Samsung Electronics, the world's No.1 memory chip maker, said it was on course to report a better-than-expected record quarterly profit, but second-half growth may falter as the euro zone crisis weakens handsets.
Though Samsung is leading rivals such as Sony Corp and Elpida Memory in earnings recovery in a robust consumer electronics market, its emerging smartphone business faces a strong headwind from Apple Inc's iPhone.
Analysts say sluggish demand from Europe and a nearly 10 percent tumble in the euro could lead Samsung to report its telecoms margin and profit nearly halved in the second quarter from the preceding quarter and warn it could be further hit by prolonged European consumer weakness.
Earnings came out very strong, even slightly better than the market had expected, said Benjamin Ban, a Daishin Securities analyst.
However I am a bit cautious on the third quarter outlook, given the current European (debt) situation. A weaker euro may dampen European appetite for electronics, given that Samsung bases its product prices in dollars.
Europe makes up an estimated 30-40 percent of Samsung's TV and handset sales.
Samsung, the world's largest maker of memory chips and flat screen TVs, estimated its April-June operating profit at a median 5.0 trillion won in a range of 4.8-5.2 trillion won, higher than a consensus forecast of 4.8 trillion won by 22 analysts polled by Thomson Reuters I/B/E/S.
The quarterly profit would beat the previous record of 4.41 trillion won reported in the preceding quarter and almost double from 2.67 trillion won a year ago.
Samsung expects sales at the midpoint of a 36 trillion and 38 trillion won range, slightly below market expectations of 38 trillion won.
Samsung, also the world's largest maker of LCD flat screens and TVs and the No.2 producer of mobile phones, did not provide a detailed guidance breakdown for each division.
After peaking at a new record of slightly more than 5.0 trillion won in the third quarter, earnings are set to shrink 20 percent to 4.0 trillion won in the fourth quarter, according to analyst forecasts, as gains in its mainstay memory chip prices falter amid rising supply growth.
Shares in Samsung, Asia's most valuable technology firm worth $92 billion and three times bigger than Nokia and Sony, have lost 11 percent over the past three months from a record high of 875,000 won, lagging the local market's 2.4 percent drop.
By 0005 GMT, the stock rose 0.4 percent to 777,000 won, versus a 0.3 percent drop in the wider market.
Samsung, the first major global technology firm to unveil second quarter estimates, will report its official quarterly results later this month.
(Reporting by Miyoung Kim; Editing by Jonathan Hopfner and Anshuman Daga)