Samsung Electronics' Operating Profit Falls Below 50 Trillion Won for the First Time in Two Years Last Year

Profitability Indicator Operating Profit Drops 16%
Samsung "Memory and Smartphone Slump"

Samsung Electronics Seocho Building, Seocho-gu, Seoul. (Image source=Yonhap News)

[Asia Economy Reporter Moon Chaeseok] Samsung Electronics' operating profit last year shrank to the 40 trillion won range for the first time in two years. This is interpreted as being influenced by sluggish performance in memory semiconductors and smartphones amid growing management uncertainties such as the possibility of a global economic recession.

On the 6th, Samsung Electronics announced that its preliminary operating profit for the fourth quarter of last year was 4.3 trillion won. It also reported sales of 70 trillion won during the same period. Operating profit evaporated by 69% compared to the same period last year, and sales also decreased by 8.58%.

Adding the results from the first to third quarters to the fourth quarter results, the annual operating profit for last year amounts to 43.37 trillion won, and sales reached 301.76 trillion won. Although sales in the 300 trillion won range is a record high, it is rare for sales to decline given the nature of manufacturing companies. The profitability indicator, operating profit, decreased by 16% compared to last year's 51.63 trillion won.

The preliminary figures were lower than securities firms' estimates. According to financial information provider FnGuide, securities firms estimated Samsung Electronics' fourth-quarter sales at 72.7226 trillion won and operating profit at 6.8737 trillion won. The operating profit fell short of the estimate by as much as 37.4%.

On an annual basis, sales of 304.721 trillion won and operating profit of 45.9811 trillion won were also below estimates. Operating profit was about 5.7% lower than the estimate.

What stands out is the sharp decline in profitability. The 4.3 trillion won is the lowest level in 32 quarters since the fourth quarter of 2014, when it was 4.06 trillion won. In this regard, semiconductors, smartphones, and home appliances are at a truly 'devastated' level.

Samsung Electronics explained, "In the memory (semiconductor) business, due to concerns about weakened consumer sentiment, customers began overall inventory adjustments, resulting in a significantly lower-than-expected purchasing demand in the fourth quarter." It added, "In the MX (Mobile Experience) division, demand weakened as the macroeconomic recession outlook continued, leading to reduced smartphone sales and revenue, and the home appliance business also experienced low profitability due to sluggish market demand and cost burdens."

Meanwhile, LG Electronics, which is scheduled to announce its preliminary results in the afternoon, is also expected to receive a poor report card. Last year's annual sales estimate is 84.3528 trillion won, and operating profit estimate is 3.9107 trillion won. Although sales are higher than last year's 74.7216 trillion won, operating profit is expected to remain at a similar level to 3.8637 trillion won.

This content was produced with the assistance of AI translation services.