Kakao's net up 451% in first quarter but operating profit flat

Kakao's net profit hit 1.32 trillion won ($1 billion) in the first quarter, up 450.6 percent, as the company booked a sizable extraordinary gain.

Sales came in at 1.65 trillion won, up 31 percent but below the FnGuide estimate of 1.74 trillion won, and operating profit rose 1 percent to 158.7 billion won during the same period, below the consensus of 161.4 billion won.

The one-off item skewing the net was the sale of shares in Dunamu in 2021. Profit from the sale was reflected in the first quarter.

Dunamu runs the Upbit crypto exchange, the largest in Korea, and Kakao was an early investor in the company.

Kakao's flat operating results came as growth in its businesses slowed with the pandemic's end and as costs increased.

Operating expenses increased 36 percent to 1.49 trillion won due primarily to higher salaries for employees.

By business, revenue from Kakao Talk advertising jumped by 23 percent to 461 billion won in the January-to-March period.

Webtoon sales increased 38 percent on year to 240.5 billion won, a record. The company credited the popularity of "Business Proposal," which was adapted into drama series in February.

Its music-related business generated 204.4 billion won in revenue, up 11 percent on-year, while games brought in 245.8 billion won, up 80 percent.

Kakao CEO Namkoong Whon said the company is focusing on e-commerce.

"Transactions at the gift shops rose 32 percent in the first quarter on year," he said. "We aim to hit the 10 trillion won mark by the end of this year by creating synergy between advertising and commerce and other Kakao services."

Kakao shares are down 22 percent year to date, compared to a fall of about 10 percent for the Kospi.

BY PARK EUN-JEE [park.eunjee@joongang.co.kr]