SEOUL (Reuters) - Samsung Electronics Co. Ltd. (005930.KS) gave a bullish fourth-quarter outlook after delivering a forecast-beating 16 percent rise in third-quarter net profit, boosted by gains from its overseas plants and its flat screen joint venture with Japan's Sony (6758.T).
But its operating profit fell 13 percent as margins in its mainstay businesses -- chips, flat screens and mobile phones -- slipped from a year ago, despite improvement in performance from the previous quarter.
Samsung, the world's top memory chip maker and third largest mobile phone producer, lifted its 2006 capital spending plan by 11 percent due to strong chip demand expected in 2007 and forecast another record handset sales in the fourth quarter.
Shares in Samsung, the most valuable technology company outside the United States, rose as much as 2.2 percent after it also forecast higher margins for liquid crystal displays (LCD) in the current quarter.
"Fourth-quarter prospects are good, as external factors look favorable. The currency situation is stable, oil prices are down, memory sales will be strong and handsets should be a hit," said Michael Min, an analyst at Korea Investment & Securities.
Samsung's memory chip division again fueled the firm's profits in the third quarter, with dynamic random access memory (DRAM) putting up strong numbers thanks to capacity limitations and solid demand for personal computers.
Samsung earned 2.19 trillion won ($2.29 billion) in net profit for the quarter ended September 30, compared with 1.88 trillion a year ago. The result breezed past the 1.89 trillion won forecast by 11 analysts surveyed by Reuters.
On the operating level, profit fell to 1.85 trillion won from 2.13 trillion a year earlier.
For more earnings details, see the company's Web site at: http://www.samsung.com/AboutSAMSUNG/ELECTRONICSGLOBAL/InvestorRe
lations/IREventsPresentations/downloads/20061016_3q_eng.pdf "All of our business segments will show improvement in the fourth quarter," Samsung senior vice president of investor relations Chu Woo-sik told reporters.
"We expect a significant improvement in earnings."
Contributions from Samsung's units, including the LCD joint venture with Sony Corp., S-LCD, also helped its bottom line outperform expectations.
Shares in Samsung Electronics, the country's biggest listed company worth $101 billion, were up 0.9 percent at 650,000 won at 0513 GMT, above levels before the earnings release, compared with the wider market's (^KS11 - news) 0.45 percent rise.
HANDSET RECOVERY
After a bruising first half, during which its handset sector was hurt by the runaway success of Motorola's (NYSE:MOT - news) clamshell RAZR phone, Samsung benefited from the success of a new series of ultra-sleek phones launched over the summer.
Samsung, which competes with Nokia (NOK1V.HE) and Motorola, sold 30.7 million mobile phones in the third quarter, a quarterly record and up from 26.3 million in the second quarter. Profit margin in the handset division came in at 11 percent against 9.5 percent in the second quarter and 12 percent a year earlier.
Samsung's display unit improved substantially from the second quarter thanks to the growing success of its alliance with Sony, which has helped the South Korean firm boost its brand power and weather steep panel price drops in the industry.
Profit margin in the display unit rose to 5 percent from the second quarter's 2.6 percent.
Samsung boasted a profit margin of 26 percent in its chip division, up from the second quarter's 22.2 percent.
"The DRAM business should continue driving earnings in the fourth quarter, as shipment growth and newer technology will offset an expected limited fall in prices," said Park Hyun, an analyst at Prudential Securities.
The company said it expected the market for NAND flash memory chips, used in digital cameras and music players, to stabilize thanks to a slower fall in prices, with shipments up by mid-40s percent in the fourth quarter.
Samsung said it had revised up its capital investment plan for 2006 by 10.9 percent to 10.24 trillion won from 9.23 trillion won, with most of the extra funds going to expand the chip business amid expectations of strong demand in 2007.
The company has spent 7.6 trillion won by the end of the third quarter.
Its third-quarter revenue came in at 15.22 trillion won, up from 14.54 trillion a year earlier.
Samsung expects no sharp rise in the won's value for the time being and said the company was prepared for an even higher won than the current level. Exports account for 82 percent of its sales in the third quarter.
The won's value on average rose 7.8 percent in the third quarter from a year earlier.
Shares in Samsung rose 10.1 percent in the third quarter, compared with a 5.9 percent gain in the wider market.
