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Samsung Electronics Co., Ltd. -- Moody's: Samsung Electronics' robust 2Q results highlight credit strengths amid pandemic

·10 min read

Announcement: Moody's: Samsung Electronics' robust 2Q results highlight credit strengths amid pandemic

Global Credit Research - 31 Jul 2020

Hong Kong, July 31, 2020 --

- Profits rose 23% year-on-year even as the coronavirus dented sales in parts of the business

- SEC's balance sheet also remains strong at KRW97 trillion as of June 2020

Moody's Investors Service says in a new report that Samsung Electronics Co., Ltd. (SEC, Aa3 stable) reported solid operating profit for Q2 2020 despite the impact of the coronavirus outbreak, with robust sales in the semiconductor segment more than offsetting weakness in other segments.

"SEC's operating profit increased 23% to KRW8 trillion in Q2 2020 from the Q2 2019, while the company also maintained a robust KRW97 trillion net cash position -- remarkable results amid the coronavirus outbreak that supports it Aa3 rating and stable outlook," says Gloria Tsuen, a Moody's Vice President and Senior Credit Officer.

SEC's revenue decline 6% year-on-year to KRW53 trillion in Q2 2020, as the spread of the coronavirus reduced sales in all business segments except semiconductor, where solid demand from data-center and PC customers more than offset weakness in mobile memory.

Nevertheless, profit increased across the semiconductor, consumer electronics and IT & mobile communications segments, while the display panel segment also recorded a one-off gain.

Moody's expects SEC's operating performance will remain steady in the second half of the year, driven by (1) continued strength in memory with the launch of new smartphones and game consoles, (2) the launch of new flagship smartphones and more mid-tier products, and (3) solid sales of premium TVs and home appliances.

Consequently, Moody's expects the company's leverage -- as measured by adjusted debt/EBITDA -- will remain very low at 0.3x over the next 12-18 months, largely unchanged from 2019.

The company also continued to generate strong free cash flow of KRW3 trillion in H1 2020 on a reported basis, boosting its net cash position to KRW97 trillion as of June 2020 from KRW94 trillion at the end of 2019.

Subscribers can access the report "Samsung Electronics Co., Ltd.: Steady memory demand supports strong credit profile amid pandemic" at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1239806

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Gloria Tsuen, CFA VP - Senior Credit Officer Corporate Finance Group Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Chris Park Associate Managing Director Corporate Finance Group JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077 Releasing Office: Moody's Investors Service Hong Kong Ltd. 24/F One Pacific Place 88 Queensway Hong Kong China (Hong Kong S.A.R.) JOURNALISTS: 852 3758 1350 Client Service: 852 3551 3077

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