The Korean maker of rechargeable batteries and plasma displays, posted a net profit of KRW86.51 billion ($82 million) in the three months ended June 30 from KRW68.42 billion a year earlier.
Samsung Mobile Display, a joint venture of Samsung SDI and sister company Samsung Electronics, currently dominates the market for organic light emitting diodes, or OLED, which require less power and offer clearer picture quality and a faster response time than conventional LCD displays. OLED screens are used in mobile phones and have more than a 90% market share.
The result was worse than expected. Six analysts polled by Dow Jones Newswires had on average forecast a net profit of KRW104.7 billion.
Operating profit rose 6.7% to KRW89.2 billion from KRW83.6 billion a year earlier, largely due to brisk sales of tablet computing devices and smartphones, while sales also rose 1.7% to KRW1.349 trillion from KRW1.327 trillion.
Analysts expect Samsung SDI's earnings to improve in the quarters to come, largely due to brisk sales of smartphones and tablet devices as it supplies rechargeable polymer batteries to global technology giants, including Apple Inc. (AAPL) and Samsung Electronics Co. (005930.SE).
"In the second quarter, Apple sold around 9.3 million iPad devices and some expect it to sell around 14 million in the third quarter, which will give a boost to Samsung SDI's earnings in the current quarter as well, regardless of the global economic situation," said KTB Securities' analyst Park Sang-hyun.
However, its acquisition of the solar cell operations from Samsung Electronics is expected to weigh on Samsung SDI's earnings, at least over the next two years, analysts say.
In May, Samsung Electronics said it would transfer its solar cell operations to the battery maker for KRW160.8 billion to allow the electronics giant to focus on its core businesses in memory chips, flat panels and mobile devices. Samsung SDI will invest KRW2.2 trillion in the business by 2015.
Samsung SDI targets annual sales of KRW13 trillion ($12.4 billion) by 2015, helped by rising demand for rechargeable batteries used in consumer electronics and vehicles as well as its solar cell operations.