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Samsung predicts biggest profits in three years, just three months after Note 7 recall

Samsung predicts biggest profits in three years, just three months after Note 7 recall

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Note 7
James Bareham / The Verge

It’s been less than four months since Samsung was forced to issue an embarrassing recall of one of its flagship phones, but the company has announced that it is expecting a big increase in year-on-year operating profit for the fourth quarter of 2016. In Q4 earnings guidance, published today, Samsung said it was expecting a consolidated operating profit of 9.2 trillion won (about $7.2 billion) for the period — almost double the 6.14 trillion won (about $5.2 billion) in profit it received in the same quarter last year.

If accurate, the guidance indicates that Samsung’s costly recall of its Note 7 smartphone was only a temporary blip in the company’s financial situation, rather than a lingering hit to consumer confidence. That’s not to say that the Note 7 didn’t have an effect, but that it appears its major financial repercussions on the wider company may have been confined to the third quarter of 2016.

Samsung says it beat analyst expectations in Q4

Samsung had originally predicted a year-on-year profit growth for Q3 this year, but had to revise those estimates after it issued a full recall of the Note 7, slashing profit expectations by a third. The actual figures bore those revised expectations out, with Samsung earning just 5.2 trillion won (about $4.4 billion) for Q3 2016, having previously expected some 7.8 trillion won (about $6.6 billion).

Today’s guidance, however, suggests that the company is in line for its strongest quarterly profit in three years, beating market expectations. Analysts noted that, with the Note 7 off the market, the mobile division still did reasonably well off the back of older Samsung phones like the Galaxy S7 — an indicator that the upcoming S8 could do well at market.

But as other analysts noted, unlike 2013’s previous profit high, Samsung’s apparent Q4 success would not be driven by the mobile division, but by sales of memory and screens, as well as the devalued Korean won against the dollar. Samsung’s Note 7 recall may not have caused as much damage financially as expected, but the company still has something to prove with its next major phone release.