Samsung predicts three-fold rise in Q3 operating profit

Seoul: Indicating a sharp recovery in earnings from last year`s Note 7 fiasco, South Korean tech giant Samsung Electronics said on Friday its third-quarter operating profit is expected to have nearly tripled compared to the previous year, apparently on the sound returns from its computer chip business.

Operating profit was estimated at 14.5 trillion won ($12.8 billion), compared with 5.2 trillion won tallied a year earlier, the company said in a regulatory filing, Yonhap news agency reported.

Sales also probably surged 29.65 per cent to 62 trillion won in the July-September period compared to a year earlier.

Samsung did not announce the performance estimates of each business division, although the chip business is anticipated to have played a key role in the record-beating report. 

The company is set to release its final earnings report later this month.

The guidance report indicates the overall operating margin for the third quarter came to 23.4 per cent, also setting a new record. 

Analysts said Samsung`s strong earnings are attributable to increased shipments of chips.

"The shipment of DRAM and NAND products increased 12 percent and 21 percent (in the July-September period) on-quarter, while the average sales price also advanced 6 percent and 2 percent, respectively," said Kim Dong-won, an analyst at KB Securities Co.

Rising sales of the Galaxy S8 and Galaxy Note 8 smartphones will also improve the profitability of the mobile division, putting the sector`s operating profit estimate at a better-than-expected 3.3 trillion won, KB Securities added.

Samsung`s mobile division saw its operating profit plunge to 100 billion won in the third quarter of 2016 due to the suspended production of the Galaxy Note 7, which recovered to 2.5 trillion won a quarter later.

While the third quarter estimate for the IT and mobile division hovers below the second quarter, the figure is still better than expected, as Samsung was widely seen to post weaker returns on increased marketing costs for the Galaxy Note 8 released last month.

Analysts said the better-than-expected performance for the mobile arm is attributable to the market`s positive reaction to the Galaxy Note 8 flagship, while the refurbished edition of the Galaxy Note 7, dubbed the Galaxy Note FE, sold out in South Korea, shipping 400,000 units.

Analysts said Samsung`s chip business may have posted an operating profit of 10 trillion won in the third quarter, along with sales of 20 trillion won, putting the operating margin at above 50 per cent.