 "Samsung profit guidance suggests costly S6 miss")
South Korean tech giant Samsung Electronics on Tuesday guided for weaker-than-expected second-quarter earnings, as a supply shortage plagued its latest smartphone launch and tepid demand from key markets likely undercut sales.
The guidance suggests that Samsung, while on a gradual recovery path, will struggle to replicate the explosive growth it recorded at the turn of the decade as smartphone competition intensifies and demand softens in China and Europe.
Operating profit for the second quarter likely fell 4 per cent from a year earlier to 6.9 trillion won ($6.13 billion), Samsung said in a filing, its best profit in four quarters but also the seventh straight period of annual decline. The average forecast from a Thomson Reuters survey of 39 analysts was a profit of 7.2 trillion won. "It doesn't matter how competitive you are if overall demand is weak," HMC Investment analyst Greg Roh said. "Third-quarter earnings will likely be similar to the second quarter." Revenue for the quarter would fall 8.3 per cent from a year earlier to 48 trillion won, well below the 53.4 trillion won average analyst forecast and the fifth consecutive quarter of annual decline. The company gave no other specifics and is expected to report its full results in late July.
Samsung shares had jumped 2.1 per cent , outperforming a 0.3 per cent decline for the broader market .KS11 as investors appeared to breathe a sigh of relief that the guidance was better than analysts' worst fears. Samsung's annual profit is expected to rebound this year from a three-year low in 2014, but its shares have languished in recent months amid doubts about sales of its new Galaxy S6 smartphones.
A failure to make enough curved-screen S6 edge models to meet demand likely hurt mobile-related earnings, analysts believe.
While the company says it has fixed the problem, it may be too late to fully capitalize on a lull in competition for new high-end devices ahead of the launch of the latest Apple Inc iPhones, expected as early as September.
China's economic slowdown is also pinching smartphone makers' earnings. Chinese rival Xiaomi Inc last week said first-half sales fell from the previous six months. Industry-wide shipments in China, the world's biggest smartphone market, slipped in the first quarter for the first time in six years, researcher IDC said in May.
HDC Asset Management fund manager Park Jung-hoon said Samsung probably decided not to force volume growth for mid-to-low tier smartphones, choosing to preserve margins at the expense of sales.
Samsung clears hurdle, court rules against US fund
A South Korean court on Tuesday denied an injunction request by a US hedge fund trying to block builder Samsung C&T Corp from selling treasury shares to ally KCC Corp, clearing another hurdle for a proposed $8 billion merger of Samsung Group firms. The ruling comes ahead of a July 17 Samsung C&T shareholder vote on an all-stock takeover offer from Cheil Industries Inc, the de facto holding company of Samsung Group. The verdict allows chemicals and construction materials firm KCC, Cheil's second-biggest shareholder, to exercise voting rights for the treasury shares.
Explaining its ruling against the request from fund Elliott Associates, the Seoul Central District Court said Samsung C&T violated no laws in selling treasury shares to KCC.
With a total of around 6 percent of C&T, including the 5.8 percent stake purchase approved by the court, KCC is the Samsung construction firm's fourth-largest shareholder and will back the Cheil deal.
Elliott said in a statement after the ruling was issued that C&T's treasury sale is "wholly improper" and it plans to appeal the ruling.
The Cheil-Samsung C&T merger is seen as a key step towards a leadership transfer for the Samsung Group's founding Lee family, as it consolidates stakes in key affiliates under the Lee heirs' control. But opposition from Elliott, C&T's third-largest shareholder with a 7.1 percent stake, has led to doubts about whether Samsung C&T can muster enough support from shareholders.
C&T needs the support of at least two-thirds of the votes cast on July 17 to proceed with the deal, making KCC's voting rights important. Recent reports from two influential proxy advisors calling on C&T investors to reject the takeover offer could bolster Elliott's efforts to block the deal, a rare case of investor activism in South Korea.
Elliott had filed the injunction seeking to block Samsung C&T's stake sale to KCC in June. It has also appealed a court ruling against its other injunction request, which sought to prevent the July 17 shareholder vote for C&T investors taking place.
Samsung C&T said in a statement on Tuesday it welcomed the court's ruling and will work to convince shareholders of the merits of the proposed merger. KCC had no immediate comment.
The guidance suggests that Samsung, while on a gradual recovery path, will struggle to replicate the explosive growth it recorded at the turn of the decade as smartphone competition intensifies and demand softens in China and Europe.
Operating profit for the second quarter likely fell 4 per cent from a year earlier to 6.9 trillion won ($6.13 billion), Samsung said in a filing, its best profit in four quarters but also the seventh straight period of annual decline. The average forecast from a Thomson Reuters survey of 39 analysts was a profit of 7.2 trillion won. "It doesn't matter how competitive you are if overall demand is weak," HMC Investment analyst Greg Roh said. "Third-quarter earnings will likely be similar to the second quarter." Revenue for the quarter would fall 8.3 per cent from a year earlier to 48 trillion won, well below the 53.4 trillion won average analyst forecast and the fifth consecutive quarter of annual decline. The company gave no other specifics and is expected to report its full results in late July.
Samsung shares had jumped 2.1 per cent , outperforming a 0.3 per cent decline for the broader market .KS11 as investors appeared to breathe a sigh of relief that the guidance was better than analysts' worst fears. Samsung's annual profit is expected to rebound this year from a three-year low in 2014, but its shares have languished in recent months amid doubts about sales of its new Galaxy S6 smartphones.
A failure to make enough curved-screen S6 edge models to meet demand likely hurt mobile-related earnings, analysts believe.
While the company says it has fixed the problem, it may be too late to fully capitalize on a lull in competition for new high-end devices ahead of the launch of the latest Apple Inc iPhones, expected as early as September.
China's economic slowdown is also pinching smartphone makers' earnings. Chinese rival Xiaomi Inc last week said first-half sales fell from the previous six months. Industry-wide shipments in China, the world's biggest smartphone market, slipped in the first quarter for the first time in six years, researcher IDC said in May.
HDC Asset Management fund manager Park Jung-hoon said Samsung probably decided not to force volume growth for mid-to-low tier smartphones, choosing to preserve margins at the expense of sales.
Samsung clears hurdle, court rules against US fund
A South Korean court on Tuesday denied an injunction request by a US hedge fund trying to block builder Samsung C&T Corp from selling treasury shares to ally KCC Corp, clearing another hurdle for a proposed $8 billion merger of Samsung Group firms. The ruling comes ahead of a July 17 Samsung C&T shareholder vote on an all-stock takeover offer from Cheil Industries Inc, the de facto holding company of Samsung Group. The verdict allows chemicals and construction materials firm KCC, Cheil's second-biggest shareholder, to exercise voting rights for the treasury shares.
Explaining its ruling against the request from fund Elliott Associates, the Seoul Central District Court said Samsung C&T violated no laws in selling treasury shares to KCC.
With a total of around 6 percent of C&T, including the 5.8 percent stake purchase approved by the court, KCC is the Samsung construction firm's fourth-largest shareholder and will back the Cheil deal.
Elliott said in a statement after the ruling was issued that C&T's treasury sale is "wholly improper" and it plans to appeal the ruling.
The Cheil-Samsung C&T merger is seen as a key step towards a leadership transfer for the Samsung Group's founding Lee family, as it consolidates stakes in key affiliates under the Lee heirs' control. But opposition from Elliott, C&T's third-largest shareholder with a 7.1 percent stake, has led to doubts about whether Samsung C&T can muster enough support from shareholders.
C&T needs the support of at least two-thirds of the votes cast on July 17 to proceed with the deal, making KCC's voting rights important. Recent reports from two influential proxy advisors calling on C&T investors to reject the takeover offer could bolster Elliott's efforts to block the deal, a rare case of investor activism in South Korea.
Elliott had filed the injunction seeking to block Samsung C&T's stake sale to KCC in June. It has also appealed a court ruling against its other injunction request, which sought to prevent the July 17 shareholder vote for C&T investors taking place.
Samsung C&T said in a statement on Tuesday it welcomed the court's ruling and will work to convince shareholders of the merits of the proposed merger. KCC had no immediate comment.
(Additional reporting by Joyce Lee; writing by Se Young Lee; Editing by Kenneth Maxwell)