expectations.
The firm did not elaborate on its performance and will disclose detailed earnings in late October.
Chips account for nearly 80 percent of Samsung’s operating profit and Samsung has benefited from a surge in data centers for cloud computing that has spurred spikes in prices for DRAM chips. DRAM chips, which help devices perform multiple tasks, are its main memory product.
It has also made gains in production technology that allow it to make smaller and faster chips per silicon wafer.
But prices for NAND chips, used for longer-term data storage, have tumbled as supply swamps demand. Prices for DRAM are expected to follow suit, albeit at a much slower pace with some analysts saying Chinese data center demand will lend support.
Market tracker DRAMeXchange predicts an average price decline of 5 percent for DRAM products in the fourth quarter from the previous quarter, steeper than its previous estimate of declines of as much as 3 percent.
Samsung is forecast to still book decent operating profit growth of 12 percent in the fourth quarter, Refinitiv data shows. But that is seen dropping to minimal profit growth in the first half of 2019 followed by small profit declines in the second half.
Shares in Samsung rose 0.2 percent on Friday afternoon, while the broader market fell slightly. The stock has lost 12 percent so far this year on concerns about chip prices, underperforming the broader market which has declined 8 percent.
While income levels for Samsung’s business divisions are yet to be disclosed, analysts expect its mobile business will struggle to deliver profit growth for the next two quarters.
It is working on bringing phones with bendable screens to market but they are not expected to become a huge profit driver.
“Its mobile division will continue to look bad. Samsung’s upcoming foldable phones are not going to be meaningful in terms of sales, more of a symbolic move in terms of innovation,” said Park Sung-soon, an analyst at BNK Securities.


Abraaj founder’s extradition hearing adjourned

Updated 25 min 17 sec ago
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Abraaj founder’s extradition hearing adjourned

  • The US alleges that Arif Naqvi and his firm raised money for the Abraaj Growth Markets Health Fund, collecting more than $100 million over three years from US-based charities and investors
  • According to the SEC’s complaint, Naqvi misappropriated money from the health fund and commingled the assets with corporate funds of Abraaj Investment Management

LONDON: A case in a London court to extradite Arif Naqvi, the founder of collapsed private equity firm Abraaj, to the US on fraud charges was adjourned until April 26, a court official said on Thursday.
The official said that a former managing partner of Dubai-based Abraaj, Sev Vettivetpillai, had also been arrested and was facing a US extradition request linked to the same charges.
While at Abraaj, Vettivetpillai was head of impact investing in a role that oversaw the firm’s troubled health care fund. Abraaj’s executives are facing US charges that they defrauded investors, including the Bill & Melinda Gates Foundation.
The US Securities and Exchange Commission alleges that Naqvi and his firm raised money for the Abraaj Growth Markets Health Fund, collecting more than $100 million over three years from US-based charities and other US investors.
According to the SEC’s complaint, Naqvi misappropriated money from the health fund and commingled the assets with corporate funds of Abraaj Investment Management and its parent company, and used it for purposes unrelated to the health fund.
Naqvi pleaded innocent last week in a statement released through a PR firm.
He was arrested in the UK earlier this month, while managing partner Mustafa Abdel-Wadood was arrested at a New York hotel, Assistant US Attorney Andrea Griswold told a Manhattan federal court on April 11.