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Alibaba in warning after tepid earnings

PUBLISHED : Friday, 25 November, 2011, 12:00am
UPDATED : Friday, 25 November, 2011, 12:00am

Alibaba.com, the world's largest business-to-business e-commerce services provider, warned of continued market volatility in the near term after posting sluggish earnings growth in the third quarter.

The Hangzhou-based company, the flagship of internet conglomerate Alibaba Group, saw its net profit climb 11.9 per cent to 409.7 million yuan (HK$500.2 million), up from 366.1 million yuan a year earlier.

That increase was spurred by higher revenue from value-added services like AliExpress and greater contribution from its wholly owned US e-commerce firms, Vendio and Auctiva.

Its net profit, however, was below an average forecast of 432.23 million yuan. The earnings growth was also its slowest in nearly two years.

Revenue rose 10.6 per cent to 1.60 billion yuan from 1.45 billion yuan.

Alibaba.com, which takes cash up front from members through annual fees, also recorded a 7 per cent increase in deferred revenue and customer advances to 4.14 billion yuan from 3.87 billion yuan. As of September 30, the Hong Kong-listed firm had 787,653 paying members from 72.78 million registered users.

'Despite the stress posed by the external environment, we will stay focused on upgrading our business model and building quality, trustworthy e-commerce platforms,' chief executive Jonathan Lu Zhaoxi said yesterday.

With operations in more than 240 markets, Alibaba.com connects small- and medium-sized firms that have little or no marketing budgets with buyers on vast trading websites.

Alibaba.com described the third quarter as filled with challenges arising from the weaknesses in the US economy and the debt troubles in Europe.

'China is unlikely to prove immune to the turmoil,' the company said in its filing with the Hong Kong stock exchange. That meant achieving strong domestic consumption growth on the mainland would take more time, which 'may hinder the development of small businesses'.

A report from JPMorgan said Alibaba.com had been successful in implementing so-called trust and safety measures.

Alibaba.com's international trading marketplace, for example, has rolled out an 'on-site inspection' programme to further verify that members are legitimate businesses. An escrow service and paid order-inspection service have also given buyers extra protection when sourcing online.

'While the investments associated with these upgrades to our business will have an impact on near-term financials, we are confident we are doing what is right for our customers {minus} both sellers and buyers {minus} for years to come,' Lu said.

Shares of Alibaba.com closed 1.95 per cent higher at HK$8.88 before the company's results were announced yesterday.

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