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Samsung beats estimates with Q1 profit

Galaxy is main driver for growth again, though analysts question whether huge marketing spend will hurt margins


Published: 5 April, 2013

READ MORE: Financial | Samsung | Handset

Samsung beat analyst estimates again with its first quarter profit, confirming strong preliminary figures which it issued last month. Its Galaxy range was the major factor in a rise in operating profit to KRW8.7 trillion ($7.7bn), up from KRW5.69 trillion a year earlier, and ahead of analyst forecasts of KRW8.38 trillion.

The mobile device business was the largest profit driver, with lower end Galaxy models adding volume while tablets and the new S4 will seek to keep margins up. Analysts estimate this unit would have delivered Q1 operating profit of KRW6.25 trillion on a 40% rise in sales. In 2012, it accounted for 67% of the group's total operating income.

"In addition to the Galaxy S3, mini models sold well in emerging markets including China, Brazil and India," Lee Sei Cheol, an analyst with Meritz Securities, told Bloomberg. "Samsung's continued ascent in the smartphone industry seems to be unparalleled."

There are some concerns however. Some observers fear that Samsung's huge marketing spend for Galaxy will hurt its margins in 2013, especially if it has invested heavily to retain market share in the seasonally weak first quarter - and to regain the US smartphone lead lost to Apple.

Samsung plans to release at least three high end smartphones in 2013, including the S4, a new version of the Galaxy Note and a device running the Tizen operating system and an Intel Atom chip. Many other models and size variations will also be rolled out.

For the second quarter, Samsung's operating profit will probably exceed KRW10 trillion, largely driven by Galaxy S4 sales, said Lee Seung Woo, an analyst at IBK Securities, in a client note. Shipments of flagship models including the S4 may total 37.8m units in the second quarter, while the average selling price may rise by 17%, which would boost operating profit at the mobile division to about KRW7.9 trillion, he added, forecasting smartphone shipments of 82m units in Q213.

Operating profit at Samsung's chip business probably rose to KRW1 trillion in the first quarter, from KRW700bn a year before, according to analysts surveyed by Bloomberg News.

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