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Samsung 3Q18 earnings guidance

10 October 2018

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by Anchor

On Friday (5 October), Samsung Electronics issued earnings guidance for 3Q18, with the company seeming to have gained back some lost momentum and improving its results YoY. Samsung said that it expects 3Q18 operating profit to jump by 20.4% YoY to its highest level ever at KRW17.5trn (c. $15.5bn), topping consensus analyst estimates. This comes as its semiconductor unit has been bolstered by robust demand from data centres and gains in production yields. The impressive operating profit increase is on the back of a 4.8% YoY gain in revenue, which is expected to come in at between KRW64trn and KRW66trn (c. $57.6bn) – in line with market expectations.

Chips account for c. 80% of Samsung’s operating profit, with the company benefiting from a surge in data centres for cloud computing that has spurred price spikes for its main memory product, DRAM chips, which help devices perform multiple tasks. Samsung has also made gains in production technology that allow it to make smaller and faster chips per silicon wafer. However, with sharp price slides for some types of chips bringing an end to a two-year super cycle of tight supply and soaring demand, many analysts expect 3Q18 to mark a peak in Samsung’s earnings. Market tracker DRAMeXchange predicts an average price decline of 5% QoQ for DRAM products in 4Q18 – steeper than a previous estimate of declines of as much as 3%. Nevertheless, Samsung is still expected to report decent operating profit growth of 12% YoY in 4Q18, although that is seen dropping to minimal profit growth in 1H19, followed by small profit declines in 2H19.

While income levels for Samsung’s business divisions are yet to be disclosed, Reuters reports that analysts expect its mobile business will struggle to deliver profit growth for the next two quarters. Samsung will release detailed earnings in late October.

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