Samsung Electronics (SSNLF) shares fell to a near two-week low Tuesday after the world's biggest chipmaker provided fourth quarter earnings guidance that fell modestly shy of market expectations amid a stronger South Korean won and slumping smartphone demand.
Samsung said it sees operating profits of around 15.1 trillion won ($14.1 billion) for the three months ending in December, up 64% from the same period last year but shot of the Street consensus of $14.9 billion. Overall revenues for the period, Samsung said in its traditional pre-earnings guidance statement, likely hit 66 billion won, a figure that also missed analysts' forecasts.
Shares in the group fell 3.11% in Seoul to close at 2.52 million won each, the lowest since Dec. 27, extending their decline from an early November record to around 12% amid concerns over pricing power in the DRAM and NASD chip markets and slowing demand for smartphones in a hyper-competitive global market. Rival SK Hynix Inc. was also pulled lower, falling 1.66% into the close of the session.
Samsung doesn't provide a detailed breakdown of it quarterly earnings until they're officially published at the end of this month, but its third-quarter numbers, which topped forecasts, indicated a a heavy reliance on chips, which generated nearly 70% of its operating profits, although its mobile division saw a surge in profits over the quarter, to 3.3 trillion Korean won, as the previous-year period included the scuttling of its flammable Galaxy Note 7 device.
The world's biggest chip and smartphone maker said on Oct. 31 that operating profit for the three months ended in September came in at 14.53 trillion Korean won, a 23.4% increase from the same period last year, on sales of around 62 trillion Korean won. Samsung also pledged to return 26 billion Korean won to shareholders over the next three years, doubling its annual dividend to 9.6 trillion Korean won.
That will put around 50% of the group's free cashflow back into the hands of investors, while capex for the full year will also be increased to a record 46.2 trillion Korean won, the company said, as it plans new factory, assembly and storage facilities to take advantage of the surge in global chip demand.
However, while demand may be increasing -- industry website semi.org suggests worldwide chip sales will topped $460 billion last year and could rise even further through 2018 -- prices are starting to edge lower as production ramps up around the world.
IHS Markit estimates the global 'dynamic random access memory', or DRAM market will grow 17% this year to $84.4 billion while the NAND flash memory chip market will expand by around 10% to $59.2 billion.
Samsung's bottom line has also been eroded by the ongoing surge in the Korea won, which traded a three-year high of 1,058.8 against the U.S. dollar Monday as authorities resisted from intervening amid concern that the U.S. Treasury could officially label the country a currency manipulator after placing on a watch list of suspected nations late last year.
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