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ECONOMY | 06-05-2022 09:08

MercadoLibre posts record revenue, braces for macro jitters

Latin American e-commerce retailer grew its revenue more than forecast in the first quarter; Company plans to invest some US$10 billion across the region this year.

Latin American e-commerce retailer MercadoLibre Inc grew its revenue more than forecast in the first quarter, boosting optimism that the company will continue to hold sway in a region where online competition is getting fiercer. 

Net revenue in the first three months of the year rose 63 percent from a year earlier to US$2.2 billion, according to a statement Thursday, topping the US$2 billion average estimate of analysts surveyed by Bloomberg. The Buenos Aires-based company reported gross merchandise volume of US$7.7 billion, also beating expectations.

MercadoLibre saw a surge in user adoption during coronavirus lockdowns, and continues to grow even as most countries in the region reopen. That’s partly because the company also offers products such as in-store payment services that benefit from reopenings, said Chief Financial Officer Pedro Arnt. Still, he pointed to a challenging year ahead, with high volatility in global markets, rising commodity prices, and macro challenges across Latin America. 

“We’ve entered a period of increased uncertainty,” he said in an interview from Montevideo. “The business has always been very resilient. We continue to trust in that, but it’s a year with many global and local challenges.”

The company is looking to invest about US$10 billion across the region this year in capital and operational expenditures, said Arnt. Previously the company had mentioned plans to spend US$3.4 billion in Brazil and US$1.5 billion in Mexico this year. Earlier in the week, it announced plans to boost direct employment by 46 percent, hiring 14,000 people across six countries in the region. 

“Because of the scale our business now has and the size it’s been able to achieve over the past two-year cycle, we’re at an attractive moment where we think we can sustain heavy investment but also consistent improvements in our profit generation,” he said.

MercadoLibre is expecting to use its cash to fund the investments, said Arnt, noting that the company continues to maintain its preference of growing organically rather than through acquisitions. 

“In this environment where cash is absolutely king, it’s even more likely that we will continue to stick to our preference to build,” he said. 

The company’s fastest-growing portion by revenue is its fintech arm, with 108 percent growth compared to the first quarter in 2021. Its credit portfolio rose to US$2.4 billion, up from about US$1.7 billion by the end of 2021, and Arnt said the company has “no intent to slow down” even as a more varied mix of credit offerings may lead to some deterioration in the credit business. 

“Periods of higher inflation and eco instability disimprove the environment for credit, no way around that,” he said. “But the level of data we have about our consumers and the short duration nature of our credit books make us well-equipped to navigate these macro turbulences.”

Shares in MercadoLibre rose 5.2 percent in postmarket trading in New York after the results. The stock is down 32 percent since the start of the year, punished by surging US rates. MercadoLibre has 24 buy-equivalent recommendations from analysts, three holds and no sell, Bloomberg data show. 

Other key points from the interview:

– Crypto transactions, which were launched in Brazil last year, are seen as a “central part” of the company’s expansion into products that promote savings

– The company is in talks with regulators in various countries to get the green light to expand that offering

by Carolina Millan & Vinícius Andrade, Bloomberg

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