Samsung posts Q3 profit surge, announces $10bn share buyback

South Korea's Samsung Electronics pulled out of an extended earnings dive Thursday, reporting a nearly 30 percent surge in third-quarter net profit and announcing a $10 billion share buyback.

Favourable exchange rates and a renewed focus on components were behind the profit jump, which provided a robust response to those who had warned Samsung would be unable to shake off the loss of smartphone market share to Apple Inc in the premium segment, and to Chinese rivals at the lower end.

Net profit in the July-September period stood at 5.46 trillion won ($4.8 billion) -- an increase of 29.3 percent on the previous year and snapping a streak of seven consecutive quarterly declines.

The cash-rich electronics giant also announced a "special shareholder return initiative program" involving an 11.3 trillion won share buyback and cancellation.

"Samsung believes that the current share price and the market value of Samsung Electronics are severely undervalued both in terms of the ability to generate earnings and also in terms of the underlying asset or equity value of the company," it said.

The announcement saw Samsung Electronics shares jump 4.3 percent in early morning trading.

The conglomerate's board has approved 4.2 trillion won for the first phase of the buyback program, which will start on October 30 and last for approximately three months.

- Surging semiconductor business -

Though the size of the third-quarter turnaround was partly due to the company's poor performance last year and a weakening Korean currency, it also showed the payback from investment in its semiconductor division.

"The memory market saw an increase in demand... driven by an overall increase in capacity in chips and the launch of flagship smartphones and increased demand by data centres," the company said in an earnings statement.

Operating profit in the semiconductor business surged to a quarterly record of 3.6 trillion won, up 60 percent from a year ago.

Samsung sets prices for most components in US dollars and benefits when those sales are translated back into won if the Korean currency is weak.

The US dollar was about 11 percent higher against the won at the end of the quarter, compared with a year earlier.

"In the fourth quarter, the company expects earnings to decline from the earlier quarter, as it does not expect the foreign exchange rate to have such a positive effect," the company said.

Samsung's mobile unit also saw a 40 percent on-year increase in third-quarter operating profit, with a "significant increase" in sales of smartphones over the period, the company said.

However, price cuts to the top end Galaxy S6 and Galaxy S6 Edge smartphones and increased shipments of mid-to-low end smartphones, meant the unit's net profit actually declined compared to the second quarter.