Indonesia’s GoTo cuts loss forecast as cost curbs pay off

BLOOMBERG

GoTo Group cut its 2023 loss projection after staunching some of the bleeding in the second quarter, taking the Indonesian internet leader closer to its goal of getting into the black after an era of costly expansion. Its shares rose 6.6% in Jakarta, the biggest gain since June. Indonesia’s largest tech company reported second-quarter adjusted loss before interest, taxes, depreciation and amortisation shrank by more than half to 1.2 trillion rupiah ($78 million).
Full-year loss on that basis will be 3.8 trillion to 4.5 trillion rupiah, compared with the as much as 5.3 trillion rupiah predicted previously, GoTo said.
The performance is a boost for Patrick Walujo, who took over as chief executive in June. The managing partner of major GoTo-shareholder Northstar Group is tasked with carrying out his predecessors’ campaign to shave losses by cutting jobs, curbing promotional spending and tightening expense controls.
Like rivals Grab Holdings Ltd and Sea Ltd, GoTo is trying to convince investors it can generate cash after years of rapid growth, despite economic uncertainty and sluggish consumer spending across Southeast Asia. Going into the second half, the “outlook should be slightly improving due to more government spending and liquidity ahead of the election in Indonesia, though we think that the e-commerce landscape is likely to remain competitive as
TikTok remains aggressive,” Citigroup analysts Ferry Wong and Ryan Davis wrote. Second-quarter net revenue, which strips out incentives to driver and merchant partners and promotions to users, almost doubled to 3.6 trillion rupiah. Like rivals, GoTo has benefited as more Indonesians go online.
Still, its shares have struggled to gain momentum in 2023 as losses swelled, leaving them down more than 70% since the company’s stock-market debut last year. GoTo cut 600 roles from its workforce in March, adding to the 1,300 jobs it axed in 2022. The company said the cuts helped it reduce monthly fixed expenses by about 20% in January and February and it has also slashed marketing spending. In February, it brought forward its  target for making profits by a year, expecting adjusted Ebitda to turn positive in the fourth quarter of 2023.
“Despite macroeconomic uncertainty, Indonesia’s digital economy shows resilience with a shift towards online spending and adoption of digital technologies,” Buana Capital analysts wrote in July, estimating the country’s digital economy could grow 19% annually to $130 billion by 2025.