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Samsung’s Q3 profits are way down after Note 7 recall

James Bareham / The Verge

Samsung profits slipped significantly as a result of the Note 7 debacle, the company confirmed today in financial results for the third quarter of 2016. The results were in line with adjusted earnings guidance issued earlier this month, showing that the company made 5.2 trillion won (around $4.7 billion) in operating profit for Q3 — a year-on-year decrease of 2.19 trillion won (around $1.93 billion) — on revenues of 47.82 trillion won (around $42.1 billion).

The year-on-year drop of more than a third marks the first decline in profits in a year for Samsung, which started to turn around a stagnant financial situation in the third quarter of 2015. The Note 7 situation makes today’s results something of an anomaly in the company’s record — it points specifically to the phone’s very public problems as the cause of the decrease — but it’s yet to be seen whether the fallout from the recall will affect Samsung’s future profits, too.

Prior to its decision to fully recall the Galaxy Note 7, Samsung had anticipated slight increases in operating profit for the quarter. Guidance released on October 7th indicated profits of 7.8 trillion won, up on last year’s figure by a few billion, and revenues of around 49 trillion won. But the company revised these figures a few days later, slashing expected profits when it became apparent that replacement Note 7 devices were also catching fire, forcing a full recall.

The hole left in the balance sheet by the Note 7 was partially filled by a solid quarter from Samsung’s consumer electronics division, but its component profits dipped slightly year-on-year due to changes in DRAM pricing. Samsung also points to the Korean won’s strength against other currencies as a cause for a slight decrease in operating profit.

The real culprit here is the Note 7, however, a fact that Samsung admits. For 2017, the company says it plans to get back to increasing profits by “normalization” of its mobile business, and presumably by hoping everyone forgets about flaming phones.