Samsung's profits hit after staff share $1bn bonus pot
Published 08/01/2014 | 02:30
Samsung, the world's largest smartphone maker, has reignited shareholder calls for more returns after splashing out on a special employee bonus estimated at nearly $1bn (€0.73bn).
The arch rival of Apple drew on its $50bn cash pile to mark 20 years of transformation into Asia's most valuable company -- just two months after investors criticised it for not spending enough to increase its dividend yield.
The bonus, to commemorate chairman Lee Kun-hee's "New Management" strategy, hit October-December operating profit which Samsung said likely fell 6pc on year and 18pc from a record third quarter to 8.3 trillion won (€5.7bn).
Initial street estimates put the bonus at 300 billion to 700 billion won, but the extent of the profit decline indicated a payout closer to one trillion won, or an average €2,937 for each of the company's 240,000 employees, analysts said.
That is likely to have sent fourth-quarter profit below even the most bearish forecast among 23 polled analysts of 8.8 trillion won, to the lowest level since the 8.1 trillion won of July-September 2012.
"This (bonus) could increase pressure from some shareholders to raise shareholder returns, and I also do have some hopes for more payout either in the form of a share buyback or dividends," said Kim Kyung-yoon, head of equities management at Kyobo Axa Investment Managers, which owns Samsung shares.
Like most South Korean companies, Samsung has kept its dividend yield low at around 1pc or less, which is a primary reason its shares are not as valuable as global peers.
"We are not against paying bonuses to workers but at least the shareholders should get as much," said Mark Mobius, executive chairman of Templeton Emerging Markets Group.
"They should really celebrate the event with a big bonus, a bigger dividend, which may happen."
Samsung shares saw their first annual decline in 2013 in five years partly due to the company's conservative shareholder return policy, despite operating profit likely growing 28pc to a record 36.8 trillion won. They closed down 0.2pc yesterday, versus a 0.3pc rise in the broader market.
Returns equal around 5.1pc of profit, the lowest since 2007 when Samsung last bought back shares, at which time its rate of return was 15.8pc.
Mr Lee, who took over Samsung Group in 1987 from his founder-father, in 1993 ordered lieutenants to "change everything except your wife and children" to transform Samsung Electronics from a mid-tier television set manufacturer into a global technology leader.
It has since overtaken Sony in TVs, Nokia in mobile phones and Apple in smart phones.