Samsung and LG warn that second quarter profits are likely to miss expectations, as smartphone sales slow

Two of South Korea’s biggest electronics companies, Samsung and LG, have issued warnings to shareholders that operating profits for the second quarter of 2018 are likely to miss estimates.

Estimates released this morning by Samsung said that earnings growth had slowed to its most sluggish rate in more than a year. Operating profit for the three-month period ending in June is now set to grow 5.2 per cent to 14.8trn won (£10bn), just below the average analyst estimate of 19.9trn won as polled by Thomson Reuters.

Meanwhile rival LG said in a regulatory filing this morning that its profit for the same period would also fall short of expectations, rising 16.1 per cent year-on-year at 771bn won. In a similar survey by Thomson Reuters, analysts had predicted an average of 821bn won in profit.

Samsung, which is listed on four exchanges including London, recorded strong first quarter in profits in April thanks to its semiconductor business, which is the largest in the world and its biggest driver of profit growth.

Read more: Samsung expects record first quarter profits

However the company also said at the time that demand for its smartphones had dropped, warning then that second quarter profits would decline as a result. Smartphone sales for new releases across the world have been slowing in recent quarters, as it becomes harder for competing companies to stand out from one another on design and device capability.

“Demand for premium and high-end smartphones continue to suffer due to marginal incremental benefits during upgrade,” said Anshul Gupta, research director at Gartner.

“Demand for entry-level smartphones sub-$100 [£75.61] and low midtier smartphones sub-$150, improved due to better-quality models.”

On the Korean stock exchange, Samsung’s share price was down 1.74 per cent. LG’s share price was down 2.31 per cent.