Samsung profit forecast hits right note despite smartphone woes

Samsung Electronics says it is expecting a 6% rise in quarterly profits to $7bn (£5.6bn) despite the cost of a damaging recall of its latest smartphone.

The South Korean firm, which is due to release the full results later this month, is expected to confirm then that earnings from its component businesses, including memory chips and displays, offset the growing phone bill.

It recalled 2.5 million units of the Note 7 last month - just two weeks after its debut - amid reports that batteries were overheating and catching fire.

The company is now investigating a claim that a replacement model - declared safe by the company - sparked the evacuation of a Southwest airlines plane before take-off because it was emitting smoke.

Analysts estimate the cost of the recall could be as much as $1.8bn (£1.4bn) as Samsung ships the phones back and replaces them with new Note 7 phones and safe lithium-ion batteries.

Kim Young Woo, an analyst at SK Securities, is expecting to see profits for Samsung's mobile phone business at their lowest level this year when the results are released.

The company's share price has hit a record level amid expectations the world's largest maker of computer memory chips and dominant supplier of advanced mobile phone screens will grow profitability.

Activist investors have also been calling for the company to be split up to maximise their returns.

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