Samsung Electronics (SSNLF) cautioned investors Friday that its first quarter profits would likely miss expectations, setting up the world's biggest smartphone maker for the weakest bottom line since 2016 and the steepest decline in four years.
Samsung repeated the concern is unveiled late last month in a rare pre-earnings update that weaker-than-expected business conditions in two of its key markets -- memory chips and panel displays -- would likely mean it first quarter profits will fall short of analysts' forecast.
Samsung now sees sales of 52 trillion Korean won ($45.7 billion), down 13% from the same period last year and firmly shy of the previous 53.7 trillion Korean won consensus. Samsung also said earnings will slump to 6.2 trillion Korean won, well below the 7.2 trillion estimate, down 60% from the same period last year the weakest tally since late 2016.
"To overcome difficult business conditions, the Company will strengthen product differentiation based on its technological leadership while also enhancing cost competitiveness via efficient resource management," Samsung said in statement filed to stock exchange regulators on March 26. "In the mid to long term, we will continue efforts to strengthen key capabilities by boosting competitiveness of our major businesses while securing sustained growth via strategic investments in R&D, new businesses, etc."
Samsung shares closed 0.21% lower in Seoul at 46,850 Korean won each, a move that still leaves the stock with a 21.06% gain for the year - as well as a 5% advance since the tech giant cautioned on earnings back on March 26.
Last month, Samsung, which makes OLED display screens for Apple Inc. (AAPL - Get Report) iPhones, referenced "a decline in demand from large customers", alongside intense price competition, for the business decline.
Apple slashed its iPhone revenue forecasts in January, citing broad-based weakness in China, and reported reported a 15% decline in first quarter handset sales of $51.98 billion.
The company also said inventory overhangs for memory, including DRAM chips, "are likely to exceed previous expectations amid overall weak demand under seasonality", but would pick up over the second half of the year.
Analysts at BMO Capital Markets see mobile handset shipments for the January to March quarter coming in at 77 million units, with smartphones comprising nearly 92% of the total.
Semiconductor revenues, BMO forecast, would likely fall 14% on the quarter to 16.1 trillion Korean won, with the division, Samsung's largest, posting an operating profit of 6.1 trillion Korean won.
Samsung will provide detailed figures on the first quarter earnings, as well as a revised 2019 outlook, later this month.