Chinese e-commerce giant Alibaba Group Holding reported a 2 per cent increase in revenue for its fourth quarter, while also approving a full spin-off of its Cloud Intelligence Group, as well as external financing for multiple business units, in its first earnings report since the company announced a major restructuring earlier this year.
The cloud business, one of the company's most important growth engines, will be listed in 12 months, said Alibaba Group chairman and CEO Daniel Zhang Yong. In the quarter ending March 31, cloud revenue decreased by 2 per cent from a year ago to 18.6 billion yuan, contributing 9 per cent of the group's total revenue.
Zhang, who took direct control of the cloud unit last December, said the revenue drop was partially a result of "external changes in the marketing environment and customer composition". He added that the company's restructuring and innovation efforts, such as the launch of its new large language model Tongyi Qianwen, will bring "greater long term returns."
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The company said that it expects the listing of Freshippo, its supermarket chain, will be completed in the next 6 to 12 months, while it is targeting completion of the Cainiao IPO in the next 12 to 18 months.
Alibaba also said it has formed a capital management committee to undertake a "comprehensive capital management plan to enhance shareholder value". The committee is chaired by Zhang, with members including director and executive vice chairman Joseph Tsai, director and president J. Michael Evans, and director and former chief financial officer Maggie Wu.
The Hangzhou-based company, which owns the South China Morning Post, reported revenue of 208.2 billion yuan (US$30.3 billion) for the three months ended March 31, representing a 2 per cent year-on-year increase. The result was just below the consensus estimates of 209.2 billion yuan, according to analysts polled by Bloomberg.
Alibaba's net income swung to a profit during the quarter, as expected. Net income reached 23.5 billion yuan during the quarter, compared with last year's 16.2 billion yuan loss when investments eroded its profitability, exceeding analysts' expectations of a 15.1 billion yuan profit. Adjusted profits were 27.4 billion yuan, up 38 per cent from a year ago.
The company said the higher income was "primarily due to net gains arising from the increases in the market prices of our equity investments in publicly-traded companies".
"We are taking concrete steps towards unlocking value from our businesses and are pleased to announce that our board has approved a full spin-off of the Cloud Intelligence Group via a stock dividend distribution to shareholders, with intention for it to become an independent publicly listed company," said Daniel Zhang Yong, chairman and CEO of Alibaba Group.
During the conference call on Thursday night, Zhang said the target date for the cloud listing was 12 months.
Toby Xu, Alibaba's chief financial officer, said "the board has approved the process to start external financing for Alibaba International Digital Commerce Business Group; exploration of an IPO for Cainiao Smart Logistics Group; and execution of an IPO for Freshippo."
Alibaba's Hong Kong-listed shares closed up 2.7 per cent to HK$87.75 on Thursday, ahead of the latest earnings.
This was Alibaba's first financial statement after the tech conglomerate announced in March its largest-ever corporate restructuring. Under the plan, the company aims to reorganise its sprawling business into six independently-run entities, each potentially seeking their own fundraising avenues through IPOs.
For the full year, Alibaba reported revenue of 868.7 billion yuan, representing a 2 per cent year-over-year increase. Net income reached 72.5 billion yuan, compared with 62 billion yuan a year ago.
People walk past the logo of Alibaba Group during the CeBit exhibition in Germany. Photo: dpa alt=People walk past the logo of Alibaba Group during the CeBit exhibition in Germany. Photo: dpa>
The improved financial results and company restructuring come amid a rebound in economic activity in China following three years of strict Covid-19 controls. National retail sales rose by 18.4 per cent year on year to 3.49 trillion yuan in April, according to government data released earlier this week.
During the March quarter, sales for Alibaba's China commerce segment, which accounts for 65 per cent of the group's total revenue, decreased 3 per cent year on year to 136.1 billion yuan. Despite a "mid-single-digit" year-on-year decline in gross merchandise value (GMV) on Taobao and Tmall during the latest quarter, the GMV in March alone was positive due to strong growth in the fashion and healthcare categories, according to the financial report.
In contrast, sales from Alibaba's international commerce business surged 29 per cent year on year to 18.5 billion yuan during the quarter, as its Lazada, AliExpress, Trendyol and Daraz platforms saw their combined order volume grow by 15 per cent in the period.
A trader works near an Alibaba screen display at the New York Stock Exchange, March 28, 2023. Photo: Reuters alt=A trader works near an Alibaba screen display at the New York Stock Exchange, March 28, 2023. Photo: Reuters>
Trudy Dai, Alibaba's president of core domestic e-commerce, said the company will double down on efforts to cut the costs for merchants. Jiang Fan, in charge of international commerce, said that after a challenging year, business has recovered and is back on a growth track.
Cainiao's revenue grew 18 per cent year on year to 13.6 billion yuan, accounting for 7 per cent of total revenue in the March quarter, primarily driven by increasing revenue per order from international fulfilment solution services, as well as increasing demand for consumer logistics services.
Revenue from Alibaba's local consumer services segment increased 17 per cent to 12.5 billion yuan, primarily driven by GMV growth of Ele.me, accounting for 6 per cent of total revenue.
During the quarter, Alibaba's total employment figures decreased by 4,524 to 235,216.
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