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Samsung braced for drop in profits

Article By: ,  Financial Analyst
January 8, 2015 12:26 PM

Samsung Electronics is bracing itself for a drop in profits as the company forecasts a downturn in quarterly operating profit.

The company is expecting to post a 37.4 per cent decrease in profits for the three months to December. This would represent an operating profit of 5.2 trillion Korean won (£3.14 billion) during the period, compared to the same time a year earlier. It is almost in line with analyst predictions which had placed its profit guidance at around 5 trillion won.

Samsung has been in a long-running battle with Apple in recent years to develop the most innovative smartphone. It has also been taking on the US firm in the laptop market but suffered a setback in September when it announced that it would be ending sales of its laptop computers in Europe.

The decision shortly after Sony had also stated that it would be withdrawing sales of its Vaio division and pulling out of the PC market altogether. Samsung's decision was made despite the company's Chromebook model being one of the category's best-sellers. While Samsung and Sony withdrew from the PC market, other companies had reported growth in the sector.

Samsung's drop in yearly profits is the first time the company has posted results of this ilk since 2011. However, analysts believe that a boost in the fourth quarter could ensure that earnings may stabilise in the short term.

Speaking to Reuters about the promising sales of Samsung's latest flagship phone, Greg Roh, HMC Investment analyst, said: "There were concerns about the mobile division but it looks like the won's recent weakness against the dollar and the Galaxy Note 4 impact helped.

"I expect profits to continue improving through at least the second quarter of 2015."

Despite the impending profit decline, Samsung's share price open one per cent up on Thursday (January 8th).

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