Samsung misses analyst profit estimates

Bloomberg

Samsung Electronics Co. missed analyst profit estimates as South Korea’s surging currency and year-end bonuses outweighed display orders from Apple Inc. for the new iPhone X.
Operating income was 15.1 trillion won ($14.2 billion) in the three months ended in December, missing the average of estimates by 1 trillion won. Shares fell in Seoul after the result.
Samsung is spending more to boost sales of smartphones and other consumer products as it shares in the benefit of Apple screen orders and buoyant semiconductor prices. That helped drive earnings across the full year to a record and triggered bonus payments to workers. The won’s 7 percent jump against the dollar in the final quarter to a three-year high is now creating headwinds for South Korea’s biggest company
“Impact from currency is inevitable,” said Sanjeev Rana, a Korea technology analyst at CLSA. “It cannot be offset unless we have price increases, but we understand contracts with Apple are pretty much fixed in terms of pricing. It’s the manufacturer that takes the risk.”
Every 10 won change in the exchange rate affects Samsung’s operating profit by about 200 billion won on a quarterly basis and the impact in the fourth quarter was about 600 billion won, Rana estimated.
Shares of Samsung dropped 3.1 percent to 2.52 million won at the close of trade. The stock has slipped 12 percent from a record in November.
Sales in the fourth quarter were 66 trillion won, compared with the 67.6 trillion won analysts expected. Samsung won’t provide net income or break out divisional performance until it releases final results this month.
While Samsung has benefited from a rally in chips, prices for benchmark memory have leveled off, limiting the growth that had powered the Suwon, South Korea-based company to record earnings in the past two quarters. Samsung leads in the next generation of screens called organic light-emitting diodes. It supplies OLED screens for the iPhone X even as the two companies vie for dominance in the global smartphone market.
South Korea’s government warned about the increase in the won and said it will take steps in the case of one-sided moves in the nation’s currency.
Samsung is said to be planning to debut its new flagship smartphone, the Galaxy S9, next month, presenting the iPhone X with a sooner-than-expected challenger. Samsung is also seeking to release a phone with a bendable display to help fend off challenges from Huawei Technologies Co., Oppo and other Chinese rivals.