Samsung earns $6.96 billion in Q2 2013, but smartphone profits are struggling

July 26, 2013
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It’s that time of the year, when companies are filing their financial reports for the second quarter of the year. Following on from LG, Samsung is the next company in line to release its revenue and sales figures, so we can finally see how the launch of the Galaxy S4 has helped, or hindered, Samsung’s bottom line.

Across the company, quarter on quarter sales are up, with the consumer electronics department leading the way, followed by IT and mobile communications, then display panels, and finally a small growth in Samsung’s semiconductor division. This across the board growth generated a net profit of 7.77 trillion won ($6.96 billion).

Looking at the part that interests us most, Samsung’s mobile sector, sales were up 9 percent compared with the first quarter of the year, and grew 54 percent from the second quarter of 2012.

Samsung Q2 2013 results

That’s clearly a very impressive figure, but as we’ve seen across the wider mobile market lately, this increase in sales hasn’t managed to translate into profit. Despite growing 8 percent over the last quarter, Samsung’s mobile division operating profit shrank by 3 percent over the same period, suggesting that revenue levels are starting to plateau.

This marginal profit is likely to have declined due to increased costs associated with launching a new products, R&D costs, such as marketing, and other retail channels investments. This all matches up with what we’ve seen in the wider industry, with company’s being forced to spend more on marketing and struggling to keep profit levels up in the face of strong competition.

Samsung also noted an interesting trend with its tablet products, demand is decreasing in saturated developed markets but increasing in emerging markets. Looking at the remainder of the year, Samsung expects growth to continue in emerging markets, including China, due largely to high demand for mass-market smartphones. In more developed markets, the company expects future growth to be led by LTE enabled products, as consumers phase out their existing handsets to make use of faster download speeds.

Overall it’s a good result for a company which has been struggling with a lack of investor confidence. But it remains to be seen whether stagnant smartphone revenues are to become the norm, or if it’s just a blip on an otherwise upward trend.

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