Samsung Electronics flagged a 23 percent rise in second-quarter operating profit on Tuesday, beating analysts’ estimates on solid chip sales to data centres catering for a work-from-home economy during the coronavirus pandemic.
The sales offset weak demand for smartphones and TVs, while one-off gains from its display business, which counts Apple as a customer, also boosted profits, the company said. It gave no further details.
The world’s top memory chip and smartphone maker said operating profit was likely KRW 8.1 trillion (roughly Rs. 50,708 crores) in the quarter ended June, far above the KRW 6.4 trillion (roughly Rs. 40,058 crores) analyst forecast by Refinitiv SmartEstimate. It would be the highest quarterly profit since the fourth quarter of 2018.
Revenue likely fell 7 percent to KRW 52 trillion (roughly Rs. 3.25 lakh crores) from a year earlier, Samsung added, giving only limited data in a regulatory filing ahead of its full earnings figures later this month.
Work-from-home orders and growth in online learning are underpinning chip demand amid the COVID-19 pandemic and pushing up DRAM memory chip prices. US DRAM supplier Micron Technology forecast strong quarterly revenue last month.
“Chip demand was stronger than expected due to the COVID-19,” said Park Sung-soon, an analyst at Cape Investment & Securities.
The payment was estimated at KRW 1 trillion (roughly Rs. 6,260 crores), bigger than a similar KRW 800 billion (roughly Rs. 5,009 crores) payment a year ago, they said.
The handset and TV business may have also fared better than expected due to lower marketing costs and as stores and factories resumed operations worldwide as countries lifted lockdowns, analysts said.
“The damage from the pandemic was less severe than the market had expected,” said CW Chung, Nomura head of research in Korea.
Analysts, however, warned that increases in memory chip prices may not continue in the second half of the year as data centre customers are likely to be conservative in stockpiling chips given the resurgence of COVID-19 cases in the United States and other countries
While prices jumped 14 percent on average in the quarter, they were flat in June versus May, data from DRAMeXchange showed.
Shares of Samsung Electronics fell 1.8 percent, versus a 0.4 perceny fall in the wider market as of 0206 GMT (7:36 am IST).
The South Korean tech giant’s resilient earnings despite the pandemic came even as its leader Jay Y Lee faces fresh legal troubles. State prosecutors are investigating Lee on suspicions of resorting to accounting fraud and stock price manipulation to win control of Samsung Group, Korea’s largest conglomerate. Lee’s attorneys have denied such allegations.
LG Electronics, Samsung’s crosstown rival in TVs, phones and home appliances, meanwhile, said its second-quarter operating profit likely fell 24 percent toKRW 493 billion (roughly Rs. 4,082 crores), ahead of a KRW 374 billion (roughly Rs. 2,343 crores) forecast by SmartEstimate.
Analysts said easing of lockdown measures had helped demand for consumer electronics recover slightly.
© Thomson Reuters 2020