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Sea posts net loss of $1.28b in Q2, withdraws its 2022 e-commerce forecast

SINGAPORE (BLOOMBERG) – Shopee owner Sea posted a bigger second-quarter loss than expected and withdrew its 2022 e-commerce forecast, joining other online giants struggling to gauge an increasingly uncertain global economic outlook.

The Singapore-based company on Tuesday (Aug 16) posted an adjusted loss before interest, taxes, depreciation and amortisation of US$506.3 million (S$698 million) in three months to end-June, surpassing the average projection for US$482.3 million.

Sea’s net loss more than doubled to US$931.2 million in the June quarter, from US$433.7 million in the year-ago period, amid higher overhead costs and allowances for credit losses.

Sea shares tumbled 14 per cent on Tuesday to close at US$77.43 in New York.

The downbeat result came after Sea cut its full-year e-commerce revenue outlook in May, to a low of US$8.5 billion versus US$8.9 billion previously. Shoppers emerging from pandemic lockdowns are cutting back on online purchases, shifting towards essentials during a potential recession.

Sea, which counts Tencent Holdings as its biggest investor, has suffered a run of setbacks this year, including a sudden ban of its most popular mobile game in India and the subsequent closure of its e-commerce operations there. Its shares have fallen about 75 per cent since peaking in October.

The company has been trying to boost profitability as topline growth plateaus. Second-quarter sales rose 29 per cent to US$2.9 billion, the slowest growth in almost five years.

In South-east Asia and Taiwan, adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) loss per order for Shopee – before allocation of headquarters’ common expenses – was less than 1 cent. Chief executive Forrest Li affirmed a target for the business to hit positive adjusted Ebitda before headquarters costs in Asia this year.

Second-quarter revenue from Shopee, Sea’s e-commerce unit, gained 51 per cent to about US$1.7 billion versus estimates of US$1.9 billion.

Revenue from gaming arm Garena fell to US$900.3 million, slightly ahead of estimates for US$827.6 million, as hit mobile game Free Fire matures. The company said in March it expected Garena to post US$2.9 billion to US$3.1 billion in bookings in 2022, set to be its first decline.

Revenue from SeaMoney, Sea’s digital financial services unit, rose to US$279 million.

Sea has been reducing its overseas footprint and slashing jobs in peripheral businesses as competition takes a toll and as it focuses more on profitability, a stark shift from its previous stance of spending for global expansion.

Shopee’s gross merchandise value, the sum of transactions flowing through its platform, rose 27 per cent to US$19 billion.

Some investors are reducing their exposure to Sea. Tiger Global Management sold US$473.8 million of Sea shares, cutting its holdings after six quarters of buying, according to  US Securities and Exchange Commission filings.

Altimeter Capital Management, a shareholder of Singapore-based Grab Holdings, exited Sea’s Class A American depositary receipts, according to an analysis of its filings by Bloomberg News.