Line drops 10% after expenses undercut Q1 profits

Shares in Line Corp, the Japanese messaging and online services company, dropped as much as 10.1 per cent on Thursday after the company reported operating profit for the first quarter had dropped by almost a quarter due to mounting expenses.

The company reported on Wednesday that operating expenses had risen 22.4 per cent year on year to ¥35.2bn ($316.5m) in the quarter ended March due to headcount growth, higher marketing expenses, system development and relocation of the company’s headquarters.

Those costs pulled operating down to ¥4m in Q1, down 24.6 per cent from a year earlier.

While revenue rose 16.3 per cent to ¥38.9bn, pre-tax profit fell 13.9 per cent for the period to ¥3.6bn – although profit came to ¥1.6bn, compared to a loss of ¥234m in the first quarter of 2015.

Line forecast higher profit for the six months ended June 2017 on steady advertising growth, but it noted increased operating expenses are expected in the second quarter following the expansion of services and marketing activities as well as investments in cloud AI.

Tokyo-listed shares in Line had pulled back slightly to be down 8.8 per cent in morning trade at ¥3,850. Shares in Naver, its Seoul-listed parent, were down 2.4 per cent, versus a 0.2 per cent in South Korea’s Kospi.