Jumia makes more losses in 2019 as profitability becomes elusive

Jumia

Despite major improvements in revenue, Africa’s largest eCommerce company and online retailer, Jumia Technologies AG, said its net losses grew by more than 133% on a year on year period.

In its 2019 full-year report, Jumia said its losses rose to €227 million from €170 million posted for the full year 2018. The result further pushes ahead hopes of Jumia turning a profit anytime soon.

However, there are several positives for Jumia in this result that should be commended. The eCommerce company said its gross margin value (which is its total revenue for the year), fell by 3% to was €301 million. This was because the company corrected its earlier report that was questioned for improper sales records. While one would have thought the decline would be huge the less than 4% decline in its revenue shows Jumia is not doing badly.

The company also reported that its annual active consumers reached a record of 6.1 million and orders increased by 49% in the fourth quarter of 2019 when compared with the fourth quarter of 2018.

Moreover, there are still worrying signs as to how Jumia would navigate its current loss-heavy balance sheet. Starting with the fact that despite its sell-off of non-performing units and major market exits, its operating loss increased by 15% to €61.1 million in the fourth quarter of 2019 from €52.9 million in the fourth quarter of 2018, this further pushed its operating loss for the full year 2019 to €227.9 million.

It should be noted that while Jumia no longer has a stronger competitor in countries such as Nigeria (since Kinnevik and Naspers sold their stakes in Konga to Zinox Group), its business has not seen major changes based on its reporting.

The question has to whether Jumia will turn a profit anytime soon is becoming more difficult to answer even for the management of the company. Without making any projection or commitment, the company noted in its report that it ‘undertook a portfolio optimization initiative to enhance our business focus and align our
investments and resources with the opportunities that we believe the best support our long-term growth and path to profitability’. This is not surprising given the fact the Jumia had missed its projection to turn a profit last year. In 2016, Jumia’s chief financial officer projected that the company could turn a profit in the next three to four years.

While there are no signs that the company is under pressure from its largest shareholders such as MTN Group Limited, AXA and Millicom, its last year’s listing on the New York Stock Exchange, NYSE, has further opened up its books for more scrutiny. There is no doubt that the company has increased its reporting benchmarks, apart from the fact that its 2019 annual report now looks more detailed with a far greater level of disclosures, the next few quarters into 2020 could see its stock plummet further should company’s fundamentals such as operating losses widen and its revenue declines.

As its stands, Jumia needs to win back the confidence of the investing public, particularly, being an NYSE-listed company more questions and scrutiny would come its way. The future of Jumia says more about the future prospects of ‘booths-on-the-ground’ eCommerce business in Nigeria and Africa in general, it is, therefore, worrying that the company might further sink into losses despite its various efforts to cut away non-performing units.

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