Grab earnings top forecasts on resilient ride, delivery demand

SINGAPORE – Grab Holdings reported a first-quarter profit that exceeded analysts’ estimates, helped by resilient demand for ride-hailing and delivery services after rolling out promotional offers and bundled features to attract customers grappling with higher costs.

Adjusted earnings before interest, taxes, depreciation and amortisation (Ebitda) rose to US$154 million (S$196.6 million) in the quarter ended March 31, the Singapore-based firm said on May 5.

Analysts had forecast US$146.3 million on average, according to data compiled by Bloomberg.

Total revenue increased 24 per cent to US$955 million, also beating projections. Deliveries revenue grew 23 per cent to US$510 million, while mobility revenue was up 19 per cent at US$337 million. 

Grab kept its annual forecast, maintaining an annual sales outlook of US$4.04 billion to US$4.10 billion. It expects adjusted Ebitda of US$700 million to US$720 million.

The company’s shares gained about 2 per cent in late US trading after the announcement of the results.

With oil and gas prices pushed up by the war in the Middle East, Grab has leaned on promoting more affordable offerings such as shared rides and deliveries, where customers split costs with friends. 

Grab has also rolled out a “saver” option on its app, offering lower fees for rides or food delivery in exchange for longer wait times or batched orders. About 35 per cent of its users are on the “saver” programme, chief financial officer Peter Oey told Reuters.

“It is a very good balance between the price-sensitive customers and those who are less price-sensitive. That gives us the levers also to continue to make sure that our margin for our delivery business continues to improve,” he said.

South-east Asia’s biggest ride-hailing and delivery company is also working to boost spending on its platform by incorporating artificial intelligence features into its super app and bundling its ride-hailing, delivery and financial services.

Mr Oey also said Grab plans to adjust its Indonesian business after Jakarta’s surprise edict to lower the ride-hailing commissions it can charge, though executives expect the decree to cover just a fraction of its fleet.

In a speech last week, Indonesian President Prabowo Subianto outlined a surprise reduction in the ride-hailing commissions that firms like Grab collect from riders.

The companies’ cut will be set at a maximum of 8 per cent of fares, compared with about 20 per cent previously, potentially squeezing margins and crimping revenue.

Mr Oey said the move is likely to apply only to two-wheel riders, not car drivers, limiting its impact.

“We have enough levers in the business to be able to offset and cushion this,” he told Bloomberg in a video interview. “But it does mean that for Indonesia, the fare structure and the business model for two-wheelers probably need to be recalibrated. Definitely, this is not a small change.”

Indonesia is South-east Asia’s biggest ride-hailing market, with millions of drivers relying on app-based transport and delivery services. Protests over pay and working conditions have intensified in recent years, with many riders unhappy with what they have described as exploitative app policies and regulatory negligence.

The country’s two-wheel riders account for less than 6 per cent of the business volume for Grab’s mobility operations, chief operating officer Alex Hungate said on a conference call.

It is essential that “our Indonesian mobility marketplace remains healthy and that driver partners’ earnings remain well supported”, Mr Hungate said.

“We’re engaging very proactively with the relevant ministries, and we try to seek absolute clarity and technical aspects of how the decree will be implemented.”

In a bid to alleviate the cut-throat competition, Grab has been exploring a combination with Indonesian technology company GoTo Group. The years-long effort has been delayed by regulatory scrutiny as well as differences over perceived valuation.

In the latest hurdle to a deal, negotiations have hit a snag over wireless carrier Telkomsel’s roughly 2 per cent stake in GoTo. BLOOMBERG, REUTERS