Euro crisis hits Samsung despite record top-end smartphone sales

Samsung Electronics has flagged record second-quarter profits of almost £4 billion thanks to strong demand for its new-generation smartphone handsets.

The Korean firm began selling the latest version of the Galaxy smartphone on 29 May, in an attempt to get a head start before arch-rival Apple announces a new iPhone.

Analysts estimate that Samsung, which is due to announce full results later this month, shipped between 48 million and 52 million smartphones in the second quarter, including some six million Galaxy S III units.

While strong handset sales grab the headlines, more than doubling profit growth, other divisions such as chips and consumer electronics are battling weak prices and demand and a weak euro, which eats away at repatriated profits. In a sign that the eurozone crisis is exercising minds in boardrooms around the globe, Samsung executives said this week the group was operating to a contingency plan.

“Europe is our biggest consumer electronics market and we may have to initiate cost cuts and product price increases should the euro fall further,” said one executive who didn’t want to be named.

“Our smartphones are flying off the shelves, with some outlets reporting 40-60 per cent sales growth, but that’s distorting the overall trading outlook which is more challenging due to the weak global economy and a weak euro.”

In its April-June profit guidance yesterday, Samsung, valued at about £110bn and the world’s top maker of TVs, smartphones and “DRAM” memory chips, estimated that operating profit had risen by 79 per cent to 6.7 trillion won (£3.8bn) from a year ago – in line with analysts’ forecasts. That would be 14.5 per cent higher than the previous record quarterly profit in January-March.

The group estimated its second-quarter revenue at 47 trillion won, just below a 50 trillion won forecast.

Nho Geun-chang, an analyst at HMC Investment Securities in Seoul, said: “Revenue is below our forecast, which suggests price pressure was more severe than had been expected in products such as televisions and home appliances.

“Earnings will be stronger in the current quarter as sales of the high-end Galaxy S III will increase dramatically and drive the telecom division’s earnings to above 5 trillion won,” he added, predicting shipments of the S III would hit 19 million this quarter.

Samsung and local rival LG Electronics are among the few global TV makers making money and gaining market share from stumbling Japanese rivals Panasonic, Sharp and Sony.

But, spooked particularly by a weak chip market, Samsung shares have dropped by about 15 per cent in the past two months, while the broader Korean market has fallen just over 5 per cent, and Apple has gained almost 3 per cent.

Smaller Taiwanese rival HTC yesterday reported that its quarterly net profit more than halved as European sales disappointed and US sales were delayed by customs inspections.