The Korea Herald


Samsung, LG achieve Q1 earnings surprises on pent-up demand

By Song Su-hyun

Published : April 7, 2021 - 09:07

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This file photo taken Jan. 18, 2021, shows an outdoor sign at Samsung Electronics Co.'s office building in Seoul. (Yonhap) This file photo taken Jan. 18, 2021, shows an outdoor sign at Samsung Electronics Co.'s office building in Seoul. (Yonhap)
In an earnings surprise, Samsung Electronics is believed to have recorded an operating profit of 9.3 trillion won ($8.3 billion) in the first three months of 2021, according to early estimates released Wednesday.

According to the company’s Q1 earnings guidance, its revenue is projected to reach 65 trillion won.

Compared to the same quarter last year, revenue and operating profit would represent increases of 17.48 percent and 44.19 percent, respectively.

The operating profit growth far exceeded market expectations. Stock analysts had predicted Samsung to report profit of around 8 trillion won.

The earnings guidance did not reveal a breakdown of numbers for each business segment.

But market watchers and analysts said high sales of smartphones, TVs and other home appliances were likely to have been key attributors, driven by pent-up consumer demand amid the prolonged COVID-19 pandemic and virus curbs.

Analysts forecast Samsung’s smartphone business to have recorded 4.3 trillion won in operating profit, owing to early launch of its flagship Galaxy S21 series in January and mid-range Galaxy A series in March.

Samsung said its Galaxy S21 hit 1 million in sales as of March 26.

The financial market’s estimate for Samsung’s Q1 smartphone shipments has been raised to the 75 million to 76 million range.

Samsung’s consumer electronics business is expected to post 1 trillion won in operating profit, according to financial reports.

As consumers continued splurging on home improvements, high-end TVs and home appliances sold well during the first three months of the year.

Samsung rolled out new TV lineups including Neo QLED through a variety of promotions which also seemed to have attributed to the high sales. Global sales of customizable Bespoke home appliance series would also have contributed to the strong earnings. 

Meanwhile, the most lucrative chip-making unit is projected to have obtained around 3.5 trillion won in Q1, earning less than the previous quarter. The figure is also lower than 4.1 trillion won from a year earlier.

“The cost of operating the second line in Pyeongtaek and profits from the foundry and system chip businesses worsened,” said Hwang Min-seong, an analyst at Samsung Securities.

The monthlong halt at Samsung’s foundry fab in Austin, Texas, due to the power outage incurred a loss of around 300 billion won, market watchers assume.

LG Electronics also surprised the market with its earnings guidance.

The company is expected to post 18.8 trillion won in revenue and 1.52 trillion won in operating profit, up 27.7 percent and 39.2 percent from a year earlier, respectively.

Both revenue and operating profit were the company’s largest ever on a quarterly basis.

The 1.52 trillion-won operating profit beat the previous record set in the second quarter of 2009, when the company earned 1.2 trillion won.

The home appliance business would have been the biggest contributor to the earnings surprise.

Market observers predict that LG’s home appliance and air solution business raised 6 trillion won in sales and 800 billion won in operating profit in the first quarter.

LG’s TV sales are expected to show around 30 percent growth year-on-year.

By Song Su-hyun (