Money & Markets
Oct 6, 8:25 PM EDT

Samsung tips 6 percent gain in 3Q profit despite recall

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Samsung tips 6 percent gain in 3Q profit despite recall

SEOUL, South Korea (AP) -- Samsung Electronics Co. estimated its profit rose more than expected in the July-September quarter despite the unprecedented recall of its flagship smartphones.

The South Korean company said in an earnings preview Friday that its third-quarter operating income rose 6 percent to 7.8 trillion won ($7 billion), compared with 7.4 trillion won a year earlier.

That was slightly higher than forecasts. According to financial data provider FactSet, analysts expected a figure of 7.5 trillion won.

Samsung said sales fell 5 percent from a year earlier to 49 trillion won ($43.9 trillion) during the three-month period.

The company will disclose its full results including earnings and divisional breakdowns later this month.

The results give clues about the short-term financial impact of its first global recall of smartphones. Last month Samsung recalled 2.5 million units of the Galaxy Note 7 just two weeks after its debut as consumers reported that batteries were overheating and catching fire.

That was followed by global airlines banning the phone during flights and official recalls by the governments in the U.S. and Canada.

Analysts estimate the cost of the recall could be as much as $1.8 billion as Samsung shipped the phones back and replaced them with a new Note 7 phone with safe lithium-ion batteries.

But they also said the damage would be outweighed by Samsung's other businesses, especially its sales of advanced computer chips and high-end smartphone displays.

The analysts also believe that the third quarter would be the bottom for Samsung's earnings. Advanced screens for mobile devices, called OLED, and Samsung's advanced chips for computers, will likely fuel a huge profit growth for the company in coming quarters, they said.

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