E-commerce giant MercadoLibre’s 4th-quarter profit stable after tax hit

Feb 22, 2024

SAO PAULO, Feb 22 (Reuters) – Latin American e-commerce giant MercadoLibre on Thursday reported a $165 million fourth-quarter net profit, as higher sales were offset by a tax hit, with results flat versus the year-ago period.

The net profit was dented by two one-off taxes provisions in Brazil totaling $351 million, and came in below the $356 million net profit forecast by analysts polled by LSEG.

MercadoLibre said the provisions should not have a material cash impact going forward.

Senior vice president of strategy and corporate development Andre Chaves told Reuters that the market had been prepared for the tax provisions, following local court rulings linked to differential Brazilian rates and payments to Argentina.

Excluding the one-offs, MercadoLibre’s net profit would have been $383 million.

MercadoLibre posted a 42% year-on-year increase in quarterly net revenues to $4.26 billion, bringing income from operations – excluding one-offs – to $572 million from $322 million a year earlier. Sales in Brazil, its largest market, rose 35% as measured by gross merchandise volume.

Analysts had expected net revenues of $4.12 billion.

MercadoLibre, nicknamed the Amazon of Latin America, has reported strong growth over the last quarters, but analysts have questioned its ability to maintain its pace of growth with profitability.

The firm said its quarterly operating margin without one-offs stood at 13.4%, compared with 18.2% in the third quarter, but due to adjustments it was unclear how comparable the numbers were.

“Seasonally, we always have margin compression in the fourth quarter,” Chaves said, adding that MercadoLibre was impacted by factors such as more promotional spending, notably for Black Friday in Brazil and Buen Fin in Mexico.

Brazil brings in more than half the company’s net revenues, while Argentina and Mexico each contribute around a fifth.

At the company’s fintech arm, Mercado Pago, net revenues grew 34%. (Reporting by Andre Romani; Editing by Leslie Adler)

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