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By Lee Min-hyung
Samsung Electro-Mechanics is likely to post a deficit in the fourth quarter, hit hard by the aftermath of the recent Galaxy Note 7 debacle and one-time restructuring costs, analysts said Monday.
The electric component manufacturer of Samsung Group posted 70.8 billion won ($60 million) in operating profit for the July-to-September period, down 75 percent from a year ago. The production and sales termination of the premium handset has been cited as the main reason for the firm's weakening profitability.
"Samsung Electro-Mechanics is expected to report an operating deficit of 50.7 billion won in the last quarter of the year, due to the unexpected fallout of the Note 7 and one-time restructuring costs," said Kim Yang-jae, an analyst at KTB Investment & Securities.
"Market competition is intensifying, so we revised down the firm's sales and operating profit estimation by 1.7 percent and 24.1 percent next year, respectively," he added.
Samsung Electro-Mechanics is seeking to tackle the gloomy outlook with its panel level packaging (PLP) and dual camera module businesses.
In particular, its dual camera module is known to generate higher margins than traditional module businesses. As part of its bid to cut heavy reliance on some Samsung flagship products, the company has been supplying dual camera modules to some Chinese smartphone vendors since the third quarter of this year.
"The company will be on track to recovery by the second quarter of next year, backed by its dual camera and PLP businesses," said the analyst.
Shinhan Financial Investment analyst Ha Joon-doo previously said the company is likely to continue its downward momentum until the first quarter of 2017, as Samsung's upcoming flagship Galaxy S8 smartphone is expected to arrive in April at the earliest.
"The Galaxy S7 was launched in mid-March this year, but its successor will make its debut in between April and May," he said. "This is because Samsung is not in a hurry to unveil its new device so as not to repeat history. So we remain conservative over parts suppliers' overall profits during the January to March period next year."
