Samsung Electronics posts 8 per cent fall in Q2 net profit

30 Jul 2015 | Author: | No comments yet »

Samsung Electronics posts 8% fall in Q2 net profit.

Samsung Electronics’ net profit for the second quarter fell 8 per cent as sales for the company’s flagship Galaxy S6 smartphone fell short of market expectations. three-months ended June 30 was 5.75 trillion Korean won ($6.7 billion), down from 6.25 trillion won for the corresponding period a year ago, the company said.The South Korean company said in its second-quarter earnings report that it will “adjust” the prices of the two flagship phones that were introduced in March this year in order to maintain “sales momentum”, adding that the company’s mobile division expects a “difficult business environment” in the second half of the year. “Despite the launch of Galaxy S6, improvement to earnings was quite marginal due to low smartphone shipments and an increase in marketing expenses for new product launches,” Samsung said in the statement.

Samsung Electronics posted an 8.0 percent fall in second quarter net profit on less than stellar sales of its flagship smartphone and stiff competition from cheaper Chinese rivals. It is the fifth straight quarter the company has posted a year-over-year profit decline, as low-cost rivals from China and India continue to weigh on Samsung’s market share and profit margins, particularly for mid-range smartphone models. This could refer to the Samsung Galaxy Note launch, rumoured to take place in New York next week. “New middle- and low-end models will also be introduced,” the company added.

The South Korean giant has seen profits sag since late 2013 due to heightened competition in an increasingly saturated smartphone market that it had dominated for years. Samsung’s dominance is being chipped away at the low-to-mid end by Chinese rivals such as Huawei Technologies Co Ltd and in the premium segment by Apple, while some markets show signs of saturation. Samsung has faced a double challenge from US arch-rival Apple in the high-end smartphone market and rising Chinese firms like Xiaomi in the mid- and low-end market. Problems for the S6 Edge started when the number of handsets produces was lower than those demanded because of the device’s difficult to manufacture curved screen.

Samsung remained the top smartphone maker in April-June, but shipments fell in part due to an inability to build enough curved-screen Galaxy S6 edge handsets, analysts said. The firm said its mobile division will launch new larger-screen phones in the third quarter but may not be able to improve earnings. “I don’t think there’s much to expect from Samsung in the third quarter,” said fund manager Park Jung-hoon at HDC Asset Management.

Second-quarter profit was 6.9 trillion won, matching the company’s estimate issued earlier this month. “While 2H 2015 is expected to present mounting challenges, the company will try to improve earnings,” Samsung said on Thursday.

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