MercadoLibre rules to reduce profits as credit portfolio expands

(Bloomberg) — MercadoLibre Inc.’s aggressive credit push across Latin America eroded third-quarter profit.

The e-commerce and fintech giant’s overall credit book grew 77% from a year earlier to $6 billion, with its credit card-related portion surging 172% during the same period, according to a press release. Provisions set aside for all loans cut into net profit, which came in at $397 million, below the $513 million average estimate of analysts polled by Bloomberg.

The company also increased investments in logistics during the quarter while opening five new fulfillment centers in Brazil and another in Mexico, CFO Martin de los Santos said in an interview Wednesday ahead of the earnings release. . Overall revenue reached $5.3 billion, in line with expectations.

“This was a quarter of very strong growth and investment in some of our strategic initiatives – one of which is credit,” de los Santos said. “Credit cards are an important part of our fintech strategy,” he added , while this may “increase a little pressure on margins year over year,” the company believes it is “the right investment for long-term growth opportunities.”

MercadoLibre’s shares are up 35% this year, making it Latin America’s most valuable company with a market capitalization of $107 billion. While its commercial business accounts for about 60% of revenue, the company is making a big push into financial services through its Mercado Pago unit, which does everything from processing payments to lending and offering deposit accounts that pay above-market interest rates. .

Its business unit’s total users increased to 61 million, while Mercado Pago has 56 million monthly active users. Gross merchandise value for the quarter was $12.9 billion, with Brazil and Mexico growing 34% and 27% respectively in local currency terms. Total payments were $50.7 billion.

In Argentina, MercadoLibre’s consumers continue to recover and the company is increasing lending as Javier Mire’s government tries to stabilize the economy, de los Santos said.

While MercadoLibre doesn’t disclose certain information by country, Mexican financial services is currently a bright spot, he said.

“We are seeing significant growth in the number of users, assets under management and credit portfolio in the country – we have the largest credit portfolio of any fintech in Mexico,” de los Santos said. “So everything we do in Mexico Things are going well. The opportunities are huge.”

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