Seoul, South Korea — Despite increased revenue from sales of premium televisions and strong movement of such IT products as PCs and printers, Samsung Electronics posted a 6 percent first-quarter drop in overall sales for its digital media business, moving down to $1.6 billion from a year-ago $1.7 billion.
This segment, primarily consumer electronics, enjoyed growing sales of large-screen LCD televisions, which registered a 14 percent sequential-quarter increase in three-month sales for sets 40 inches and up, and a 49 percent quarter-over-quarter rise for 42-inch-and-up PDP televisions. PC’s notched a 7 percent sequential-quarter rise in shipment growth in the first three months, while printer shipments climbed 5 percent quarter over quarter.
Digital media segment operating profit took it on the chin in the first quarter, widening its operating loss to $52.6 million in the period ended March 31, compared with a loss of $42.1 million in the same quarter in 2005, as retailers became even more aggressive in their pricing, and company costs moved upward.
A strong surge in 40-inch-and-above TFT-LCD panel business helped Samsung’s LCD business segment post a 41 percent increase in first-quarter sales, rising to $2.8 billion from a year-earlier $2 billion.
The company was able to minimize the price decline in LCD panels, triggered by weaker demand, with more aggressive results from increased shipments. The company’s LCD segment enjoyed a fivefold operating profit increase in the first quarter, to $115.7 million, compared with a $21 million profit in the same period last year.
Despite weak seasonality, Samsung registered an increase in handset shipments in most regions during the first quarter. However, its overall telecommunications segment sales dipped 5 percent, to $4.8 billion in the first quarter, down from $5.1 billion year-on-year.
Handset sales, alone, in the first quarter, slipped 4 percent to $4.6 billion, from $4.8 billion in the first three months of 2005. The company shipped 29 million phones in the first quarter, up from 27.2 million in the fourth quarter of last year.
First quarter operating profit for Samsung’s telecommunications business was off 45 percent, due to narrowing margins for mobile phones in both the company’s export and domestic markets, and higher overseas marketing costs. Profit dropped to $483.9 million in the three months, compared with a year-earlier $883.7 million.
A decrease in business due to seasonality factors, partially offset by an increase in air conditioner sales, led to a 13 percent drop in appliance segment revenue. This figure for the first quarter came in at $725.9 million, down from $831.1 million in the same period the prior year.
Although the appliance segment boasted improved profitability due to cost reduction and higher premium product sales, the overall segment operating loss doubled to $21 million, compared with a loss of $10.5 million in the first three months of 2005.
In the first quarter, consolidated Samsung sales were essentially flat at $14.7 billion, up 1 percent from the $14.5 billion recorded in the same quarter the previous year.
Consolidated operating profit dropped 25 percent to $1.7 billion, from $2.3 billion in the same three months in 2005, while gross profit margin decreased to 27 percent from a year-on-year 30 percent. Expenses in the quarter climbed by 9 percent to $2.3 billion from a year-ago $2.1 billion.
The company cited the strength of the South Korean won and falling prices of products such as flash memory chips used in digital music players for its operating profit slide. A stronger won helps to make exports more expensive overseas and reduces profit value earned offshore when foreign currency is converted back to won, said the company.
Consolidated net profit in the first quarter, however, jumped 26 percent to $2 billion, from the $1.6 billion registered in the first three months of 2005, primarily due to strong demand for large-size flat-screen TVs. The company said strong performance from overseas subsidiaries contributed to the positive net profit contribution. However, Samsung also had posted a $764.4 million write-down to support its credit-card affiliate in the first quarter of 2005.