Alibaba conjures up 37pc profit rise

PUBLISHED : Friday, 13 May, 2011, 12:00am
UPDATED : Friday, 13 May, 2011, 12:00am, the world's largest business-to-business e-commerce site, reported a 37 per cent profit growth in the first quarter of this year, beating market expectations.

But the company, part of Hangzhou-based internet conglomerate Alibaba Group, which is 43 per cent owned by Yahoo, said business growth would slow as it focused on quality rather than quantity.

The Hong Kong-listed company said net profit in the first three months of this year reached 452.5 million yuan (HK$541 million), compared with 330 million yuan a year earlier. Alibaba's earnings beat an average forecast of 389.24 million yuan by Reuters.

Revenue climbed 25.5 per cent to 1.532 billion yuan. The first-quarter year-on-year sales growth slowed down from 37.6 per cent in the fourth quarter of last year.

'We expect revenue to grow, but the rate will not be the same as in the previous years,' said chief executive Jonathan Lu Zhaoxi. 'The view of the revenue for coming quarters would be relatively flat compared to the first quarter, but it will represent continued growth from 2010.' connects small and medium-sized firms that have little or no marketing budget with buyers on vast trading websites. It operates in more than 240 markets worldwide.

The company's business largely hinges on mainland exports and its revenue comes mainly from paying members who use the site.

Alibaba said it had shifted its focus from attracting more members to boosting its 'value-added' services.

The fine-tuning of the business model allows to collect more fees from each customer, though overall sales growth would slow.

At the end of March, the number of paying members was up 26.4 per cent year-on-year to 832,469. This was down from the 31.6 per cent year-on-year growth recorded in the fourth quarter last year.

The company said it saw opportunities to leverage industry and user data to create more value for small businesses. Lu said operations under the new leaders of the company had stabilised as reduced high-risk suppliers to avoid online frauds.

Zhu replaced former chief executive David Wei Zhe in February after an investigation found that more than 2,000 online vendors used trading websites to defraud international buyers during the past two years.

Separately, its parent Alibaba Group will restructure ownership of its online payment business, known as Alipay, part of its effort to get a licence from the People's Bank of China, Yahoo said in a government filing.

Chief executive Jack Ma Yun, of Alibaba Group, will take full control of Alipay as a way to accelerate the licence application process.

Beijing is more likely to allow a domestic company rather than a Sino-foreign joint venture to run an online payment businesses.

Yahoo and Softbank, another shareholder of Alibaba Group, are in talks with Alibaba management about the ownership restructuring.