Roundup: Samsung's Q1 profit posts double-digit growth on smartphone sales

Samsung Electronics' first-quarter operating profit posted a double-digit growth on the back of robust sales of Galaxy S7 smartphones, launched earlier than forecast, the company said on Thursday.

Consolidated operating profit reached 6.68 trillion won (5.84 billion U.S. dollars) in the January-March period, up 11.7 percent from a year earlier. From the previous three-month period, the profit increased 8.7 percent.

It was an earnings surprise as it sharply surpassed market expectations of about 5.2 trillion won.

Revenue grew 5.7 percent over a year earlier to 49.78 trillion won in the first quarter, and net income surged 63 percent to 5.25 trillion won.

The operating profit margin jumped to 13.4 percent, nearing to the 15 percent level which Samsung achieved when posting a record-breaking earnings several years ago.

The positive first-quarter earnings came as Samsung's mobile phone business posted the highest profit in about two years. Samsung sold a total of 92 million phones in the first quarter.

The local currency's depreciation to the dollar and the euro also contributed to the profit growth, increasing repatriated overseas earnings.

The smartphone unit's operating profit reached 3.89 trillion won, accounting for nearly two-thirds of the combined profit. It was up 74 percent from the previous quarter and marked the largest since the second quarter of 2014.

Operating profits of Samsung's smartphone division stayed in the range of 2 trillion won in the past years due to global market slowdown, falling below the level in the third and fourth quarters of 2014.

Samsung's Galaxy S7 and S7 Edge smartphones were released earlier than forecast in the first quarter, resulting in profit growth in the smartphone division. Low-end smartphone lineups were simplified, also helping boost profitability.

The semiconductor business logged 2.63 trillion won in operating profit, leading Samsung's first-quarter earnings surprise. The company overcame sluggish market conditions caused by a drop in DRAM memory chip prices.

The consumer electronics unit posted an operating profit of 510 billion won, turning around from a loss of 140 billion won a year earlier. The turnaround came on the back of strong demand for premium TVs and brisk sales of home appliances in North America. Samsung sold 10 million LCD TVs during the quarter.

However, the display-making division registered an operating loss of 270 billion won due to a decline in prices of LCD panels used for TV. Profitability in OLED panels improved on rising usage of the panels in Galaxy S7 smartphones.

Samsung spent 4.6 trillion on facility investment, with 2.1 trillion won invested in the chip-making division and 1.8 trillion won allocated to the display business.

Samsung said that it will aggressively expand OLED facilities if necessary, forecasting that demand for OLED used for smartphones will increase continuously.

Meanwhile, Samsung decided to buy back its own shares worth about 2 trillion won, which will be carried out in the next three months. The repurchased shares, including 1.3 million common stocks and 0.32 million preferred shares, will be cancelled. Enditem