South Korean conglomerate Samsung Electronics Co. Ltd. (SSNLF.PK, SSNNF.PK) said late Wednesday that it expects operating profit for the second quarter to drop about 26 percent from last year, while sales are expected to increase nearly 3 percent year-over-year. The company is scheduled to report financial results for the second quarter later this month on July 29.
The company estimates operating profit for the second quarter to be 3.7 trillion won or about US$3.5 billion, slightly above analysts' expectations of 3.6 trillion.
The forecast is 26.2 percent lower than the company's year-ago second quarter operating profit of 5.01 trillion won, but represents 25.4 percent growth from first-quarter operating profit of 2.95 trillion won.
Suwon, South Korea-based Samsung Electronics said it estimates sales for the quarter to be 39 trillion won, expected to increase 2.9 percent from the prior-year quarter's sales of 37.89 trillion won, but will be shy of Street estimates of 40 trillion won. Total sales is also seen to grow 5.4 percent from the previous quarter's sales of 36.99 trillion won.
Samsung is the world's largest manufacturer of liquid crystal displays as well as flat-screen televisions and is currently ranked second only to Nokia Corp. (NOK) in the production of mobile phones.
In late April, Samsung reported a 30 percent year-over-year drop in profit for the first quarter, hurt primarily by lower semiconductor memory prices and reduced profitability in LCD panels and TV sets.
Samsung then projected tough business conditions to continue in the second quarter on lingering worries about the global economy and tight competition in consumer electronics and the mobile businesses.
Meanwhile, the company said it will respond to such challenges by enhancing cost competitiveness, launching new smartphones and tablet PCs, as well as increasing sales focus on premium LCD panels and TVs.
In mid-June, Fitch Ratings affirmed Samsung's long-term foreign and local-currency issuer default ratings at 'A+' with a stable outlook. The agency has also affirmed the company's senior unsecured rating at 'A+'.
The rating agency stated that despite a sharp erosion in memory prices and downturn of display panel and TV industries since the second half of 2010, Samsung's full-year revenues grew 13.4 percent to 154.63 trillion won.
Fitch expects the stable operating environment for the company to continue throughout the year 2011. However, Fitch anticipates demand for display panels and TVs to remain depressed.
Meanwhile, Samsung said at its annual general shareholders in mid-March that 2011 will be a challenging year for electronics companies, as intensifying competition continues to put pressure on profit margins.
The company added that its management strategy for 2011 will be to focus on three main pillars: bolster market leadership through source differentiation in each business area; identifying and nurturing future businesses that will sustain growth for the next five to ten years; and integrating management capabilities to preemptively respond to business risks in times of market uncertainty.
Samsung shares fell 9,000 won or 1.00 percent in Thursday's regular trading and is currently trading at 889,000 won on the Kospi on a volume of 0.10 million shares.
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