Seoul - Samsung Electronics on Tuesday said it expects profit growth in 2017
despite challenges arising from political uncertainty, after
record chip earnings glossed over the Note 7 smartphone fiasco
in the fourth quarter.
The South Korean tech giant and Apple Inc rival is
embroiled in an influence-peddling scandal surrounding President
Park Geun-hye, with five Samsung Group executives already
grilled by prosecutors and investigations ongoing.
"The uncertain business environment such as the changing
political landscape in Korea and overseas poses a challenge to
the execution of mid- to long-term business strategies, such as
M&A and investment decisions and developing new growth engines,"
Samsung Electronics said in a statement.
Even so, it flagged higher earnings this year after a slow
first quarter, when steeper marketing costs will eat into its
bottom line as it tries to rebuild its reputation from the
failure of its latest flagship phone.
The world's top manufacturer of smartphones, memory chips
and flat-screen televisions is counting on the booming chip
market to continue driving growth and give the mobile business
breathing space to rebuild its premium lineup.
The company forecast "stable demand" in 2017 for memory
chips, which hit an all-time earnings high in the
October-December period.
Fourth-quarter operating profit jumped 50 percent to 9.22
trillion won ($7.93 billion), its highest in over three years
and matching prior guidance of 9.2 trillion won. Earnings from
the chips business soared 77 percent year-on-year to a 4.95
trillion won. Revenue were flat at 53.3 trillion won.
Analysts said the outlook for 2017 was clouded by
uncertainty over the performance of new premium smartphones,
succession planning within the controlling Lee family and the
fallout from the graft scandal.
Samsung Group scion Jay Y. Lee, 48, is restructuring the
sprawling conglomerate in moves analysts see as preparations to
succeed his father, Lee Kun-hee, who was hospitalised in 2014.
But the heir-apparent has been classified as a suspect by
prosecutors investigating whether the conglomerate paid bribes
to a Park associate to win support for a merger of affiliates in
2015.
"If the head of the group is indicted there will likely be
some leadership vacuum, which does present a risk," Alpha Asset
Management fund manager C.J. Heo said.
BUYBACK
Samsung said it planned to buy back 9.3 trillion won worth
of shares this year, in response to calls for improved
shareholder returns. In November it said it would return 50
percent of its free cash flow for 2016 and 2017 to investors.
Read also: Samsung chief staves off arrest
In its mobile business, operating profit rose 12 percent to
2.5 trillion won in the fourth quarter as models such as the
Galaxy S filled the void following the discontinuation of the
fire-prone Note 7 in October.
Samsung said on Monday that defective batteries caused the
Note 7 handsets to overheat and catch fire, and indicated that
it may delay the launch of its next premium Galaxy S smartphone
as it overhauls its product safety systems.
Executives declined to give a launch date for the S8 handset
when asked on Tuesday.
While the mobile business is struggling, the positive
outlook for memory chips used in mobile devices and OLED
televisions propelled Samsung's shares to a series of
record-highs this month.
The stock traded flat versus the wider market's 0.2
percent fall as of 0305 GMT on Tuesday.