Samsung’s third-quarter profit rebounds, unveils $9.9 billion buyback

Seoul (By Se Young Lee for Reuters) — Tech giant Samsung Electronics on Thursday unveiled a 11.3 trillion won ($9.9 billion) share buyback after reporting its first on-year profit growth in two years thanks to strong component sales, pushing its shares sharply higher.

Samsung said it would cancel all shares purchased through the buyback, its biggest to date, and planned to give shareholders 30 percent to 50 percent of its free cash flow over the next three years, primarily through dividends.

The buyback, which will be carried out in phases over a year, will be welcome news for those investors who have been clamoring for bigger payouts from the world’s top smartphone maker, which has lost market share to rivals such as Apple Inc and Huawei Technologies.

“Samsung’s decision to buy back and cancel its own shares was exactly what the market was hoping for,” HDC Asset Management fund manager Park Jung-hoon said.

Samsung’s shares touched a near six-month high and were up 2.3 percent as of 0210 GMT, outperforming a 0.2 percent rise for the broader market.

The maker of Galaxy-series handsets and tablets said third-quarter operating profit jumped 82 percent to 7.4 trillion won ($6.5 billion), in line with its guidance. Revenue rose 8.9 percent from a year earlier to 51.7 trillion won.

“In the fourth quarter, the company expects earnings to decline from the earlier quarter, as it does not expect the foreign exchange rate to have a positive effect,” Samsung said in a statement.

Exchange rate conditions such as the won’s weakness against the dollar led to a 800 billion won gain during the July-September period.

The mobile division posted its first on-year profit growth in two years, climbing 37 percent to 2.40 trillion won, thanks to strong sales of the Galaxy Note 5 tablet as well as new lower-end products.

But the chip division remained the top earner for the fifth-straight quarter with a record 3.66 trillion won profit.

Healthy third-quarter returns have boosted hopes that Samsung’s profit recovery remains on track, although investors are skeptical about its ability to return to the record earnings it posted in 2013 on the back of its smartphone business.

Despite a major overhaul of its product lineup, Samsung’s smartphone shipments will shrink for the first time in 2015 due to competition from Apple Inc in the high-end market and Chinese rivals in the low end, according to researcher TrendForce.

(Editing by Stephen Coates)