Jumia's Sales Dented by Currency Depreciation, Inflation in Nigeria, Other Countries

Jumia's Sales Dented by Currency Depreciation, Inflation in Nigeria, Other Countries

  • Jumia's global sales in 2023 were impacted by currency depreciation and rising inflation rates in some countries where it operates
  • The e-commerce giant said it embarked on a series of decisive measures aimed at steering the company toward profitability
  • It addressed the discontinuance of its food delivery operations, stating the need to effectively focus on essential priorities

Legit.ng journalist Victor Enengedi has over a decade's experience covering Energy, MSMEs, Technology and the stock market.

The weakening of local currencies in some countries where it operates resulted in a decrease in Jumia's revenue to $186.4 million in 2023 from the $203.3 million recorded in 2022, marking an 8.3% decline.

This information was unveiled by Francis Dufay, the chief executive officer of the e-commerce giant, in the company's comprehensive earnings statement for the fiscal year 2023.

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Jumia's sales in Nigeria, others affected by currency devaluation, inflation
Jumia's CEO emphasized the profound repercussions of global upheavals on African economies, the effect on their populace and the impact on businesses. Photo credit - Ventures Africa, Jumia Group
Source: UGC

Currencies' devaluation shrinks Jumia's revenue

2023 has been very challenging for many economies of the world, resulting in many countries experiencing high inflation rates and unavoidable currency devaluation.

For instance, in Nigeria, a significant depreciation of the naira against the US dollar occurred after President Bola Tinubu encouraged the Central Bank of Nigeria to stop propping up the exchange rate artificially in June 2023.

This led to the devaluation of the naira by the CBN in June, coinciding with the consolidation of all segments in the FX market into the Investors & Exporters' Window.

Consequently, the official exchange rate plummeted from 465.46/$ at the beginning of the month to 751.98 per dollar.

By year-end, the official market rate further declined to 907.11/$, while the parallel market rate surged to N1,200/$ compared to N750/$ at the close of 2022.

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The substantial devaluation adversely affected businesses with significant exposure to foreign exchange, dampening their earnings.

Speaking on Jumia's earnings, Dufay emphasised the profound repercussions of global upheavals on African economies, the effect on their populace and the impact on businesses.

He said:

High inflation rates and currency depreciation have led to a scarcity of supply and have adversely impacted the purchasing power of customers. These have been challenging times for tech and retail businesses across the continent.

More losses than gains for Jumia

In 2023, the e-commerce powerhouse took decisive measures to mitigate its losses and steer the company toward enduring expansion and profitability.

Jumia's Adjusted EBITDA loss for 2023 showed a significant decrease to $58.2 million, compared to $182.1 million in 2022, demonstrating steady improvement throughout each quarter.

Furthermore, its loss before tax from continuing operations for the full year of 2023 also decreased to $98.6 million from $206.2 million in 2022.

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Notably, the rate of decline in liquidity slowed down, reducing from $285.4 million in 2022 to $106.9 million in 2023.

This left the company with a liquidity position of $120.6 million by the conclusion of 2023.

Key highlights of Jumia's 2023 result

  • Revenue of $186 million, down 8% year-over-year and up 20% in constant currency.
  • GMV of $750 million, down 20% year-over-year and up 1% in constant currency.
  • Operating loss of $73 million compared to $202 million in 2022, down 64% year-over-year, and down 64% in constant currency.
  • Adjusted EBITDA loss of $58 million compared to a loss of $182 million in 2022, down 68% year-over-year, and down 70% in constant currency.
  • Loss before Income tax from continuing operations of $99 million compared to $206 million in 2022, down 52% year-over-year, and down 47% in constant currency.
  • Liquidity position of $121 million, marking a decrease of $107 million in 2023 compared to a decrease of $285 million in 2022.
  • Net cash flows used in operating activities were $74 million compared to $240 million in 2022, down 69% year-over-year.

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Jumia implements new strategy for its business

Dufay mentioned that the company initiated a significant overhaul to swiftly enhance its financial standing and lay a sturdier groundwork for its e-commerce operations.

This transformation brought about a challenging but necessary short-term repercussion involving the cessation of initiatives with limited growth potential, the discontinuation of costly marketing strategies, and the thorough restructuring of its organizational framework.

Dufay said:

"Recently, we discontinued our food delivery operations as we concluded that the growth prospects did not justify the complexity it created. We believe our focus and resources will be better invested in our physical goods business, where we see more opportunity for revenue growth and higher margins."

He added that the company believes smaller and more agile teams can concentrate effectively on key priorities as leaner logistics operations enable it to enter new cities without compromising profitability.

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Dufay also emphasised that the company believes smaller, more agile teams can effectively focus on essential priorities.

This approach and streamlined logistics operations will facilitate the expansion into new cities without compromising profitability.

Jumia focusing on core business areas

Discussing Jumia's financial performance, Khalil Amusa, a financial analyst, remarked that despite global economic challenges and market obstacles, the company wrapped up 2023 with a narrative of resilience and strategic evolution.

He said:

"While its Q4 2023 results may show year-over-year decline in some metrics, a deeper analysis reveals a company laser-focused on operational efficiency, loss reduction, and sustainable growth.
"By prioritizing efficiency, focusing on core business areas, and adopting a more data-driven approach to marketing, Jumia has reaffirmed its position as a leader in Africa's dynamic e-commerce landscape."

He further noted that as the company remains committed to executing its strategic initiatives and leveraging its distinct positioning, it is steadily advancing toward shaping the continent's digital future.

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Starlink partners Jumia to deliver internet kits

Meanwhile, Legit.ng reported that Elon Musk's Starlink is set to partner with Jumia to deliver Starlink's internet kits to Nigerians.

Jumia will initiate the sale of Starlink's satellite kits, terminals, and other equipment in select African countries, starting with Nigeria.

Jumia's chief commercial officer, Hisham El Gabry, said the partnership offers the kits through sales and distribution agreements in Africa.

Source: Legit.ng

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