Samsung posts 18% drop in quarterly operating profit

Friday 24 January 2014 07.30
Samsung has seen a slow-down in smartphone sales
Samsung has seen a slow-down in smartphone sales

South Korea's Samsung has posted an 18% drop in operating profit in the fourth quarter, due to a one-off bonus and slowing sales of the electronic giant's high-end smartphones.

Operating profit stood at 8.3 trillion won ($7.8 billion), down 18% from the July-September period, marking the company's first quarterly profit decline in two years.

The fourth quarter figure was also down 6% from a year ago.

The world's top maker of mobile phones and TVs said earnings were hit by a "negative currency impact" of 700 billion won and a one-off 800 billion won employee bonus to mark the 20th anniversary of a marketing strategy by Chairman Lee Kun-Hee that laid the groundwork for the company's recent success.

"For the first quarter it will be challenging for Samsung to improve its earnings as the weak seasonality of the IT industry will put pressure on demand for components and TV products," the company said.

The latest earnings result ended the company's long run of record quarterly profits on the back of surging sales of its flagship Galaxy series smartphones.

The mobile division posted a quarterly operating profit of 5.47 trillion won, down 2.8% from the third quarter.

The company statement said the division's earnings were down due to seasonally increased marketing costs, as well as the one-off bonus.

The strength of the Korean won against other currencies also weighed on performance, inflicting foreign-exchange losses and making Samsung less price-competitive in the global market.

Operating profit for the whole of 2013 was 36.8 trillion won, up 27% from the previous year.

Samsung had a leading share of 38.8% in the global smartphone market as of the third quarter of last year, followed by arch-rival Apple's 13.1%, according to the industry research firm IDC survey.

But its bottom line has been hit by competition from budget handset makers, especially from China, and the company faces a fresh challenge this year after Apple struck a distribution deal with China Mobile Ltd., the world's biggest carrier by users.

Samsung commanded more than an 18% share of China's smartphone market as of the third quarter last year, according to Chinese consultancy Analysys International, while Apple sat in eighth place with just 3.5%.

Samsung's display division, which dominates the global market for LED panels, posted an operating profit of 110 billion won in the fourth quarter, down 90% from the previous year.

Slowing Galaxy S4 smartphone sales increased the inventory of unsold displays, while weaker TV sales also impacted the division.