Japan’s Rakuten reports a net loss of $600 million in Q1 and plans to issue new shares to raise approximately $22 billion in funds

Rakuten, Japan's company, reports a Q1 net loss of $600 million and plans to raise $22 billion through new share issuance

Overall, Lotte Group’s three main business segments all achieved revenue growth, including internet services, financial technology, and mobile business, with a combined revenue of 475.6 billion yen, a year-on-year increase of 9.3%, setting a record for Lotte Group’s highest first-quarter revenue in history.

In the first quarter of the 2023 fiscal year ending in March, Lotte Group’s monthly active users in Japan exceeded 40 million, a year-on-year increase of 10.3%. The customer base of Lotte’s entire ecosystem continues to expand, with the percentage of users who have used two or more services steadily increasing to 76.1% in the past 12 months.

Lotte Group’s advertising business revenue increased significantly to 48.3 billion yen, a year-on-year increase of 15.8% in the first quarter of the 2023 fiscal year. The goal of this business is to achieve revenue of 200 billion yen in the 2023 fiscal year.

Following the previous quarter, Lotte Group’s combined EBITDA was profitable again, reaching 7.4 billion yen, a year-on-year increase of 42.9 billion yen. Lotte Group expects to achieve combined EBITDA profitability in the 2023 fiscal year.

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In the first quarter of the 2023 fiscal year, Lotte Group’s internet service segment revenue was 271.1 billion yen, a year-on-year increase of 8.7%. In this segment, the total GMS of domestic e-commerce in Japan exceeded 1.4 trillion yen this quarter, achieving double-digit growth of 12.2%; domestic e-commerce revenue was 205 billion yen, a year-on-year increase of 12.1%.

In addition, Lotte’s consumer base in Japan grew by 29.1%, and the average consumption amount increased by 16.6% compared to the first quarter of the 2020 fiscal year before the epidemic. Lotte Travel also experienced strong growth due to the relaxation of some epidemic-related restrictions.

The report shows that Lotte’s US e-commerce business revenue was US$186 million, a year-on-year increase of 1.4%, and its total merchandise sales were US$2.6 billion, a year-on-year increase of 5.5%.

According to two informed sources, Rakuten Group of Japan is finalizing plans to raise approximately $2.2 billion through the issuance of new shares on May 14th, Business Dialogue learned.

The sources said that Rakuten plans to use the funds to repay debt and build base stations for its mobile business, while improving its financial situation caused by years of losses in its mobile business. According to Refinitiv data, Rakuten has incurred a net loss of 735 billion yen in just over four years, with last year’s loss reaching a historic high.

In addition, according to Refinitiv data, Rakuten Group will face approximately 400 billion yen of bond maturities by 2024, and a further 430 billion yen by 2025, with the dollar-denominated bonds issued in January carrying an annual interest rate of over 10 percent.

After releasing its first-quarter financial report, Rakuten announced that it would sell its stake in the supermarket chain Seiyu to US private equity firm KKR & Co Inc for 22 billion yen, just three years after agreeing to buy a stake from Walmart.

One of the sources said that Rakuten’s board of directors could hold a meeting as early as this week to decide on fundraising activities. The public offering is expected to raise approximately 300 billion yen ($2.2 billion), although the amount could vary depending on Rakuten’s share price, which will affect the price of the new shares issued.

However, a Rakuten spokesperson said that the company is considering various options regarding its financial situation, but has not made a decision on issuing new shares. If such a decision is made, an official announcement will be made.

Last month, Rakuten raised approximately 83.3 billion yen in its bank department’s first IPO, and it is expected that its brokerage department will also conduct an IPO.

Editor ✎ Ashley/Business Dialogue

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