Samsung's First-Quarter Profit Plummets

[HenryTo]

I think this piece of news is important since Samsung is the biggest company in South Korea. Please also note that the South Korea KOSPI Composite closed at a low of 515.24 on March 17, 2003. From that trough to its most recent peak, the index has just risen slightly below 100% in about two years:

http://finance.yahoo.com/q/bc?s=%5EKS11&t=5y&l=on&z=m&q=l&c=
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Associated Press
Samsung's First-Quarter Profit Plummets
Friday April 15, 9:44 am ET
Samsung's First-Quarter Profit Slumps 52 Percent With Tough Second Quarter Ahead


SEOUL, South Korea (AP) -- Samsung Electronics Co. reported a worse-than-expected 52 percent slump in first quarter profit as prices of liquid crystal displays and computer memory chips fell amid a supply glut.

Samsung, South Korea's largest company by market capitalization, posted net profit of 1.50 trillion won ($1.47 billion) for the three months ended March 31, down from 3.14 trillion won a year earlier, and 1.83 trillion won in the fourth quarter of 2004.

Sales fell 4 percent to 13.81 trillion won ($13.5 billion) from 14.41 trillion won, while operating profit slumped 46 percent to 2.15 trillion won from 4.01 trillion won a year ago.

The results came in sharply lower than market expectations of earnings of 2.10 trillion won ($2.05 billion) on sales of 14.19 trillion ($13.88 billion), according to the mean estimate of analysts surveyed by Dow Jones Newswires.

The world's largest memory-chip maker also forecast a challenging quarter ahead.

"It's difficult to say whether profit margins will improve in the second quarter at this stage," Woosik Chu, vice president of investor relations, said at a press conference. "We expect the second quarter to be challenging as it is a typically slow season in terms of demand for IT products."

J.J. Park, an analyst at JPMorgan Chase & Co. in Seoul, said he expects operating profit to decline in the second quarter, "unless the TFT-LCD (thin-film transistor liquid crystal display) business shows significant improvement in the second quarter."

Samsung executives said during a conference call that the market for dynamic random access memory, or DRAM, chips most widely used in personal computers will remain weak in the second quarter, while profit margins from its cell phone business will likely deteriorate as competition in the global market intensifies and marketing costs rise.

While the liquid crystal display, or LCD, business is showing signs of a recovery as demand increases following steep price declines, it won't be until the latter half of this year that oversupply conditions ease, executives said.

The company, however, remained upbeat about the market for NAND flash memory chips used in MP3 players, such as Apple Computer Inc.'s iPod, and digital cameras. Samsung is the world's biggest NAND flash producer.

Samsung's main businesses -- making chips, cell phones and liquid crystal displays used in computer monitors and televisions -- were at their pricing peak in the first quarter last year, allowing the technology firm to post its highest-ever quarterly profit. But Samsung's strong earnings momentum has slowed and profit margins have eroded due to an oversupply in DRAM chips and LCDs, as well as stiffer competition in the cell-phone business.

Chu said the strengthening won against the U.S. dollar wiped out 900 billion won ($880 million) from operating profit in the first quarter, while a wider loss at its Samsung Card affiliate, in which it retains a 46 percent stake, bogged down net profit.

The worse-than-expected results, coupled with a weak U.S. market finish overnight, led Samsung shares to close down 2.1 percent at 491,500 ($480.71), dragging down the benchmark index 0.7 percent.

Samsung posted a first-quarter operating profit margin of 31 percent from its semiconductor business, down from 43 percent last year. Semiconductor sales rose 9 percent from a year earlier to 4.48 trillion won ($4.38 billion) thanks to strong NAND flash shipments. DRAM prices fell 16 percent from the fourth quarter to the high $4 range while shipments rose 16 percent. Flash memory prices fell 9 percent, while Samsung saw shipments surge 38 percent, better than the 12 percent it expected.

At the telecommunications business, operating profit margin fell to 17 percent from 26 percent a year earlier, but recovered from 3 percent in the fourth quarter as the popularity of its D500 "slide-up" phone in Europe boosted shipments and margins.

Samsung sold 24.5 million handsets in the first quarter, up from 21.1 million units in the fourth quarter, and forecast shipments to be "similar" in the second quarter, but expects average selling prices of cell phones to decline in the second quarter.