Samsung Post First-Quarter Profit on Strong Initial Sales of Galaxy S7

Tech giant Samsung Electronics Co Ltd said on Thursday that its first-quarter operating profit rose 12 percent from a year earlier, propelled by strong initial sales for its flagship Galaxy S7 smartphones.

The South Korean firm also said its "solid performance" will continue in April-to-June, striking a more optimistic tone about prospects for its handsets and chips businesses despite broadly weaker demand for consumer electronics.

Samsung's mobile division was the top earner for the first time in nearly two years, thanks to better-than-expected sales of Galaxy S7 devices, in a sign the world's top smartphone maker has righted itself after two years of shrinking profits.

Boasting an improved camera, waterproofing and microSD storage support, Galaxy S7 models are on track to set a new first-year shipments record, boosting hopes the mobile business will post its first annual profit gain in three years.

"In the second quarter, the company expects its solid performance to continue, led by steady earnings in the mobile and semiconductor businesses," Samsung said in a statement.

Samsung, in a regulatory filing, said January-March operating profit was KRW 6.7 trillion ($5.84 billion), compared with its earlier estimate of KRW 6.6 trillion. Revenue rose 5.7 percent to KRW 49.8 trillion, compared with its guidance for KRW 49 trillion.

Profit for the smartphone division increased 42 percent from a year earlier to KRW 3.9 trillion, the highest since the second quarter of 2014. Samsung said it expects further sales growth for its Galaxy S7 devices in the second quarter as well as from its mid-to-low tier products.

Market researcher TrendForce says combined shipments for flat- and curved-screen S7 models will reach 52 million by the year-end, surpassing the previous record of 47 million sets by the Galaxy S4.

Operating profit for the chip division fell 6 percent to KRW 2.6 trillion, undercut by price declines for memory chips stemming from slower demand for products such as personal computers.

The firm said in a separate filing it will buy back KRW 2 trillion of its own shares in the third instalment of its KRW 11.3 trillion buyback plan.

© Thomson Reuters 2016