Mercado Livre’s profit soars 71%, with Brazil and Mexico offsetting negative effects in Argentina

O Market Free announced this Thursday, 2, a 71% increase in net profit for the first quarter compared to the same period last year, exceeding analysts’ expectations, with the performance of its operations in Brazil and Mexico offsetting some negative effects in Argentine.

The company, which operates a marketplace in 18 countries and also owns fintech Market Paid, it recorded a net profit of US$344 million in the first three months of the year, against the average estimate of analysts consulted by LSEG of US$314 million.

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The e-commerce giant is the second largest company by market value in Latin America (US$73.9 billion), behind only Petrobras (US$108 billion), according to a survey by Einar Rivero, from Elos Ayta Consultoria.

The company released some changes in its earnings report, including the reclassification of the company’s interest income and expense lines. Market Paid, with a positive impact of US$99 million on net revenue, but with no effect on net profit. The changes also include a change to the terms and conditions of Market Shipping, which had a negative impact of US$10 million on net profit.

O Market Free reported net revenue of US$4.3 billion, an increase of 36% compared to the previous year and above the US$3.9 billion estimated by analysts.

Marketplace sales, its main business, increased 36% at its highest MarketplaceBrazil, and 42% in Mexico, according to an indicator measured by the Gross Volume of Marketria (GMV, its acronym in English).

Operating margins, which analysts had highlighted negatively last quarter following higher logistics costs during the year-end peak, came in at 12.4%, up from 11.2% a year earlier, not including reporting changes .

Argentina x Mexico x Brazil

The company’s chief financial officer, Martin de los Santos, told Reuters that Argentina’s macroeconomic situation had hurt margins, as a strong currency devaluation at the end of last year weighed on logistics costs and shrank its business in the region. Even so, the performance in Brazil and Mexico enabled year-on-year expansion.

“We obviously continue to operate a profitable business in Argentina. It’s just not as profitable as it used to be,” Santos said.

Argentina, where the Market Free was founded, represented 15% of its earnings before interest and taxes (Ebit) in the first quarter, up from more than 50% the previous year.

Other numbers from the period

O Market Free recorded a total Ebit of US$528 million in the quarter, an increase of 29% compared to the previous year, exceeding analysts’ forecasts of US$488 million.

For your fintech unit, the Market Free expanded its credit portfolio by more than US$600 million compared to the previous quarter, the largest increase since the beginning of 2022, to US$4.4 billion. The short-term delinquency rate rose to 9.3% from 8.2% in December, but the rate over 90 days fell to 17.9% from 18.7%.

“The fact that we have better default rates and greater profitability allows us to have more confidence in increasing our origination at consumer and merchant levels,” said Santos.