SEOUL: Samsung Electronics today said that it is bracing for extended global political and economic turmoil, as the war in Ukraine and China’s Covid-19 lockdowns increase risks for its businesses, even as net profit for the first quarter surged nearly 60%.
Samsung is sensitive to global circumstances as more than 80% of the South Korean tech company’s revenue comes from overseas markets.
“We expect uncertainties will persist in the second half of 2022 due to macroeconomic and geopolitical issues,” said Seo Byung-hoon, a Samsung vice president, during an earnings conference call.
“However, we will focus on advanced processes and expansion of new applications as the components market is expected to improve,” Seo added, referring to products such as semiconductors and displays.
The South Korean company announced that net profit rose 58.6% to 11.3 trillion won (US$8.9 billion) in the first quarter of this year compared to the same period in 2021.
Operating profit, meanwhile, jumped 50.5% to 14.1 trillion won in the same period thanks to milder memory price declines and a weak South Korean won. Revenue increased 19% to 77.8 trillion won.
The company earlier this month flagged the operating profit and revenue figures when it issued quarterly guidance. The final results were slightly stronger than guidance. Samsung does not offer guidance on net profit.
Quarter on quarter, Samsung’s operating profit increased 1.8%, while revenue rose 1.6%.
The results come as geopolitical risks are weighing on the company’s global businesses, which range from semiconductors and smartphones to TVs and home appliances. Samsung last month suspended shipments of smartphones and other products to Russia as it joined Western corporations in pulling back from the country.
China’s lockdown of Shanghai also raises worries of a supply chain crunch.
By sector, the semiconductor-focused device solutions division led first quarter performance, with operating profit increasing 151.5% to 8.5 trillion won year-on-year.
Favourable chip prices and the weak South Korean won helped boost the sector’s performance.
However, its mobile experience and network business was hit by underperforming sales of the Galaxy S22 smartphone. Operating profit fell by 13% to 3.8 trillion won during the period.
The company, however, said that its mobile business will rebound with the launch of a new foldable smartphone lineup in the second half of the year.
“We plan to maximise (the) effect of our new Z-series model with new user experiences,” Kim Sung-koo, a company vice president, said on the call. “We expect the foldable smartphone market will double this year from the previous year and will continue high growth later.”
Nomura estimated in a report earlier this month that cost burdens from shipping problems and more expensive raw materials amid the war in Ukraine and the lockdown of Shanghai weighed on the visual display and digital appliances division, which includes TVs and home appliances such as washing machines.
Samsung said that operating profit fell 27.7% to 800 billion won in the first quarter from a year ago.
The company said that the TV market will rebound in the second half on the back of scheduled major sporting events, including the FIFA World Cup Qatar 2022. Samsung expects demand for premium and ultra large TVs to be robust.
Samsung shares closed down 0.31% at 64,800 won today. The earnings announcement came shortly before the market opened.