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Samsung Reports Q1 Lower Profits, Higher Sales

Seoul, Korea –
Samsung Electronics reported higher revenues but a 30 percent cut in profits in
its first quarter ended March 31.

Samsung reported revenues
of 36.99 trillion Korean won on a consolidated basis for the first quarter, a
7-percent increase year-on-year.

 But it reported consolidated net income of
2.78 trillion won, representing a 30-percent decrease year-on-year.

In its earnings
guidance disclosed on April 7, Samsung estimated first-quarter consolidated
revenues would reach approximately 37 trillion won.

By business,
Telecom, Semiconductor and Digital Media & Appliances drove revenue growth
in the quarter. The Semiconductor Business saw sales jump 12-percent
year-on-year thanks to stronger demand for NAND products used in smartphones
and tablet PCs, while the Telecom segment continued to perform strongly with
sales reaching 10.64 trillion won.

Samsung’s overall net profit declined after the strong first quarter
performance in 2010, weighed down by lower semiconductor memory prices and
reduced profitability in LCD panels and TV sets, the company said.

“A difficult
business environment remained in the first quarter, due to rising costs of raw
materials, uncertainties in the financial market in Europe, and the devastating
earthquake in Japan,” said Robert Yi, VP and Head of Samsung Electronics’
Investor Relations Team. “But we will actively respond to such challenges by
enhancing cost competitiveness in memory products through geometry migration,
launching new smartphones and tablet PCs, as well as increasing the sales focus
on premium LCD panels and TVs.”

Operating profit
for Digital Media & Appliances Business turned around from the previous
quarter to register 0.10 trillion won on revenue of 13.52 trillion won in the
first quarter.

Amid weak seasonality,
Samsung’s overall shipments of flat panel TVs fell 31 percent to 8.8 million
units from the previous quarter. Profit was driven by increased sales of LED
TVs, which now make up 39 percent of TV sales. For the remainder of 2011, sales
of flat panel TVs are expected to remain slow in advanced countries, with
emerging markets forecast to take up 55 percent of total demand by year end.

As for digital
appliances, emerging market growth and brisk sales of premium refrigerators,
washing machines and air conditioners in Europe drove up revenue by 13 percent
compared with the same period last year. Samsung will continue focusing on the
launch of new premium and eco-friendly products, while enhancing global
production efficiency.

Samsung forecasts
that the challenging business conditions will persist in the second quarter,
effected by lingering worries over the global economy and tight competition in
consumer electronics and mobile businesses.

The impact on
earnings from volatility in foreign exchange was minimal, as the fluctuation of
the Korean won against the US dollar and the euro was less than 1 percent. With
regards to concerns over disruptions to the supply chain after the March 11
earthquake in Japan, Samsung expects the impact on its businesses to be relatively

Beginning this
quarter, Samsung has renamed the LCD and Digital Media segments in the earnings
release as Display Panel (DP) and Digital Media & Appliances (DM&A),
respectively. The set-top box product line, which previously was under Telecom,
is now part of DM&A, and 2010 earnings have been re-stated for comparison.

The Display Panel
Business recorded an operating loss of 230 billion won on revenue of 6.51
trillion won, representing a 5-percent sales dip on the same period last year. Overall
market shipments of LCD panels declined 8 percent quarter-on-quarter due to
weak seasonality, set-makers’ conservative inventory management and slower
sales in China.

For Samsung,
total panel shipments also decreased quarter-on-quarter, but were up by around
10 percent compared with the first quarter of 2010. Highlights included
increased shipments of high-end LED panels and strong sales of tablet displays,
which saw growth in the high 30-percent range.

forecasted that demand for LCD panels will begin to gather momentum in the
latter part of the second quarter, as set-makers restock inventory for the peak
sales season ahead. The business will focus on securing profitability through
emphasis on differentiated products and enhanced manufacturing line efficiency.

In its Telecommunications
businesses – including mobile communications and telecommunication networks –
posted an operating profit of 1.43 trillion won on revenue of 10.64 trillion
won. The businesses maintained an operating profit margin of 13.5 percent for
the quarter.

Samsung sold a
total of 70 million mobile handsets during the quarter, down 14 percent
year-on-year. However, strong sales of smartphones and high-end mobile devices
helped to increase Samsung’s average sales price and boost operating profit.
Smartphones made up 18 percent of Samsung’s total handset unit sales for the
quarter, up from 4 percent during the same period last year.

In the second
quarter, Samsung expects the industry to see single-digit growth in mobile handset
demand quarter-on-quarter. The company aims to continue to outperform the
market by launching of a range of devices to meet diverse market needs.