Samsung announce impressive profit U-turn for Q4 2016

Electronics giant Samsung has announced that it expects to make its highest quarterly profit since 2013, despite initially reducing its guidance after an embarrassing recall of its flagship phone earlier this year.

Samsung said it was expecting a consolidated operating profit of 9.2 trillion won (around $7.2 billion) for the fourth quarter of 2016. This is almost a 50 percent rise on the 6.14 trillion won (about $5.2 billion) in profit it received in the same quarter last year.

Samsung had originally expected a profit rise for the third quarter of this year, but revised this downwards after recalling its flagship phone, the Galaxy Note 7. The phone was first recalled in September after a spate of exploding batteries, with customer offered replacement devices; however, these were also found to be defective, prompting a further recall.

The Note 7 problems were expected to make a $2.1 billion dent in Samsung’s profits, but it appears that strong performance in other areas of the business have offset the problems. After a strategic business move, Samsung’s profits are now more dependent on the components that go into the phones rather than the phones themselves. This appears to have allowed the company to recover quickly from what was seen by many to be a major setback.

Samsun’s focus on parts has led it to become the world’s largest chip maker, specialising in dynamic random access memory, or DRAM, and NAND flash-memory chips. According to research firm IHS Markit, in the three months to the end of September 2016, Samsung had a 49.1 percent share of global DRAM sales and a 35.5 percent share of NAND sales.

Samsung (KRX:005930) shares are currently up 1.8 percent at 1,810,000 (1016GMT). Final earnings results for the quarter will be released later this month.

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