LatAm’s Mercado Libre reports triple growth in profits in Q1
E-commerce giant Mercado Libre May 3 reported triple growth in net profits during the first quarter, with fintech as the fastest-growing category within the $60 billion Latin American company.
With headquarters in Argentina, Mercado Libre booked $201 million in net income in the period, up from $65 million in the year-ago quarter.
More substantial revenue from its business units drove the improved performance, up 35% in US dollars to $3 billion.
The company, which is present in over 18 countries, draws more than half of its entire revenue from Brazil, the largest economy in the region.
Shares of Mercado Libre were up 5% in after-hours once the results were publicly known. The tech company has seen a recovery in its stock price during 2023, following a similar trend for many technology companies after a sharp repricing last year.
Fintech revenue is vital to Mercado Libre
Fintech products were a key component of the surge in revenue. The firm said that payment services, investments, and the credit card business raised income and generated a significant increase in users, which in the case of fintech amounted to over 44 million unique active clients.
Through Mercado Pago, Mercado Libre’s digital bank, fintech net revenues in U.S. dollars have grown 40% yearly. It marks a faster expansion than the e-commerce business, which expanded at 31%.
However, it is also a sharp deceleration from the triple-digit rates Mercado Pago saw a year earlier, indicating that its business might be maturing.
The fintech unit has been busy rolling out new products in the past few years, especially in Brazil. These include investments, loans, and it’s acquiring business.
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“In Brazil, our move upmarket – to serve larger merchants, including SMBs – with Point of Sale devices is still showing good results, despite decelerating,” the company said.
Mercado Pago is now looking to position itself as a full-fledged digital bank. “We now have the critical mass of services necessary for users to have their principal financial services relationship with Mercado Pago,” the company said in its letter to shareholders.
At 44 million, the number of active fintech users grew 25% yearly, it said.
Lending yet to pick up
In terms of credit, even as the company took a more cautious approach, Mercado Papgo marginally grew its $3 billion portfolio during the quarter.
The lender has been particularly wary of worsening conditions in Brazil, with interest rates now well over double digits following steep hikes from the central bank of Brazil. The firm launched a credit card business in Mexico during the quarter, but it reckoned issuances were scant so far.
At any rate, the company is still pursuing ambitious growth, even in the face of tighter financial markets.
Last month, it announced it would hire 13,000 new jobs this year, bucking a global trend of massive layoffs across large technology companies. Most new employees will be based in Mexico and Brazil, the company’s most important markets.
Since 2020, the company has quadrupled its headcount from 9,700 to almost 40,000 employees by the end of last year.
Source: Fintech News
