Samsung’s Q1 Guidance Forecasts a 60 Percent Drop in Operating Profit

Samsung is feeling the chill from cooling global demand for smartphones.

Samsung said in a press release on Friday that it was heading for its lowest quarterly profit in more than two years as a surplus in memory chips, slowing panel sales, and rising competition in smartphones hit margins.

Samsung warned last week that its earnings would be hit by slowing demand for memory chips and display panels, a sign that device makers and their suppliers are coming under pressure.

Now, in its earnings guidance for the first quarter of 2019, Samsung said it expected consolidated operating profit of approximately 6.2 trillion Korean won (around $7.3 billion CAD), which is less than half of the $19.3 billion CAD profit it recorded in the same period last year, a drop of roughly 60 percent year-over-year. Consolidated sales, meanwhile, are estimated to be 52 trillion Korean won ($61.1 billion CAD).

Samsung expects to report a sales decline of roughly 14 percent when full earnings are published later in April.

The Korean company said that last quarter the release of the Galaxy S10 was expected to help “prop up” performance, although the flagship devices have only been available for a few weeks of this quarter.

“We do expect server DRAM demand to pick up as well as the S10 sales and foldable-phone sales to be better than expected going into the second half,” Daniel Yoo, global strategist at Kiwoom Securities, told Bloomberg. “Therefore the earnings pickup should lead the share price going into the future.”

Samsung said it expects smartphone sales to be relatively flat throughout the year, which affects the company’s ability to sell components like OLED displays, as well as its own devices. Demand at its lucrative memory business, meanwhile, isn’t likely to pick up until the second half of the year.

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