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- 1. Aquilla Samsung Electronics Results Q1 2015 Summary and Commentary (Based on Samsung’s un-audited earnings release 29th April 2015, in KRW) Note: Samsung Q1 = Calendar Q1 The following slides are in USD, converted from the KRW results using quarter-end exchange rates. This provides the most relevant comparisons with global technology companies. (Samsung has not yet released its Dollarised results, which when available may vary depending on the mix of exchange rates and currency hedges employed by the company) These data are derived from results published by Apple, Inc., from the published results of other companies, and from assorted independent analysts, as identified in the slides. The opinions are those of the author, and should in no way be interpreted as investment advice.
- 2. Aquilla Samsung Electronics •Samsung Electronics is the largest company within the Samsung Group, a “Chaebol” conglomerate based in the town of Samsung, in South Korea. •Samsung Electronics comprises three main divisions, one of which is usually reported in two parts. These are: •Device Solutions, which includes: •The Semi-conductor Division, abbreviated to “Semi” •and the Display Panel Division, abbreviated to “DP” •Consumer Electronics Division, abbreviated to “CE” •IT & Mobile Communications Division, abbreviated to “IM”. This includes the smartphone and tablet business. •In 2013, Samsung Electronics accounted for 64% of the revenue and 92% of the Net Income of Samsung Group •This report focuses entirely on Samsung Electronics
- 3. Aquilla Source: Samsung Electronics Results Quarterly Revenue and YoY Growth Continuing Decline •The sharp declines of the past two quarters eased slightly, with a fall in $ revenues of only 15% •Set against Apple’s equivalent quarter Samsung Electronics reported sales 27% lower, and its Mobile division 60% less than Apple’s sales •However the slowing declines may suggest that the worst is over, and with the Galaxy S6 now shipping, and Semi Conductor surging ahead, the picture may look rather better in the upcoming quarters Comparative Revenues CQ1 2015 Apple Microsoft Google -30% -15% 0% 15% 30% 45% 60% 75% 90% 0 10 20 30 40 50 60 70 80 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Growth (%) Revenue (B$) Samsung Electronics Revenue Revenue B$ Revenue YoY Growth
- 4. Aquilla Source: Samsung Electronics Results Divisional Profitability Mobile Supplanted by Semi •For the third quarter in succession the Semi-conductor Division has been the major profit contributor, with 46% of the profit at a healthy 29% margin •IM operating margins gained slightly to 11% (from 7% in Q4 2014), but down from 16% a year ago. This represented 43% of the whole •DP and CE remain less profitable, though both were marginally positive in Q1 •These figures suggest the conflict between Samsung as OEM supplier through its Semi-conductor division, versus device vendor through IM continues to swing towards the OEM business •The 14nm fab plant will prove increasingly influential - it has already regained Apple as a customer -2.0 0.0 2.0 4.0 6.0 8.0 10.0 12.0 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 B$ Divisional Operating Profit Semi%Opera*ng%Profit%B$% DP%Opera*ng%Profit%B$% CE%Opera*ng%Profit%B$% IM%Opera*ng%Profit%B$%
- 5. Aquilla Source: Samsung Electronics Results Inventory Inventories Jump Upwards •Samsung had warned of excess inventory back in Q2 2014, and while Q4 saw the picture improve, Q1 2015 reported a sharp increase as the company exited the quarter with 37 days of stock, up from 30 in December •This contrasts dramatically with Apple’s, who carried less than 4 days of stock at the end of the same quarter •The company reported stabilised inventory in its IM business, leading to improved margins, which suggests that the inventory increases derive from other divisions 0 5 10 15 20 25 30 35 40 45 50 0.0 5.0 10.0 15.0 20.0 25.0 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Days of Stock Inventory (M$) Samsung Electronics Inventory Inventory B$ Days of Stock
- 6. Aquilla Smartphone Units - Challenged Tracking the trailing 12 months (current and 3 previous Quarters) eliminates seasonality, and gives a better indication of the longer term trends Source: Gartner, IDC and others 0 40,000 80,000 120,000 160,000 200,000 240,000 280,000 320,000 360,000 0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000 Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Q1 '15 Q2 '15 Q3 '15 Q4 '15 Trailing 12m Units (000s) Q Units (000s) Smartphone Units Smartphones kU Smartphones Trailing 12m kU
- 7. Aquilla Source: Samsung Electronics Results Regional Splits Red Ink Everywhere •Sharp declines were reported in every region Home Market Drops •South Korea declined 19%, with Apple the main beneficiary America Turns •The Americas saw a second quarter of decline, but it remains Samsung’s largest region Europe Fades Further •29% YoY growth in 2012 has given way to big declines in 2014, with another sharp drop in Q4 Asia/Africa Reverses •Even the promising Asia/ Africa region posted a sharp decline China Worrying •Massive 44% growth in 2013 has reversed catastrophically in this critical region, with the sharpest decline of all Most recent Share YoY 8% -19% 38% -15% 22% -31% 17% -25% 14% -34%China B$ Asia/Africa B$ Europe B$ America B$ South Korea B$ 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q1 '10 Q2 '10 Q3 '10 Q4 '10 Q1 '11 Q2 '11 Q3 '11 Q4 '11 Q1 '12 Q2 '12 Q3 '12 Q4 '12 Q1 '13 Q2 '13 Q3 '13 Q4 '13 Q1 '14 Q2 '14 Q3 '14 Q4 '14 Regional Splits Note: Q1 Regional Breakdowns not yet available from Samsung - commentary relates to Q4
- 8. Aquilla Source: Samsung Electronics Results Competitive Landscape - Tablets Apple still leads in declining and fragmented market •Apple still leads, but lost 6% of share YoY •Samsung remains a clear second, but other vendors lag substantially •Others represents 42% of the market, but the real competition is from Phablets, from which both Apple and Samsung benefit through higher ASPs and margins Q1’15 M Q1’15% Q1’14 M Q1’14% Change Apple 12.6 26.8% 16.4 32.7% -22.9% Samsung 9.0 19.1% 10.8 21.6% -16.7% Lenovo 2.5 5.3% 2.0 4.1% 23.0% ASUS 1.8 3.8% 2.6 5.2% -30.7% LG 1.4 3.1% 0.1 0.2% 1423.7% Others 19.7 41.9% 18.1 36.3% 8.6% Total 47.1 100.0% 50.0 100.0% -5.9% Q1 2015 Tablet Units (IDC) Source: IDCSource: IDC
- 9. Aquilla Samsung’s Q4 Results Analysis - Full Slide Deck
- 10. Aquilla Samsung’s Q1 2015 Audited Results Analysis These popular slides cover an in-depth analysis of Samsung’s Q1 results The slides shown are an introduction To receive the full set, including charts, commentary, interpretation and outlook plus all slides in full colour contact Aquilla Europe nick@aquilla-europe.com
- 11. Aquilla Nick Graves, CEO • nick@aquilla-europe.com • +44 780 225 6536 Aquilla Europe Ltd • Kennett Cottage • OX9 3QS • UK • www.aquilla-europe.com