Samsung posts biggest quarterly net profit since 2013
South Korean tech giant reported US$6.7 billion in net profit for January to March, up 46% from a year ago and the largest gain for more than three years
South Korean tech giant Samsung Electronics posted its biggest quarterly net profit for more than three years on Thursday after shrugging off the fallout from the exploding Galaxy Note 7 battery debacle.
The results, driven by strong demand for its memory chips, represented the company’s second-largest ever quarterly profit.
Shares in the firm – the flagship subsidiary of the sprawling Samsung Group – have climbed in recent months as rising expectations overcame the smartphone recall last year and its vice-chairman going on trial for bribery.
It also formally dropped a reform plan on Thursday that would have seen it split in two and could have made the group’s opaque structure more transparent.
Net profit for the January to March period amounted to 7.68 trillion won (US$6.7 billion), up 46% from a year ago, Samsung Electronics said.
It was its biggest quarterly net profit since the record third quarter of 2013.
The first quarter earnings were bolstered by solid performance of our component-making business that enjoyed strong sales thanks to favorable memory chip and display panel prices
Operating profit jumped 48% from a year ago to 9.89 trillion won – also the biggest since the third quarter of 2013.
A breakdown of the figures showed the firm’s semiconductor business made its largest-ever operating profit of 6.3 trillion won.
Samsung – the world’s largest maker of both mobile phones and memory chips – provides its chips to other companies including arch-rival Apple.
“The first quarter earnings were bolstered by solid performance of our component-making business that enjoyed strong sales thanks to favorable memory chip and display panel prices,” the firm said.
But the firm’s mobile business saw sales and profit slow, with operating profits of 2.07 trillion won, down by 47% from a year ago.
Samsung suffered an embarrassing recall last year of its Galaxy Note 7 smartphone over exploding batteries, which cost the firm billions of dollars and dealt a blow to its reputation.
It has just launched a new flagship device, the S8 smartphone, to positive reviews and strong orders.
Shares in Samsung Electronics – South Korea’s largest firm by value – rose as much as 2.8% to 2.2 million won in morning trade on the Seoul stock market.
But the company has come under pressure on other fronts.
Vice-Chairman Lee Jae-yong, the heir to the Samsung group, has been held in custody and is on trial for bribery, with other key executives, in connection with the sprawling corruption scandal that brought down South Korean president Park Geun-hye.
The firm has also come under growing pressure from investors to overhaul its byzantine ownership structure, which enables the founding Lee family to control the vast Samsung empire with complex web of cross-holdings across dozens of group units.
Investors have called for more transparency in the group’s decision-making process, with US hedge fund Elliott suggesting splitting Samsung Electronics into a holdings firm and an operating unit.
Samsung earlier considered the proposal, but said Thursday it had officially dropped the plan, citing regulatory hurdles and potential risks to its business.
“Samsung concluded the risks and the challenging environment surrounding a change in the corporate structure would not be beneficial for enhancing shareholder value and sustaining long-term business growth,” it said in a statement.
Lee Jae-yong is accused of bribing Park and her secret confidante at the heart of the scandal millions of dollars in a bid to seek policy favour from Park.
He has effectively been at the helm of the group since his father suffered a heart attack in 2014.
His indictment in February sent shockwaves through the firm and triggered the announcement of a major reform of its top-down management style.
The scandal shed light on the cosy and corrupt ties between the country’s officials and the powerful family-run business groups, called chaebol, that have endured for decades.