By Se Young Lee
SEOUL (Reuters) – South Korean tech giant Samsung Electronics Co Ltd <005930.KS> said on Thursday it expects solid earnings to continue in the second half of 2016, with stronger components demand likely offsetting heightened margin pressures for smartphones.
The world’s No. 1 maker of smartphones and memory chips said mobile sales would likely remain buoyant in the third quarter but marketing costs would rise as rivals launch new models.
“Looking ahead to the second half of 2016, the company expects its solid performance to continue compared to the first half, mainly driven by earnings increase in the component business,” Samsung said in a statement.
April-June profit rose 18 percent from a year earlier to 8.1 trillion won ($7.17 billion), the highest since the first quarter of 2014, Samsung said. The result was in line with the firm’s earlier profit guidance.
Samsung’s mobile division remained the top earner for the second straight quarter and was on track for its first annual profit gain in three years, thanks to strong Galaxy S7 handset sales and improved margins.
Profit for the smartphone division climbed 57 percent from a year earlier to 4.32 trillion won, the highest since the second quarter of 2014.
Samsung is expected to unveil its new Galaxy Note smartphone next week and will likely start selling its phablet about a month before rival Apple Inc
Though some investors say Samsung’s profit may have peaked in April-June, signs of recovery in memory chip and display panel prices suggest the components businesses could buttress earnings in the second half.
Operating profit for the chips division fell 22 percent to 2.64 trillion won, its lowest since the third quarter of 2014, as broadly weaker demand for consumer electronics undercut chip prices.
Samsung however said earnings for the business would improve in the current quarter as market conditions stabilize.
The firm also said in separate filings it would buy back and cancel 1.79 trillion won worth of shares in the final installment of its 11.3 trillion won program, and declared an interim dividend of 1,000 won per common share.
Samsung shares were down 0.1 percent as of 8.15 p.m. ET, compared with a 0.1 percent rise for the broader market <.KS11>.
(Reporting by Se Young Lee; Editing by Stephen Coates)