Earnings Release Q1 2015 Samsung Electronics April 2015 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 1Q 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 1Q ’15 % of sales 4Q ’14 % of sales 1Q ’14 47.12 100.0% 52.73 100.0% 53.68 28.96 61.5% 33.85 64.2% 32.05 Gross Profit 18.16 38.5% 18.88 35.8% 21.63 SG&A expenses 12.18 25.9% 13.60 25.8% 13.14 3.49 7.4% 3.65 6.9% 3.69 5.98 12.7% 5.29 10.0% 8.49 Other non-operating income/expense 0.05 0.1% △0.21 - 0.96 Equity method gain/loss 0.06 0.1% 0.25 0.5% 0.03 Finance income/expense 0.13 0.3% 0.27 0.5% 0.17 6.22 13.2% 5.59 10.6% 9.65 1.59 3.4% 0.25 0.5% 2.07 4.63 9.8% 5.35 10.1% 7.57 (Unit: KRW Trillion) Sales Cost of Sales - R&D expenses Operating Profit Profit Before Income Tax Income tax Net profit Key Profitability Indicators 1Q ’15 4Q ’14 1Q ’14 1Q ’14 11% 13% 20% 23% Profitability (Net profit/Sales) 0.10 0.10 0.14 Asset turnover (Sales/Asset) 0.82 0.95 0.98 Leverage (Asset/Equity) 1.36 1.40 1.44 ROE EBITDA Margin 22% 18% 23% 4Q ’14 1Q ’15 22% 18% 20% 13% ROE 11% EBITDA Margin 1 Segment Sales & Operating Profit Sales (Unit: KRW Trillion) Total CE VD IM Mobile DS Semiconductor - Memory DP 1Q ’15 QoQ 4Q ’14 1Q ’14 47.12 11%↓ 52.73 53.68 10.26 28%↓ 14.27 11.32 6.22 36%↓ 9.79 7.39 25.89 2%↓ 26.29 32.44 24.99 0.1%↓ 25.02 31.37 17.10 3%↓ 17.71 15.56 10.27 4%↓ 10.66 9.39 8.32 2%↑ 8.18 6.29 6.85 3%↓ 7.05 6.10 Operating Profit 1Q ’15 QoQ 4Q ’14 1Q ’14 5.98 0.69 5.29 8.49 CE △0.14 △0.32 0.18 0.19 IM 2.74 0.78 1.96 6.43 DS 3.39 0.25 3.13 1.87 Semiconductor 2.93 0.23 2.70 1.95 DP 0.52 0.05 0.47 △0.08 (Unit: KRW Trillion) Total 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 Q1 Results and Outlook by Business Units Semiconductor DP [Q1 Results] [Q1 Results] □ Memory : Mobile/server demand remained solid despite seasonality - DRAM : Continuously enhanced cost competitiveness by 20㎚ migration ; Increased sales of differentiated products (e.g. DDR4/LPDDR4) - NAND : Increased sales of solution products (e.g. SSD/UFS) □ S.LSI : Revenue decreased QoQ under low seasonality; profitability improved led by 14㎚ ramp-up and utilization increase □ OLED: Shipments increased including new premium products □ LCD: Solid performance driven by expansion of premium TV panel sales despite shipment decrease under weak seasonality · TV panel shipments: decreased by high single-digit % QoQ decreased by mid single-digit % YoY [ 2Q Outlook] □ OLED : Focus on shipment expansion through addressing new product demand However, factors for cost increase exist due to A3 line ramp-up □ LCD : Expect solid demand for TV panel due to China Labor day and new product launches; Actively address the demand with product mix focused on profitability [ 2Q Outlook] □ Memory: Expect strong mobile demand driven by new flagship smartphones ; Server DRAM and SSD demand for datacenters to continue to grow □ S.LSI: Expect earnings to improve as 14nm AP and LSI supply increase in earnest for new flagship smartphone [’15 Outlook] □ DRAM: Expect mobile/sever DRAM demand to sustain solid growth driven by launches of smartphones with higher specification and continued solid server demand □ NAND: High-density mobile storage demand to increase and SSD adoption to expand; Enhance competitiveness by expanding supply of high value-added products □ S.LSI: Expect earnings to improve throughout the year driven by expansion of 14nm FinFET sales and high value-added LSI products shipments [‘15 Outlook] □ OLED: Expect shipment increase driven by new set product launches and expansion of external sales; Expect higher profitability; Shipments of flexible products to increase, which are mid to long-term growth engines □ LCD: In 1st half, expect continued solid shipments due to favorable supply and demand condition In 2nd half, risk exists due to supply increase and demand decrease from exchange rate impact 3 Q1 Results and Outlook by Business Units IM CE [Q1 Results] [Q1 Results] □ Mobile : Earnings improved QoQ due to decreased marketing expenses and expansion of new mid/low-end smartphones (e.g. A/E/J) ; Revenue declined slightly QoQ due to decreased shipments of tablet and feature-phones ☞ Marketing expenses decreased due to seasonality and stabilized inventory - Smartphone: Shipments increased QoQ led by mid to low-end products, ASP declined QoQ □ Network: Revenue declined QoQ due to decreased investment in LTE network by overseas carriers □ TV : Under weak seasonality, earnings declined QoQ led by decreased demand due to exchange rate impact in Europe/ emerging markets, as well as by increased material cost [2Q Outlook] □ Market: Expect smartphone and tablet demand to stagnate due to continued weak seasonality □ SEC: Expect earnings improvement led by increased high-end sales with S6 global expansion, while smartphone shipments to remain at similar level due to decreased mid/low-end sales; Expect marketing expenses to increase due to S6 expansion [’15 Outlook] □ Market: Expect product/marketing competitions to intensify amid a slowdown of smartphone growth; Risk for weaker demand exists due to exchange rate impact (e.g. weak €) □ SEC: Pursue smartphone shipments growth by enhancing product competitiveness; Enhance R&D/marketing cost efficiency by streamlining line ups - LCD TV shipments increased YoY within the regions that are not impacted by exchange rates · North America YoY 8%↑, Asia YoY 16%↑ - Portion of premium products(UHD/Curved) continued to increase · UHD TV portion 4Q 8% → 1Q 11% □ DA: Earnings improved YoY led by increased premium product sales - FDR/FSR : YoY 77%↑, Drum Washing Machine : YoY 18%↑ ※ FDR : French Door Refrigerator, FSR : Food Showcase Refrigerator [2Q Outlook] □ TV: Expect continued exchange rate impact in Europe/CIS and similar market demand as the previous quarter - Focus on recovering profitability through expanding premium product sales amid new product launch □ DA: Expect earnings improvement by increased premium products sales and strong seasonality of air conditioner [’15 Outlook] □ TV: Expect demand to grow led by spread of UHD amid competition over new technologies □ DA: Expect premium product demand and demand in US to increase 4 [Appendix 1] Statement of Financial Position (K-IFRS) (Unit : KRW Billion) Mar 31, 2015 Dec 31, 2014 Mar 31, 2014 109,990.5 115,146.0 116,246.0 - Cash ※ 56,128.6 61,817.3 61,478.4 - A/R 24,911.7 24,694.6 25,235.9 - Inventories 19,119.8 17,317.5 19,648.5 9,830.4 11,316.6 9,883.2 117,259.9 115,277.0 109,046.6 - Investments 17,439.7 17,900.0 14,677.0 - PP&E 83,442.4 80,873.0 76,519.0 5,338.5 4,785.5 4,120.2 11,039.3 11,718.5 13,730.4 227,250.4 230,423.0 225,292.6 59,631.1 62,334.8 69,730.9 - Debts 9,847.3 11,265.5 12,479.4 - Trade Accounts and N/P 8,736.9 7,914.7 10,263.0 - Other Accounts and N/P & Accrued Expenses 21,126.1 23,195.2 19,987.8 - Income Tax Payables 2,109.1 2,161.1 5,116.7 - Unearned Revenue & Other Advances 2,482.8 2,588.9 2,830.1 15,328.9 15,209.4 19,053.9 Shareholders' Equity 167,619.3 168,088.2 155,561.7 - Capital Stock 897.5 897.5 897.5 227,250.4 230,423.0 225,292.6 Current Assets - Other Current Assets Non Current Assets - Intangible Assets - Other Non Current Assets Total Assets Liabilities - Other Liabilities Total Liabilities & Shareholder's Equity ※ Cash = Cash and Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities Mar 31, 2015 Dec 31, 2014 Mar 31, 2014 Current ratio ※ 223% 221% 214% Liability/Equity 36% 37% 45% 6% 7% 8% -28% -30% -31% Debt/Equity Net debt/Equity ※ Current ratio = Current assets/Current liabilities [Appendix 2] Cash Flow Statement (K-IFRS) (Unit : KRW Trillion) 1Q '15 ※ 4Q '14 1Q '14 61.82 66.95 54.50 5.12 5.41 12.21 Net profit 4.63 5.35 7.57 Depreciation 4.56 4.38 4.00 Cash flows from investing activities -7.47 -6.76 -6.54 -7.76 -7.56 -5.94 -2.62 -3.96 1.26 -1.27 -2.76 1.25 -5.69 -5.13 6.98 56.13 61.82 61.48 Cash (Beginning of period) Cash flows from operating 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 □ Current State of Net Cash (Net Cash =Cash ※ - Debts) (Unit : KRW Trillion) Net Cash Mar 31, 2015 Dec 31, 2014 Mar 31, 2014 46.28 50.55 49.00 ※ Cash = Cash and Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities