Samsung reports 20% profit decline in Q2

Samsung reports 20% profit decline in Q2

Smartphone maker Samsung posted a 20% profit drop to £3.6bn (KRW6.25tn) net profit in its second quarter. It was the first time in three years that the manufacturer had posted a year-on-year decline. Operating profit was also down, falling 24.6% to KRW7.19tn from the same period last year. Meanwhile, sales fell by 8.9% to KRW52.35tn in the period.

Samsung said it expected smartphone sales to increase by 10% for its third quarter to the end of September. The company will also bring a new premium smartphone to market later this year.

The manufacturer's flagship Galaxy S5 smartphone faced stiff competition from Apple's iPhone 5S during its second quarter. With Chinese firms such as Xiaomi continuing to grow market share in the low-end handset category, Samsung announced it plans to introduce a new pricing structure to its mid-to-low-tier product range while concentrating on a smaller produce range.  

'The second quarter was affected by several factors including the slow global sales of smartphones and tablets and escalating marketing expenditure to reduce inventory,' said the company in its earnings report.

'The appreciation of the Korean currency also chipped away at this quarter’s operating profits, which amounted to about 500 billion won in missed revenues prompted by the foreign exchange market.'

Speaking on a conference call to analysts, senior vice president Kim Hyun-joon said that considering the intensifying competition of price and specifications as well as the release of new models from rivals, it would be difficult to expect earning to improve in the next quarter.

The forecasts are in line with anaylsts' expectations, although the manufacturer had predicted in June that its profits were going to be down by 25%.

Jasdeep Badyal, an analyst with CCS Insight, told Mobile that it was a disappointing quarter of results for the phone maker, revealing a continued slowdown in smartphone growth. 'The company is facing steadily increasing competitive headwinds across its smartphone portfolio. The Galaxy S5, its 2014 flagship, received a mixed reception and this dragged on its performance throughout the quarter,' he said.

He added that CCS Insight predicts that Samsung will face a challenging 2H14. 'Apple's launch of the next-generation iPhone is likely to apply further pressure to Samsung's top-end portfolio, particularly in North America where we believe there is significant latent demand for a larger-screen iPhone,' he concluded.


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