Alibaba hit by Covid reports 60% decline in full-year profits

Chinese e-commerce and media giant Alibaba said Thursday its profit fell 59% in the previous financial year, joining a number of technology firms reporting disappointing results following strict Covid-19 restrictions and a sector crackdown.

The Hangzhou-based company said macro challenges impacted supply chains and consumer sentiments as it announced a loss of 16.2 billion yuan ($2.56 billion) for the January to March quarter. However, the company said it would not issue a forecast for the ongoing financial year, citing pandemic-related risks and uncertainties.

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The Chinese economy has been hammered in the past few months by the fallout from Covid curbs, including lockdowns and transportation restrictions that have kept consumers at home, pushed up urban unemployment rates, and disrupted supply chains.

Alibaba also had to face a wide-ranging crackdown on alleged anti-competitive practices by China’s tech giants, with officials increasing scrutiny in late 2020.

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Alibaba’s digital-payments affiliate Ant Group cancelled its IPO at the last minute and was fined a record $2.75 billion for alleged unfair practices. Ant Group reported a profit of around 22 billion yuan for the quarter ended December, compared with 21.76 billion yuan a year ago.

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It reported fourth-quarter revenue that exceeded market expectations, as growing demand for some of its niche online shopping services in China offset weakness at its primary marketplaces caused by the country’s COVID-19 lockdowns. Alibaba’s consolidated revenue surged 9% to 204.05 billion yuan ($30.35 billion) in the quarter. Analysts on average had expected revenue of 199.25 billion yuan, according to Refinitiv data.

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Annual active consumers on its platforms reached around 1.31 billion for the fiscal year, including over 1 billion consumers in China for the first time.

Net income attributable to shareholders declined 59% to 61.96 billion yuan in the fourth quarter ended March 31, 2022, primarily due to losses associated with its equity investments in public traded companies.

US-listed Alibaba shares, which have lost nearly one-third of their value so far this year, were up around 5% in the premarket.

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Full-year profit came to 62-billion yuan ($9.8 billion) for the latest financial year.

“Since mid-March 2022, our domestic businesses have been significantly affected by the Covid-19 resurgence in China, particularly in Shanghai,” the company said.

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“Considering the risks and uncertainties arising from Covid-19… we believe it is prudent at this time not to give financial guidance as we typically do at the start of the fiscal year,” it added.