South Korean tech giant Samsung Electronics Co. said Friday that its third-quarter operating profit is expected to have nearly tripled on-year, apparently on the sound returns from its computer chip business.
Operating profit was estimated at 14.5 trillion won (US$12.8 billion), compared with 5.2 trillion won tallied a year earlier, the company said in a regulatory filing.
Sales also probably surged 29.65 percent to 62 trillion won in the July-September period compared to a year earlier.
The operating profit figure was slightly higher than the market's consensus of 14.3 trillion won, a number compiled by Yonhap Infomax, the financial arm of Yonhap News Agency, based on 21 local brokerage houses.
Samsung did not announce the performance estimates of each business division, although the chip business is anticipated to have played a key role in the record-beating report. The company is set to release its final earnings report later this month.
The guidance report indicates the overall operating margin for the third quarter came to 23.4 percent, also setting a new record. Analysts said Samsung's strong earnings are attributable to increased shipments of chips.
"The shipment of DRAM and NAND products increased 12 percent and 21 percent (in the July-September period) on-quarter, while the average sales price also advanced 6 percent and 2 percent, respectively," said Kim Dong-won, an analyst at KB Securities Co.
KB Securities added that rising sales of the Galaxy S8 and Galaxy Note 8 smartphones will also improve the profitability of the mobile division, putting the sector's operating profit estimate at a better-than-expected 3.3 trillion won.
Samsung's mobile division saw its operating profit plunge to 100 billion won in the third quarter of 2016 due to the suspended production of the Galaxy Note 7, which recovered to 2.5 trillion won a quarter later.
While the third quarter estimate for the IT and mobile division hovers below the second quarter, the figure is still better than expected, as Samsung was widely seen to post weaker returns on increased marketing costs for the Galaxy Note 8 released last month.
Analysts said the better-than-expected performance for the mobile arm is attributable to the market's positive reaction to the Galaxy Note 8 flagship, while the refurbished edition of the Galaxy Note 7, dubbed the Galaxy Note FE, sold out in South Korea, shipping 400,000 units.
Analysts said Samsung's chip business may have posted an operating profit of 10 trillion won in the third quarter, along with sales of 20 trillion won, putting the operating margin at above 50 percent.
Samsung raked in 8.03 trillion won from the chip business in the April-June period in operating profit, along with 4.06 trillion won from the mobile arm.
As for the fourth quarter, Samsung Electronics is expected to continue its growth, backed especially by its highly competitive chip business.
"The release of new models, including the iPhone X by rival Apple Inc., could weigh down on the mobile business, but it will at the same time help Samsung's parts business," said Doh Hyun-woo, analyst at Mirae Asset Daewoo Securities Co. in a report.
Mirae Asset Daewoo Securities added the consumer electronics division will experience growth on the back of strong seasonal demand.
Yonhap Infomax data based on research from 21 securities firms showed Samsung is expected to post an operating profit of 16 trillion won in the fourth quarter, up 74 percent from a year earlier.
Industry watchers, meanwhile, said the absence of Samsung's top leaders cast a cloud over the company's long-term strategy.
Samsung Electronics Vice Chairman Lee Jae-yong is currently behind bars after a local court found him guilty of bribery and embezzlement in a massive corruption scandal that led to the ousting of former President Park Geun-hye. Lee was given a five-year jail term, although he has appealed the case.
His ailing father Lee Kun-hee has been hospitalized since 2014, and is currently unable to participate in the company's management.
Industry watchers said Samsung's latest record-beating performance was made possible by investments and strategies established by Lee Jae-yong ahead of his imprisonment in February, and the lack of leadership in Samsung will hinder its long-term growth.
The rising presence of Chinese rivals coupled with U.S. trade protectionism headed by President Donald Trump are also major hurdles, they added.
"Currently, Samsung is only harvesting from rich soil," an anonymous Samsung executive said. "While (the company) seems to be an invincible fleet, it is true that there are fears of leaks,"
Shares of Samsung Electronics closed at 2,700,000 won Friday, down 1.46 percent from the previous session. Samsung announced its earnings guidance before the market opened. (Yonhap)