Samsung Electronics’ Credit Ratings Advances

Standard and Poor’s, the global credit rating agency, changed the credit rating of Samsung Electronics to positive last Monday. S&P cited that Samsung’s operating performance improved as a result of its stronger position in the world’s handset market.

According to the report from S&P, the change to a positive credit rating indicates that they expect Samsung Electronics to continue its improved operating performance because of its strong positions in the global market and apparent technological leadership. Moreover, the agency confirmed that they change Samsung’s corporate credit and debt rating to “A”.

In addition, S&P reported that Samsung’s share of the global smartphone market was 30 percent in the year 2012, which is a significant increase from 4 percent during the year 2009. This increase in market share is attributed to the success of its Galaxy range of smartphones.

Recently, Samsung reported an operating profit of 6.72 trillion Won, which is its record high so far, in the second quarter of this year. It exceeded last year’s record high operating profit for three consecutive quarters.

Over 80 percent of Samsung’s sales are coming from outside the country. In fact, its cash and cash equivalents reached more or less 25 trillion Won, which is enough to cover roughly 14 trillion Won in total debts as of the end of March.

According to Park Jun-hong, a credit analyst at S&P in Hong Kong, because of the success of the Galaxy range of smartphones, Samsung’s operating performance in recent quarters were very strong. However, Jun-hong added that high concentration of earnings attached to mobile devices could create fluctuations in earnings at some point.

Park said that natural volatility and the slowdown of the global economy might pressure the profitability of a few divisions of Samsung. However, he also said that this risk can be toned down by the fact that Samsung has a well-diversified business portfolio.

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