Samsung Electronics has announced financial results for the second quarter ended June 30, 2016. The company’s revenue for the quarter was KRW 50.94 trillion (US $45.85 billion), an increase of KRW 2.40 trillion (US $2.16 billion) year-on-year (YOY), while operating profit for the quarter was KRW 8.14 trillion (US $7.33 billion), an increase of KRW 1.24 trillion (US $1.12 billion) YOY.
The second quarter saw significant earnings growth led by strong performance both in the set and component businesses. Overall earnings of the set business improved YOY as well as QOQ due to the continuous sales increase of premium products.
The IT & Mobile Communications (IM) Division saw substantial earnings improvement led by expanded sales of flagship products such as the Galaxy S7 and S7 edge. A streamlined mid-to low-end smartphone lineup also contributed to improved profitability. Operating profit for the IM Division was KRW 4.32 trillion (US $3.9 billion).
The Consumer Electronics (CE) Division achieved significant earnings growth YOY led by strong sales of its premium lineup such as SUHD TVs, Chef Collection Refrigerator, AddWash washer and newly launched air conditioner.
The component business achieved solid performance although overall earnings decreased YOY due to ASP declines in the industry. Earnings for the Display Panel segment improved QOQ led by increased OLED capacity utilization and stabilized LCD panel yields. Demand for semiconductors for mobile and SSD increased and the company achieved solid growth with a competitive edge in differentiated products, including 20-nanometer DRAM, V-NAND and 14-nanometer mobile AP.
The company estimated that the stronger Korean won against major currencies in the second quarter negatively impacted operating profit by approximately KRW 0.3 trillion, reflected mainly in the component business earnings.
Looking ahead to the second half of 2016, the company expects its solid performance to continue compared to the first half, mainly driven by earnings increase in the component business due to sales growth in high value-added products and stable demand and supply conditions. The set business is expected to continue its stable earnings while the IM Division expects marketing expenditure to increase.
In the third quarter, the company expects the component business to maintain its solid performance due to improved demand and supply conditions for memory chips and LCD panels and stable earnings for OLED and System LSI. For the set business, the company forecasts marketing expenditure for the IM business to increase mainly due to a new flagship product launch and fierce competition in the industry. Meanwhile, weak seasonality is likely to impact the CE business.
Capital expenditure (CAPEX) for the second quarter was KRW 4.2 trillion (US $3.78 billion), which includes KRW 2 trillion (US $1.8 billion) for the Semiconductor business and KRW 1.6 trillion (US $1.44 billion)for the Display Panel business. The accumulated total CAPEX for the first half was KRW 8.8 trillion (US $7.92 billion).
The annual plan for CAPEX has not yet been confirmed but is projected to increase slightly compared to last year. This year’s CAPEX will be concentrated on OLED and V-NAND capacity as the company sees strong market demand for OLED panels for smartphones and V-NAND SSD.
The Display Panel segment posted KRW 6.42 trillion (US $5.78 billion) in consolidated revenue and KRW 0.14 trillion (US $126 million) in operating profit for the quarter driven by increased shipments of OLED panels and enhanced yields for new LCD TV panel production technology according to the statement.