Samsung Profit Increases Sevenfold on Chip Prices

Better-than-expected demand for PCs and limited supply growth by smaller players

By Shin, Kirim

Samsung Electronics Co. on Tuesday forecast a surge in first quarter operating profit to near-record levels, heading into a year for which the biggest flat screen TV producer is predicting double-digit sales growth as global markets recover.

The company said it expects operating profit of 4.1 trillion won and 4.5 trillion won ($4 billion) for the three months ended March 31, according to a statement. That would be at least seven times the 590 billion won profit for the same period last year and might top its record of 4.2 trillion won for the third quarter of 2009.

Samsung gave no reasons for the strong first quarter performance and spokeswoman Hwang Eun-ju said it would explain when it releases results at the end of this month.

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. Samsung had a net earnings of 620 billion won in the first quarter of 2009. It does not release net profit forecasts.

Samsung, based in Suwon, South Korea, is the world's largest manufacturer of flat screen televisions, computer memory chips and liquid crystal displays and the No. 2 maker of mobile phone handsets after Finland's Nokia Corp.

Samsung last month predicted a strong 2010 as economic growth in advanced and large developing economies gains speed. The company said it is aiming for double-digit percentage growth from last year's record high sales of 136.3 trillion won.

Samsung made headlines last month when it announced that Lee Kun-hee, its former chairman who was convicted of tax evasion and later pardoned by South Korea's president, returned to the top post after a nearly two-year absence.

The company began issuing earnings estimates, or guidance, last year in hopes 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 33 trillion won and 35 trillion won for the first quarter. That compares with sales of 28.7 trillion won a year earlier.

"I believe earnings would peak in the third quarter, but there's risk that DRAM prices' strength may continue and hit demand growth. DRAM supplies will also grow more toward the second half," said Song Myung-sup, an analyst at HI Investment & Securities.

아주경제 신기림 기자 [e-mail]
[아주경제 ajnews.co.kr] 무단전재 배포금지