Samsung's 1Q operating profits slide

Samsung's 1Q operating profits slide

	Published : Sat, 15 Apr 2006 07:40 By : Cedric Benson Print this Story

SEOUL: Korean electronics powerhouse Samsung Electronics said its operating profit for the first quarter of the current fiscal slid by nearly 25 per cent mainly because of reducing margins in mobile phones and memory chips.

Samsung said it earned 1,610 billion won in operating profit for the quarter ended 31 March, compared with 2,150 billion won a year ago. The market expectations were 1,790 billion won.

However, the company's net profit rose 26 per cent to 1,880 billion won, because of the 700-billion-won write-down to support Samsung Card, its credit card affiliate, in the first quarter of last fiscal. Sales increased marginally to 13,960 billion won.

The company said the outlook for the second quarter is grim as it expects the prices of flash memory chips to fall further before recovering in the second half of the year.

Samsung's senior vice president Chu Woo-sik said profit levels declined because of market challenges such as the exchange rate. "Excluding the exchange rate variable, the financial results were on the whole reasonable," he added.

The Korean won is trading 4.5 per cent higher against the dollar from a year ago. This has severely impaired the company price competitiveness in overseas markets as nearly 70 per cent of its revenue is from exports.

Samsung, the world's No 2 chipmaker, had the operating profit for the semiconductor business fall 19 per cent due to price declines in flash memory chips used in MP3 players and digital cameras.

While the company had sold a record of 29 million handsets, operating profit in the telecom division fell 45 per cent. This has been because the company lacks adequate presence in the emerging markets with their demand for cheaper phones.

Operating profit at its highly viable LCD division rose almost five times to 110 billion won, which the company attributed to higher demand in the market because of the World Cup. It said LCD prices may fall more sharply in 2006.

Samsung along with Japan's Sony Corp. had announced earlier in the week a $2 billion expansion of a joint LCD plant.

The company's shares were up 3.13 per cent at 658,000 won.