SEOUL (Reuters) - Soaraway sales of the Galaxy smartphone drove record quarterly profit of $5.9 billion (3.79 billion pounds) at Samsung Electronics (005930.KS), though the South Korean tech giant is fretting over how Europe’s debt crisis is denting demand in its biggest market for televisions and home appliances.
In its April-June earnings guidance on Friday, Samsung, valued at $170 billion and the world’s leading maker of TVs, smartphones and DRAM memory chips, estimated operating profit jumped 79 percent to 6.7 trillion won from a year ago.
The average forecast in a Reuters survey of 23 analysts was for 6.67 trillion won. That forecast had been revised down slightly due to delays in shipping the latest Galaxy S III smartphone. The estimated second-quarter profit is 14.5 percent higher than the previous record quarterly profit of 5.85 trillion won in the first quarter.
Samsung estimated its second-quarter revenue at 47 trillion won ($41.4 billion), just below a 50 trillion won forecast.
Samsung is due to release its full second-quarter results - the first since former components chief Kwon Oh-hyun took over as CEO - towards the end of this month.
Samsung’s flagship Galaxy smartphones are likely to have stretched their lead over rivals Apple (AAPL.O) and Nokia NOK1V.HE - despite a parts shortage that meant it struggled to keep up with stronger-than-expected demand for its latest S III model.
While strong handset sales grab the headlines, more than doubling profit growth, other businesses such as chips and consumer electronics are battling weak prices and demand and a limping euro, which eats away at repatriated profits.
In a sign that the euro zone crisis is exercising minds in boardrooms around the globe, Samsung executives said this week the group was operating to a contingency plan.
“Europe is our biggest consumer electronics market and we may have to initiate cost cuts and product price increases should the euro fall further from the current level,” said one executive who didn’t want to be named as the plan is internal.
“Our smartphones are flying off the shelves, with some outlets reporting 40-60 percent sales growth, but that’s distorting the overall trading outlook which is more challenging due to the weak global economy and a weak euro.”
The euro has fallen around 5 percent against the Korean won since April, and about 8 percent in the past year, to 2-year lows.
“A sharp drop in the euro could hit Samsung’s TV and home appliance sales as the region has traditionally generated some 30 percent of (consumer electronics) sales,” Brian Park, an analyst at Tongyang Securities, said ahead of the guidance. “If you take European sales alone, TVs may have swung to a loss ... but the division as a whole is profitable and is a very small part of Samsung’s entire profit structure.”
($1 = 1135.0750 Korean won)
Editing by Ian Geoghegan