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Samsung’s Galaxy Note 7 problems may be continuing – one of the replacement units caught fire recently as its owner was boarding an aircraft – but the last few days have brought some good news for the company: its shares reached a record high, and it expects to beat third-quarter profit estimates.
The share increase came after yesterday’s news that activist investor Elliott Management had submitted proposals to restructure the company. It also wants Samsung to pay a $27 billion special dividend to shareholders.
Samsung said it would carefully consider the proposals, which includes splitting the South Korean firm into separate holding and operating companies, merging the former with construction company Samsung C&T, and listing the latter on Nasdaq stock exchange.
Analysts say the move would simplify the complex group structure of Samsung, while still allowing the founding Lee family, which has a combined 4.9 percent stake in Samsung Electronics, to maintain control. Lee Jae-Yong has been de facto leader of the company since his father was incapacitated by a heart attack in 2014. The son faces an inheritance tax bill running into the billions of dollars.
Elliott Management - owners of a 0.62 percent stake in Samsung Electronics - also called for a one-off dividend payment of $27 billion to be taken from its $70 billion cash reserves. The company’s shares rose 5 percent as other investors indicated their support for the proposals.
Today brought more good news for the South Korean firm. Despite the Note 7 debacle, Samsung expects an operating profit of around $7 billion on sales of approximately $44 billion from Q3 2016 – an increase of just over $3.6 billion from the same period last year.
Samsung hasn’t revealed the full cost of the Note 7 recall, but analysts say it could have slashed around $896 million from its earnings. It was the company’s other businesses, such as semiconductors and OLED displays, that accounted for the better-than-predicted figures.
“Without the one-off recall costs, Samsung was originally expected to perform better and better this year,” Chung Chang Won, an analyst at Nomura Holdings Inc. in Seoul, told Bloomberg. “If its mobile unit doesn’t get into further trouble from here and given the strong performance of its components businesses, Samsung shares will continue its upward march.”