Company DigestCompaniesLast updated: 7 November 2024

Kakao's Q3 2024 Net Income More Than Doubles to 78.5 Billion Won on Base Effect as Sales Slip 4.5%

South Korean internet company Kakao Corp. closed the third quarter of 2024 with a net profit of 78.5 billion won (US$56 million), more than double the 36.8 billion won earned a year earlier, as the 113% jump was driven largely by a base effect from a weak prior-year quarter. Operating income rose 5% year on year to 130.5 billion won, while sales declined 4.5% to 1.92 trillion won. The bottom line landed below market expectations, with analysts having pencilled in a net profit of 94.6 billion won.

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Q3 2024 in numbers

SEOUL, November 7, 2024 — Kakao Corp., an internet company headquartered in South Korea, has reported its results for the third quarter of 2024. The report was carried by Yonhap News Agency, whose article is available at https://en.yna.co.kr/view/AEN20241107001352320. Corporate announcements and investor materials of the company are published on its website at https://www.kakaocorp.com/.

The key reported figures for the third quarter of 2024 are as follows:

net profit — 78.5 billion won (US$56 million), up 113% from 36.8 billion won a year earlier;
operating income — 130.5 billion won, up 5% year on year;
sales — 1.92 trillion won, down 4.5% year on year.

Of the three lines, the doubling of the net profit became the headline of the quarter, while the top line moved in the opposite direction and contracted against the same period of the previous year.

The base effect behind the 113% jump

The sharp rise in net profit is a base effect: the comparison figure of 36.8 billion won recorded in the third quarter of 2023 was a low base against which the current quarter was measured. The doubling therefore reflects the weakness of the prior-year period at least as much as the momentum of the quarter just reported.

What the comparison of the two profit lines shows

The gap between the two profit measures makes the point visible. Net profit grew 113%, from 36.8 billion won to 78.5 billion won, while operating income over the same comparison rose a much more modest 5%, to 130.5 billion won. A 5% improvement at the operating line is an incremental change; the triple-digit growth below it comes from measuring against an unusually low prior-year net figure rather than from an equally dramatic improvement of the underlying business in the quarter. Sales followed their own path, declining 4.5% year on year to 1.92 trillion won, which frames the quarter as one of a soft top line combined with a favourable comparison on the net line.

Below market expectations

Despite the headline doubling, the quarter's result did not meet market expectations. Analysts had forecast a net profit of 94.6 billion won, according to a Yonhap Infomax consensus cited in the report. The actual figure of 78.5 billion won came in more than 16 billion won below that expectation. Together with the 4.5% decline in sales, the shortfall frames the quarter as a period in which a weak prior-year base produced a large percentage gain on paper, while the absolute result still fell short of what market watchers had projected.

Kakao and Kakao Bank: two separate results

One distinction matters when reading the numbers. The Q3 2024 results of Kakao Corp. are separate from those of its subsidiary Kakao Bank, which reported its own set of figures for the same period: an operating profit of 174 billion won, up 36.2% year on year. The parent company's net profit of 78.5 billion won and the bank's operating profit of 174 billion won belong to two different reporting entities, and the two results should not be mixed when assessing the quarter.