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ECONOMY | 02-05-2024 20:21

MercadoLibre weathers Argentina tumult with Mexico, Brazil gains

MercadoLibre saw its profit surge in the first quarter, with strong growth in Brazil and Mexico helping offset the hit from Argentina’s currency devaluation. 

Latin American e-commerce and fintech provider MercadoLibre Inc saw its profit surge in the first quarter, with strong growth in Brazil and Mexico helping offset the hit from Argentina’s currency devaluation. 

Net income for the three-month period ended March totalled US$344 million, a 71 percent increase from a year earlier. That compares to the US$313-million average forecast by analysts tracked by Bloomberg, and also incorporates a negative US$10-million impact due to some changes to its reporting method unveiled Thursday. Revenue rose 36 percent from a year earlier to US$4.3 billion.

The devaluation of the Argentine peso under President Javier Milei “shrank the size” of the firm’s highly profitable local business, while also affecting consumption, according to Chief Financial Officer Martin de los Santos. Still, the margin compression seen in Argentina was “more than compensated” by improvements in Brazil and Mexico, he said. 

There are “some tough headwinds from Argentina,” de los Santos said in an interview. “We’ve seen it in the past, we’ve been through it. The good thing is our marketplace tends to be very resilient to this kind of situation.”

Shares jumped as much as 8.8 percent in post-market trading before trimming some gains. 

Gross merchandise volume totalled US$11.4 billion, also ahead of estimates, while the loan book rose to US$4.4 billion amid a pickup in the credit-card business in Brazil and Mexico. MercadoLibre has grown “a lot more confident” in its underwriting capabilities as it gathers more data from customers, he said. 

The Montevideo, Uruguay-based company announced updates to the way it reports some lines including the exclusion of peer-to-peer transfers from its total payment volume, which led to a lower total number of US$40.7 billion for the first quarter. 

It also reclassified its fintech division Mercado Pago’s interest income and altered the way it books some expenses in its logistics arm Mercado Envios — which ended up having a positive impact on net revenue. 

Founded in 1999, MercadoLibre is now Latin America’s second-most valuable publicly listed company with a market capitalisation of US$76 billion. Shares had been down about 4.5 percent this year, spurred by a selloff following full-year earnings in February when the company announced a series of one-off costs that caused it to miss estimates on several metrics.  

The company reported 53.5 million unique buyers through its e-commerce arm and 49 million monthly active users for its fintech division. The number of users for its asset management service nearly doubled in the past year with strong growth in Argentina and Mexico, the company said in the release.

Last month, MercadoLibre announced plans to add 18,000 jobs this year — with the bulk in Mexico — which would leave its workforce at about 76,000 people by year-end. Investments in its biggest market of Brazil will grow 21 percent this year to 23 billion reais (US$4.5 billion).

by Vinícius Andrade, Bloomberg

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