Samsung SDI is well positioned for turnaround this year

2017.07.13 14:54:47 | 2017.07.13 15:06:59

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Samsung SDI, a South Korean manufacturer of electronic vehicle (EV) and smartphone batteries, is estimated to have broken even in the second quarter and poised for profitable growth in the remaining months of this year despite its battered EV battery business.

Market analysts expect the company’s smartphone battery and process materials of semiconductors and·displays businesses would more than offset losses from its EV battery business, allowing the firm to turn around for the first time in seven quarters.

Since an 80.8 billion won ($71.1 million) loss in the fourth quarter of 2015, the company had incurred losses for six straight quarters to the start of this year, according to data from the Financial Supervisory Service and FnGuide on Wednesday.

The company started to post losses after the sale of its petrochemical division, then a major cash cow for Samsung SDI, to Lotte Group in 2015. The petrochemical business, if not sold, could have narrowed the company’s huge losses of 926.3 billion won last year.

It has been also hit by China’s suspension in subsidy payment to Korean EV battery makers, a move by Beijing to protect its own industry and retaliate against Seoul and Washington`s THAAD deployment decision.

EVs equipped with batteries from South Korean LG Chem and Samsung SDI again failed to join the subsidy list recently released by the Chinese government. Such subsidy, a lifeline for the EV market, has remained completely off limits to Korean manufacturers since last December.

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Brokerage houses estimate Samsung SDI to have lost some 90 billion won from EV battery business in the first quarter and 60 billion won in the second quarter.

However, this loss may be narrowed fast later this year thanks to a price reduction in lithium, a key raw material for EV batteries. The latest available price tag is 21,100 won per kilogram, down 12.5 percent from March of last year. This is definitely contributing to increased profitability of Samsung SDI.

Market analysts expect profits from smartphone batteries and process materials for semiconductors and displays would help the company weather overall losses, too. Particularly, robust sales of Samsung Electronics’ Galaxy S8 series are boosting profits in Samsung SDI’s small battery business.

Another positive factor is a massive investment plan of Samsung Electronics, one of key customers of Samsung SDI. Samsung Electronics plans to inject a total of 50 trillion won to ramp up its capacity for semiconductor and display production by 2021. Samsung SDI has provided process materials for integrated circuitry and polarizer films to Samsung Electronics.

Analysts forecast Samsung SDI to report an operating profit of 1 billion won in the second quarter, 29.6 billion won in the third quarter and 34.1 billion won in the fourth quarter.

Shares of Samsung SDI were up 4.9 percent at 181,000 won as of 2:50 p.m. Thursday.

By Moon Il-ho

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