Ali: The Single Digit Negative Growth Of Income In April Will Shut Down And Transfer Businesses With Long-term Value Difference

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On the evening of May 26, Alibaba (NYSE: Baba, 09988. HK) released the results of the fourth quarter of fiscal year 2022 and fiscal year 2022 as of March 31, 2022. In the fourth quarter of fiscal year 2022, the revenue was 204.05 billion yuan, a year-on-year increase of 9%, higher than the market expectation. The net loss attributable to common shareholders in the fourth quarter was 16.241 billion yuan, a year-on-year decrease of 196%.

In the fourth quarter, the net profit under non US GAAP was 19.799 billion yuan, a year-on-year decrease of 24%. The adjusted EBITDA in the fourth quarter was 23.37 billion yuan, a year-on-year decrease of 22%, with an estimated 22.03 billion yuan.

Last year, the annual revenue was 853.062 billion yuan, a year-on-year increase of 19%. The net profit attributable to common shareholders was 61.959 billion yuan, a year-on-year decrease of 59%, and the net profit under non US GAAP was 136.388 billion yuan, a year-on-year decrease of 21%. The main reason is that compared with the net income of these investments last year, the market price of Alibaba's equity investment in listed companies decreased.

In terms of business, China's commercial business realized a revenue of 592.71 billion yuan, a year-on-year increase of 18%; International commercial business achieved a revenue of 61.08 billion yuan, a year-on-year increase of 25%; The revenue of local living service business was 43.49 billion yuan, a year-on-year increase of 23%; Rookie's revenue was 46.11 billion yuan, a year-on-year increase of 24%; The revenue of cloud computing business was 74.57 billion yuan, a year-on-year increase of 23%; The revenue of digital media and entertainment business was 32.27 billion yuan, a year-on-year increase of 3%; Innovation and other businesses achieved a revenue of 2.84 billion yuan, a year-on-year increase of 23%.

Xu Hong, Alibaba's deputy chief financial officer, said at the financial report telephone conference that in terms of guidance, the repeated domestic epidemic in China has had a significant impact on Alibaba Group's domestic business since mid March 2022. Considering the risks and uncertainties caused by the impact of the epidemic, especially many factors that cannot be predicted or controlled, the Group believes that the suspension of financial guidance is usually provided at the beginning of the fiscal year.

Xu Hong also said that in the future, we will focus on optimizing the overall cost structure, continue to control costs, improve the returns of major businesses, continue to maintain healthy cash flow generation capacity and strong net cash level, so as to maintain financial flexibility, invest in business expansion and capacity-building, and expand the market to benefit all key stakeholders.

As of the closing on May 26, Alibaba Hong Kong shares fell 1.52% to HK $81.1. Alibaba shares closed at $94.48, up 14.79%.

"Close down and transfer businesses with no obvious long-term value"

Zhang Yong, chairman of the board of directors of Alibaba group, introduced the impact of the local epidemic on the performance since March. Under the impact of the epidemic, Alibaba's overall income showed a low single digit negative growth in April. In China's retail market, the physical transaction of Amoy Department decreased slightly by more than 10% in April. In April, Gmv transactions accounted for more than half of the Amoy market in cities with epidemic diseases where consumers are located. "Especially for Shanghai, Shenzhen and its surrounding cities, they are also important business gathering places. The interruption of supply chain and logistics caused by the epidemic has had a widespread impact."

Zhang Yong also introduced that due to the urgent and vigorous demand of consumers in the epidemic area, the customer unit price of Alibaba's near-field retail business has increased significantly. Therefore, although the single quantity is affected by the limited ability to perform the contract, the sales of several businesses have increased rapidly year-on-year.

For the recovery progress of logistics, Zhang Yong said that so far, the social logistics system has recovered to a great extent compared with April. If we can ensure the stability and smoothness of supply chain and logistics under the uncertain epidemic situation, business can operate stably and consumer sentiment and willingness can be better restored.

"In May, we saw signs of improvement in logistics." Xu Hong said that in the past two months, with the recovery of express delivery, including the mitigation of the epidemic in Shanghai, the whole logistics is gradually recovering, but on the whole, it still takes some time to digest the early packages. At present, businesses have begun to prepare for the "618" Shopping Festival.

For the strategic adjustment after the comprehensive unsealing in the future, Zhang Yong said that he did see some changes in consumption trends in the recent epidemic, and consumers would increase inventories to deal with uncertainty. In the future, Ali needs to give full play to the near-field infrastructure in the city and lay out the distribution force in big cities in China to support consumers' demand for timely distribution on demand.

In terms of cost reduction and efficiency increase of the group, Xu Hong said that on the one hand, many businesses will be shut down and transferred if their long-term value is not obvious. On the other hand, according to the different nature of business, all business ends will have certain cost reduction and efficiency increase objectives and requirements.

Alibaba cloud's growth slowed down and made its first annual profit in 13 years

According to the financial report, Alibaba cloud's total annual revenue before and after offsetting cross segment transactions was 100.18 billion yuan and 74.568 billion yuan respectively, with a year-on-year increase of 21% and 23% respectively. Alibaba cloud also achieved its first annual profit in 13 years. Alibaba cloud's EBIT profit improved significantly from a loss of 2.251 billion yuan last year to a profit of 1.146 billion yuan this year.

The year-on-year growth of revenue in fiscal year 2022 slowed down, mainly due to a top customer in the Internet industry gradually stopped using Alibaba cloud services in its international business due to non product related reasons, the slowdown of enterprise economic activity under the epidemic, the delay of project delivery and the slowdown of customer demand in China's Internet industry.

"We think these impacts are short-lived. Although the growth rate of cloud services in the domestic Internet industry has declined due to the peak traffic and user time, the digitization process of other industries is highly determined and has just begun. Cloud computing big data services are the basic services required by every enterprise and industry to complete the digital transformation," Zhang Yong said

The financial report shows that the revenue of cloud business is becoming more diversified, and the revenue contribution of non internet industry is increasing steadily. For the fiscal year and quarter ended March 31, 2022, the contribution of cloud revenue after cross sectoral exclusion of non internet industries was 50% and 52% respectively.

For the follow-up development of cloud business, the management said at the teleconference that in addition to the opportunities of vertical industry, they hope to continue to realize technology dividends through technological innovation and breakthrough, so as to make the cloud business obtain better economies of scale.

With regard to Alibaba cloud's thinking on the upgrading of its leadership team, the management said that with Alibaba's internal services, Alibaba cloud is already a business of more than 100 billion yuan. If this complex working system can further improve work efficiency, make better progress in reducing costs and increasing efficiency of growing businesses, and form a new generation of working methods for enterprise level services.

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