Alibaba posts first-quarter profit despite fine as revenue soars 34%

Hangzhou company's annual active consumers reached about 1.18 billion for the 12 months ended June 30

Alibaba Group posted a first-quarter net profit despite paying a hefty anti-trust fine, with the company rebounding from a loss in the previous quarter.

The Hangzhou company’s net income attributable to ordinary shareholders was 45.14 billion Chinese yuan ($7bn), down from 47.6bn Chinese yuan in the previous year.

Quote
We are investing our excess profits and additional capital to support our merchants and invest in strategic areas to better serve customers and penetrate into new addressable markets
Maggie Wu, Alibaba’s chief financial officer

Revenue for the April-June period soared 34 per cent annually to 205.74bn yuan, fuelled by growth in the company's China commerce retail business and its international retail and Cainiao logistics businesses. Revenue was up more than 11.4 per cent on a quarterly basis.

“Alibaba started the new fiscal year by delivering a healthy quarter. Over more than 20 years of growth, we have developed a company that spans across both consumer and industrial internet, with multiple engines driving our long-term growth,” said Daniel Zhang, chairman and chief executive of Alibaba.

Annual active consumers of the Alibaba ecosystem across the world reached nearly 1.18 billion at the end of June quarter, an increase of 45 million from the March quarter. This includes 912 million consumers in China and more than 265 million consumers overseas served by companies such as Lazada, AliExpress, Trendyol and Daraz.

Revenue from the China commerce retail business in the quarter was more than 135.8bn Chinese yuan, an annual increase of 34 per cent. Sales from the international commerce retail business increased 54 per cent year-on-year to 10.8bn yuan.

“We believe in the growth of the Chinese economy and long-term value creation of Alibaba,” said Mr Zhang.

“We will continue to strengthen our technology advantage in improving the consumer experience and helping our enterprise customers to accomplish successful digital transformations.”

The company’s cloud computing sales surged 29 per cent on an annual basis to more than 16bn yuan in the first quarter, underpinned by growth in revenue from customers in the internet, financial services and retail industries, Alibaba said.

FILE PHOTO: Jack Ma, founder of Chinese e-commerce giant Alibaba, speaks during the launch of Alibaba's office in Kuala Lumpur, Malaysia June 18, 2018. REUTERS/Lai Seng Sin/File Photo

Its net cash decreased almost 33 per cent annually to 33.6bn Chinese yuan. Free cash flow dropped more than 43 per cent to 20.7bn yuan in the quarter.

“The year-over-year decreases were mainly due to the partial settlement in the amount of 9.1bn yuan of the 18.2bn yuan anti-monopoly fine and a decrease in profit as a result of our investments in key strategic areas,” the company said.

In April, China slapped a record 18.2bn yuan penalty on the e-commerce giant after an anti-monopoly investigation found it abused its market dominance. The penalty, which was calculated on the basis of 4 per cent of Alibaba’s 2019 domestic revenue, was almost thrice the previous high of $1bn that US chip maker Qualcomm had to pay to China in 2015.

Alibaba’s digital media and entertainment arm recorded a 15 per cent jump in sales to more than 8bn yuan, driven by an increase in revenues from Youku, Alibaba Pictures and other entertainment businesses.

Revenue from innovation initiatives and others segment in the quarter was 1.4bn yuan, an increase of 37 per cent compared to a year earlier.

“We are investing our excess profits and additional capital to support our merchants and invest in strategic areas to better serve customers and penetrate into new addressable markets” said Maggie Wu, Alibaba’s chief financial officer.

“We are increasing our share repurchase programme from $10bn to $15bn, the largest share repurchase programme in the company’s history, because we are confident of our long-term growth prospects.”

The company’s revenue from local consumer services – which represents platform commissions and fees from provision of delivery services – rose 23 per cent yearly to 8.8bn yuan.

In May, Alibaba forecast revenue for the year ending March 2022 will rise 30 per cent to more than 930bn yuan, beating the analysts’ average expectations of 923.5bn yuan. This is down from the previous year’s 41 per cent.

Updated: August 3rd 2021, 9:20 PM
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