Samsung’s Q3 profits grow despite Galaxy Note 7 calamity

Samsung Electronics will beat its profit estimates for the third quarter of 2016, the company has indicated, despite its much-publicized problems with its Galaxy Note 7 smartphone. In Q3 earnings guidance published today, Samsung said it expected an operating profit of approximately 7.8 trillion won (around $7 billion), on sales of approximately 49 trillion won (around $44 billion) — a profit increase of just over 4 billion won ($3.6 million) from the same quarter last year.

That figure outstripped analyst estimates, but there are some signs that Samsung is feeling the effects of the Note 7 recall. Overall sales during the period from July to September are down on analyst projections, with the expected number of Note 7 smartphones sold drastically reduced after continuing problems with exploding batteries that first surfaced in September. The figures still project a year-on-year increase, but coming off the back of its biggest quarterly profit of the past two years, the company could have put in a stronger showing. "Samsung was originally expected to perform better and better this year," Nomura Holdings analyst Chung Chang Won told Bloomberg, specifying that the one-off recall costs will have put a dent in that plan.

Samsung's semiconductor seems to have performed well

But while the mobile side of the business is contending with an ongoing problem, Samsung's overall profits seem to have been buoyed by other sections of the company. Speaking before the guidance was released, Lee Seung-woo, a Seoul-based analyst at IBK Securities said that although the recall had likely "taken its toll" on the mobile division, Samsung's "other businesses, particularly semiconductors, have fared extraordinarily well." Semiconductor prices rose over the past few months — a trend also spotted by competitor Intel.

"If its mobile unit doesn't get into further trouble from here and given the strong performance of its components businesses, Samsung shares will continue its upward march," Chung said, but it doesn't look like Samsung is in the clear with its Note 7 yet. Earlier this week, a supposedly safe replacement Note 7 caught fire on a Southwest Airlines plane shortly before takeoff, prompting a fresh investigation by US regulators.


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