Rocket Internet Drops in Frankfurt Amid $222 Million Loss

Updated on
  • Losses widen at startups including HelloFresh, Lazada
  • CEO Samwer targets `significant improvements' in profitability

Rocket Internet SE, Europe’s biggest startup factory, fell the most in more than two months in Frankfurt trading after reporting a loss of 197.8 million euros ($222 million) for last year.

While Rocket-backed companies continued to increase sales, operating losses widened at several of them, including at food delivery startup HelloFresh and e-commerce site Lazada, which drew an investment from Alibaba Group Holding Ltd. this week. Rocket had net income of about 429 million euros the previous year, according to the Berlin-based company’s statement Thursday.

The revenue growth “does not mask that many off the underlying businesses have seen a huge ramp in costs,” Neil Campling, an analyst at Aviate Global LLP, said in a research note.

The shares fell 10 percent to 26.09 euros at 11:42 a.m. local time after dropping as much as 12 percent, the biggest intraday decline since Jan. 15.

The company will show “significant improvements in profitability” at its startups this year and next, Chief Executive Oliver Samwer said on a call with reporters. Rocket still seeks to bring companies public but will do so only if markets are positive, he said.

Rocket is under pressure to prove its investments are paying off after showing little progress with reducing losses. That’s because most of his startups needed major cash infusions to scale them, Samwer said. HelloFresh, which added warehouse centers in the U.S. and quadrupled the number of servings it delivered to about 50 million last year, will expand to the U.K. and "continue to grow very fast,” Samwer told investors at an event in London.

Profitability Steps

Rocket-backed delivery service Foodpanda already has countries where it’s breaking even, and furniture seller Westwing and fashion retailer Lamoda will continue to move toward profitability, Samwer said. Rocket expects its African business, which got investments from Goldman Sachs and Axa SA, to become "very successful" in the coming years, Chief Financial Officer Peter Kimpel told investors.

As part of the Alibaba deal, Rocket is selling a 9.1 percent stake in Lazada and keeping an 8.8 percent slice. Lazada will get a significant boost from Alibaba’s "hundreds of thousands” of suppliers in China, Samwer said.

If Rocket doubts that a startup can succeed, it will consider exiting, Samwer said.

"If something doesn’t work, don’t wait long,” he said. "But the point is: All those tries cost us very little.”

Rocket had 1.8 billion euros of gross cash as of March 31, according to a presentation.