Samsung Expects Another Quarter of Record Profits; CEO to Resign -- Update

Samsung Electronics Co. is forecasting third-quarter profits will be the company's highest ever, spurred on by roaring demand for its components.

Samsung on Friday said it expects operating profit of 14.5 trillion South Korean won ($12.8 billion) for the three months ended Sept. 30, up from 5.2 trillion won for the same period a year earlier. The South Korean technology giant estimates revenue will be 62 trillion won from July to September, up from the prior year's third quarter of 47.82 trillion won.

Separately, Samsung Electronics Chief Executive Kwon Oh-hyun, who has overseen the firm's lucrative components business, will resign and relinquish his vice chairman post by next March, the company said on Friday. Mr. Kwon, one of three CEOs at Samsung Electronics, will also not seek re-election in March for his board position.

Samsung has also been challenged by the absence of its de facto leader, Lee Jae-yong, who was convicted in August over bribing South Korea's former president. The appeal trial for Mr. Lee, who has denied wrongdoing, started this week.

Mr. Kwon said in a statement the company now "needs a new leader more than ever and it is time for me to move to the next chapter of my life." After informing Mr. Lee and others, Mr. Kwon, in the statement, said he would get their feedback and then recommend a successor.

The world's largest smartphone maker will report final results later this month.

It was just a year ago that Samsung slashed third-quarter earnings guidance by one-third after yanking fire-prone Galaxy Note 7 devices from the shelves. The global recall ultimately cost the company around $6.5 billion, tarnished the firm's chic brand and shook consumer trust..

Samsung's run of profits reflects its dominance as an electronics components supplier, where it has invested tens of billions of dollars. It is the largest maker of two major types of memory chips and dominates the market for flexible OLED displays, short for organic light-emitting diodes, which enable phone makers to create sleeker, thinner devices.

Now the components division rakes in the lion's share of profits, a shift from early last year when hand-held devices product most of the company's earnings.

Samsung is supplying memory chips, OLED displays and other parts for rival Apple Inc.'s iPhone X, which will be released Nov. 3. The South Korean firm's components division stands to make $110 from for each top-of-the-line, $1,000 iPhone X that Apple sells, according to an analysis conducted by Counterpoint Technology Market Research for The Wall Street Journal.

Samsung didn't provide a breakdown of smartphone sales on Friday. But Samsung mobile chief D.J. Koh said last month that initial preorders for the Galaxy Note 8, which hit shelves Sept. 15, were the highest ever for the Note series.

Fitch Ratings upgraded Samsung Electronics' credit rating this week to AA-minus--three notches below the top grade--citing "growing strength" of its core businesses. Despite Mr. Lee's absence, Samsung's "strategic direction has been clearly established," Fitch said.

Samsung Electronics shares have risen more than 50% this year, more than double the roughly 22% gains of the South Korean stock market's benchmark Kospi index.

Write to Timothy W. Martin at timothy.martin@wsj.com

(END) Dow Jones Newswires

October 12, 2017 23:19 ET (03:19 GMT)