NetEase Q1 Profit Rises 6%, But Misses View; Revenues Beat

(RTTNews) - Chinese online games provider NetEase Inc. (NTES) on Wednesday reported a 6 percent increase in profit for the first quarter from last year, helped mainly by double-digit growth in revenue. However, quarterly earnings per share missed analysts' estimates, while revenue exceeded their expectations.

William Ding, Chief Executive Officer and Director of NetEase said, "The active development of new, high-quality games, products and services for China's expanding traditional and mobile Internet market continues to fuel our business."

Beijing, China-based NetEase's net income attributable to shareholders for the first quarter was RMB1.12 billion, or $180.79 million, up from RMB1.06 billion in the year-ago period.

On American Depositary Share or ADS basis, earnings for the quarter climbed to RMB8.60 or $1.38 per share from RMB8.19 or $1.32 per share a year ago. On average, seven analysts polled by Thomson Reuters expected the company to report earnings of $1.40 per ADS for the quarter. Analysts' estimates typically exclude special items.

In the latest quarter, NetEase recorded a net foreign exchange gain of RMB7.1 million, or $1.1 million, compared to net foreign exchange losses of RMB9.3 million for the prior-year period.

Total pre-tax revenues for the quarter increased 12 percent to RMB2.52 billion or $405.22 million from RMB2.26 billion in the prior-year quarter. Analysts had a consensus revenue estimate of $390.89 million for the quarter.

Revenues from online games increased 6 percent from last year to RMB2.16 billion, or $346.8 million. Advertising revenues grew 48 percent from the year-ago period to RMB244.71 million, or $39.4 million, while e-mail, e-commerce and other revenues surged 81 percent to RMB118.64 million or $19.1 million.

Gross profit for the quarter rose to RMB1.71 billion or $274.72 million, from RMB1.55 billion in the prior-year period.

The increase in gross profit was primarily driven by increased revenues from Hearthstone, as well as certain self-developed games of the company, such as Fantasy Westward Journey II, which launched a new expansion pack during the quarter, and New Westward Journey Online II, for which a series of promotional activities were held.

On May 13, 2014, NetEase's board of directors approved a new quarterly dividend policy commencing in 2014. Under the new policy, quarterly dividends will be set at an amount equivalent to about 25 percent of the company's anticipated net income after tax in each fiscal quarter.

The board of directors has accordingly declared a dividend of $0.34 per ADS for the first quarter of 2014, which is expected to be paid on June 6, 2014 to shareholders of record as of the close of business on May 28, 2014.

NTES closed Wednesday's trading at $71.04, down $0.39 or 0.55 percent on a volume of 901,920 shares.