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Samsung Group to scrutinise underperforming businesses
Publication Date : 16-07-2014
Samsung Group is said to be carrying out a sweeping “management assessment” on underperforming affiliates in the electronics sector in the wake of the second-quarter earnings shock of its cash cow Samsung Electronics.
The audit division under Samsung’s Corporate Strategy Office, the conglomerate’s control tower, has recently began a review on Samsung Electro-Mechanics, a manufacturer of smartphone camera modules, according to Samsung Group.
The latest move is just another in a series of management reviews conducted on the conglomerate’s affiliates including Samsung Heavy Industries and Samsung Engineering.
“The poor business performance of affiliates, including those that supply smartphone parts to Samsung Electronics, seems to be a major reason for the conglomerate to proceed with the reviews,” a market analyst said.
The camera module business has gone downhill since the second quarter of 2013 when it reaped 222 billion won (US$216 million) in operating profit.
The profit also dropped during the final three months of last year, with the company posting an operating loss of 36 billion won in the fourth quarter that same year. The firm’s January-March operating profit in 2014 stood at 15 billion won.
Market observers forecast that other affiliates including Samsung Display and Samsung SDI, which showed deteriorating operating profits, may also be subject to a management review.
Samsung Display posted an operating loss of 80 billion won in the first quarter of this year, while Samsung SDI recorded operating losses in the last quarter of 2013 and the first three months this year, of 56 billion won and 39 billion won respectively.
Some market watchers said Samsung could come up with restructuring measures, including layoffs, for the underachieving affiliates in a bid to improve efficiency.
Samsung officials, however, denied the speculation about carrying out full-fledged restructuring.
According to a regulatory filing from Samsung Electronics earlier this month, the world’s largest smartphone maker by sales recorded 7.2 trillion won in operating profit, its lowest in two years.
The tech giant pointed to the neck-and-neck competition in the low-end smartphone market in China as one of the major factors for the lower-than-expected result.