Samsung E&A Posts 184% Profit Surge, Announcing 780 Billion Won Share Buyback

Samsung Electronics Chairman Lee Jae-yong (second from right) tours key sections of the Al Dhafra gas-fired power plant construction site in Abu Dhabi, United Arab Emirates, on Oct. 21 (local time). (Samsung Electronics) Samsung E&A reported third-quarter operating profit of 500.6 billion won, or approximately $378.44 million, nearly double market expectations and up 183.6% from a year earlier. The stronger-than-expected earnings, coupled with a 780 billion won share repurchase plan, have fueled investor optimism over the company’s profitability and shareholder returns. In a regulatory filing on Oct. 22, Samsung E&A reported consolidated third-quarter revenue of 2.91 trillion won and operating profit of 500.6 billion won, well above market estimates of approximately 250 billion won. Net profit rose 37.7% year on year to 216.7 billion won, while cumulative operating profit for the first nine months reached 961.9 billion won. The earnings beat was driven by revenue recognition from major chemical plant and advanced industrial projects, along with productivity gains from technology-driven improvements in project execution. One-time gains totaling approximately 230 billion won included around 100 billion won in provision reversals related to the Yanbu wind power project in Saudi Arabia, as well as design efficiency incentives and gains from final project settlements. Securities analysts estimate that operating profit would still have reached approximately 270 billion won excluding these items, pointing to stronger underlying profitability. Order intake also remained strong. New orders totaled 9.4 trillion won in the third quarter, bringing cumulative orders for the year to 17.1 trillion won. A 4.7 trillion won fertilizer plant project secured in Saudi Arabia last month was a major contributor. The order backlog stood at 27.2 trillion won at the end of September, equivalent to approximately three years of revenue based on last year's sales. Buoyed by its strong performance, Samsung E&A sharply raised its full-year targets. The company increased its new order guidance from 12 trillion won to 19 trillion won and its operating profit forecast from 800 billion won to 1.4 trillion won. It also raised its revenue target to 11 trillion won. Samsung Electronics Chairman Lee Jae-yong's recent visit to a construction site in the United Arab Emirates, where he discussed the group's Middle East business strategy, has also raised expectations for further regional expansion. The company's shareholder return initiative provided another boost to investor sentiment. Samsung E&A's board approved the repurchase of approximately 780 billion won worth of treasury shares over a three-month period beginning Oct. 23. Of that amount, shares worth 690 billion won are slated for cancellation, while the remaining 90 billion won will be used for employee bonuses and other compensation purposes. Brokerages have responded by raising their price targets for Samsung E&A. NH Investment & Securities lifted its target to 86,000 won, while Hanwha Investment & Securities and Samsung Securities raised theirs to 84,000 won and 83,000 won, respectively. Analysts are increasingly focusing on whether improvements in project execution, including design optimization and modularization, can translate into sustained structural gains in profitability rather than one-time earnings boosts. Market observers expect earnings growth to continue next year, supported by semiconductor plant expansion and additional chemical plant project opportunities in the Middle East. Reduced capacity among European and Japanese competitors could also create a more favorable environment for new orders. Samsung E&A shares surged 16.14% on the day of the earnings announcement and gained more than 6% in morning trading on Oct. 23, extending their winning streak to three consecutive sessions.