Samsung reports record high quarterly profit

The world’s biggest technology company by sales reported second-quarter revenue of 57.5 trillion won ($51.7 billion), a year-on-year increase of 20.1%. This was in line with estimations made by the company earlier this month, and fell short of analysts’ forecasts. Net profit was 7.8 trillion won ($7 billion) in the April to June quarter, a 50% jump from a year ago.

It said the launch of new models such as the Galaxy S4 helped boost sales of smartphones during the period. While the device beat company records as selling 10 million units in less than a month after its launch, the associated marketing costs drove a decline in operating profit at Samsung’s IT and mobile communications arm of 3% from the first quarter to 6.3 trillion won.

Furthermore, Samsung Electronics said smartphone sales growth would continue to slow in the third quarter, as it reported that earnings at its flagship division were pulled down by high marketing costs in the three months through June.

“Entering into a typically strong season for the IT industry, we expect earnings to continue to increase,” said Robert Yi, head of investor relations. “However, we cannot overlook delayed economic recovery in Europe and risks from increased competition for smartphone and other set products.”

However, in recent weeks some analysts have voiced concern over whether the company can continue to sustain high growth. They have pointed out increased competition, market saturation in key segments and the emergence of low-cost smartphone devices from China. Samsung may have to lower the prices of its products which could hurt its earnings. Analysts say Samsung needs to introduce new and innovative products if it is to maintain its market share and keep charging a premium price.

“The big question right now is whether they have got that card up their sleeve,” Bryan Ma of research firm IDC told the BBC. “What is the killer product that they have in the pipeline that is going to help sustain this growth,” he added.

Samsung, the worlds biggest TV maker, also reported a big jump in its earnings in its display panel division. However, it warned that “uncertainties over Europes economy and Chinese subsidies for electronics goods could possibly hinder growth” in the coming months.

Samsung shares lost 0.91% yesterday while 1 year return is up 11.73%.