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Samsung Q3 net profit spikes 25.6%

Seoul: South Korea’s Samsung Electronics said on Friday its net profit spiked 25.6 per cent to another record in the third quarter, driven by soaring revenue from memory chip sales.

The world’s largest technology firm by revenue said July-September net profit rose to 8.24 trillion won (Dh28.45 billion, $7.8 billion), from 6.56 billion won a year ago.

The previous record was 7.77 trillion won set in the second quarter.

“Despite currency depreciation in emerging markets, increased price competition and global market uncertainties, we were able to reach record earnings driven by solid earnings in our core businesses including memory chips and smartphones,” said Robert Yi, Senior Vice President and Head of Investor Relations.

“Although we expect demand to increase next quarter due to peak seasonality, lingering macro-economic issues and intensifying market competition will remain in the fourth quarter,” Yi said.

Operating profit soared 26 per cent on-year to a record 10.2 billion won in the third quarter, in line with the estimates Samsung provided earlier this month.

Stagnant growth in sales of the company’s flagship Galaxy S smartphones was offset by strong sales growth in the cheaper end of the smartphone market.

The semiconductor business saw the biggest gains, with a 12 per cent spike in revenue over the previous quarter to 9.74 trillion won.

The bulk of that came from the memory chip business which attracted revenue of 6.37 trillion won.

“Looking ahead, mobile DRAM shipments will stay strong with the release of various low- to high-end smartphones as the holiday season nears,” the company said.

Third quarter operating profit in the semiconductor business more than doubled from a year ago to 2.06 trillion won.

Samsung’s mobile unit still accounted for two-thirds of the company’s operating profit in the third quarter, but has been slowing down as the market for premium smartphones becomes increasingly crowded and prices drop.

Analysts estimate Samsung sold between 85 million to 89 million smartphones during the quarter, including the company’s latest Galaxy S4 smartphone.

“An upswing in shipments of mass market models helped to improve earnings,” the company said.

Oh Young-Bo, an analyst at Hanmag Securities, said Samsung’s mobile segment had performed better than expected, with the strong sales of low and middle-end smartphones covering falls in profit margins.

“This is something positive,” said Oh, who predicted that overall operating profit would touch a new record of around 11 trillion won in the fourth quarter on seasonal sales.

“Memory chip prices will stay high and sales of graphic DRAMs will go up with the new Sony Playstation model to hit the market soon,” he added.

Samsung’s consumer electronics unit – the company’s second largest in terms of sales – continued to struggle in squeezing out profits. Margins were at 2.9 per cent as new demand for TVs remained weak.

During a conference call with analysts, Yi said Samsung expected an additional divided payment of 1.5 trillion won, resulting from the sale of its subsidiary Samsung Display’s 43 per cent stake in an LCD glass venture with US firm Corning Inc.

Corning announced the buyout on Tuesday.

Samsung Electronics’ share price closed unchanged on Friday on the South Korean stock exchange at 1,449,000 won.