Samsung Electro-Mechanics Faces 'Earnings Decline' Due to Weak Demand... "This Year Also Challenging" (Comprehensive)

Q4 Operating Profit 101.2 Billion KRW... 68% Decrease YoY
"This Year's Facility Investment Expected to Decrease Compared to Last Year"
"Performance Improvement Difficult in Q1 This Year"

[Asia Economy Reporter Han Yeju] Samsung Electro-Mechanics recorded poor performance last year due to a slump in IT demand for PCs, smartphones, and other devices. With performance improvement this year remaining uncertain, Samsung Electro-Mechanics plans to focus on pioneering relatively resilient business sectors such as automotive electronics and servers.

Samsung Electro-Mechanics announced on the 25th that its consolidated operating profit for the fourth quarter of last year was tentatively estimated at 101.2 billion KRW, down 68% compared to the same period last year. Compared to the previous quarter, it decreased by 67%. During the same period, sales were 1.9684 trillion KRW, down 19% year-on-year and 17% quarter-on-quarter.

Samsung Electro-Mechanics explained, "Due to the slowdown in set demand in the fourth quarter and the seasonal off-season effect, the performance of key products such as IT multilayer ceramic capacitors (MLCC), camera modules, and mobile package substrates (BGA) deteriorated."

Looking at each business sector, sales in the components division for the fourth quarter were 833.1 billion KRW, down 29% compared to the same period last year. Although sales of automotive MLCC grew, the recovery of demand for IT products such as smartphones and PCs was delayed, and sales decreased due to inventory adjustments.

The optical communication solutions division recorded sales of 655.5 billion KRW, down 16% year-on-year. Supply of automotive camera modules increased, but supply of IT camera modules decreased.

Sales in the package solutions division for the fourth quarter were 479.8 billion KRW, up 0.2% year-on-year. Supply of flip chip ball grid array (FC-BGA) increased, but sales decreased 13% compared to the previous quarter due to reduced demand from applications such as smartphones and PCs.

Samsung Electro-Mechanics’ consolidated performance for last year was recorded at sales of 9.4246 trillion KRW and operating profit of 1.1828 trillion KRW. Sales decreased by 2.6% year-on-year, and operating profit also declined by 20.4%.

Samsung Electro-Mechanics stated, "Although an uncertain management environment is expected to continue this year, we plan to focus on improving our business structure by expanding businesses related to growth markets such as automotive electronics and servers." In particular, Samsung Electro-Mechanics plans to expand the supply of high value-added products, led by server package substrates, which it began mass-producing domestically for the first time last year.

During the earnings conference call on the same day, Samsung Electro-Mechanics said, "Despite the effect of new flagship smartphone launches by strategic customers in the first quarter of this year, sales are not expected to improve significantly compared to the previous quarter due to weak demand for IT devices and delayed inventory adjustments by customers."

Regarding this year’s performance, it added, "Geopolitical issues and inflation continue to create economic uncertainties, and the outlook for recovery in demand for IT sets such as smartphones and PCs is unclear, so overall conditions will be challenging."

However, Samsung Electro-Mechanics emphasized, "Promising related fields such as automotive electronics and servers will maintain steady growth proactively. We will strive to pioneer growth markets and expand efforts to discover new customers and businesses for automotive MLCC, automotive camera modules, and server package substrates."

This year’s capital expenditure is expected to decrease compared to last year. Samsung Electro-Mechanics explained, "Capital expenditure this year will decrease compared to last year due to the slowdown in demand for smartphones and PCs. Package substrates will be similar to last year, but MLCC and camera modules will decrease."

It also forecasted that MLCC utilization rates will improve somewhat in the first quarter due to increased shipments, and that market conditions will gradually recover from the second quarter onward following China’s reopening (resumption of economic activities).

Meanwhile, Samsung Electro-Mechanics announced on the 25th that it will pay a cash dividend of 2,100 KRW per common share. For preferred shares, the dividend is 2,150 KRW per share. The dividend yield is 1.6% for common shares and 3.3% for preferred shares. The total dividend amount is 158.7919027 billion KRW.