SEOUL, South Korea – Samsung Electronics recorded a better-than-expected profit in January-March, as an early debut of its flagship Galaxy smartphones boosted sales of high-end phones despite flat growth in the overall smartphone market.
The South Korean company said Thursday it earned 5.3 trillion won ($4.6 billion) in the last quarter, up 14 per cent from 4.6 trillion won a year earlier.
That’s above the average forecast of analysts polled by FactSet of 4.7 trillion won.
Sales rose 6 per cent to 49.8 trillion won ($43.4 billion) from a year ago while operating profit was up 12 per cent to 6.7 trillion won, broadly in line with the company’s earnings guidance earlier this month.
Samsung Electronics launched the latest versions of its flagship Galaxy smartphones on March 11, about a month earlier than its new phones launch last year. The updated Galaxy S7 models sported new features such as expandable storage space and water resistance but were cheaper than previous versions.
“Market response to the Edge model is better than expected in major regions such as North America, China and the Middle East,” Lee KyeongTae, vice-president at mobile communications business, said referring to the Galaxy phone with a curved screen. “They are almost sold immediately upon supply.”
Analysts said the early debut and Samsung’s pricing strategy helped boost sales of the premium phones during the quarter despite softer demand for the iPhone 6S. The absence of new products from competitors also helped.
Counterpoint Technology Market Research estimated that Samsung sold 10 million Galaxy S7 series during the month of March, up 25 per cent from a year ago.
As a result, Samsung’s mobile business posted its biggest profit in nearly two years, raking up 3.9 trillion won ($3.4 billion) in operating profit. That is 42 per cent higher than a year ago and the phone division’s biggest quarterly profit in seven quarters.
The company also benefited from streamlining the type of cheap smartphones it sold in emerging markets, which helped save on costs for components.
During the first three months of this year, the South Korean company’s overall smartphone sales declined slightly, but not as badly as Apple’s, according to the latest industry data. Samsung’s shipments dropped 1 per cent from a year earlier, while Apple’s sales sank 16 per cent, according to IDC, a market research firm.
Analysts are divided over whether the strong sales of the Galaxy S7 series would continue during the second quarter.
“It is positive that Samsung posted a better-than-expected income even though the first quarter was a slow season. But it was thanks to the effect from the S7 (released) one quarter earlier, which is why (I see) a limited reason to revise up the future earnings forecasts,” said Yoo Eui-hyung, an analyst at Dongbu Securities.
Samsung confidently forecast its flagship smartphone sales will grow from last year even as the overall industry stays flat.
“We are cautiously optimistic for operating profit to increase quarter-on-quarter,” said Robert Yi, senior vice-president at investor relations.
The second quarter earnings in the mobile and semiconductor businesses will be steady and the consumer electronics and display businesses will improve, he said.
During the first quarter, the semiconductor division posted slightly lower operating profit than a year ago, contributing 2.3 trillion won or a third of the total. Its display division posted a loss of 270 billion won while its TV division made 510 billion won in operating profit.