Alibaba Returns to Profit After Quarter with Billions Of Fines

Alibaba made a significant profit in the second quarter. A quarter earlier, the large Chinese online store suffered a rare loss due to a multi-billion dollar fine from the Chinese authorities for monopoly practices.

 

Nevertheless, the company continued to grow, and the number of customers increased, thanks to the many corona shopping.

Alibaba expects growth in Europe to slow due to a new tax rule. Since 1 July, customers who order something outside the European Union also pay VAT on purchases under 22 euros. Until that date, there was still an exemption up to that amount.

Alibaba’s turnover increased by more than a third year-on-year in the second quarter to 205.7 billion yuan or 26.8 billion euros. However, a net profit of EUR 5.9 billion remained below the line. Last quarter there was still a loss of 705 million euros. That was due to the record fine of more than 18 billion yuan.

The Chinese government has been taking stricter measures against the large technology groups in the country, which hold a lot of power and until recently were only bound by few rules. At the end of last month, it was announced that dozens of Chinese technology companies must implement internal controls to curb illegal online activities. For example, Alibaba and Tencent of the Chinese government should look at data security and the protection of consumer rights.

The profit of Alibaba’s payment company Ant Group fell by 37 percent to 1.8 billion euros. The Chinese government has been trying to curb Ant for some time. For example, Beijing has instructed the primary payment service provider to become a financial holding company. As a result, the company is regulated more like a bank, with much stricter government oversight.

An IPO of Ant was unexpectedly stopped last November. Ant’s CEO and founder, Jack Ma, has hardly appeared in public since then. As a result, the Chinese billionaire is not mentioned in the figures update from Alibaba.

Alibaba rewards investors by buying more of its own shares. The existing USD, 10 billion buyback program, will be expanded to USD 15 billion.