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Samsung forecasts weaker-than-expected profits in second quarter

The smartphone maker reduces profit estimates due to decline in sales of flagship product.

Samsung Electronics, in its earnings guidance for the second-quarter of 2013, has said it expects to report an operating profit of 9.5tn South Korean Won (£5.5bn) for the period.

Earlier, Bloomberg analysts estimated the company to post an operating profit of 10tn South Korean Won.

The South Korean smartphone maker, which will release its April-June quarter results by the end of this month, reduced its profit estimate primarily due to fall in sales of its flagship product Galaxy S4 that was launched in April this year.

Byun Han Joon, an analyst at KB Investment & Securities, was quoted by Bloomberg as saying: “It sharply missed the market expectation, and that worries me. The market was initially concerned about the third- and fourth-quarter results, but today’s news raises questions if the earnings are already in bad shape.”

The company is estimated to generate sales of between 56tn and 58tn South Korean Won in the second-quarter of this year, compared to 47.6tn South Korean Won for the same period last year.

Daniel Kim, an analyst at Macquarie, told the Financial Times: “The company has tried to lower expectations, but still people are used to positive earnings surprises from Samsung. Including myself . . . the investment community believed the company’s management had a conservative bias.”

The company sold about 100 million Galaxy S4 smartphones in 27 days following its launch.