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Samsung operating profit up 10% in Q1 on weak won

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  © Reuters

SEOUL -- South Korea's electronics giant Samsung Electronics posted a 10% rise in group operating profit to 6.6 trillion won ($5.69 billion) in the January to March quarter from a year earlier, the company said in its preliminary earnings report on Thursday.

     This marks three consecutive quarters of operating profit increase compared with a year earlier. The company has benefited largely from a weaker won and cutting production costs at a time when other major chipmakers are suffering deterioration in their earnings due to falling chip prices.

     Samsung's group operating profit beat market expectations, with its stock being traded at 1.3 million won on Thursday morning, up more than 1% from yesterday's close.

     The company reported a 4% increase on the year in group sales to 49 trillion won during the same period, while its operating profit margin came to 13.5%. It has not yet disclosed revenue breakdown by segment, but is scheduled to release it along with revised earnings figures at the end of April.

     According to the Bank of Korea, the country's central bank, the won traded at one dollar to 1,200 won on average in the first three months of 2016. The South Korean currency fell 8% against the greenback from a year earlier.

     Market participants believe that the won's drop has helped push up Samsung's operating profit by at least 100 billion won. "As Samsung ended its patent dispute with Nokia, a return of reserves may have generated a temporary profit [increase]," said an analyst at South Korea's brokerage house SK Securities.

     Semiconductor prices have continued to decline due to a loosening supply-demand balance for memory chips used in smartphones, personal computers and data centers. America's Micron Technology, for instance, logged a net loss of $97 million in the three months from December 2015.

     Samsung, meanwhile, has long enjoyed high productivity and benefited from low costs. Moreover, it has been seeking to cut costs further by reducing the ratio of its defective products.

     The company said its information technology devices unit is seeing strong sales of its new Galaxy S7 smartphones, released in March. In contrast, its display panel unit appears to have been struggling due to falling prices of liquid crystal display panels.

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