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By | Alexander J Martin 7th October 2016 12:20

Samsung's profits may not be as explosive as its products, says firm

Chip and display business segments claimed to have covered the burning bottom

Samsung Electronics has told investors to expect a modest increase in its operating profits between July and September this year, despite the costly recall of its new Galaxy Note 7 smartphones.

Profits for Q3 2016 are expected to have grown by more than 5.5 per cent to between 48tn and 50tn Korean won (£5.7bn), although actual figures will not be released until 27 October.

The good news comes despite the recall of Samsung's "exploding" smartphones, which is estimated to have undercut earnings by more than £700m, with some analysts estimated a recall cost of as much as £1.4bn

Other business units at Samsung had excelled over the quarter, however, and analysts were keen to note how Samsung's sudden need for additional chips in the replacement Note 7 mobiles offers a great opportunity by exacerbating demand in an already stretched memory market.

"Obviously the Note 7 recall costs were reflected but (business) segments such as memory and OLED (organic light-emitting diode) displays did well and will probably continue to do so until at least next year," IBK Asset Management's fund manager, Kim Hyun-su, said in a pre-earnings call.

Lee Seung-Woo, an analyst at IBK Securities, also noted that Samsung's "other businesses, particularly semiconductors, have fared extraordinarily well" and were likely to continue to be in demand ahead of the Christmas sales season. ®

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