Samsung Electronics Reports Q3 Operating Profit in the 10 Trillion KRW Range... Down 32%

[Image source=Yonhap News]

[Asia Economy Reporter Park Sun-mi] Samsung Electronics announced shock-level third-quarter earnings. Although sales exceeded 70 trillion won for five consecutive quarters, operating profit shrank by 32% compared to a year ago.

On the 7th, Samsung Electronics announced its preliminary third-quarter results for this year, reporting consolidated sales of 76 trillion won and operating profit of 10.8 trillion won. Compared to the same period last year, sales increased by 2.73%, but operating profit decreased by 31.73%. Compared to the second quarter, both sales and operating profit declined by 1.55% and 23.4%, respectively.

This third-quarter performance fell short of market expectations. According to financial information firm FnGuide, the market consensus (average estimate by securities firms) was sales of 78.6 trillion won and operating profit of 11.75 trillion won.

Although sales have surpassed 70 trillion won for five consecutive quarters, the streak of record quarterly earnings has been declining since it stopped in the second quarter. Samsung Electronics achieved its highest-ever sales record of 73.98 trillion won in the third quarter of last year, followed by 76.57 trillion won in the fourth quarter and 77.78 trillion won in the first quarter of this year, setting new records for three consecutive quarters. However, sales dropped to 77.2 trillion won in the second quarter and further declined to 76 trillion won in the third quarter.

Profitability has worsened significantly. Operating profit, which barely exceeded 14 trillion won in the second quarter of last year, plummeted to the 10 trillion won range in the third quarter of this year. The uncertain global business environment, including ▲ the Russia-Ukraine war ▲ rising raw material and logistics costs due to inflation ▲ weakened consumer sentiment ▲ rapidly changing exchange rates ▲ intensified competition and sharp demand decline in the semiconductor market, is interpreted as the cause of this third-quarter earnings deterioration.

However, it seems unlikely that these adverse factors will ease in the fourth quarter, and at the current pace, Samsung Electronics' annual sales this year are estimated to barely surpass 300 trillion won.

Samsung Electronics' annual sales showed a sharp increase from 230.4 trillion won in 2019 and 236.81 trillion won in 2020 to 279.6 trillion won last year. Including the announced preliminary third-quarter results, cumulative sales from the first to third quarter amount to 230.99 trillion won, with operating profit at 39.02 trillion won. Operating profit has also significantly declined from 51.6 trillion won last year, and there is a possibility that it will fall short of 50 trillion won this year.

Meanwhile, LG Electronics, which also announced preliminary earnings in the afternoon, is expected to reveal a weak third-quarter performance. The market consensus is sales of 20.1 trillion won and operating profit of 870 billion won.