E-commerce company MercadoLibre on Wednesday posted a net profit below analyst expectations, hurt by currency effects and weaker demand in Argentina, while a boost to free shipping in Brazil hurt margins but helped beat revenue forecasts.
Uruguay-based MercadoLibre, Latin America’s most valuable company by market capitalization, posted a net profit of $421 million for the July-September quarter, up 6% year-over-year, but below the $481 million expected by analysts in an LSEG survey.
Net revenue for the firm, which operates an e-commerce platform in Latin America and fintech Mercado Pago, grew 39% to $7.4 billion, above the $7.2 billion expected by analysts, as sales measured by Gross Merchandise Value (GMV) rose 35% in constant currency terms.
“We made investments in Brazil and we are already seeing the results of those investments,” CFO Martín de los Santos told Reuters.
In June, MercadoLibre lowered its free shipping threshold in Brazil, its main market, helping the country achieve a 34% increase in GMV and its highest growth in unique buyers since the beginning of 2021.
However, the initiative continued to impact profitability, with its operating margins, or EBIT margins, falling to 9.8%, the lowest level since the fourth quarter of 2023.
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Sales in Argentina slowed compared to the first half of the year, which also contributed to the contraction of margins, as greater economic instability caused lower demand, de los Santos said, adding that, on the other hand, operations in Mexico were accretive to margins.
MercadoLibre management has indicated that the company will not pass up growth opportunities that could be key to long-term development, even if those opportunities generate pressure on margins in the short term.
The firm’s EBIT (earnings before interest and taxes) increased 30% year-on-year to $724 million, but was below the $752 million estimated by analysts.
The CFO said that the devaluation of the peso and the higher tax rate in Argentina also negatively impacted MercadoLibre’s net profit.
As for fintech Mercado Pago, its loan portfolio increased 83% year-on-year to $11 billion, driven primarily by credit cards, while the 15- to 90-day delinquency rate fell to 6.8% from 7.8%.
The total payment volume of Mercado Pago’s acquiring operations grew by 32% to $47.7 billion.
With information from Reuters.
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