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Samsung splits stock after record results in 2017

Chip unit continues to be profit machine, but TVs and phones falter
Feb 01,2018
Samsung Electronics approved a 50-to-1 stock split, shrinking the face value of its shares to make them more affordable to investors, Samsung Electronics said Wednesday after it announced record earnings for the previous quarter.

The split would reduce a Samsung share’s face or nominal value from 5,000 won ($4.70) to 100 won, while the number of shares issued will increase from more than 128 million shares of common stock to roughly 6.42 billion.

The company said the move was in response to requests by shareholders.

“The company received numerous requests for a stock split based on the view that a high share price was a hindrance to potential investors,” Samsung said in a statement.

After hitting record profits last year, the company’s share price has been on a continuous rise, making it difficult for retail investors to buy even one share.

“The split is expected to make investing in Samsung more accessible and add liquidity to the company’s stock, positively impacting the share price in the future,” said Doh Hyun-woo, an analyst at NH Investment & Securities.

The stock split is subject to approval at a shareholders’ meeting scheduled for March 23.

The news of the split in the morning led to heavy trading of Samsung shares on Seoul’s main bourse and lifted Samsung shares as high as 8.7 percent at one point. By closing, the trading volume for the day of Samsung shares surpassed 3.32 trillion won, a record for any single listed company in Korea. Samsung shares closed at 2,495,000 won on Wednesday, up 0.2 percent from the previous trading day.

The announcement came on the same day Samsung announced record revenues and operating profit in the fourth quarter largely thanks to its chip division.

Revenue for the previous quarter jumped 24 percent year on year to 65.98 trillion won while operating profit grew 64.3 percent to 15.15 trillion won. The company’s net profit stood at 12.26 trillion won, 72.9 percent higher on year. For all of 2017, sales increased 19 percent year on year to 239.58 trillion won and operating profit jumped 83.4 percent to 53.65 trillion won. Net profit grew 85.6 percent to 42.19 trillion won.

Chips played a big part as expected on the back of strong demand for DRAM and NAND chips in the October-December quarter. Growing need for high-performance servers and mobile storage have been pushing up memory demand. Increased shipments of OLED (organic light emitting diode) panels for premium smartphones also contributed to robust earnings, according to Samsung in a statement.

From its chip division, Samsung reaped in 21.11 trillion won in revenue (up 42 percent) and 10.9 trillion won in operating profit (up 120 percent). Some two-thirds of the company’s operating profit was dependent on the chip unit. Another 1.41 trillion won in operating profit was from the display panel business, which includes OLED panel sales, 9.3 percent of the total. Operating profit from the company’s IT and mobile communications division declined compared to the previous quarter despite increased sales of its premium mobile devices like the Galaxy Note8 phablets. The company said sales of its mid-to-low priced phones declined and heavy marketing expenses ate up profits. Operating profit from the division fell 26.4 percent from 3.29 trillion won in the third quarter to 2.42 trillion won.

The company plans to strengthen camera features and its artificial intelligence-powered voice assistant Bixby to differentiate its premium phone in the future. Foldable OLEDs will also be a key differentiator, according to Samsung. It is expecting the release of the Galaxy S9 smartphone later in the month to greatly boost earnings for the division in the first quarter.

While Samsung’s operating profit was expected to reach as high as 16 trillion won by analysts, it was limited to 15.15 trillion won largely due to a strong Korean won over other major currencies including the U.S. dollar, the company said. Samsung said the won’s appreciation cost it 66 billion won in operating profit in the quarter.

Samsung’s TV and smartphone sales have not been in very good shape recently and there is no leader of the empire to help turn the situation around, with Vice Chairman Lee Jae-yong in jail awaiting an appeals trial on corruption convictions.

For the time being, however, the chip market is expected to keep Samsung chugging ahead strongly, and the market is far from losing steam. According to market tracker Gartner, sales in the global semiconductor market are expected to increase by 7.5 percent this year from last year.

BY KIM JEE-HEE [kim.jeehee@joongang.co.kr]