Samsung says Q2 operating profit fell on weak LCD demand

(ATTN: RECASTS headline, lead, para 2; ADDS share price outlook, analyst comment in para 6, 16-20; RESTRUCTURES) By Lee Youkyung SEOUL, July 7 (Yonhap) -- Samsung Electronics Co., the world's top maker of memory chips and liquid crystal display (LCD) panels, said Thursday its second-quarter operating profit is estimated to have slumped 26.2 percent from one year ago mainly due to its flagging display division. Samsung put its operating profit for the April-June period at an estimated 3.7 trillion won (US$3.47 billion), compared with a record operating profit of 5.01 trillion won a year ago, Samsung said in a regulatory filing. Samsung's estimate is slightly above analysts' forecasts. Samsung was forecast to have posted an operating income of 3.61 trillion won in the second quarter, according to the median estimate of 20 analysts polled by Yonhap Infomax, the financial news arm of Yonhap News Agency. Second-quarter revenue was estimated to be 39 trillion won, up 2.93 percent from one year earlier, according to the company's earnings guidance. It did not provide an estimate of its net profit or figures for each of its divisions. Shares of Samsung Electronics were trading at 887,000 won on the Seoul bourse as of 10:45 a.m., down 1.22 percent from the previous session. Although its second-quarter preview hovers slightly above the market consensus, its earnings took a beating from weak global spending, which is eroding demand for TVs and personal computers and subsequently pushing down prices of key electronics components such as memory chips and LCD panels. Market researchers revised down forecasts for annual TV sales and PC sales because the uncertainties in the global economy, such as hefty public debts in Europe and the political instability in the Middle East, were seen as crimping consumer spending in the advanced economies and China. In June, DisplaySearch cut its forecast of the global LCD TV market for this year to 210.49 million units from an earlier estimate of 216.82 million units. Gartner Inc. downgraded its outlook for the PC industry last month, putting its estimate of annual growth at 9.3 percent, compared with the previous 10.5 percent forecast. Prices of LCD panels for TVs have failed to rebound for nearly two years as a result. Computer memory chip prices showed an unexpected dip in late June after some analysts expected them to bounce back due to the March-11 earthquake leading to a reduction in the global chip supply. Samsung, whose component businesses account for about half of its operating profit, is forecast to post a second straight quarterly loss in its display sector of about 240 billion won, according to Lee Ka-keun, an analyst at Hana Daetoo Securities Co. Last week, Samsung combined its semiconductor and LCD panel divisions and sacked its LCD chief in a bid to accelerate the revival of its display business under a single leadership. Kwon Oh-hyun, president of Samsung's semiconductor division, began to double as the company's chief of its LCD business. The company's mobile business, however, probably fared well in the April-June period, helping offset losses in other businesses, analysts said. Samsung, the world's fourth-largest smartphone maker and also the fastest growing smartphone vendor in the first quarter, sold more than 3 million units of its latest Galaxy S2 smartphone globally less than two months after its debut. The company's performance will likely improve for the rest of the year, analysts said, as its advanced displays, called organic light emitting diodes (OLED), help turnaround its display business. "The display business hit the bottom and with a higher profit from the OLED panels, it will post about 100 billion won in operating profit in the third quarter," said David Choi, an analyst at KTB Investment & Securities Co. Samsung is also well-positioned to capitalize on the booming demand in smartphones and tablet computers, analysts said, which will fuel its third-quarter and fourth-quarter earnings growth. Samsung sold 10.8 million smartphones in the first three months of this year, the largest on-year growth among the world's mobile vendors, according to International Data Corp. The company is estimated to have exceeded its smartphone sales target during the first six months thanks to the brisk demand for its Android smartphones. "Samsung is forecast to have shipped more than 30 million units of smartphones in the first half of this year, more than half of its annual sales target," said Kang Jeong-won, an analyst at Daishin Securities Co. "It is possible that Samsung will raise its annual smartphone target." Samsung, also the world's No. 2 mobile phone maker, plans to disclose its second-quarter earnings later this month.