Earnings Release Q3 2015 Samsung Electronics October 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 3Q 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 3Q ’15 % of sales 2Q ’15 % of sales 3Q ’14 51.68 100.0% 48.54 100.0% 47.45 31.61 61.2% 28.96 59.7% 30.71 Gross Profit 20.07 38.8% 19.58 40.3% 16.74 SG&A expenses 12.68 24.5% 12.68 26.1% 12.68 3.42 6.6% 3.34 6.9% 3.34 7.39 14.3% 6.90 14.2% 4.06 △0.08 △0.2% 0.50 1.0% 0.54 Equity method gain/loss 0.02 0.0% 0.03 0.1% 0.00 Finance income/expense 0.06 0.1% 0.19 0.4% 0.24 7.39 14.3% 7.63 15.7% 4.85 1.93 3.7% 1.88 3.9% 0.62 5.46 10.6% 5.75 11.9% 4.22 3Q ’15 2Q ’15 3Q ’14 13% 13% 11% Profitability (Net profit/Sales) 0.11 0.12 0.09 Asset turnover (Sales/Asset) 0.87 0.84 0.85 Leverage (Asset/Equity) 1.37 1.35 1.42 24% 24% 18% (Unit: KRW Trillion) Sales Cost of Sales - R&D expenses Operating Profit Other non-operating income/expense Profit Before Income Tax Income tax Net profit Key Profitability Indicators ROE EBITDA Margin 3Q ’14 2Q ’15 24% 3Q ’15 24% 18% 13% 11% ROE 13% EBITDA Margin Segment Sales & Operating Profit Sales (Unit: KRW Trillion) Total CE VD IM Mobile DS Semiconductor - Memory DP 3Q ’15 QoQ 2Q ’15 3Q ’14 51.68 6%↑ 48.54 47.45 11.59 3%↑ 11.20 11.60 6.97 5%↑ 6.66 7.21 26.61 2%↑ 26.06 24.58 25.94 2%↑ 25.50 23.52 20.31 14%↑ 17.87 16.29 12.82 14%↑ 11.29 9.89 9.14 8%↑ 8.49 7.93 7.49 13%↑ 6.62 6.25 Operating Profit 3Q ’15 QoQ 2Q ’15 3Q ’14 7.39 0.50 6.90 4.06 CE 0.36 0.15 0.21 0.05 IM 2.40 △0.36 2.76 1.75 DS 4.65 0.79 3.87 2.33 Semiconductor 3.66 0.26 3.40 2.26 DP 0.93 0.38 0.54 0.06 (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. 2 Q3 Results and Outlook by Business Units Semiconductor DP [Q3 Results] [Q3 Results] □ Memory : Continued process migration and improved product mix □ OLED: Earnings improved led by launch of new products, - DRAM : Addressed solid demand for high value-added products such as DDR4/LPDDR4; Expanded 20nm migration - NAND : Increased high-density solution product (SSD/UFS) sales □ S.LSI : Began to supply 14nm foundry products, while solid demand for LSI continued under strong seasonality - OLED shipments increased by high-30% QoQ □ LCD: Despite slowdown in demand as well as decline in ASP, shipment area increased due to trend toward larger size TV; Solid profit driven by increased shipments of · TV panel shipments: □ Memory: Expand sales of high-density/solution products; Continue cutting-edge process migration previous years, server/mobile demand to remain solid due to acceleration of DDR4/LPDDR4 penetration and content increase; PC demand to improve QoQ - NAND : Increase demand for high-density mobile and SSD; Reinforce product competitiveness by 10nm-class 3rd (units) increased by mid teen-digit % QoQ (area) increased by low teen-digit % QoQ - DRAM : While seasonal demand to slow down compared with gen V-NAND □ S.LSI: Expect earnings to improve driven by 14nm foundry supply growth low-end panel shipments and external customer base TV panels such as UHD [ Q4 Outlook] migration and mass production of the improved productivity, an increase in mid to [ Q4 Outlook] □ OLED : Focus on enhancing cost competitiveness and expand external customer base by reinforcing mid- to low-end line-ups □ LCD : Plan to focus on cost reduction, inventory management and expanding customer base to address concerns in oversupply and ASP decline due to a slowdown of set demand in emerging market and LCD industry capacity expansion 3 Q3 Results and Outlook by Business Units IM CE [Q3 Results] [Q3 Results] □ Mobile: Strong shipment growth QoQ led by the launch of new models; □ TV : Market demand increased QoQ under strong seasonality; Earnings improved led by expanded sales of premium Slight increase in revenue while profitability declined due to S6 price adjustment and product mix change - Smartphone: Strong shipment growth driven by new models, including S6 Edge+, Note5, A8, J5; Lower ASP due to increased sales in mid- to lowend products - Tablet : Despite weak market demand, shipments and earnings remained in line with the previous quarter □ Network: Profit improved QoQ due to overseas carriers’ LTE network expansion products such as UHD/ultra-large sized TV - Strong shipment growth mainly in developed markets, including Europe · LCD TV: North America QoQ 6%↑, Europe QoQ 14%↑ - Product-mix improved due to sales of high value-added UHD TV · UHD TV: QoQ 23%↑ (Portion: 2Q 17% → 3Q 19%) □ Digital Appliances : Solid demand growth in North America; earnings improved QoQ led by strong sales of premium products - Revenue share of premium products: 2Q 47% → 3Q 49% [Q4 Outlook] [Q4 Outlook] □ Market: Expect smartphone and tablet demand to grow QoQ, □ TV: Entering the year-end peak season, expect a significant while competition to intensify under strong seasonality □ SEC: Focus on maintaining solid earnings by expanding shipments and by managing expenses efficiently - Smartphone: Expand sales of new models released in Q3 - Tablet: Expect shipments to increase slightly due to strong seasonal demand demand increase in developed markets, but FX risks remain in emerging markets - Focus on premium product sales by seasonal promotion; Improve earnings through efficient product operation including profit-oriented line-up optimization □ Digital appliances: Focus on increasing revenue by sales of premium line-up and launching of new products (Add Wash, etc.) 4 [Appendix 1] Statement of Financial Position (K-IFRS) (Unit : KRW Billion) Sep 30, 2015 Jun 30, 2015 Sep 30, 2014 129,778.4 115,789.7 119,811.3 - Cash ※ 69,724.8 61,833.8 66,951.2 - A/R 27,631.5 25,578.1 24,069.5 - Inventories 22,841.1 19,311.2 18,872.7 9,581.0 9,066.6 9,917.9 116,789.2 115,901.2 111,935.2 - Investments 14,035.0 14,466.2 17,709.7 - PP&E 86,560.4 84,666.3 76,012.1 5,560.3 5,530.4 4,684.8 10,633.5 11,238.3 13,528.6 246,567.6 231,690.9 231,746.5 65,838.9 57,754.2 68,278.8 12,886.9 11,313.7 13,938.5 - Trade Accounts and N/P 9,842.9 6,766.9 9,483.4 - Other Accounts and N/P & Accrued Expenses 18,745.2 17,710.9 17,747.1 - Income Tax Payables 1,712.2 1,750.6 3,943.6 - Unearned Revenue & Other Advances 2,217.0 2,263.5 3,048.2 20,434.7 17,948.6 20,118.0 Shareholders' Equity 180,728.7 173,936.7 163,467.7 - Capital Stock 897.5 897.5 897.5 246,567.6 231,690.9 231,746.5 Current Assets - Other Current Assets Non Current Assets - Intangible Assets - Other Non Current 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 Sep 30, 2015 Jun 30, 2015 Sep 30, 2014 Current ratio ※ 245% 251% 225% Liability/Equity 36% 33% 42% 7% 7% 9% -31% -29% -32% Debt/Equity Net debt/Equity ※ Current ratio = Current assets/Current liabilities [Appendix 2] Cash Flow Statement (K-IFRS) (Unit : KRW Trillion) 3Q '15 ※ 2Q '15 3Q '14 Cash (Beginning of period) 61.83 56.13 60.66 Cash flows from operating activities 11.87 10.71 10.44 Net profit 5.46 5.75 4.22 Depreciation 5.10 4.95 4.33 Cash flows from investing activities -5.84 -3.70 -3.90 -6.06 -6.29 -3.86 1.31 -1.67 -0.20 1.46 1.25 -0.12 7.89 5.71 6.29 69.72 61.83 66.95 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 Sep 30, 2015 Jun 30, 2015 Sep 30, 2014 56.84 50.52 53.01 ※ Cash = Cash and Cash equivalents + Short-term financial instruments + Short-term available-for-sale securities