Rocket Internet Narrows Losses, Boosts Sales at Key Startups

  • HelloFresh, Global Fashion among businesses that improved
  • Samwer trying to convince investors of path to profitability

Rocket Internet SE increased sales and shrank losses at some of its biggest startups, bringing the company closer to a target of having three of its main investments break even by the end of this year.

Food-box startup HelloFresh boosted sales 49 percent to 158.7 million euros ($173 million) in the fourth quarter. Adjusted losses before interest, tax, depreciation and amortization narrowed at businesses including HelloFresh, Global Fashion Group and Dafiti, Rocket said Tuesday. Overall, Rocket reported a loss of 741.5 million euros for 2016, weighed down by impairment charges and deconsolidation of subsidiaries.

Investors are betting Berlin-based Rocket can improve its businesses after criticizing the startup incubator’s reporting for a lack of transparency and questioning Chief Executive Officer Oliver Samwer’s ability to turn profits from units that operate in commodity sectors in challenging markets. The CEO has vowed to make three businesses profitable by the end of the year, a target the company reiterated Tuesday.

“In 2016, our selected companies progressed on their path towards profitability, while demonstrating further growth,” Samwer said in a statement.

Investors have long hoped for initial public offerings by Rocket’s startups so they can recoup their investment. One candidate is Delivery Hero, a food-delivery company about 37 percent owned by Rocket. Delivery Hero said yesterday it is considering an IPO after reporting a 79 percent increase in full-year sales to 297 million euros.

While the current market environment is "very positive,” it’s up to the startups to decide on potential IPOs, Samwer said on a call with reporters.

Shares of Rocket Internet declined 0.3 percent to 16.30 euros at 10:22 a.m. in Frankfurt. They had lost 15 percent this year through Monday.

Not every startup managed to grow. Sales at African online platform Jumia declined 1.4 percent to 30 million euros in the fourth quarter as it shifted to a marketplace model. The adjusted loss narrowed to 15.5 million euros from 62.8 million euros.

Meanwhile, revenue at HelloFresh grew at a slower pace, and the company remains loss-making as it expands in challenging markets including the U.S. The startup raised new funds at a lower valuation in December than in a previous investment round.

“The deceleration in HelloFresh growth needs to be watched further in the upcoming quarters,” Alexander Rummler, an analyst at Otto Seydler Bank AG, said in an emailed note.

Rocket expects to start five to eight companies this year after launching and incubating 8 last year in industries including logistics, Samwer said. The company will provide more information on its outlook when it reports first-quarter results at the end of next month, Chief Financial Officer Peter Kimpel said on the call.

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