The Chinese group Alibaba slowed down its growth rate and earned 59% less in its last fiscal year, which ended on March 31, according to the accounts report presented on Thursday. The government restrictions to curb covid-19 and the offensive launched by the Chinese authorities more than a year ago against the big technology companies have had an adverse effect on this giant of online sales. However, some of these limitations have played in favor of the firm, which has exceeded market forecasts with an increase in revenue of 9%. Although the bottlenecks in distribution have slowed down its activity, the closures decreed by the Chinese authorities in the first three months of the year have favored trade on-line.
Business is not going smoothly for Alibaba. The company obtained a net profit of 61,959 million yuan (8,597 million euros) in its last fiscal year, which represents a year-on-year drop of 59%, a decrease that it attributes “to the losses caused by the decrease in prices” of your capital investments. The company’s shares, which have lost about a third of their value so far this year and 74% compared to their all-time high – of $310 in October 2020 – have soared more than 14% in Wall Street due to the optimism that is breathed from the report.
“Despite the challenges generated by the macroeconomic environment, this quarter we have obtained prosperous results, with revenue growth of 9% year-on-year (204,052 million yuan, about 28,310 million euros), while total profits for the year tax increased by 19% year-on-year (853,062 million yuan, about 118,370 million euros)”, reported Toby Xu, financial director of the Alibaba Group. The director and CEO of the company adds that a historic milestone has been achieved by exceeding 1,000 active users within China and 305 million abroad in the last quarter.
These results do not reflect the effects of the stoppage derived from the confinement of Shanghai, which began at the end of March and will last, according to the local government, until the beginning of June. The closure of the financial capital of China, where the largest freight port in the world is also located, as well as the adverse situation that other important cities in the country are going through, will inevitably end up weighing down the performance of the current quarter and will have a logical impact negative at the end of the next fiscal year.
In fact, although Alibaba usually offers financial guidance, this time they have been cautious, alleging difficulties in making forecasts in the midst of so much uncertainty. The current outbreak of omicron has caused Chinese economic activity to register its biggest contraction in two and a half years in April, due to the inflexibility of the authorities when applying their strict covid zero policy, which implies confinements, massive tests and centralized quarantines.
Supply chain disruptions and declining consumer spending caused Alibaba’s biggest local rival, JD.com, to post a €416m loss in the first quarter and Chinese gaming and networking giant social media, Tencent Holdings, reported its worst quarterly sales result since going public in 2004.
He knows in depth all the sides of the coin.
But not only the pandemic has undermined investor confidence. The Chinese authorities have been putting the magnifying glass on the big technology companies for eighteen months, and one of the most affected has been the firm founded by the charismatic Jack Ma in 1999. After Ant Group (Alibaba’s financial arm) saw its exit to the Stock Exchange of Hong Kong in November 2020 – which was to be the largest initial public offering on record – in April 2021, Alibaba was fined a record fine for violating antitrust laws (2.6 billion euros at the current exchange rate).
Although that sum of money did not make much of a dent in the company’s fortunes (in the last three months of 2020 alone, the company had generated more than 11,000 million euros in profits), after that, the campaign of the regulators to curb the runaway growth of the powerful technology and Internet sectors in the Asian giant has not stopped tightening. Last summer, Beijing launched an investigation into Didi Chuxing, the nation’s leading ride-sharing platform, for alleged misuse of user data, which ended up causing its exit from the US stock market. The Cyberspace Administration of China, the country’s Internet regulator, which until then had no say in financial matters, has since required all technology companies with more than a million users to conduct a cybersecurity review before to trade abroad.
As a result of the Didi case, the United States toughened the requirements for Chinese companies that want to launch an initial public offering on the New York Stock Exchange and requires companies from this Asian nation to explicitly clarify whether they have permission from the Chinese government. to list on the US stock market. In addition, Washington demands full access to the account books of these companies and has threatened to remove them from the list of not being able to review them, a requirement that Beijing opposes because it is foreign inspection.
The Chinese authorities’ crusade against technology, however, could be about to experience a 180º turn. Last week, Premier Li Keqiang encouraged companies in the sector to list on domestic and international markets, a step analysts say has been taken to offset mounting economic losses from the pandemic. Although Li assured that the government would create a stable, transparent and fair regulatory and business environment for technology companies and the digital economy, experts believe that his speech will not restore investor confidence, as it exposes the lack of a long-term focus. , as the restrictions could be implemented and lifted without notice, according to the whims of Beijing.