Samsung's Fourth-Quarter Profit Surges to Record 76% as Mobile Earnings Double

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By Jerin Mathew | January 25, 2013 4:51 PM EST

New televisions are displayed at a Samsung booth in a Consumer Electronics Show in Las Vegas

Electronics major Samsung has recorded a 76 percent surge in its fourth-quarter profit primarily due to high margins from record sales of its high-end smartphones and chip business.

Net profit for the quarter rose to 7.04 trillion won ($6.6bn, £4.2bn), up from 4.01tn won in the same period a year earlier. In the third quarter, the company had posted a record profit of 6.56 trillion won.

Quarterly revenues rose 18.5 percent to 56.1tn won from last year.

Revenues from the mobile phone business rose 58 percent in the fourth quarter, with robust sales of Samsung's Galaxy S3 and Galaxy Note ll. Samsung's mobile phones and telecoms equipment business accounted for 62 percent of its operating profit in the fourth quarter.

However, the company did not disclose the details of its mobile phone shipments in its earnings release, as always. Analysts have forecast overall shipments at 110 million with smartphones making up 60 million in the quarter.

Semiconductor

In the chip division, operating margin rose to 14.8 percent from 11.7 percent in the third quarter. Operating margin at its LCD business was 14.3 percent, up from 13.8 percent in the third quarter and an operating loss in the same quarter a year ago.

Samsung, which took over Apple last year as the world's biggest smartphone maker, retained its position in the fourth quarter. However, the company showed signs of a leveling of growth as seen in the quarterly results of arch-rival Apple.

The company noted that increased competition in the smartphone sector could lead to softening of demand in some regions.

"The furious growth spurt seen in the global smartphone market last year is expected to be pacified by intensifying price competition, compounded by a slew of new products," the company said in its earnings statement.

"In the first quarter, demand for smartphones in developed countries is expected to decelerate, while their emerging counterparts will see their markets escalate with the introduction of more affordable smartphones and a bigger appetite for tablet PCs throughout the year."

Indications

Analysts indicated that the company may suffer from lower margins for the telecom unit in 2013, as increased competition in the segment would result in more compromising on prices. They expect the company to rely more on the chip business to retain strong profitability in 2013.

For the first time since the global financial crisis, Samsung refrained from making higher investments and kept its annual capital expenditure budget at 2012 levels. The move is in line with the slowdown in the PC and smartphone markets.

Samsung had spent 4.4tn won in the fourth quarter, pushing its 2012 capital expenditure to a record 23tn won.

"Heading into this year, we are expecting a slow recovery in the component business due to reduced capital expenditures, while competition in the set business will intensify further as demand slows and the mid- to low-end market expands," said Robert Yi, senior vice president and head of investor relations at Samsung.

Samsung shares were trading at 1,413,000 won, down 2.75 percent, on Korea Stock Exchange as at 4.23 am GMT.

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