Samsung Q4 net down 40% at $2.7 bn as smartphone demand slows

Samsung Electronics reported Thursday a 40-per cent decline in fourth quarter earnings as its mainstay smartphone and semiconductor businesses suffered from weakening global demand for consumer electronics.

Samsung's net profit for the October-December period plunged to 3.2 trillion won ($2.7 billion) down 40 per cent from a year earlier.

The world's No.1 maker of smartphones and memory chips said its October-December operating profit was 6.1 trillion won ($5.05 billion), matching its earlier guidance.

Revenue rose 1.1 per cent to 53.3 trillion won, slightly better than the 53 trillion won it had guided for.

The maker of Galaxy smartphones and tablets reported a full-year 2015 operating profit of 26.4 trillion won, compared with 25 trillion won the previous year.

The South Korean tech giant also warned that a recovery in profit is unlikely during the first half of this year as sales of gadgets such as smartphones continue to be slow.

Samsung's results come a day after US tech giant and iPhone maker Apple forecast its first quarterly sales drop in 13 years, which also pushed its shares down more than 6.5 per cent - the biggest percentage drop in two years.

The market for electronics is shrinking with the slowing economic growth in China and weaker emerging market currencies undercutting sales of electronics ranging from televisions to personal computers, spelling trouble both major companies and parts suppliers..

"Broadly weaker IT demand will make it difficult to maintain 2016 profits at the level of the previous year's," Samsung said in a statement accompanying its fourth-quarter results, adding that "challenging business conditions" would remain for the current quarter and last throughout the first half of this year.

Samsung shares ended down 2.6 per cent on Thursday, underperforming a 0.5 per cent rise for the broader market KS11.

The semiconductor division was the top earner for the sixth straight quarter in the October-December period, lifting its operating profit to 2.80 trillion won from 2.70 trillion won a year earlier.

Mobile division profit slipped 7.3 per cent from the third quarter to 2.23 trillion won, its weakest result in four quarters.

Samsung said first-quarter mobile profits would improve slightly, boosted by the launch of new smartphones, although overall smartphone shipments were expected to decline slightly.

Samsung also said it will buy back and cancel 2.99 trillion won worth of common and preferred shares, marking the second round of share purchases as part of a 11.3 trillion buyback plan announced late last year. It also declared a year-end dividend of 20,000 won per share.

Later on Thursday, the firm said it will sell a 37.5 per cent stake in Samsung Card Co Ltd to Samsung Life Insurance Co Ltd for 1.54 trillion won ($1.3 billion), the proceeds from which will be used to fund new businesses.

The transaction will give Samsung Life a 71.9 per cent stake in Samsung Card, a step that is in line with the group's restructuring efforts to streamline its ownership structure and solidify the founding Lee family's control over the smartphones-to-construction conglomerate.