Ctrip profits fall on expansion costs
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Ctrip International has continued to see a trend of rising revenues and falling profits, as the fast-growing Chinese travel company incurred high costs associated with its expansion.
For the second quarter of 2014, Ctrip’s net profits fell 36% year-on-year to CNY135 million (US$22m). But this result is slightly misleading as the company’s revenues continued to rise sharply, jumping 38% to CNY1.7 billion. Accommodation revenues surged 47% to CNY753m while transport ticketing earnings were up 39% to CNY726m.
But Ctrip’s expenses also rose sharply. Product development costs jumped 55% to CNY479m, mainly due to “personnel-related expenses”, while sales and marketing costs increased 77% to CNY479m.
As a result, operating profit slumped 54% to CNY91m. But Ctrip’s chairman & CEO, James Liang, remained positive about the direction the company is heading.
“We have continued to maintain an accelerated growth rate in the second quarter of 2014,” said Liang. “Both accommodation reservation and transportation ticketing services achieved strong volume growth at 64% and 83% year-over-year respectively.”
And Liang added that Ctrip’s mobile channels are also seeing strong growth.
“During the second quarter of 2014 approximately 80% of Ctrip’s total transactions were booked online or through mobile channels,” Liang noted. “The number of Ctrip Mobile App downloads has reached 200m, growing at a rate of 60% quarter-over-quarter. Total mobile transaction value for the second quarter of 2014 more than tripled from a year ago and the peak daily transaction value exceeded CNY220m recently.”
For the third quarter of 2014, Ctrip said it expects continued revenue growth of approximately 30-35%. It did not offer a profit forecast.
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