Samsung in Q2: lowest quarterly profit in two years

Samsung unveiled its Q2 earning report and the numbers match the guidance published earlier. The consolidated revenue of Samsung Electronics was $50.9 billion and net profit is down almost 20% since last year, $6.1 billion.

That's a significant decrease from the $7 billion in operating profit Samsung earned in the second quarter of last year. Currency exchange rates are said to have resulted in $485 million in missed revenue.

Most of the revenue comes from Samsung's lucrative phone business, which raked in $27.7 billion in revenue and made an operating profit of $4.3 billion on that. Samsung is pointing the finger to seasonally weak demand and built-up inventory in European markets, which lead the company to increase its marketing budget.

Demand for smartphones remained level with Q1, while tablets declined slightly. Samsung isn't saying it but it seems that the Galaxy S5 failed to light up the market like the Galaxy S4 did last year.

The company states that the second half of the year will be a challenge too but will focus on launching premium devices, expanding the availability of AMOLED-packing Galaxy Tab S tablets and the mass-market Tab 4, plus diversifying its wearables portfolio.

"Despite this plan, prospects for improving profit margins are still uncertain, due to the increasing market competition," warns Samsung.

Samsung is a component supplier for other smartphone makers and the weaker smartphone and tablet demand are having an impact. System LSI (the division that makes chipsets) revenue dropped because of it. Shipment of OLED displays increased with better high-end smartphone shipments (but those mostly come from Samsung's own phones).

Samsung Memory recorded a 4% increase in revenue quarter on quarter but also a 5% lower margins. Samsung reports steady demand for DRAM chips and maintained profitability from SSDs.

The World Cup was a boon for Samsung's TV business with increased demand for large, UHD TVs. Samsung saw a record demand for its TVs in the US. The LCD panel business posted improved earnings, which are expected to get even better in H2 of this year with predicted growth in TV sales.

The Consumer Electronics Division, which makes TVs but also appliances, printers and medical equipment, saw a 15% increase in revenue and a whopping 300% increase in profit quarter-on-quarter.


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