Samsung reports Q1 profit slump but expects better results in second half

South Korean tech giant Samsung Electronics reported Q1 results that disappointed investors, unveiling its weakest profits in two years.

The consumer electronics giant posted operating profits of $5.4bn for the quarter ending in March, the least since late 2016 but in line with the company’s guidance.

Revenue fell 13.5% when compared to the same quarter last year to reach $44bn, which was in line, as turnover in the semiconductor business dropped by 30.4% to $12.4bn, including a 33.8% drop in memory sales.

"The semiconductor business experienced a fall in the prices of memory chips in the face of inventory adjustments in companies, while the demand for high-density memory for mobile phones increased thanks to the new smartphones", said Samsung in a statement.

The Ebitda margin of the Suwon-based giant fell to 25% from 36% in the first quarter of 2018. In addition, Samsung's return on equity (RoE) stood at 8%, compared to 21% a year earlier.

Nevertheless, management expected to see an improvement in the second-half, anticipating a pick-up in memory chip demand and smartphone sales.

But first, the company warned, there was more short-term pain to come in the second quarter.

“For the second half of 2019, the company expects memory chip demand for high-density products to increase, but uncertainties in the external environment will persist,” the tech giant said.

An easing in China-U.S. trade tensions could also improve demand for consumer electronics and encourage Chinese cloud service providers to lower their inventories to more normal levels, Reuters reported.