Jumia focuses on loss reduction following downbeat Q2 results

Inflation and currency devaluations in key African markets have weighed on customer spending with the e-commerce firm.


Image : Jumia

Pan-African e-commerce company Jumia lost approximately 1m active consumers and registered 3.8m fewer orders and nearly $70m less in gross merchandise value between Q2 2022 and Q2 2023. 

The figures were revealed in the NASDAQ-listed firm’s downbeat financial results for the second quarter ended June 30, 2023, which prompted a decline in the share price of over 16% in the day after the results were released.

Revenue reached $48.5m in the second quarter of 2023, down 15% on a year-over-year basis and up 6% on a constant currency basis.

Jumia attributed the results to difficult macro-economic conditions in the key African markets where it operates.

“Continued macro challenges with elevated inflation levels affected consumers’ spending power and sellers’ ability to source goods due to import restrictions,” it said.

“The average inflation level across our footprint reached 14.1% in June 2023, with highs of 42.5% and 35.7% registered in Ghana and Egypt, respectively. In Nigeria, inflation rose to an 18-year high of 22.8% in June 2023,” the company said.

The depreciation of nine out of 10 local currencies against the US Dollar in the first half of 2023 compared to the same period in 2022 has also contributed to reducing Jumia’s revenues.

“In particular, the liberalisation of the foreign exchange regime in Nigeria, announced on June 14, 2023, led the Nigerian Naira to drop by over 60% against the US Dollar in June 2023,” it said.

Focus on loss reduction

Nevertheless, the company said that it has made progress in reducing losses in the first half of 2023, enabling it to adjust its projected Earnings Before Interest, Taxes, and Amortisation (EBITA) loss – a standard measure of a company’s profitability – from $90m to $100m in 2023 compared to the previously communicated range of $100m to $120m.

“We remain committed to reducing our losses and accelerating our progress towards profitability,” said Jumia.

Jumia said it will cut sales and advertising expenses from $20m to $30m, compared to the previously communicated range of $30m to $40m – and $76m in 2022 – as well as general and administrative expenses, expected to reach between $85m and $95m, compared to the previously communicated range of $90m to $105m. This compares to $118m in 2022.

“The above forward-looking statements reflect our expectations as of August 15, 2023, are subject to change and involve inherent risks, which are partially or fully beyond our control,” said Jumia. “These risks include, but are not limited to, political and economic conditions across countries where we operate, the broader economic impact of the ongoing Russia-Ukraine conflict, and global supply chain issues.”

Analysts cautious on outlook 

Despite strong progress in loss reduction being a “positive sign”, Dair Sansyzbayev, a financial blogger on the crowd-sourced content service platform Seeking Alpha, said there are still concerns that the firm could run out of cash. 

“The improved guidance means, on average, about a $4m improvement for the quarterly cash burn, which does not cancel the high probability of running out of cash in summer 2024.”

“The effect of macro headwinds is only partial, and the rest relates to the weak company’s performance overall,” he said. 

“All these adverse recent developments and relatively low remaining liquidity do not make me optimistic about the company’s prospects,” he said.

Jumia has received $1.2bn in funding from 11 investors since 2012, including firms such as MTN and Mastercard.

Upon the company’s Q2 earnings call, Jumia Group CEO Charles Ballard said, “We’re facing the worst macroeconomic situation in a decade or more right now in emerging markets and especially in Africa… It’s heavily impacting the purchasing power of consumers.”

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Leo Komminoth

Leo is tech reporter for African Business, based in Dakar, and also works on data visualisations.