Samsung Electronics forecasts record profits for Q4 of 2017, but the estimate missed analyst expectations.
The world’s biggest memory chip maker forecast operating earnings of 15.1 trillion won ($14.1billion) – up 64% from a year earlier.
However, while chip prices boosted margins, a stronger won weighed on the figures.
The record guidance comes despite a corruption scandal engulfing Samsung top leadership.
The operating profit forecast is slightly below the 15.9 trillion won estimated by analysts surveyed by Reuters.
The forecast keeps the South Korean company on track for record annual profits, in a year when prices for computer memory chips kept surging.
However, the 2018 outlook is less certain, with Samsung shares having fallen nearly 10% from their all-time high in November, as some investors bet on an end to the chip boom.
Meanwhile, the market for smartphones and other mobile devices is facing increasing competition from Chinese rivals.
As well as the jailing of its heir apparent Lee Jae-yong for bribery and corruption, Samsung’s reputation was also hit by the global recall of its flagship Note 7 smartphone in 2016, following the fiasco with its overheating and exploding batteries.
However, the problems with the handset did not cause major disruption to Samsung’s finances, helped by its chip business as well as customers seeming unfazed by the incident.
Samsung Electronics is regarded as the jewel in the crown of the Samsung Group conglomerate, which is made up of 60 interlinked companies and is one of South Korea’s massive family-run businesses known as chaebols.
Samsung Electronics has announced that its profit in Q4 of 2016 surged 50% despite the fiasco with its flagship Note 7 phone.
Analysts had expected the company’s profits to surge thanks to its mainstay semiconductor business, but the result surpassed even the most optimistic forecasts. The semiconductor division cashed in on strong demand and a tight supply for microchips during the September-December period, likely contributing to more than half of its quarterly earnings.
The earnings estimate would mark Samsung’s highest quarterly profit since 2013.
In October 2016, the world’s largest smartphone maker had to scrap the Note 7 after batteries caught fire and even replacement devices went up in smoke.
Samsung said it expected to post 9.2 trillion won ($7.8 billion) in operating profit for the months from September to December.
In an earlier profit forecast for the fourth quarter, Samsung had said it expected the Note 7 recall would mean a $2.1 billion hit to their profits.
Samsung first issued a recall for the Galaxy Note 7 in September following complaints about exploding batteries.
After replacement devices deemed safe were also found to overheat and catch fire, Samsung scrapped the phone entirely.
The company said that it will “very soon” share details of its inquiry into the cause of the Note 7 problems.
Samsung will disclose a detailed earnings release for Q4 of 2016 in late January which will give more insights into the performance of its individual businesses.
Samsung Electronics has revised down its Q3 profit forecast due to the scrapping of its Galaxy Note 7 smartphone.
The company now expects Q3 profits of 5.2 trillion won ($4.7 billion), which is a third lower than its original estimate of 7.8 trillion won.
The Galaxy Note 7 was recalled last month after battery fires, but after replacement phones experienced the same problem, Samsung scrapped the device.
Ahead of the profit warning, the South Korean company’s shares fell 0.8% on October 12.
That added to October 11 8% fall.
Photo Samsung
Samsung has seen more than $20 billion wiped off its market value in two days.
Its shares have fallen on concerns that the current crisis will go beyond the costs of the recall and affect the brand’s overall reputation.
According to analysts, the Note 7 crisis could cost Samsung in the long run, particularly coming just as rivals, such as Google and Apple, have announced new high-end smartphones.
The Galaxy Note 7 had been seen as the main rival to Apple’s new iPhone 7 model. Samsung’s woes have sent Apple’s shares to a 10-month high.
Last month, Samsung recalled around 2.5 million Galaxy Note 7 phones after complaints of exploding batteries.
The company later insisted that all replaced devices were safe. However, that was followed by reports that those phones were catching fire too.
On October 11, Samsung said it would permanently cease production of the device and urged owners to turn it off.
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