Samsung’s jump in sales of 21 units dispels the worst fears of inflation


Samsung Electronics Co. reported a better-than-expected 21 percent jump in sales, allaying investors’ worst fears about the impact of weakening consumer demand and rising material costs on the tech giants.

The modest increase offset weaker-than-expected operating profit, reflecting pressure on margins from rising inflation. Operating profit growth slowed to the lowest level in more than two years at 14 trillion won ($10.7 billion) for the three months to June, South Korea’s largest company said in a statement on Thursday. Analysts had averaged an estimate of 14.6 trillion won.

Sales of 77 trillion won were helped by the South Korean won, which weakened against the US dollar over the period. Samsung will report net income and divisional performance with its full report later this month.

Shares rose as much as 3.2 percent in morning trade in Seoul.

“Results were less bad than expected,” said Song Myung-sup, an analyst at HI Investment & Securities. “There have been major concerns and earnings estimates have been cut. But the 14 trillion won results are in line with expectations.”

The Korean electronics giant is among the first major tech companies to report earnings after a pivotal quarter for the industry. The company’s pre-eminence as a memory chip supplier and leading smartphone maker means its slowing earnings growth could increase concerns about technology demand in the corporate and consumer sectors.

Samsung’s smartphone shipments may have fallen by more than 10 million units to 63 million in the second quarter compared to the previous three months, according to Eugene Investment & Securities analyst Lee Seung-woo. TV and PC sales also fell significantly compared to the first quarter as people spent less on expensive IT products.

South Korea’s chip inventories rose more than 50 percent in May, according to the national statistics bureau, suggesting that weak consumer demand is directly impacting the memory chip industry. Samsung and compatriot SK Hynix Inc. are two of the leading trio of memory manufacturers, supplying data centers and electronics manufacturers around the world. Both have seen share prices plummet more than 20 percent this year as concerns mount about a potential recession.

“Macro uncertainty persists around the world,” said Nam Dae-jong, analyst at eBEST Investment & Securities Co. “The Fed’s rate hikes have triggered exchange rate fluctuations, while commodity and logistics costs continue to rise.

Samsung warned during its latest earnings call that it faces a “huge” challenge to its business outlook as global macro risks such as inflation and the war between Russia and Ukraine loom large. Consumers and corporate customers are cutting spending to hide from a potential recession, while rising interest rates and costs hit their disposable income head-on.

US rival Micron Technology Inc., the third-largest DRAM maker, gave a gloomy outlook for the current quarter last week with lowered expectations for technology spending. Samsung’s jump in sales of 21 units dispels the worst fears of inflation

Fry Electronics Team

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