Explaining The Decline In Samsung’s Q3 Profits

SSNLF: Samsung Electronics logo
SSNLF
Samsung Electronics

Samsung Electronics (OTC:SSNLF) published its Q3 2019 results on Thursday, reporting that its revenues declined 5% year-over-year to about KRW 62 trillion ($53 billion), with operating profits falling 55% to KRW 8.62 trillion ($7.4 billion), on account of a sharp decline in its semiconductor business. Below, we break down the key drivers of the profit decline and take a look at how the company’s key segments performed over the quarter.

View our interactive dashboard analysis on Why Did Samsung’s Operating Profits Plummet Over Q3?

Samsung’s Operating Profits Declined From KRW 17.6 Trillion in Q3’18 To About KRW 7.8 Trillion In Q3’19

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The key contributors to the decline were:

  • Lower Semiconductor Operating Profit (- KRW 10.6 trillion impact)
  • Lower Other Segment Operating Profit (- KRW 0.2 trillion impact)

However, this was partly offset by:

  • Higher Mobile & IT Operating Profits (+ KRW 0.7 trillion impact)
  • Display and Other Operating Profits (+ KRW 0.3 trillion impact)

Semiconductor Business Reels As Weak DRAM Prices Hurt Revenues And Margins

  • Semiconductor revenues declined 29% year-over-year to KRW 17.6 trillion ($15 billion) in Q3’19, with operating margins falling from 55% to 17.3%, on account of a sharp decline in DRAM prices and to an extent by lower NAND pricing.
  • However, the company expects the NAND market to stabilize, with memory content per device on the rise.
  • Samsung is looking to address challenges in the DRAM space by further transitioning to the more advanced 1Y-nano process and catering to demand for LPDDR5 RAM modules.

Note 10 Launch Helps The Mobile Division Grow Revenues 18% YoY

  • Mobile and IT revenues grew 18% year-over-year to KRW 29.3 trillion ($25 billion) in Q3’19, with operating margins rising from 8.9% to 10%, driven by strong demand for the flagship Galaxy Note 10 phones and the mid-range A-Series devices.
  • However, profits could be impacted over Q4, as the company expects to see higher marketing costs and potentially softer sales of the Note 10.

Display Division Sees Improved Profits On Higher Utilization

For more details on the performance of Samsung’s Display business, view our interactive dashboard analysis.

 

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