Samsung SDI recorded a net current loss of 12.9 billion won (US$12.2 million) in the third quarter along with sales of 1.8918 trillion won (US$1.7908 billion) and operating profits of 26.2 billion won (US$24.8 million). The company merged with Cheil Industries, which is now the materials division of Samsung SDI, in July. Sales decreased by 0.2 percent and profits dropped by 45.8 percent from a quarter earlier due to the decreasing popularity of Galaxy smartphones.
The company’s small battery business unit, meanwhile, increased its sales and profits at the same time based on an increased machine tool sales volume. The energy storage system (ESS) business unit showed no improvement, and the automobile battery business unit had to be content with its groundwork for future profits through closer cooperation with BMW.
“The electric vehicle and ESS business of Samsung SDI is growing fast, but the profit increase is slower than the quantitative growth,” said NH Nonghyup Securities research analyst Kim Chang-jin. The chemical division went up only slightly, while the electronics material division increased its sales and profits, thanks to better conditions in the semiconductor industry. The photovoltaic cell material and LED divisions’ outlook is vague, though.
The less-than-expected quarterly performance is resulting in doubts about the synergy effect of the merger. “We will combine the energy segment with the materials segment through the merger so as to overcome uncertainties and maximize the outcome of our new business,” president Jo Nam-sung said in July. The stock price of the company rose to 176,500 won (US$165) per share in just a couple of weeks after the consolidation, but lost more than 35 percent during the following three months.
This past summer many industry insiders pointed out that the business consolidation between Samsung SDI and Cheil Industries was more to rearrange the shareholding structure of the Samsung Group’s owners than to create synergy. “The merger is hardly a logical business decision,” the Financial Times reported last month, continuing, “Rather, it appears to have to do with the owner’s tighter control over the group.”
At the same time, President Park Sang-jin’s management capability is increasingly being doubted. The company’s performance has steadily worsened since he took office four years ago. The sales and profits were 5.4439 trillion won (US$5.1131 billion) and 203.7 billion won (US$191.3 million) in 2011, but dropped to 5.0165 trillion won (US$4.7047 billion) and 27.4 billion won (US$25.7 million) last year, when the company turned into a loss for the first time in six years. It recorded operating profits of 700 million won (US$656,495) in the second quarter of 2014, 97.8 percent down from a year earlier.