Business

Samsung profits plunge on low demand and falling prices

  • 29 April 2011
  • From the section Business
Samsung Galaxy tab
Image caption Samsung has launched new products in an attempt to retain its market share

Samsung Electronics' has reported its lowest quarterly profit in almost two years as demand for its products continues to fall.

Net profit for the first three months of the year stood a 2.78 trillion won ($2.6bn; £1.6bn) a 30% drop compared with the same period last year.

The electronics maker has been hit hard by weak demand and falling prices of TVs and LCD panels.

Samsung is the world's largest maker of memory chips and flat screens.

The problems of falling sales and weak prices have been compounded by the strengthening South Korea's currency.

The Korean won has risen by almost 11% against the US dollar since June last year.

A stronger currency not only makes Korean products more expensive compared with its competitors in the region, it also hurts companies when they repatriate their foreign earnings back home.

Analysts have warned that if the Korean currency continues to rise, it will have a negative impact on the company.

"The firming won is a concern. Should the won fall below 1,050 won per dollar, it may cause trouble." said Kim Sung-In of Kiwoom Securities.

Growth

However, there was optimism among analysts that Samsung's trading performance would improve throughout the rest of the year.

"We expect the second quarter to be better than the first quarter. Semiconductors will lead the growth of the business," said Kim Young-Chan, fund manager at Shinhan-BNP Paribas Asset Management.

Kim Jang-Yeul, analyst at Mirae Asset Securities, added: "There are some concerns about foreign exchange rates, but Samsung's operating profits will likely improve."

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