January 14, 2005 in Social Responsibility News

SAMSUNG Electronics Announces Annual Profit of over US$10 Billion

SEOUL, Korea – January 14, 2005 : Samsung Electronics Co., Ltd. announced its financial results for 2004. The company recorded sales of KRW57.63 trillion, a 32% increase, operating income of KRW12.02 trillion, a 67% rise, and net income of KRW10.79 trillion, a 81% gain. In particular, it maintained high profit margins at 21%. Samsung achieved profits of over US$10 billion for the first time in its 35-year history, a remarkable feat for a manufacturing company. Last year, only 9 companies recorded profits of over $10 billion, the majority being from either the financial services or oil industries.
In the fourth quarter, sales, operating income and net income came to KRW13.89 trillion, KRW1.53 trillion and KRW1.83 trillion, respectively. Despite a drop in prices, the Semiconductor Business recorded gains in revenue from a steady increase in demand. While LCD panel prices experienced sharp declines, the drop in price increased demand and LCD Business sales grew 3% from the previous quarter. In the Telecommunication Network Business, sales and profits decreased due to a strategic channel inventory adjustment in mobile phones, increase marketing spend to strengthen relations with carriers and rise in R&D expenditure for 3G. However, the company expects unit sales to further increase in the first quarter of 2005 with the continued launch of multi-functional products.
In addition, the operating income decline can be attributed to the distribution of a KRW700 billion bonus. Operating margins decreased to 11%, however when excluding the one-time special bonus expense, margins of all businesses increase by 5% and overall margins excluding the bonus comes to 16%.
Dr. Woosik Chu, Senior Vice President and General Manager of the IR Team, states, “From the rising Won and high oil prices to difficulties in procuring raw material and China's economic retrenchment policy, many elements made the business environment particularly difficult in 2004. Samsung was able to achieve record sales and profits of US$10 billion with its cost competitiveness, product differentiation and ability to respond quickly to changes in the marketplace.” He adds, “Market conditions are not expected to improve in 2005, especially with the continuing stagnant domestic market and strengthening of the won. However, our future prospects in 2005 look bright. First quarter semiconductor demand is expected to increase, sales and ASPs for mobile phones will increase with the launch of new products and a recovery in LCD sales is expected in the second half.”
The Semiconductor Business had another great year as annual sales increased by 43% to reach KRW18.22 trillion. Operating income was at KRW7.48 trillion, up 107% from the previous year. With operating margins of 41.1%, the business delivered its strongest year ever. This performance is attributed to the stabilization of DRAM prices, a rising demand of NAND flash memory due to a strategic drop in prices and the increase in demand of high value-added products, such as DDR2 and mobile DRAM. In addition, the company's cost competitiveness was further improved with the mass implementation of 90-nanometer processing technology. The company is confident that its differentiated competitiveness will continue in 2005.
The LCD Business reported an increase of 67% and 111% for annual sales and operating profits of KRW8.69 trillion and KRW1.88 trillion, respectively. The strong performance is due to the robust growth of demand for large-sized panels for LCD monitors. Although LCD panel demand fell in the third-quarter after an incredible climb in the first half of 2004, the company expects the continued drop in LCD panel prices to drive demand that will lead to a balancing of supply and demand in the second-half of 2005. The company will begin mass-production at its generation 7 line in March to meet the expansion of the large-sized LCD TV market, further establishing its leadership in this industry.
The Telecommunication Network Business sold 86.53 million phones throughout 2004, a 55% increase from the 55.66 million units it sold in 2003. Sales grew 33% to KRW18.94 trillion and profits were at KRW2.81 trillion. The aggressive push of its successful Olympic marketing program and favorable sales in the US and BRICs (Brazil, Russia, India and China) region all contributed to its best recorded performance to date and a marked improvement in market share from 10.8% in 2003 to 13.7% in 2004.
The Digital Media Business and Digital Appliance Business experienced losses of KRW25.8 billion and KRW53.7 billion due to the stagnant domestic market. However, the company expects improved performances in 2005 with momentum gains in the digital TV segment and the establishment of its Kwangju manufacturing system.
Revenue by Business ( in trillion won )








Business

2003

2004

Growth


Semiconductor

12.71

18.22

43%





Memory

9.19

14.11

54%





System LSI

1.84

2.28

24%





LCD

5.19

8.69

67%





Telecommunication Network

14.20

18.94

33%





Mobile Phone

12.84

17.75

38%





Digital Media

7.72

8.03

4%





Digital Appliance

3.41

3.26

(4%)











Total Revenue

43.58

57.63

32%














Business

Q304

Q404

Q403


Semiconductor

4.74

4.78

3.53





Memory

3.64

3.74

3.02





System LSI

0.63

0.49

0.51





LCD

1.90

1.95

1.96





Telecommunication Network

4.82

4.32

3.94





Mobile Phone

4.57

3.97

3.60





Digital Media

1.95

1.93

2.13





Digital Appliance

0.81

0.75

0.86











Total Revenue

14.34

13.89

12.89







Operating Profit ( Margin ) by Business ( in trillion won )





Business

2003

2004

Growth


Semiconductor

3.61

28.4%

7.48

41.1%

107%





LCD

0.89

17.1%

1.88

21.6%

111%





Telecommunication Network

2.70

19.0%

2.81

14.8%

4%





Digital Media

0.15

1.9%

(0.03)

(0.4%)

(118%)





Digital Appliance

(0.11)

(3.2%)

(0.05)

(1.5%)

52%











Total Operating Profit

7.19

16.5%

12.02

20.9%

67%












Business

Q304

Q404

Q403


Semiconductor

1.95

41.1%

1.60

33.4%

152

38.9%





LCD

0.23

12.1%

0.007

0.4%

0.50

25.8%





Telecommunication Network

0.61

12.7%

0.15

3.4%

0.73

18.5%





Digital Media

(0.333)

(1.7%)

(0.13)

(6.7%)

0.003

0.1%





Digital Appliance

(0.009)

(1.1%)

(0.09)

(12.0%)

(0.08)

(9.3%)











Total Operating Profit

2.74

19.1%

1.53

11%

2.63

20.4%







About Samsung Electronics

Samsung Electronics Co. Ltd. is a global leader in semiconductor, telecommunication, digital media and digital convergence technologies with 2003 parent company sales of US$36.4 billion and net income of US$5.0 billion. Employing approximately 88,000 people in 89 offices in 46 countries, the company consists of five main business units: Digital Appliance Business, Digital Media Business, LCD Business, Semiconductor Business and Telecommunication Network Business. Recognized as one of the fastest growing global brands, Samsung Electronics is the world's largest producer of color monitors, color TVs, memory chips and TFT-LCDs. For more information, visit www.samsung.com .


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