Samsung unveils W11.3tr share buyback as profit rebounds

Samsung Electronics on Thursday unveiled plans to boost investor dividends through an 11.3 trillion won ($10 billion) share buyback after reporting its first on-year profit growth in two years.

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

The plans come after investors have increasingly requested bigger payouts from the Korean tech giant, which had a record high of 70 trillion won in cash as of September.

“The company’s stock price has been severely undervalued,” said the company in a statement. “The largest-ever share buyout and cancellation would boost shareholder values.”

Samsung’s share price rose 1.3 percent to close at 1,325,000 won on the nation’s main bourse Thursday.

Samsung said third-quarter operating profit jumped 82 percent to 7.4 trillion won, in line with its earlier guidance. Revenue rose 8.9 percent from a year earlier to 51.7 percent.

The flagship mobile division posted its first on-year profit growth in two years, climbing 37 percent to 2.40 trillion won. Even though the world’s largest smartphone-maker sold a record 150 million phones in the previous quarter, more budget phone sales drove down overall profitability.

The chip division continued its upbeat momentum with a record 3.66 trillion won profit. The division has become the biggest earner making up more than 50 percent of the company’s total profit.

“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.

Favorable exchange rates such as the won’s weakness against the dollar led to an 800 billion won gain in the third quarter.

The company expected 27 trillion won to be poured into facility investment this year, up 14 percent from a year ago.

About 15 trillion won will be invested into its chip business, especially on memory chips and system large-scale integrated circuits, while 5.5 trillion won will be used for displays.

About the rumored merger with Samsung SDS, the group’s IT solution service affiliate, investor relations chief Lee Myung-jin said during a conference call that the company had no such plans. 

By Lee Ji-yoon (jylee@heraldcorp.com)