Samsung Q4 profits seen lower at $2.67bn

South Korea’s giant Samsung Electronics said yesterday Q4 operating profit was expected to fall to $2.67 billion as a slowdown in demand from European consumers continued to bite, as analysts forecast earnings had now bottomed out.

The company said the October-December period was expected to have generated around three trillion won, down 12.8 per cent from a year earlier.

The estimate released by the world’s top maker of memory chips and liquid-crystal display (LCD) panels was lower than the 3.28 trillion won average forecast of seven analysts in a Dow Jones poll.

The earnings also represented a 38.3 per cent drop from the previous quarter.

The weaker-than-expected earnings corroborated the view that the economic slowdown in Europe was taking its toll on demand for consumer electronics, mainly personal computers and flat-screen TVs.

This has led to price erosion in its mainstay memory chip and flat panel divisions, hurting profitability.

“The number slightly misses the consensus forecast, but the company has more upside momentum in the longer-term, such as growing smartphone sales,” Shinyoung Securities analyst Lee Seung-woo told Dow Jones Newswires.

Sales were estimated at 41 trillion won, up 4.5 per cent from a year earlier.

Analysts said they expected Samsung’s semiconductor business to continue to suffer from falling chip prices amid an industry slowdown, with its chip division accounting for more than half of its total profit.

But they expressed optimism, citing easing marketing costs and brighter prospects for the company’s mobile business. Samsung is the world’s second-largest maker of cellphones behind Nokia Corp. (NOK) of Finland.

They said earnings were likely to start to improve from the beginning of this year as brisk sales of smartphones, tablet devices and Web-connected TVs are likely to drive sales.

“Samsung’s quarterly operating profit is expected to have hit bottom in the fourth quarter of last year and will continue to rise this year,” said Lee Sun-tae, an analyst at Meritz Securities.

He said the first-quarter operating profit would reach four trillion won.

The estimated figures were released in the form of the company’s earnings guidance, which is provided before external audit is completed and a formal announcement is made. The estimate may differ from the actual results.