Rocket Internet’s Jumia has just released its Q1 2016 financial result showing that Jumia’s sales for the first quarter of the year fell by 36.6%.
The company made a total sales of EUR33.0 within the same quarter last year but the impact of Africa’s slowing down economy hit its gross revenue slumping down to EUR20.9. Nigeria is Jumia’s biggest market and the impact of the local economy did impact the company in Nigeria more than anywhere else
Jumia’s gross merchandise volume, GMV which is a term used in online retailing to indicate a total sales dollar value for merchandise sold through a particular marketplace over a certain time frame, also saw a decline from EUR56.1 last year within the same quarter to EUR51.6 in Q1 of 2016.
The company’s earnings before interest, tax, depreciation and amortization, EBITDA- a measure of a company’s operating performance, fell from EUR25.0 last year to EUR17.4 in the first quarter of this year.
The Jumia is fast burning out its cash holding and unless it gets more investment to shore up its capital base, it might become technically insolvent. Its cash position fell from EUR8.8 same quarter last year to EUR7.2.
One good thing about the result is that the company’s growth of customers is positive growing by about 136.8%. Its active customers are 1.3 million as at Q1 2016.
Giving balance to the result, Rocket internet noted that:
- GMV and net revenue negatively impacted by challenging macroeconomic environment in Nigeria – the largest country of Jumia in terms of GMV
- Net revenue further impacted by the acceleration of the shift to the marketplace model
- Gross profit and adj. EBITDA both improving in absolute terms, driven by a number of initiatives on margin and efficiency improvements as well as the successful shift to a marketplace model
As regards its operational efforts that produced the result, the company said:
- Acceleration of strategic initiatives with existing shareholders (MTN, Tigo) across all countries, and kickoff of strategic initiatives with new shareholders Axa and Orange
- Introduction of “Jumia First” in several key markets, offering Jumia customers faster delivery for all products, which are held in the Jumia distribution centers
Rocket Internet’s Jumia will have to raise more capital from existing and or new investors for it to withstand negative macro-economic challenges confronting its business in key markets especially Nigeria.
Till date, Jumia has received funding from MTN, Millicom, AXA, Orange Telecom, Tigo and Goldman Sachs. Earlier this year, the company valued itself for USD1 billion.
As the company plans to focus on hitting profit for Jumia in the next 2-3 year’s more sacrifices will have to be made.
Refocusing the eCommerce site and getting out of areas that are costing the business huge cash should be done as soon as possible. The company has to stop the bleeding before it bleeds to death.
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