WSJ Samsung Blames Weaker Demand For Disappointing Results

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Samsung Blames Weaker Demand For Disappointing Results

Smartphone Maker Says its Second-Quarter Operating Profit Likely Fell 22.3% to 26.5%

SEOUL— Samsung Electronics Co. 005930.SE +0.54% said its operating profit fell for the third consecutive quarter, hurt by weaker-than-expected demand for its products in China and Europe, and South Korea's strengthening currency.

Investors and brokerages are increasingly skeptical over the company's near-term growth prospects as smartphone adoption slows in advanced markets, while the rise of low-cost smartphone makers threaten Samsung's competitiveness in emerging markets. On those concerns, Samsung shares dropped to a more than three-month low Monday to 1,292,000 won, its lowest level since March 26.

WSJD is the Journal's home for tech news, analysis and product reviews.

Foreign Investors Put Pressure on Samsung Samsung Braces for Earnings Pain, Speaks Up Bandits Loot Samsung Plant in Brazil A Broader, More Collaborative Apple Emerges Under Cook Mims: Is Silicon Valley Pouring Money Into the Wrong Stuff? Critics Fault Court's Grip on Patent Appeals New Media Landscape in Sun Valley The world's largest smartphone maker by shipments said Tuesday its second-quarter operating profit likely fell 22.3% to 26.5% from a year earlier to between 7.0 trillion won ($6.9 billion) and 7.4 trillion won ($7.3 billion). A year earlier, Samsung reported an operating profit of 9.53 trillion won.

The disappointing results follow a 3.3% decline in operating profit in the first quarter compared with a year ago, and mark its first double-digit percentage decline since the third quarter of 2011. The company estimated its sales fell 7.8% to 11.2% from a year ago to a range of 51 trillion won to 53 trillion won.

The profit estimate fell short of market expectations. A poll of seven analysts expected Samsung's operating profit to come in at 7.85 trillion won on sales of 52.2 trillion won.

The company said in a statement that it "witnessed a slowdown in the overall smartphone market growth and saw increased competition in the Chinese and some European markets," which led to higher inventories for low-to mid-end smartphones. The company usually doesn't provide any explanation with its earnings forecasts.

Samsung, which makes everything from memory chips to televisions and smartphones, didn't disclose net profit estimates and final numbers are due later this month.

Local brokerage I'M Investment & Securities cut Samsung to "hold," this week, saying the company is likely to continue losing market share to Chinese brands, while sales of its latest Galaxy S5 smartphone is expected to quickly lose momentum this quarter. The brokerage forecasts sales of the S5 phone could be as little as 6 million units for the third quarter after selling an estimated 17 million units during the second quarter, which is poorer than the performance of its predecessor.

Analysts estimate Samsung shipped between 77 million and 79.5 million smartphones in the quarter ended June 30, which falls short of the 90 million units that many in the market had been anticipating earlier this year. The company doesn't disclose smartphone shipments.

Samsung is betting on a number of new mobile products this quarter to keep sales momentum going in the seasonally strong second half. This includes a new smartwatch powered by Tizen, which can operate independently, without having to link to a smartphone, people familiar with the matter told The Wall Street Journal in May. Samsung also began shipping a new line of high-end tablets earlier this month, hoping to take on Apple Inc. AAPL +2.06% in the competitive U.S. market.

"Samsung's earnings may bottom out in the second quarter, but the expected launch of iPhone 6 models will be a huge challenge for the company's high-end models in the second half," said Lee Seung-woo, an analyst with IBK Securities in Seoul. He noted that a lot lies on the anticipated launch of a succeeding model to Samsung's smartphone-tablet hybrid, the Galaxy Note 3, in the autumn, to propel mobile sales.

Samsung said it cautiously expects better results in the third quarter.

>>> Asian Update

Asian Market Update: Asia stock markets pause ahead of earnings; Samsung Electronics preliminary results miss with cautiously positive outlook

***Notable Economic Data*** - (AU) AUSTRALIA JUN NAB BUSINESS CONFIDENCE: 8 V 7 PRIOR; NAB BUSINESS CONDITIONS: +2 V -1 PRIOR - (JP) JAPAN MAY BOP CURRENT ACCOUNT BALANCE: ¥523B (4th consecutive surplus) V ¥418BE; BOP ADJUSTED CURRENT ACCOUNT: ¥385B V ¥158BE; TRADE BALANCE BOP BASIS: -¥676B V -¥823BE - (JP) JAPAN JUN BANK LENDING INCL TRUSTS: 2.3% V 2.2%E; BANK LENDING EX-TRUSTS: 2.5% V 2.4% PRIOR - (NZ) NEW ZEALAND Q2 NZIER BUSINESS CONFIDENCE: 32 V 52 PRIOR (largest decline since Q4 2011) - (CN) China H1 new foreign investment $130.1B, +23.8% y/y - People's Daily - (AU) Australia ANZ Roy Morgan Weekly Consumer Confidence Index: 105.1 v 105.4 prior - (TW) TAIWAN JUN CPI Y/Y: 1.6% V 1.6%E; WPI Y/Y: 0.8% V 1.1%E

***Index Snapshot (as of 02:30 GMT)*** - Nikkei225 -0.5%, S&P/ASX -0.2%, Kospi -0.3%, Shanghai Composite -0.5%, Hang Seng -0.3%, Sept S&P500 -0.1% at 1,968

***Commodities/Fixed Income/Currencies*** Aug gold +0.2% at $1,319, Aug crude oil -0.2% at $103.39/brl, Sept Copper -0.2% at $3.25/lb - (CN) PBoC to drain CNY20B in 28-day repos (3rd consecutive drain) - (CN) PBoC sets yuan mid-point at 6.1626 v 6.1658 prior setting (strongest setting since July 2nd) - (AU) Australia MoF (AOFM) sells A$300M in 1% indexed bonds due 2018; Avg yield: 0.5971%; Bid-to-cover: 3.07x - (JP) Japan MoF sells ¥400B in 10-year CPI-linked Bonds; Bid-to-cover ratio 2.54x v 2.89x prior - (CN) Morgan Stanley: Sees China iron ore mines shutting; Cuts 2015 thermal coal price forecast by 16% to $74/t - financial press - (US) USDA weekly crop progress report

***Market Focal Points/Key Themes*** - Taking its cues from Wall Street the Asian stock markets were trading lower with the Nikkei225 down 0.8% in early trading as the yen strengthened against the dollar. Investors will now be focused on earnings out of the US, the Fed's position on monetary policy, as well as Chinese economic data including the trade inflation data and GDP.

- Japan's current account balance had a surplus for the fourth consecutive at ¥523B; imports sliding for the first time in 19 months with the consumption tax increase cooling domestic demand.

- South Korea's largest electronics firm Samsung released preliminary Q2 results with operating profits declining to a two-year low of KRW7.2T -24% y/y. Despite the weak results share price initially jumped by over 2%before settling to 0.5% in early trading as a drop in profits were widely expected and as it cautiously expects a more positive outlook for the next quarter with the release of its new smartphone lineup and improving mobile business.

- The June NAB business confidence index increased to 8 from 7 as confidence strengthened in nearly all the industries. The AUD recovered from its early lows against the major currency pairs, with the AUD/USD trading higher by 10pips above 0.9390-level following the confidence data.

- Iran Supreme Leader Khamenei was reported to have said Iran required additional centrifuge capacity, higher than the amount acceptable to the western governments. The leader stated that they were being offered 10k SWU when 190k SWU is needed. These comments have changed course from those reported on July 3rd where Iran said it would ease its nuclear capacity demands during Vienna talks.

***Equities*** US markets: - MIC: To acquire remaining 50% of International-Matex Tank Terminals (IMTT) for $910.0M in cash, $115.0M in stock; raises quarterly dividend by 1.3% to $0.95/shr; +5.4% afterhours - CRMB: 07/07/2014 19:45:26 CRMB: Reportedly to cease operations, close all stores; considers filing for bankruptcy - financial press

Notable movers by sector: - Financials: Evergrande Real Estate 3333.HK +0.9% (June sales results); Guotai Junan 1788.HK +1.4% (H1 guidance); Gemdale Properties and Investment Corp 535.HK -3.1% (Jun sales results) - Materials: Zhejiang Kaier New Materials 300234.CN +5.0% (H1 results) - Energy: Datang International Power Generation 991.HK +16.2% (announces restructure; shares resume trading) - Industrials: Anhui Heli 600761.CN -2.5% (H1 guidance); Daiwa House Industry 1925.JP -0.1% (revenue target); Elders ELD.AU +8.9% (may receive bid) - Technology: TCL Corp 000100.CN +1.3% (H1 guidance); Samsung Electronics 005930.KR +0.4% (Q2 prelim results) - Healthcare: Pharmaxis PXS.AU -16.9% (updates on pre-clinical projects) - Utilities: Leshan Electric Power 600644.CN +2.9% (H1 guidance)

>>> US Close Dow-0,26% S&P-0,39% Nasdaq-0,77%

Closing Market Summary: Small Caps Lead Stocks Lower

The stock market began the first full week of July on a cautious note with small caps pacing the retreat. The Russell 2000 and Nasdaq Composite posted respective losses of 1.7% and 0.8%, while the S&P 500 fell 0.4% with seven sectors ending in the red.

Equities spent the duration of the trading day in negative territory with the opening weakness taking place amid cautious action in Europe. A disappointing Industrial Production report from Germany (-1.8% versus expected 0.2%) weighed on sentiment, which contributed to the profit-taking.

Back in the U.S., profit-taking was also the theme of the day with some of the recent leaders seeing larger losses than the broader market. Specifically, the Nasdaq and Russell 2000 led the slide after entering the session with respective gains of 9.9% and 6.3% over the last three months.

The tech-heavy Nasdaq underperformed even as its top-weighted component—Apple (AAPL 95.97, +1.94)—rallied throughout the session. Chipmakers, however, pressured the index with the PHLX Semiconductor Index falling 0.7%. Similarly, biotechnology proved to be a drag on the index as the iShares Nasdaq Biotechnology ETF (IBB 259.09, -6.93) lost 2.6%.

In turn, the relative weakness of the biotech space pressured the health care sector (-0.8%), while the remaining countercyclical groups fared a bit better than the broader market. Telecom services (+0.3%) and utilities (+0.4%) held gains throughout the session, while the consumer staples sector (+0.1%) climbed out of the red during the afternoon.

Meanwhile, just about every cyclical sector struggled to keep pace with the market. The technology sector (unch) was the lone outperformer, while the other five registered losses between 0.5% and 0.8%.

Notably, the industrial sector (-0.7%) was pressured by widespread losses among transportation stocks. Airlines like Delta Air Lines (DAL 36.90, -1.70) and United Continental (UAL 38.62, -1.26) registered respective losses of 4.4% and 3.2%, while the Dow Jones Transportation Average (-1.0%) surrendered its July gain.

With stocks ending on their lows, participants did show some increased demand for volatility protection, which sent the CBOE Volatility Index (VIX 11.43, +1.11) from seven-year lows into the middle of its range from June.

Treasuries saw overnight losses, but a daylong rally resulted in the 10-yr note adding five ticks to send its yield lower by two basis points to 2.61%.

Participation was well below average with less than 600 million shares changing hands at the NYSE.

Tomorrow, the Job Openings and Labor Turnover Survey will be released at 10:00 ET, while the May Consumer Credit report will cross the wires at 15:00 ET (consensus $16.20 billion).

* S&P 500 +7.0% YTD  * Nasdaq Composite +6.6% YTD  * Dow Jones Industrial Average +2.7% YTD  * Russell 2000 +2.1% YTD

(BFW) KKR Sees Minority Stake Wild Flavor as Model for Futur


KKR Sees Minority Stake Wild Flavor as Model for Future: FAZ
2014-07-07 16:23:38.445 GMT


By James Kraus
     July 7 (Bloomberg) -- KKR European head Johannes Huth tells
Frankfurter Allgemeine Zeitung in interview co. can “live
with” minority stakes if they give family owners feeling that
“they’re not being taken over.”
     Newspaper also reports:
  * KKR in several discussions over similar minority holding
    acquisitions
  * Such investments have long lead times
  * NOTE: KKR acquired 2010 35% stake in Wild Flavors, remainder
    held by Hans-Peter Wild
  * NOTE: Earlier, ADM to Acquire Wild Flavors for $3 Billion in
    Biggest Deal NSN N8CDP76TTDS1 <GO>


For Related News and Information:
First Word scrolling panel: FIRST<GO>
First Word newswire: NH BFW<GO>

To contact the reporter on this story:
James Kraus in Geneva at +41-22-317-9232 or
jkraus2@bloomberg.net
To contact the editors responsible for this story:
Mariajose Vera at +49-89-244478-803 or
mvera1@bloomberg.net
James Kraus, Richard Weiss

WSJ: Oil's Round Trip Makes for Hidden Gains

Oil's Round Trip Makes for Hidden Gains

And we're back. Brent crude oil, at $110 and change a barrel, is where it started the year. Or is it?
The near-month futures price for Brent—typically quoted as the oil price—has indeed made a round trip up and down over the past six months or so. That is despite twin geopolitical shocks in the form of Ukraine's crisis and renewed insurgency in Iraq. In both cases initial worries, with Iraq's situation of particular concern, have given way to a sense that oil supplies aren't directly in the line of fire.
Focusing on the headline oil price misses the real story, though. Longer-dated oil futures have moved higher this year. Brent for delivery in 2015 through 2017 is up by between 3.5% and 4% on average since the start of the year. Prices for 2018 and 2019 are up by an average of 4% to 5%.
This makes sense. The immediate threat to oil supply is minimal. In addition, again hopes are rising of higher Libyan oil exports—although that has for months been the oil market's equivalent of Charlie Brown's football being pulled away.
But Iraq's flare-up, especially, has been a reminder that despite high and rising North American production, the global oil market remains beholden to several unstable countries. Iraq's role as a source of potential supply growth—enough to meet 17% of anticipated demand growth through 2019, according to International Energy Agency forecasts—means any doubt such barrels will actually appear raises longer-term price expectations.
That, in turn, tends to support valuations for exploration and production companies; the sector is up 15% so far this year.
That gain, far outpacing the oil price and more than double the rise in the S&P 500, now looks overdone. For one thing, oil prices over the next few years matter much more to E&P valuations than those further out. So raised expectations for the later years of the decade matter less anyway. In the nearer term, higher oil prices risk hurting demand. Average U.S. gasoline prices heading into the Fourth of July holiday were the highest since 2008, when the economy was hitting the skids.
And don't forget that many E&P companies also produce natural gas, where futures prices for the balance of 2014 and 2015 have actually dropped by about 7% since the frigid start of the year. The lesson? Relying on geopolitics to support your portfolio can be just as risky as taking cues from the weather outside.

>>> US Gapping down

Gapping down
Select financial related names showing weakness: BBVA -3.1%, SAN -2.5%, LYG -2.4%, NBG -2.3%, ING -1.9%, ING -1.9%, BCS -1.6%, DB -1.4%.

Select metals/mining stocks trading lower: AG -3%, RIO -1.5%, ABX -1.4%, GOLD -1.1%, BHP -0.9%, GDX -0.7%, SLV -0.7%.

Other news: NQ -3.5% (mentioned cautiously in updated Muddy Waters report; thinks NQ set pretext to change auditors), PSTI -2.9% (still checking), MT -2.5% (announces the issuance of EUR600 mln Notes under its EUR3 bln EMTN Program), TSLA -1.1% (reports of stolen Model S crash/fire).

Analyst comments: GTAT -9.2% (downgraded to Neutral from Buy at UBS), JMI -2.5% (downgraded to Sell from Neutral at Citigroup), NSIT -2% (downgraded to Underperform from Mkt Perform at Raymond James), TDW -2% (downgraded to Underweight from Overweight at Morgan Stanley), ODFL -1.3% (downgraded to Hold from Buy at Deutsche Bank), BTU -1% (downgraded to Hold from Buy at Deutsche Bank), HOLX -0.8% (downgraded to Neutral from Buy at BTIG Research).

>>> US Gapping up

Gapping up
In reaction to strong earnings/guidance: SIMO +7.3%, .

Other news: CYTX +16% (receives notice of intent to exercise first contract option from BARDA), BDSI +15% (Co and ENDP announce positive top-line results from the Phase III clinical trial of BEMA buprenorphine in opioid-experienced patients with chronic pain), PAL +10% (announces reduction of senior secured term loan interest rate and extension of credit facility), MNGA +8.4% (announced that the results of the recent Swine Manure Sterilization trials meet Rule 503.32 requirements making swine manure suitable for Class A treatment.), PMFG +4.9% ( awarded new SCR system orders for Asia valued at more than $10 mln), SPPI +4.5% (FDA grants accelerated approval of Beleodaq (belinostat) for injection), RSH +4.2% (still checking), NGD +3.3% (announces 24% increase in new afton C-zone gold measured and indicated mineral resources), SNTA +2% (cont strength), GPRO +1.7% (Cont strength), RLGY +1.7% (positive Barron's mention), CGEN +1.6% (discloses achievement of milestone in cancer immunotherapy collaboration with Bayer (BAYRY)), WTW +1.6% (positive Barron's mention), CASI +1.5% (receives U.S. Orphan Drug Designation for the use Of ENMD-2076 to treat hepatocellular carcinoma), CBI +1.4% (Awarded $60 mln Sphere Storage Contract By Petrofac ).

Analyst comments: KING +4.4% (upgraded to Overweight from Neutral at Piper Jaffray), MOBL +3.9% (initiated with a Buy at Goldman among others), SONS +3.8% (initiated with an Outperform at Pacific Crest), UTEK +3.5% (upgraded to at ), BXE +2.8% (positive comments from Northland), AMAT +2.7% (upgraded to Overweight from Neutral at JP Morgan), SEAS +1.7% (upgraded to Outperform from Mkt Perform at BMO Capital Mkts), CENX +1.5% (upgraded to Neutral from Sell at Goldman), SCCO +1.3% (upgraded to Buy from Neutral at BofA/Merrill), NAO +1.1% (initiated with a Outperform at Credit Suisse), VC +1.1% (resumed with a Overweight at JP Morgan), WSM +1% (upgraded to Buy from Neutral at BofA/Merrill)

>>> Family Dollar: TAG discusses FDO ahead of earnings, still prefers DG and DLT

Family Dollar: TAG discusses FDO ahead of earnings, still prefers DG and DLTR

TAG sees in-line Q3 results; they note FDO has failed to take full advantage of the growth in the deep discount sector, by its own admission, due to poor execution—evidenced by its (3.8%) same-store sales result in 1QF14 and 2014 guidance of negative LSD. Going forward, they are encouraged by the co's return to an EDLP strategy, which we believe will drive traffic and allow Family Dollar to better compete. However, they would like to see proof of sustained improvement before becoming more constructive on the name, which could take several quarters, and they continue to prefer DG and DLTR given their consistent track records. Regardless of the fundamentals, the stock price still has support in the near-term on talk of a possible merger or LBO.

>>> US Early premarket gappers

Early premarket gappers

Gapping up: LQDT +15.9%, LIVE +11.5%, CGEN +3.3%, KING +3.2%, SFUN +2.8%, GPRO +2.7%, RAD +1.1%

Gapping down: GTAT -6.5%, NQ -6.1%, BBVA -3.1%, AG -3%, MT -2.7%, PSTI -2.6%, SAN -2.4%, NBG -2.1%, LYG -1.9%, RIO -1.7%, ABX -1.7%, ING -1.7%, GOLD -1.3%, AUY -1.3%, GDX -1.1%, BCS -1.1%, DB -0.9%, SLV -0.8%

FT : SABMiller to sell out of African hotel and casino group Tsogo Sun

Tsogo Sun operates more than 90 luxury hotels in seven African countries including Nigeria and the Seychelles. Its interests include Montecasino, a hotel, theatre and casino complex in Johannesburg designed to resemble a weathered Tuscan village.
In April, the world’s second-largest brewer by sales announced it was reviewing its strategic options for its shareholding in the South African company, one of its few non-core assets. It had signalled its desire to exit the business as early as 2010.
Alan Clark, SABMiller chief executive, said on Monday that the proceeds from the sale would be reinvested in “core growth business, including our African operations”.
“Gaming and hotels are not core to our operations, and we have concluded that the time is right for us to exit our investment through a transaction which is beneficial to shareholders of both SABMiller and Tsogo Sun,” he said in statement.
The brewer announced in May that it would merge its South African business with its wider African operations in an effort to exert greater central control over a company that has more than 200 beer brands and 70,000 employees across more than 75 countries.
SABMiller shares slipped 0.4 per cent to £33.383, while Johannesburg-listed Tsogo Sun fell 7.1 per cent to R5,000.

Tsogo Sun operates more than 90 luxury hotels in seven African countries including Nigeria and the Seychelles. Its interests include Montecasino, a hotel, theatre and casino complex in Johannesburg designed to resemble a weathered Tuscan village.
In April, the world’s second-largest brewer by sales announced it was reviewing its strategic options for its shareholding in the South African company, one of its few non-core assets. It had signalled its desire to exit the business as early as 2010.
Alan Clark, SABMiller chief executive, said on Monday that the proceeds from the sale would be reinvested in “core growth business, including our African operations”.
“Gaming and hotels are not core to our operations, and we have concluded that the time is right for us to exit our investment through a transaction which is beneficial to shareholders of both SABMiller and Tsogo Sun,” he said in statement.
The brewer announced in May that it would merge its South African business with its wider African operations in an effort to exert greater central control over a company that has more than 200 beer brands and 70,000 employees across more than 75 countries.
SABMiller shares slipped 0.4 per cent to £33.383, while Johannesburg-listed Tsogo Sun fell 7.1 per cent to R5,000.