Samsung announces results for Q1/ 2014
Samsung Electronics Co., Ltd. today announced revenues of 53.68 trillion Korean won ($51.5 billion) on a consolidated basis for the first quarter ended March 31, 2014. Samsung’s revenue slipped 9 percent quarter-on-quarter due to weaker seasonality but saw gains compared with the same period last year.
For Q1 2014, the company posted consolidated operating profits of 8.49 trillion Korean won ($8.15 billion), representing a 2-percent increase quarter-on-quarter, while the consolidated net profit for the quarter increased by 270 billion Korean won ($259.2 million) to 7.57 trillion Korean won ($7.27 billion).
Although global market demand for electronics devices such as smartphones and tablets in the January-March quarter is traditionally slow, profit margins for Samsung’s IT & Mobile Communications (IM) division were driven by strong demand for smartphones and efficient management of marketing expenses.
Samsung is expected to see further increases in profits in the second quarter of 2014 and for the rest of the year as well, especially in the divisions of display panels and home appliances. Orders for display panels that are used for premium smartphones and TVs are expected to increase, as new mobile devices are rolled out into the market. The outlook for household appliances will also pick up on seasonal demand for air conditioners, as well as orders for high-end TVs as consumers look forward to the upcoming World Cup in Brazil.
Moreover, Samsung also has solid plans to expand its new product categories such as wearable devices; strengthen its B2B business footprint through the Samsung Knox and Samsung Smart Education solutions; and make advancements in its ecosystem for device connectivity.
“We expect our overall earnings to improve starting from the second quarter, driven by improvements in the Display Panel segment and the Consumer Electronics division in conjunction with steady growth momentum in mobile and memory businesses,” said Robert Yi, Senior Vice President and Head of Investor Relations.
Mobile Business Leads Solid Earnings Momentum
The IT & Mobile Communications (IM) division – consisting of Mobile Communications and Networks – posted operating profits of 6.43 trillion Korean won ($6.71 billion) on 32.44 trillion Korean won ($31.14 billion) in revenue for Q1. Out of the total IM earnings, the mobile business was responsible for 31.36 trillion Korean won ($30.12 billion).
Although market demand for both smartphones and tablets decreased during the first quarter, operating profits for the IM division jumped 18 percent compared with the previous quarter thanks to steady smartphone shipments, efficient execution on marketing expenditures and a positive impact from adjustments of one-off expenses.
As for smartphones, Samsung continued to see solid sales of GALAXY S4 and GALAXY Note 3 while also strengthening its premium product portfolio through the introduction of a new flagship smartphone, GALAXY S5.
Looking at the tablet business, the company maintained solid tablet sales momentum by shipping nearly 13 million units during the slowest quarter and reinforced its mid to high-end lineup, including launches of the premium GALAXY Note PRO and GALAXY Tab PRO devices equipped with 12.2-inch displays, office functionalities and PC-level performance.
For the next quarter, smartphone and tablet demand is expected to slightly increase under continued weak seasonality, but Samsung will maintain solid earnings momentum through full-fledged global sales of GALAXY S5. Based on its differentiated features, and initial response from the market, Samsung expects GALAXY S5 to surpass sales of GALAXY S4.
Additionally, as the wearable device market is expected to grow, the company will reinforce its market leadership to gradually increase the wearable device business’ contribution to entire earnings.
Premium TV Sales Outperform Market Growth
The Consumer Electronics Division – encompassing the Visual Display, Digital Appliances, Printing Solutions and Health and Medical Equipment businesses – posted an operating profit of 190 billion Korean won ($18.24 billion) for the quarter on revenues of 11.32 trillion Korean won ($10.87 billion). The Visual Display business alone accounted for 7.39 trillion Korean won ($7.09 billion) of earnings.
Seasonally low demand for consumer electronics goods during the first quarter corresponded with the Division’s overall sales retreating by 21 percent quarter-on-quarter. Despite challenging conditions in the TV market, Samsung outperformed the market thanks to increased sales of premium products, including UHD TVs. Latin America was also a bright spot, buoyed by increased demand for TVs due to the World Cup, helping Samsung post on-year growth for the region in the mid 70-percentage range.
Looking forward, while competition is likely to intensify and slight quarter-on-quarter demand growth is forecasted, Samsung expects demand for UHD TVs to drive solid growth in the global TV market. Against this forecasted drop, the company will focus on increasing sales of value-added premium products, including UHD and curved TVs, and actively responding to the rising demand driven by the World Cup and emerging markets.
For the Digital Appliances Business, earnings declined quarter-on-quarter under weak seasonality and increased expenses associated with new product launches. Looking ahead, we expect steady growth in the appliance market thanks to increased demand in developed markets and strong seasonal sales for air conditioner products. Samsung will also focus on improving supply chain management capabilities in strategic regions and continuing efforts to build brand power through its premium product lineup.
Higher Panel Shipments Expected for Second Quarter
The Display Panel segment posted revenues of 6.10 trillion Korean won ($5.86 billion) in the first quarter with an operating loss of 80 billion Korean won ($76.8 billion) amid traditionally weak seasonal demand.
During the first quarter of 2014, the global LCD market witnessed a quarter-on-quarter decline in demand for TV and tablet panels as manufacturers reduced orders. For Samsung, earnings were impacted by cost increases related to the ramp-up of production in China coupled with the decline in ASP.
Looking ahead, the LCD panel market is likely to improve due to increased demand for TVs in preparation for the World Cup later this year and declines in ASP are expected to abate. Samsung expects shipments of both mass-market panels as well as premium products, such as curved panels, to drive growth while expansion of the UHD TV market to lead to improved profitability.
For OLED panels, weak seasonal demand led to a decline in sales for the first quarter. As for the outlook for the second quarter, Samsung expects to increase shipments of larger and higher resolution panels for tablets and mass-market smartphone lineups. The company will also focus on leading innovation in the production of flexible panels and expanding the applications of OLED to the emerging wearable devices category.
For Q1 2014, the company posted consolidated operating profits of 8.49 trillion Korean won ($8.15 billion), representing a 2-percent increase quarter-on-quarter, while the consolidated net profit for the quarter increased by 270 billion Korean won ($259.2 million) to 7.57 trillion Korean won ($7.27 billion).
Although global market demand for electronics devices such as smartphones and tablets in the January-March quarter is traditionally slow, profit margins for Samsung’s IT & Mobile Communications (IM) division were driven by strong demand for smartphones and efficient management of marketing expenses.
Samsung is expected to see further increases in profits in the second quarter of 2014 and for the rest of the year as well, especially in the divisions of display panels and home appliances. Orders for display panels that are used for premium smartphones and TVs are expected to increase, as new mobile devices are rolled out into the market. The outlook for household appliances will also pick up on seasonal demand for air conditioners, as well as orders for high-end TVs as consumers look forward to the upcoming World Cup in Brazil.
Moreover, Samsung also has solid plans to expand its new product categories such as wearable devices; strengthen its B2B business footprint through the Samsung Knox and Samsung Smart Education solutions; and make advancements in its ecosystem for device connectivity.
“We expect our overall earnings to improve starting from the second quarter, driven by improvements in the Display Panel segment and the Consumer Electronics division in conjunction with steady growth momentum in mobile and memory businesses,” said Robert Yi, Senior Vice President and Head of Investor Relations.
Mobile Business Leads Solid Earnings Momentum
The IT & Mobile Communications (IM) division – consisting of Mobile Communications and Networks – posted operating profits of 6.43 trillion Korean won ($6.71 billion) on 32.44 trillion Korean won ($31.14 billion) in revenue for Q1. Out of the total IM earnings, the mobile business was responsible for 31.36 trillion Korean won ($30.12 billion).
Although market demand for both smartphones and tablets decreased during the first quarter, operating profits for the IM division jumped 18 percent compared with the previous quarter thanks to steady smartphone shipments, efficient execution on marketing expenditures and a positive impact from adjustments of one-off expenses.
As for smartphones, Samsung continued to see solid sales of GALAXY S4 and GALAXY Note 3 while also strengthening its premium product portfolio through the introduction of a new flagship smartphone, GALAXY S5.
Looking at the tablet business, the company maintained solid tablet sales momentum by shipping nearly 13 million units during the slowest quarter and reinforced its mid to high-end lineup, including launches of the premium GALAXY Note PRO and GALAXY Tab PRO devices equipped with 12.2-inch displays, office functionalities and PC-level performance.
For the next quarter, smartphone and tablet demand is expected to slightly increase under continued weak seasonality, but Samsung will maintain solid earnings momentum through full-fledged global sales of GALAXY S5. Based on its differentiated features, and initial response from the market, Samsung expects GALAXY S5 to surpass sales of GALAXY S4.
Additionally, as the wearable device market is expected to grow, the company will reinforce its market leadership to gradually increase the wearable device business’ contribution to entire earnings.
Premium TV Sales Outperform Market Growth
The Consumer Electronics Division – encompassing the Visual Display, Digital Appliances, Printing Solutions and Health and Medical Equipment businesses – posted an operating profit of 190 billion Korean won ($18.24 billion) for the quarter on revenues of 11.32 trillion Korean won ($10.87 billion). The Visual Display business alone accounted for 7.39 trillion Korean won ($7.09 billion) of earnings.
Seasonally low demand for consumer electronics goods during the first quarter corresponded with the Division’s overall sales retreating by 21 percent quarter-on-quarter. Despite challenging conditions in the TV market, Samsung outperformed the market thanks to increased sales of premium products, including UHD TVs. Latin America was also a bright spot, buoyed by increased demand for TVs due to the World Cup, helping Samsung post on-year growth for the region in the mid 70-percentage range.
Looking forward, while competition is likely to intensify and slight quarter-on-quarter demand growth is forecasted, Samsung expects demand for UHD TVs to drive solid growth in the global TV market. Against this forecasted drop, the company will focus on increasing sales of value-added premium products, including UHD and curved TVs, and actively responding to the rising demand driven by the World Cup and emerging markets.
For the Digital Appliances Business, earnings declined quarter-on-quarter under weak seasonality and increased expenses associated with new product launches. Looking ahead, we expect steady growth in the appliance market thanks to increased demand in developed markets and strong seasonal sales for air conditioner products. Samsung will also focus on improving supply chain management capabilities in strategic regions and continuing efforts to build brand power through its premium product lineup.
Higher Panel Shipments Expected for Second Quarter
The Display Panel segment posted revenues of 6.10 trillion Korean won ($5.86 billion) in the first quarter with an operating loss of 80 billion Korean won ($76.8 billion) amid traditionally weak seasonal demand.
During the first quarter of 2014, the global LCD market witnessed a quarter-on-quarter decline in demand for TV and tablet panels as manufacturers reduced orders. For Samsung, earnings were impacted by cost increases related to the ramp-up of production in China coupled with the decline in ASP.
Looking ahead, the LCD panel market is likely to improve due to increased demand for TVs in preparation for the World Cup later this year and declines in ASP are expected to abate. Samsung expects shipments of both mass-market panels as well as premium products, such as curved panels, to drive growth while expansion of the UHD TV market to lead to improved profitability.
For OLED panels, weak seasonal demand led to a decline in sales for the first quarter. As for the outlook for the second quarter, Samsung expects to increase shipments of larger and higher resolution panels for tablets and mass-market smartphone lineups. The company will also focus on leading innovation in the production of flexible panels and expanding the applications of OLED to the emerging wearable devices category.