Samsung: Smartphone demand to drive second half earnings

The new Galaxy Z Flip 5G. (Supplied)
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Updated 31 July 2020

Samsung: Smartphone demand to drive second half earnings

  • Huawei’s rise was spurred by sales in China, where fresh COVID-19 cases are low, but Samsung is likely to gain back market share as demand in other countries recover

SEOUL: Samsung Electronics expects a recovery in demand for smartphones and consumer electronics to underpin profits in the second half of the year, after the coronavirus disease (COVID-19) saw a shift to online working boost quarterly earnings.
It tempered its relatively upbeat forecast when announcing second quarter results on Thursday with a warning that the pandemic and trade disputes posed ongoing risks for earnings.
Samsung posted a 23 percent jump in operating profit in the April-June quarter on the back of strong DRAM memory chip sales to online server providers, along with cuts in marketing costs.
Prices for the chips, which create temporary workspaces to allow devices to multitask, spiked in the second quarter as people shifted to working and learning online from home because of the pandemic. Samsung’s Korean peer SK Hynix and US firm Micron Technology Inc. also benefited from the trend.
Operating profit at Samsung’s chip business surged 60 percent to 5.43 trillion won in the second quarter, accounting for two thirds of its total 8.1 trillion won profit.
Samsung said it expected server demand for chips to remain solid for the remainder of the year and a boost in smartphone demand, given planned product launches and anticipated demand for 5G-capable phones.
Still, Samsung and other Asian tech companies in the global supply chain have been rocked by trade tensions between the United States and China that has put cross-border trade in components, devices and technology at the mercy of politics.
“Given many uncertainties including COVID-19, trade tension and that customers may change their inventory and investment strategies, it’s still difficult to say when (DRAM) price will hit an inflection point,” senior vice president of memory business Han Jin-man said.
The company would keep a close eye on chip inventory levels at data center firms who stockpiled in the first half to meet telecommuting demand, he said.
SK Hynix and some analysts have painted a more downbeat outlook, expectating a fall in DRAM chip prices.
“Demand for the second half ... will be relatively weak ... but it’s not going to be a hard landing as the market had feared,” said Choi Young-san, analyst at E-Best Securities.
Quarterly operating profit in Samsung’s mobile division rose 25 percent to 1.95 trillion won. Total revenue dropped 6 percent to 53 trillion won.
During the quarter, China’s Huawei overtook Samsung as the world’s biggest seller of phones, shipping 55.8 million devices to Samsung’s 53.7 million, according to research firm Canalys.
Huawei’s rise was spurred by sales in China, where fresh COVID-19 cases are low, but Samsung is likely to gain back market share as demand in other countries recover.
Samsung plans to unveil new flagship smartphones, including the Galaxy Note and a foldable phone in the second half, as well as expand sales of mid-tier models.
Samsung also said its display business, which makes screens for mobile phones, TVs and monitors and counts Apple Inc. as a customer, is expected to improve late this year as set makers launch new products to meet demand from lockdowns easing and people shopping for year-end holidays.

Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

Updated 09 August 2020

Aramco profits fall in tough quarter, but sees partial recovery from COVID-19 impact

  • Aramco see’s “partial recovery” from pandemic impact
  • Aramco president says company remains resilient

DUBAI: Saudi Aramco, the world’s biggest oil company, reported a net income of $6.57bn for the second quarter of 2020, the period which witnessed the most volatile oil market conditions for many decades.

The result, announced to the Tadawul stock exchange in Riyadh where the shares are listed, compared with income of $24.7 bn last year.

Amin Nasser, president and chief executive, said: “Despite COVID-19 bringing the world to a standstill, Aramco kept going. We have proven our financial resilience and operational reliability, setting a record in our business operations, while at the same time taking steps to ensure the health and safety of our people.”

Aramco’s dividend - a big attraction for the investors who bought into the world’s biggest initial public offering last year - will remain as pledged, Nasser added. Cash flow in the quarter amounted to $6.106 bn.

““Strong headwinds from reduced demand and lower oil prices are reflected in our second quarter results. Yet we delivered solid earnings because of our low production costs, unique scale, agile workforce, and unrivalled financial and operational strength. This helped us deliver on our plan to maintain a second quarter dividend of $18.75 billion to be paid in the third quarter,” he said.

Aramco said the loss was “mainly reflecting the impact of lower crude oil prices and declining refining and chemicals margins, partly offset by a decrease in production royalties resulting from lower crude oil prices and a decrease in the royalty rate from 20 per cent to 15 per cent, lower income taxes and zakat as a result of lower earnings, and higher other income related to sales for gas products.”

Sales and revenue in the period - which saw oil prices collapse on “Black Monday” in April - fell 57 per cent to $32.861 bn from the comparable period last year. 

Nasser said he was cautiously optimistic that the world economy was slowly recovering from the depths of the pandemic lockdowns.

“We are seeing a partial recovery in the energy market as countries around the world take steps to ease restrictions and reboot their economies. Meanwhile, we continue to place people’s safety first and have adapted to the new normal, implementing wide-ranging precautions to limit the spread of COVID-19 wherever we operate.

“We are determined to emerge from the pandemic stronger and will continue making progress on our long-term strategic journey, through ongoing investments in our business – which has one of the lowest upstream carbon footprints in the world,” he added.

Aramco expects capital expenditure to be at the lower end of the $25bn to $30bn range it has already indicated for this year.