Samsung Electronics' Net Profit
Doubled in 1998 on Strong Exports
Dow Jones Newswires
SEOUL, South Korea -- Samsung Electronics Co. said Friday its 1998 net profit more than doubled because of increased semiconductor exports and the company's recent cost-cutting measures, including the elimination of about 7,000 jobs.
The company reported a profit of 313.2 billion won ($267.6 million), up from 123.5 billion won a year ago. Sales rose to 20.08 trillion won in 1998 from 18.47 trillion won in the prior year. Samsung, the world's largest maker of computer-memory chips, is South Korea's top electronics company.
Samsung Electronics Meets Estimates With 22% Gain in First Half Profit (Aug. 13, 1998)
Samsung spokesman Lim Soo Kil said the company posted a sharp rise in net profit last year after selling some its unprofitable operations, which resulted in the elimination of about 7,000 jobs in services, distribution and transportation. The company has about 50,000 employees.
Analysts said the restructuring efforts likely made a modest contribution to the company's bottom line last year, with a much larger benefit expected in 1999.
In addition to restructuring, the company was able to post strong earnings because of increased exports of semiconductors, particularly in the second half of the year. This countered sluggish domestic chip sales last year because of the Asian economic crisis, which significantly weakened consumers' purchasing power at home. Samsung, which has been trying to become more export-oriented, exports about 60% of its products.
Meanwhile, Mr. Lim said Samsung posted "sizable profit in home electronics appliances, ending years of small loss in the products." He added that exports of these products also rose last year, amid a saturated domestic market.
The recovery in the prices of dynamic random access memory, or DRAM, chips, in the second half of 1998 was a major contributor to Samsung's strong earnings growth last year, analysts said. DRAM memory chips are used to temporarily store programs and data when computers are switched on.
Samsung's bottom line had been under pressure during the previous two years because of a global oversupply of DRAM chips that had sent prices plunging by 60% a year, said D.J. Yook, an analyst at Credit Suisse First Boston in Seoul.
But after prices on 64-megabit DRAM chips bottomed out around $7 a piece last summer, prices rebounded in the second half of the year to their current levels above $10, Mr. Yook said.
Jon Chong Hwa, an analyst with KEB Salomon Smith Barney in Seoul, estimated that layoffs reduced the company's labor costs by about 15% in 1998. Further job pruning should cut labor expenses by 24% in 1999, he said.
In addition to benefiting from the recovery in chip prices, Samsung got a boost from a turnaround in the sales of its thin film transistor liquid crystal displays, or TFT-LCDs, Mr. Chong Hwa said. TFT-LCDs, which are used in notebook-computer displays, were a major money loser for the company until September, when it started turning a monthly profit on the product, Mr. Jon said.
Sales were helped by the increasing use of TFT-LCDs in flat-screen desktop monitors, which has created a shortage in the market that could last through next year, Mr. Jon said.
|
