Samsung cuts profit forecast sharply after Note 7 debacle

Samsung has sharply revised its profit forecast for the third quarter of this year. The group does this a week after announcing its profit forecast. Then there was only talk of a recall.

Last week, Samsung said it would make more profit than in the comparable quarter last year, despite the recall of the Note 7. The South Korean company then expected a quarterly profit of 7.8 trillion won. billion euros. At the time, Samsung had not yet decided to withdraw the Galaxy Note 7 from the market in its entirety and to stop production. Now that it has, Samsung has adjusted its profit forecast to 5.2 trillion won, about 4.2 billion euros.

The profit forecast relates to the third quarter of 2016, which runs from the beginning of July to the end of September. Samsung started shipping the Note 7 in a number of countries in mid-August, but in many regions, including the Benelux, the release was delayed after problems emerged and the device never appeared. It is not known how much profit Samsung expected before the problems surrounding the Note 7.

The difference in profit is expected to be 2.1 billion euros this quarter, but the total costs for Samsung due to the Note 7 recall and the loss of revenue from sales are likely to be much higher. Reuters reports that according to analysts, Samsung had planned to sell a total of 19 million units of the Note 7 during the product’s product cycle. With a suggested retail price of 849 euros, that would be good for a turnover of 16.1 billion euros. Analysts estimate that four million Note 7s have been produced so far and it would cost Samsung $1.3 billion to process them safely.

The production stop of the Galaxy Note 7 will probably hit the company hard, especially in the fourth quarter of this year. Samsung launched the flagship to compete with Apple’s iPhone 7 and iPhone 7 Plus, and at the moment the South Korean manufacturer has no new device to compete with. Revenue in the fourth quarter should mainly come from sales of the Galaxy S7 and S7 edge, devices that have been on the market since the beginning of this year.

Samsung has not yet announced when the results for the third quarter will be published, but that will probably be at the end of this month. The manufacturer can also provide an estimate of the impact that the Note 7 debacle will have on the financial results for the fourth quarter of the year.