(Bloomberg) — Internet investment giant Prosus and its parent company Naspers AG reported their e-commerce business turned a profit for the first time as new Chief Executive Officer Fabricio Broisi prepares to take over in July.
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The group's e-commerce business, excluding its Tencent Holdings stake, posted an operating profit of $38 million for the year ended March 31 after successfully expanding after years of investment, it said in a statement on Monday. That was up from a $413 million loss in fiscal 2023 for the unit, whose portfolio includes companies ranging from Brazil's iFood to India's PayU.
The result will give Breusi a boost as the group struggles with a tough market for internet businesses and a legacy of a convoluted business structure that confounded Breusi's predecessor, Bob van Dijk.
Cape Town-based Naspers is one of the world's biggest technology investors and listed its internet unit Prosus in Amsterdam five years ago, but has left both companies with one CEO. Apart from its big e-commerce investments, the group owns a 25% stake in China's Tencent, whose value has soared, distorting the rest of the business. Van Dijk stepped down last September, shortly after unwinding a complex cross-shareholding structure between the two companies to remove the distortion.
The e-commerce division has turned profitable thanks to improved efficiency in core divisions like classified advertising, food delivery, payments, and fintech, and cost-cutting measures, including the closure of unprofitable units. IFood, the Brazilian online food delivery business run by CEO-designate Broisi, has used artificial intelligence to cut costs by $100 million.
Broisi discussed the technology's potential in an interview with Bloomberg News.
“I've been a big adopter of new technologies and learning quickly about what's possible,” he said. “With billions of customers around the world and the game-changing technology of AI, the opportunity is 100 times greater.”
Broisi will become CEO on July 1, succeeding interim head Irving Tu, who will also serve as chief investment officer and president.
Prosus Chief Financial Officer Basil Sgoedos said in the same interview that the group's e-commerce sales grew 19% annually, which he compared with an internal analysis that showed peers growing at around 7%.
“This is central to improving profitability, as we deploy AI and continue to better manage costs,” Sgoedos said. “Growth, profits and margin expansion are our focus for the year ahead.”
The group has sold some of its Tencent shares and bought back shares to eliminate the discount to the trading price. Broisi said the group has reduced the discount to 36% from 62% through a share buyback program. The program will continue as long as the discount remains high, Tu added.
Full-year net income fell 35 percent to $6.61 billion, beating the $6.25 billion forecast in a Bloomberg survey of analysts.
The deal is done
The company currently boasts $14.6 billion in cash, primarily reserved for investment.
Tu said mergers and acquisitions remain an important part of the group's growth plans: “Whether it's a minority investment or acquiring a controlling stake, we're looking at it quite actively.”
Prosus shares were up 0.56 percent at 34.75 euros as of 11:40 a.m. Amsterdam time on Monday. Naspers was up 3.72 percent Johannesburg time.
–With assistance from Thomas Hall and Andre-Pierre Du Plessis.
(Updated with interview comments from CEO, CIO, and CFO)
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