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

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.