Earnings Release Q4 2015 Samsung Electronics January 2016 Disclaimer The financial information in this document are consolidated earnings results based on K-IFRS. This document is provided for the convenience of investors only, before the external audit on our Q4 2015 financial results is completed. The audit outcomes may cause some parts of this document to change. This document contains "forward-looking statements" - that is, statements related to future, not past, events. In this context, "forward-looking statements" often address our expected future business and financial performance, and often contain words such as "expects”, "anticipates”, "intends”, "plans”, "believes”, "seeks” or "will ". “Forward-looking statements" by their nature address matters that are, to different degrees, uncertain. For us, particular uncertainties which could adversely or positively affect our future results include: · The behavior of financial markets including fluctuations in exchange rates, interest rates and commodity prices · Strategic actions including dispositions and acquisitions · Unanticipated dramatic developments in our major businesses including CE (Consumer Electronics), IM (IT & Mobile communications), DS (Device Solutions) · Numerous other matters at the national and international levels which could affect our future results These uncertainties may cause our actual results to be materially different from those expressed in this document. Income Statement 4Q ’15 % of sales 3Q ’15 % of sales 4Q ’14 FY ’15 % of sales FY ’14 % of sales 53.32 100.0% 51.68 100.0% 52.73 200.65 100.0% 206.21 100.0% 33.96 63.7% 31.61 61.2% 33.85 123.48 61.5% 128.28 62.2% Gross Profit 19.35 36.3% 20.07 38.8% 18.88 77.17 38.5% 77.93 37.8% SG&A expenses 13.21 24.8% 12.68 24.5% 13.60 50.76 25.3% 52.90 25.7% 3.46 6.5% 3.42 6.6% 3.65 13.71 6.8% 14.39 7.0% Operating Profit 6.14 11.5% 7.39 14.3% 5.29 26.41 13.2% 25.03 12.1% Other non-operating income/expense △2.50 - △0.08 - △0.21 △2.04 - 1.54 0.7% Equity method gain/loss 0.99 1.9% 0.02 0.05% 0.25 1.10 0.5% 0.34 0.2% Finance income/expense 0.10 0.2% 0.06 0.1% 0.27 0.48 0.2% 0.97 0.5% 4.72 8.9% 7.39 14.3% 5.59 25.96 12.9% 27.88 13.5% 1.50 2.8% 1.93 3.7% 0.25 6.90 3.4% 4.48 2.2% 3.22 6.0% 5.46 10.6% 5.35 19.06 9.5% 23.39 11.3% (Unit: KRW Trillion) Sales Cost of Sales - R&D expenses Profit Before Income Tax Income tax Net profit Key Profitability Indicators 4Q ’15 3Q ’15 4Q ’14 FY ’15 FY ’14 7% 13% 13% 11% 15% Profitability (Net profit/Sales) 0.06 0.11 0.10 0.09 0.11 Asset turnover (Sales/Asset) 0.90 0.87 0.95 0.85 0.93 Leverage (Asset/Equity) 1.36 1.37 1.40 1.36 1.40 21% 24% 18% 23% 20% ROE EBITDA Margin 4Q ’14 3Q ’15 24% 18% 13% 4Q ’15 21% 13% 7% ROE EBITDA Margin 1 Segment Sales & Operating Profit Sales (Unit: KRW Trillion) Total CE VD IM Mobile DS Semiconductor - Memory DP 4Q ’15 QoQ 3Q ’15 4Q ’14 FY ’15 YoY FY ’14 53.32 3%↑ 51.68 52.73 200.65 3%↓ 206.21 13.85 20%↑ 11.59 14.27 46.90 7%↓ 50.18 9.37 35%↑ 6.97 9.79 29.22 10%↓ 32.45 25.00 6%↓ 26.61 26.29 103.55 7%↓ 111.76 24.08 7%↓ 25.94 25.02 100.51 6%↓ 107.42 19.74 3%↓ 20.31 17.71 75.03 14%↑ 65.79 13.21 3%↑ 12.82 10.66 47.59 20%↑ 39.73 8.34 9%↓ 9.14 8.18 34.29 17%↑ 29.32 6.53 13%↓ 7.49 7.05 27.49 7%↑ 25.73 3Q ’15 4Q ’14 FY ’15 Operating Profit (Unit: KRW Trillion) Total 4Q ’15 QoQ YoY FY ’14 6.14 △1.25 7.39 5.29 26.41 1.39 25.03 CE 0.82 0.45 0.36 0.18 1.25 0.07 1.18 IM 2.23 △0.17 2.40 1.96 10.14 △4.42 14.56 DS 2.98 △1.68 4.65 3.13 14.89 5.46 9.43 Semiconductor 2.80 △0.86 3.66 2.70 12.79 4.01 8.78 DP 0.30 △0.63 0.93 0.47 2.30 1.64 0.66 Note) CE (Consumer Electronics), IM (IT & Mobile communications), DS (Device Solutions), DP (Display Panel) ※ Sales for each business unit includes intersegment sales. ※ 2014 sales and operating profit of each business stated above reflect the organizational structure as of 2015. 2 Q4 Results and Outlook by Business Units Semiconductor DP [Q4 Results] [Q4 Results] □ Memory : Earnings decreased due to weak demand from certain applications - DRAM : Managed profitability-focused product mix; Enhanced cost competitiveness by expanding 20nm process portion - NAND : Increased sales of solution products, e.g. high-density SSD/eMCP □ OLED: Despite increased panel shipments, earnings decreased slightly led by ASP decline due to an increase in shipments portion of mid-range products - OLED shipments: (units) increased by mid-10% QoQ □ S.LSI : Earnings improved led by increased 14nm foundry supply [ Q1 Outlook] □ Memory: Expect slow demand under weak seasonality - DRAM: Continue 20nm migration; Focus on expanding shipments of high value-added products e.g. high-density server DRAM - NAND: Expand shipments of enterprise SSD; Start 3rd gen V-NAND ramp-up in earnest □ S.LSI: Expect demand to slow down under seasonality; Expect to begin supply for new premium smartphones with new 2nd gen. 14nm process volume ramp [ ‘16 Outlook] □ LCD: Amid decline of TV panel shipments, earnings fell due to continued decrease of ASP · TV panel shipments (units/area) : decreased by mid-10% QoQ [ Q1 Outlook] □ OLED : Focus on securing profitability by responding to major customers’ mass production of new products in a timely manner and improving cost □ LCD : As set demand decreases due to weak seasonality and recession in emerging markets, focus on improving product mix and expanding customer base by actively addressing new UHD/ultra-large sized product □ Memory: Potential IT market slowdown; Expect content increase of each application to drive demand growth - Focus on increasing sales of high value-added/differentiated products and reinforcing leadership of leading-edge process technology to strengthen long-term profitability [ ‘16 Outlook] □ S.LSI: Strive to continue growth momentum despite uncertainties in mobile demand; Focus on customer diversification and product line up expansion for long-term growth □ LCD : Reinforce high value-added line ups (UHD↑/Curved/ultralarge size); Expand customer base □ OLED : Maintain high rate of operation and enhance profitability by expanding customer base; Continue to increase new applications such as HMD, Automotive, transparent, and mirror 3 Q4 Results and Outlook by Business Units IM CE [Q4 Results] [Q4 Results] □ IM: Profit declined slightly as shipments decreased due to year-end inventory adjustment and as marketing expenses increased due to seasonality - Smartphone: Note 5 shipments increased and new mid/low-end products released such as 2016 A7/A5/J3/etc. - Tablet: Shipments increased QoQ due to strong seasonality □ TV : Earnings increased significantly under strong seasonality and Black Friday promotional sales of North America □ Network: Earnings improved QoQ led by overseas carriers’ LTE network expansion □ DA : Demand growth continued in North America; strong shipments of premium products including Chef collection led to earnings improvement - Sales of premium refrigerators: QoQ 5%↑, YoY 22%↑ [Q1 Outlook] □ Market: Under weak seasonality, expect a decline in smartphone and tablet demand □ SEC: Expect earnings to increase due to product mix improvement and impact of new models, while shipments to decrease slightly due to weak seasonality and discontinuation of old models [ ‘16 Outlook] □ Market: Expect single-digit growth of smartphone and tablet demand □ SEC: Despite difficulties of strong competition amid weak demand growth, strive to maintain solid earnings through reinforcing product competitiveness and efficiently managing line ups - Strong shipment growth mainly in North America · LCD TV: North America QoQ 94%↑/ YoY 19% ↑ - Shipments of premium products (SUHD/Curved TV) increased · SUHD TV: QoQ 106%↑ (UHD portion: 3Q 19% → 4Q 22%) [Q1 Outlook] □ TV : Expect demand to decrease due to weak seasonality and slowness in emerging markets; Focus on premium product sales, including successful launch of new SUHD models □ DA : Expect a slowdown of global demand for home appliances amid economy uncertainties in Emerging market; Focused on premium and high value-added product sales [ ‘16 Outlook] □ TV : Expect an increase in demand led by the Olympics; Focus on increasing premium product sales □ DA : Focus on continuously launching of innovative products, customer oriented marketing and B2B business 4 [Appendix 1] Financial Position (Unit : KRW Billion) Dec 31, 2015 Sep 30, 2015 Dec 31, 2014 242,179.5 246,567.6 230,423.0 71,536.0 69,767.2 65,667.7 - A/R 25,168.0 27,631.5 24,694.6 - Inventories 18,811.8 22,841.1 17,317.5 - Investments 13,565.9 13,992.6 14,049.6 - PP&E 86,477.1 86,560.4 80,873.0 5,396.3 5,560.3 4,785.5 21,224.4 20,214.5 23,035.1 242,179.5 246,567.6 230,423.0 63,119.7 65,838.9 62,334.8 12,874.0 12,886.9 11,265.5 - Trade Accounts and N/P 6,187.3 9,842.9 7,914.7 - Other Accounts and N/P & Accrued Expenses 20,493.1 18,745.2 23,195.2 - Income Tax Payables 3,401.6 1,712.2 2,161.1 - Unearned Revenue & Other Advances 2,336.2 2,217.0 2,588.9 17,827.5 20,434.7 15,209.4 Shareholders' Equity 179,059.8 180,728.7 168,088.2 - Capital Stock 897.5 897.5 897.5 242,179.5 246,567.6 230,423.0 Assets - Cash ※ - Intangible Assets - Other Assets Total Assets Liabilities - Debts - Other Liabilities Total Liabilities & Shareholder's Equity ※ Cash = Cash and Cash equivalents, Short-term financial instruments, Short-term available-for-sale securities, Long-term time deposits, etc. Dec 31, 2015 Sep 30, 2015 Dec 31, 2014 Current ratio ※ 247% 245% 221% Liability/Equity 35% 36% 37% 7% 7% 7% -33% -31% -32% Debt/Equity Net debt/Equity ※ Current ratio = Current assets/Current liabilities [Appendix 2] Cash Flow (Unit : KRW Trillion) FY '15 4Q '15 3Q '15 Cash (Beginning of period)※ 65.67 69.77 62.28 Cash flows from operating activities 40.06 12.36 11.87 Net profit 19.06 3.22 5.46 Depreciation 19.66 5.05 5.10 1.34 4.09 1.31 -27.10 -6.28 -6.24 -25.88 -5.76 -6.06 -6.57 -3.59 1.31 1.59 0.15 1.46 Acquisition of treasury stock -5.02 -3.69 - Payment of dividends -3.13 -0.05 -0.15 5.87 1.77 7.48 71.54 71.54 69.77 Others Cash flows from investing activities Increase in tangible assets Cash flows from financing activities Increase in debts Increase in cash Cash (End of period)※ ※ Cash = Cash and Cash equivalents, Short-term financial instruments, Short-term available-for-sale securities, Long-term time deposits, etc. □ Current State of Net Cash (Net Cash =Cash※ - Debts) (Unit : KRW Trillion) Net Cash Dec 31, 2015 Sep 30, 2015 Dec 31, 2014 58.66 56.88 54.40 ※ Cash = Cash and Cash equivalents, Short-term financial instruments, Short-term available-for-sale securities, Long-term time deposits, etc.