As expected, the Galaxy Note 7 recall is going to cost Samsung’s bottom line rather dearly. Ahead of the company’s third quarter financial results, analysts are estimating that the company’s profits could fall by as much as 8.6 percent compared to the previous quarter, having adjusted their estimates down following the Note 7 recall.
The consensus seems to have settled on a profit target of 7.4 trillion won ($6.7 billion) for the third quarter of the year. Initially, the company was predicted to generate a profit of between 8.2 and 8.5 trillion won for the quarter. Many had expected that the launch of the Galaxy Note 7 would see a continuation of strong profits following the successful launches of the Galaxy S7 and S7 edge in the second quarter. Samsung enjoyed a fresh two-year high for its profits in Q2, but now looks set to fall back to 2015 levels.
Looking more specifically at the company’s mobile division, Kwon Sung-ryul from Donbu anticipates that division’s operating profits will fall to 2.6 trillion won from his initial estimate of 4.1 trillion won.
If accurate, this suggests that the Galaxy Note 7 recall could cost Samsung as much as 1.5 trillion won, or approximately $1.35 billion. This would be higher than the $1 billion that the recall has initially been expected to cost the company. There are also the knock-on effects for Samsung SDI and other component businesses to take into account when looking at the company’s overall business performance.
It isn’t all bad news for Samsung though. Analysts are expecting that the company’s fourth quarter performance will pick back up once the Galaxy Note 7 is back on the market. Reports also suggest that the company may expedite the launch of its Galaxy S8 smartphone in order to compensate for earnings lost with the Note 7.