Jumia is set to sell 20 million shares to capitalize on strong results amid a volatile market
Upon the stock market’s opening on Tuesday, Jumia’s share price was approximately $5.70. The e-commerce company can raise approximately $100 million through its new share offering.
Nevertheless, the ultimate sum will be contingent upon the share price, which has since declined to $4.90. The unfavorable reaction of shareholders to news of dilution, the impact of global carry trades, or both may cause the decline, which began at approximately $11 on Monday and followed a 200% rally in the previous three months.
It is not the first time that Jumia has implemented this strategy. The e-tailer raised nearly $600 million by selling secondary shares between 2020 and 2021.
During a call with TechCrunch, CEO Francis Dufay, who is conducting his first secondary share sale, stated that Jumia is raising this capital to expedite its operations following substantial cost management and efficiency advancements.
“The new funding will be utilized to broaden our supply chain network and improve logistics to reach smaller cities,” Dufay stated. “We also intend to allocate resources to technology, with a particular emphasis on vendor and marketing technology, as we think this will substantially affect growth.”
In conclusion, we think the time has come to redirect our attention to growth and allocate additional funds to accelerate the company’s expansion. This decision was made after extensive, fundamental, and challenging work on cost and efficiency.
Exceeding the Two Million Mark
The funds will specifically enhance Jumia’s cash position, which is currently at $92.8 million (i.e., $45.1 million in cash and cash equivalents and $47.7 million in term deposits and other financial assets) as of its most recent financial report, which was published in Q2 2024. This contrasts the platform’s liquidity position of $120.6 million in Q4 2023 and $101.5 million in Q1 2024.
In addition to customer acquisition, product assortment, supply retention, and additional vendors to its marketplace, the funds raised will be utilized for other purposes.
For several quarters, Jumia’s active consumer base has maintained a consistent level of approximately two million. The figure indicates a 6.0% increase in the quarter over quarter compared to Q1 2024 and a flat year-over-year development between Q2 2023 and Q2 2024.
“Our customer base is still relatively small, with approximately two million active consumers per quarter, even though we operate in markets with a population exceeding 600 million.” Dufay stated, “We can accomplish a great deal more with the customer base.”
Consequently, orders increased by 7% year over year to 4.8 million. Jumia attributes its expansion to the diversification of its product line, which it intends to further develop with the newly acquired capital.
Jumia’s GMV and revenue, which were $170.1 million and $36.5 million, respectively, decreased by 5% and 17% year-over-year, despite increased orders. This has been a consistent theme in Jumia’s financial reports since the new management took over in Q4 2022. The figures typically indicate a year-over-year improvement on a constant currency basis.
Still, they fluctuate in dollar terms due to devaluation, as is the case with most other financial reports. For example, revenue increased 15%, while Jumia’s GMV in constant currency increased 35.0% year-over-year.
“Our revenues were significantly affected by the devaluation that occurred in both of our largest potential markets, Egypt and Nigeria, after Q1,” stated Dufay. “Nevertheless, we have observed indications of stabilization and a significant decrease in the spread between the official and parallel market rates.” More importantly, our capacity to generate growth in gross merchandise volume (GMV) in constant currency indicates our value proposition’s effectiveness.
Regarding profitability, Jumia’s adjusted EBITDA loss, which excludes finance costs, decreased by 10% to $16.3 million. This decrease was consistent with the 8% year-over-year decrease in operating loss to $20.2 million, primarily due to cost-saving initiatives.
Dufay insisted on the call that Jumia, the 12-year-old e-commerce platform, is more interested in reporting loss before income tax from continuing operations, which includes finance costs, such as the cost of cash repatriation and the impact of FX, even though Jumia has long used both adjusted EBITDA and operating loss to measure its losses and path to profitability. The loss before income tax from continuing operations was $22.5 million, representing a 27% decrease from the previous year.
“We have placed a greater emphasis on this KPI in recent quarters due to the associated costs and currency volatility.” It is imperative for organizations that are susceptible to such volatility to disclose the complete picture. For example, the CEO stated that Mercado Libre in Latin America favors examining the loss before income tax rather than EBITDA.
“They emphasized the impact of currency volatility in Argentina on finance costs during their most recent results announcement.” Consequently, a more comprehensive perspective is provided when operating across multiple markets with currency fluctuations by concentrating on loss before income tax.
