Korean electronics giant Samsung Electronics Co., Ltd. (KRX:005930) posted their earning reports for the fourth quarter ending December 31, 2013. According to the report the company has reported revenues of 59.28 trillion Won which amounts to $54.95 billion, while the net profit stood at 8.31 trillion Won ($7.7 billion) amounting to a decline of 18% compared to the previous quarter with 8.84 trillion Won, when converted to USD the same figures reach $ 8.18 billion operating profits for the same period in 2012.
Interestingly, this was the first quarterly net profit decline for Samsung in the last two years although the company was able to record more revenue with 228.69 trillion Won compared to the fiscal year 2012 with just 201.10 trillion Won which accounted for profits of 14%. Focusing on the record revenue generation and net profit on a quarterly basis, Samsung dived significantly in Q4, 2013 with a decline of 18% over the previous qaurter – Q3, 2013 to record revenues of $55.6 billion and net profit 0f $9.40 billion. Korea-based electronics gaint accounted for $51.5 billion in Q2, 2013 with a net profit of $6.96 billion. The comparative study below indicates how the revenue and the net profit have changed over Q1, 2013 to Q4, 2013.
Even though the company’s performance was appreciable if we compare the revenue generated over the previous year, but Samsung has experienced a substantial loss over the last quarter. The revenue generated through their mobile division was again responsible for half of their revenue which is 33.89 trillion Won, but their performance declined over the last quarters by 9% and 18% each.
“This year, looking at the industry environment, we do expect that the industry will become a bit more difficult with growth slowing down and competition becoming more fierce.” – Hyunjoon Kim, an executive in Samsung’s mobile business.
Reasons Amounting To The Loss!
The fiscal year 2013 saw the company surpass previous year records but somehow in the last quarter the revenue for Samsung did not live up to their own expectations. Samsung also lost its first spot in mobile ad impressions with 29.58% in Q3, 2013 with an accounted fall of 1.52% over the last quarter. They lost in the mobile segment as their profits declined and the advertisements could not strengthen their products in the market when compared to the previous years. Samsung generally invests heavily on marketing in the last quarter of its fiscal year, but the same could not help them to profit in Q4, 2013.
One of the main other factors behind the company’s loss is decrement in the value of the Korean Won compared to the US Dollar, which has declined to 1080 KRW per 1 USD resulting in the loss of approximately 700 billion Won. This amounts to improper impact on the revenue and net profit generated by Samsung Electronics. The company rewarded their employees with special bonuses worth 800 billion Won to commemorate 20 years since Chairman Lee Kun-hee announced a management strategy, which brought the profit figures down, as per Reuters.
Closely analyzing a few aspects of the deal between Apple Inc. (NASDAQ:AAPL) and China Mobile Ltd. (NYSE:CHL), Samsung needs to be more worried about the China market where Apple has collaborated with the world’s largest mobile telecom carrier to sell an estimated 20 million iPhones in the present year. This is the biggest challenge for Samsung in the Chinese market where it has been the largest Smartphone vendor till date.