Samsung forecasts record Q2 operating profit

Wed, 07/07/2010 - 8:05am
Kelly Olsen, AP Business Writer

SEOUL (AP) – Samsung Electronics Co. forecast Wednesday that operating profit rose to a record high in the second quarter on what analysts said were strong sales of computer memory chips and liquid crystal displays.

The Suwon, South Korea-based company said it expects consolidated operating profit of between 4.8 trillion won and 5.2 trillion won (between $3.9 billion and $4.2 billion) for the three months ended June 30. That would beat the company's previous all-time high of 4.41 trillion won ($3.6 billion) set in the first quarter.

Samsung, a major force in the global electronics industry, is the world's biggest seller of computer memory chips, liquid crystal displays and flat-screen televisions. It ranks No. 2 in mobile phone handsets after Finland's Nokia.

The company gave no reason for the quarterly performance and will formally announce second-quarter earnings at the end of this month, according to spokesman Jason Kim.

Samsung does not release net profit forecasts. The company recorded net profit of 2.25 trillion won ($1.8 billion) in the second quarter of 2009, a figure based on South Korean accounting standards, according to spokesman James Chung. Samsung adopted international financial reporting standards, or IFRS, from the first quarter of this year.

Lee Min-hee, an analyst at Dongbu Securities in Seoul, forecast that Samsung will record second-quarter net profit of 4.2 trillion won ($3.4 billion).

Operating profit is seen as a direct indicator of business performance before taxes, dividends, asset sales and other items that are figured into net profit or loss.

Analysts said Samsung benefited in the second quarter from strong sales of liquid crystal displays, as well as DRAM, or dynamic random access memory, chips used mostly in personal computers. Seo Won-seok of NH Investment & Securities in Seoul estimated that the company's DRAM profit margin exceeded 40 percent.

The outlook for extending its record operating profit performance the rest of this year was uncertain.

"Many investors doubt that this trend is sustainable in the second half as the global economy slows down," Min-hee said.

Samsung began issuing earnings estimates, or guidance, last year in hopes that increased transparency would help minimize market speculation over its performance. The estimates include the performance of its overseas and domestic subsidiaries.

Samsung estimated consolidated sales of between 36 trillion won and 38 trillion won (between $29.5 billion and $31.1 billion) for the second quarter. That compares with sales of 32.51 trillion won a year earlier, a figure Samsung recalculated to conform with IFRS.

The company said in May that it would invest a record 26 trillion won ($21.3 billion) this year in capital spending and research and development as it bets on future growth, despite questions about the global economic outlook. Samsung said investment in new production facilities meant it expects to hire 10,000 new workers this year.

Shares in Samsung fell 0.8 percent to close at 769,000 won ($629.53) Wednesday. The company's stock price surged 77 percent in 2009.

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